India will not renew an investment treaty with the Netherlands that will expire on November 30 as part of its plan to rework all similar pacts it signed with other countries.
The move has raised unease among many countries and the European Commission took up the matter with the Indian government last week, sources said. The concerns also include the impact the Indian position would have on negotiations for a tree trade pact between India and the European Union.
Indian government officials told Hindustan Times every partner country is aware that India is re-modeling bilateral investment treaties (BIT) and engaged in ‘conversations’ with them. These countries include France, Germany, the United Kingdom and Sweden.
At the heart of the contention is the Indian position that a foreign firm should first exhaust all legal options available in India for resolving disputes before seeking international arbitration.
India’s stand comes in the wake of the capital gains tax dispute between UK-based telecom firm Vodafone and Indian tax authorities in 2014 and a clutch of similar cases of international arbitration.
Vodafone International Holdings, a Dutch subsidiary of Vodafone, had challenged the capital gain tax demand worth more than $2 billion for acquiring 67% controlling interest in Hutchison Essar Limited in 2007 through arbitration.
“These investment treaties should also factor in the reality that Indian legal process is often lengthy,” a European diplomat, who didn’t wish to be named, said.
The diplomat also said “fair and equitable treatment (of investment) clauses has been “substantially narrowed”.
Indian officials, however, maintained that even in the absence of a treaty the investments would get protection for an additional time frame.
“The treaties have sunset clauses. That means all investments made before the lapse or termination of the pact will get a grace period. That is good enough time for India to rework the pacts with these countries,” an official said.
“We have issued a model BIT and we have engaged in conversation, a treaty is signed after both the parties agree to the terms and conditions,” another official said.