A bilateral investment treaty with a ‘bit’ of change

• The recently signed Bilateral Investment Treaty (BIT) between India and the UAE represents a pivotal moment in India’s evolving approach to international investment agreements. While maintaining alignment with India’s 2015 Model BIT, it introduces refinements that address practical concerns, offering insights for India’s ongoing negotiations with other nations, particularly developed economies.

Balancing Investment Protection and Sovereignty:

• One of the key features of the India-UAE BIT is the reduction of the mandatory waiting period for accessing Investor-State Dispute Settlement (ISDS) from five years to three.
• This change acknowledges the challenges posed by India's overstretched judicial system, allowing foreign investors quicker access to dispute resolution mechanisms. It strikes a balance between investment protection and India’s right to regulate its domestic matters without compromising sovereignty.

Clarity in Investment Definitions:

• The treaty simplifies the definition of an “investment” by removing the requirement that it must be significant for the host state’s development—a subjective element present in the Model BIT.
• This clarification reduces arbitral discretion and ensures that genuine economic investments are protected, without overburdening the arbitral process with subjective assessments.

Preserving Regulatory Authority:

• India has also maintained crucial provisions from its Model BIT, such as excluding most-favored-nation (MFN) clauses and taxation matters from the treaty’s scope. These exclusions reinforce the nation’s sovereignty and its ability to regulate domestic issues without being subject to excessive foreign investor claims.

Conclusion: A Balanced Approach to Global Investment:

• The India-UAE BIT represents a balanced approach to fostering foreign investment while protecting India’s regulatory space. It demonstrates India’s commitment to refining its investment policies to meet the needs of both investors and the state.
• The treaty’s pragmatic adjustments not only reflect India’s changing stance on investment protection but also set a valuable precedent for its future negotiations with global partners, especially with developed economies like the UK and EU.
• This agreement positions India as a global player capable of adapting to contemporary challenges in international economic relations.