Law Commission suggests changes in model BIT draft

The Law Commission has suggested a host of changes in the model Bilateral Investment Treaty (BIT) draft to make it more investment friendly and include a confidentiality clause.
It has also suggested inclusion of the most favoured nation in the model treaty and removal of restrictions with regard to procurement.
"Any disclosure requirement, or in fact, any obligations imposed under a BIT on investors must take into consideration National Treatment obligations that are provided for through the same treaty," the Law Commission of India said in its report analysing the 2015 Draft Model Indian Bilateral Investment Treaty.
It said that the government procurement should not be excluded from the treaty protection.

"Excluding public procurement could lead to the exclusion of many activities that would otherwise meet treaty objectives of contributing substantially to the host State's development.
"Absence of treaty protection could lead to an exodus of foreign investors which may not be desirable in the long term," it said.

The Commission also said it is not necessary to exclude taxation from the purview of the treaty as "power to tax is an integral part of the State's police powers in international law. The power to tax exists independent of a treaty, unless the tax itself is arbitrarily imposed to destroy the State's regulatory freedom".

It suggested that specific provisions should be included to ensure that "nothing in this treaty shall apply to either party in relation to any act or measure or law that existed before the date of entry into force of this treaty".
The report was submitted to Law Minister Sadananda Gowda by Law Commission Chairman A P Shah. The report, however, was not signed by one ex-officio member - P K Malhotra - as he has already communicated his views on the subject to the Ministry of Finance.
The government will soon come out with a comprehensive model BIT, which will form the basis for renegotiation of the existing pacts and negotiating new ones with different countries.

The government had decided to bring in a new framework after several multinational firms invoked bilateral investment protection agreements.