Non-European Union states keen on investment agreements with India | Latest News India - Hindustan Times
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Non-European Union states keen on investment agreements with India

By, Rajeev Jayaswal
Apr 09, 2024 07:04 PM IST

Coinciding with the termination of investment treaties, the Indian government developed a model agreement after studying global good practices

New Delhi: Several non-European Union (EU) states are keen on finalising bilateral investment treaties with India to boost the potential for investments and to address concerns of investors on matters such as dispute resolution, people familiar with the matter said.

Non-EU states, which are among some 68 countries whose bilateral investment treaties were terminated by the Indian government in recent years, are also keen to finalise such pacts. (Representative photo)
Non-EU states, which are among some 68 countries whose bilateral investment treaties were terminated by the Indian government in recent years, are also keen to finalise such pacts. (Representative photo)

These efforts have got a boost following the signing last month of the Trade and Economic Partnership Agreement (TEPA) between India and the European Free Trade Association (EFTA), which comprises Iceland, Liechtenstein, Norway and Switzerland.

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The 27-member EU is negotiating an investment protection agreement with India, alongside a free trade agreement (FTA). However, non-EU states, which are among some 68 countries whose bilateral investment treaties were terminated by the Indian government in recent years, are also keen to finalise such pacts, the people said.

This includes members of EFTA such as Switzerland, which believe new investment treaties will help the four members of the bloc to deliver on the commitment to promote investments worth $100 billion into India over the next 15 years, the people added. While the EFTA members jointly signed the FTA, they will have to negotiate separate investment pacts with India.

Also Read: India, EFTA states sign trade deal to create resilient supply chains

“Investors are seen to be holding back in the absence of investment treaties and insurance premiums have gone up. There are also concerns about the lack of adequate mechanisms to settle disputes,” one of the people said.

There is also a feeling among investors that the resolution of disputes under the Indian system takes too long, the people said.

Coinciding with the termination of investment treaties, the Indian government developed a model agreement after studying global good practices, factoring in the nation’s interests and considering the need to protect investments of foreign entrepreneurs, two officials from two different ministries said requesting anonymity.

While the model agreement provides broad guidelines, it also gives flexibility to Indian negotiators, depending on reciprocity, the officials said.

Also Read: Reading the fine print of India-EFTA trade deal

“Negotiators are, however, expected to follow the spirit of the December 2015 cabinet decision on this matter,” one of them said, referring to a cabinet meeting chaired by Prime Minister Narendra Modi that approved a revised Model Text for International Investment Agreements, including independently signed bilateral investment agreements and investment chapters in any FTA.

“India is the investment destination for global investors because it is the world’s fastest growing major economy,” the second official said. Investors are no longer comfortable with China and India is the new alternative with political stability and the rule of law, he added.

While Switzerland is keen on a bilateral investment treaty with India, it wants a free hand in invoking the arbitration clause in international tribunals, which is a major departure from the model agreement of 2015, the second official said.

The first official said the model agreement of 2015 has several attractive features, such as an enterprise-based definition of investment, non-discriminatory treatment through due process, protections against expropriation, an Investor State Dispute Settlement (ISDS) provision requiring investors to exhaust local remedies before starting international arbitration, and limiting the power of a tribunal to award monetary compensation alone.

However, several countries have sought modifications in provisions of the model text, especially those related to dispute settlement, the people said.

The 2015 model also excludes sensitive areas such as government procurement, taxation, subsidies, compulsory licences and matters related to national security, the second official said. “While India welcomes FDI, it cannot sacrifice its national interest for foreign investments,” he said.

“The 1993 Model BIT text, with some amendments made in 2003, had provisions that were vulnerable to broad and ambiguous interpretations by arbitral tribunals,” the second official added.

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