Datanomics: India's investment treaties progress in bits and pieces

Objectives of these agreements are to promote and protect investments through a stable legal environment for investors from both countries

Though it is still unclear if the proposed India-US bilateral trade agreement (BTA) will have clauses on investment protection, it makes sense to assess the bilateral investment treaties (BITs) that India has signed with other countries after amending the model framework in 2015, which came into effect from 2016. 

A BIT is an agreement between two countries that sets the terms for private investments of one country in the other. The objectives of these agreements are to promote and protect investments through a stable legal environment for investors in both countries. 

India had terminated its BITs with 77 countries after the new framework came into effect as those were based on the old framework of 1993, while it had earlier signed such an agreement with 86 countries. 

Since the introduction of the new framework, India has signed BITs with only five countries — Uzbekistan, United Arab Emirates (UAE), Brazil, Kyrgyzstan, and Belarus. Of these, only two BITs have been enforced, those with UAE and Belarus. 

The Centre is negotiating such treaties with over 30 countries. The current clause in the model framework — that investors will exhaust local remedies for five years before going for arbitration, among other provisions — has not gone down well with many countries. 

India is currently reviewing its model framework. 

Presenting the Union Budget for 2025-26, Finance Minister Nirmala Sitharaman had said: “To encourage sustained foreign investment and in the spirit of ‘first develop India’, the current model BIT will be revamped and made more investor-friendly.” 

India, however, has a new investment incentive agreement (IIA) with the US. Signed in 2022, it replaced the earlier pact signed between the two countries in 1997. 

Key developments had taken place since the IIA of 1997, including the creation of a new agency called DFC, as a successor of the erstwhile Overseas Private Investment Corporation. 

The agreement is a legal requirement for DFC to continue providing investment support in India.