Investment treaties and free-trade deals may be separated
Sitharaman said in her budget speech that the current model of BIT will be revamped and made more investor-friendly to encourage sustained foreign investment
NEW DELHI: India may treat investment treaties separate from free trade deals so as to prevent partners from using the former as a bargaining chip to get concessions for the later and vice versa, indicating a new approach in ongoing talks with the UK , the European Union and the Eurasian Economic Union, officials said.
Negotiations for free trade agreements (FTAs) often include a separate chapter on the Bilateral Investment Treaty (BIT), which is sometimes used as a negotiating card. But trade matters are often different from issues pertaining to BITs. Investment protection treaties could be in conflict with sovereign functions such as taxation . Hence, there is a school of thought that BITs should be negotiated separately rather than as part of an FTA agreement, at least three officials with direct knowledge of the matter said.
India’s ongoing free trade talks with the EU also involve simultaneous negotiations for bilateral investment treaties (BITs). The UK is also keen on a BIT. Besides, the yet-to-be-finalised terms of reference (ToRs) for an FTA with the Eurasian Economic Union (EAEU) may also involve some kind of investment protection agreement, they added requesting anonymity. EAEU members are Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia.
That will change now, one of the officials cited in the first instance explained.
“While FTAs are in the domain of the commerce ministry, BITs are negotiated by the finance ministry, which is in the process of framing a template for future BITs,” this person added. The Union budget presented on February 1 clearly mentioned this, he 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,” finance minister Nirmala Sitharaman said in her budget speech on February 1.
The officials said the FTA talks with major economies such as the UK and the EU, which were in suspension for months, will resume soon. A delegation of the European Commission (EC) is visiting India on February 28 before resuming talks for an India-US free trade agreement (FTA) after a gap of over five months. The four-day talks, marking the 10th round, are scheduled to start from March 10 in Brussels, a second official said. The 15th negotiating round on the India-UK FTA is expected to restart from February 25 in New Delhi, the second official said.
