{"id":81106,"date":"2026-08-08T20:45:20","date_gmt":"2026-08-08T15:15:20","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=81106"},"modified":"2026-08-08T20:46:22","modified_gmt":"2026-08-08T15:16:22","slug":"model-bilateral-investment-treaty","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/08-08-2026\/model-bilateral-investment-treaty","title":{"rendered":"India\u2019s Model Bilateral Investment Treaty"},"content":{"rendered":"\n<p><strong>Syllabus: GS2\/IR<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The GoI is evaluating its Model Bilateral Investment Treaty (BIT) to make the investment treaty environment more investor-friendly and conducive, while safeguarding India\u2019s sovereign regulatory space.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is a Bilateral Investment Treaty (BIT)?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A Bilateral Investment Treaty (BIT) is an <strong>agreement between two countries to facilitate and protect investments <\/strong>by investors from one country into the other.<\/li>\n\n\n\n<li><strong>The BIT provides legal safeguards,<\/strong> for example protection from expropriation, fair treatment and dispute settlement procedures.<\/li>\n\n\n\n<li>BITs are designed to promote investor trust and <strong>encourage foreign direct investment (FDI).<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Features of Bilateral Investment Treaties<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>National Treatment: <\/strong>Foreign investors are not treated less favourably than those of the domestic country.<\/li>\n\n\n\n<li><strong>Fair and Equitable Treatment (FET): <\/strong>The host State shall not treat investors arbitrarily or discriminatorily.<\/li>\n\n\n\n<li><strong>Free Movement of Capital Investment:\u00a0 <\/strong>The rules state that gains, dividends and capital may be freely moved across national borders.<\/li>\n\n\n\n<li><strong>Dispute settlement mechanism: <\/strong>It provides for settlement of issues between investors and host states or between states.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>India&#8217;s Progress on BITs<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Evolution of India&#8217;s BIT Framework:<\/strong> India signed its first <strong>Model BIT in 1993, <\/strong>which was amended in<strong> 2003.<\/strong>\n<ul class=\"wp-block-list\">\n<li>Following several international arbitration disputes, India adopted a <strong>new Model BIT in December 2015, <\/strong>which became operational in <strong>2016.<\/strong><\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Recent Developments: <\/strong>India has signed BITs or investment agreements with countries such as; Belarus, Kyrgyz Republic, United Arab Emirates, Uzbekistan and Brazil (through an Investment Cooperation and Facilitation Treaty).<\/li>\n\n\n\n<li><strong>In Budget 2025-26,<\/strong> the Government announced a review of the BIT framework to make it more investor-friendly while safeguarding national interests.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Why is India revising its Model BIT?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Net FDI inflows: <\/strong>Net FDI dropped from an average of almost<strong> $40 billion <\/strong>in FY20-FY22 to $7.65 billion in FY26.<\/li>\n\n\n\n<li><strong>Growing outbound investment: <\/strong>Indian enterprises are investing more abroad and need protection in foreign jurisdictions.<\/li>\n\n\n\n<li><strong>Improve investor confidence: <\/strong>A predictable and balanced investment environment will sustain long-term capital inflows.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Key Features of the Proposed New BIT Model<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Two-Year Local Remedies Requirement: <\/strong>Foreign investors are required to pursue remedies within India&#8217;s domestic legal system for <strong>at least two years <\/strong>before initiating international arbitration.\n<ul class=\"wp-block-list\">\n<li>For certain partner countries, a shorter <strong>one-year cooling-off period<\/strong> may also be considered during negotiations.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>No Most-Favoured Nation (MFN) Clause:<\/strong> The revised model is likely to exclude the Most-Favoured Nation (MFN) clause.\n<ul class=\"wp-block-list\">\n<li>MFN clauses <strong>allow investors to claim more favourable treatment<\/strong> available under India&#8217;s treaties with other countries.<\/li>\n\n\n\n<li>It is believed that removing the clause will <strong>reduce treaty-shopping <\/strong>and legal uncertainties.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Taxation Matters Excluded: <\/strong>Tax-related disputes will remain outside the scope of investment treaties.\n<ul class=\"wp-block-list\">\n<li>This approach is influenced by past arbitration cases involving foreign companies such as<strong> Vodafone Group and Cairn Energy.<\/strong><\/li>\n\n\n\n<li>The government maintains that <strong>taxation is a sovereign policy matter <\/strong>and should <strong>not be subject to investor-state arbitration.<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What are the concerns?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Investor Concerns: <\/strong>The provisions of<strong> <\/strong>mandatory exhaustion of local remedies before international arbitration may increase costs and delays. Also <strong>lengthy judicial processes<\/strong> can discourage foreign investors.\n<ul class=\"wp-block-list\">\n<li><strong>The absence of a Most-Favoured Nation (MFN)<\/strong> clause will reduce investor protections available under other treaties.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>India&#8217;s Concerns: Excessive investor rights<\/strong> constrain legitimate public policy measures and also <strong>Investor-State Dispute Settlement (ISDS) <\/strong>mechanisms challenge sovereign regulatory actions.\n<ul class=\"wp-block-list\">\n<li><strong>International arbitration awards <\/strong>may impose significant financial liabilities on governments.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Global Trends in Investment Dispute Settlement<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Shift Away from Traditional ISDS: <\/strong>Many countries are reconsidering traditional Investor-State Dispute Settlement mechanisms.\n<ul class=\"wp-block-list\">\n<li>For example, the BIT between Australia and the United Arab Emirates adopts <strong>State-to-State Dispute Settlement (SSDS)<\/strong> instead of ISDS. Under SSDS, disputes are resolved between governments rather than directly between investors and host states.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Way Ahead<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A balanced BIT approach is required respecting India\u2019s regulatory sovereignty and policy space and protecting investor interests.<\/li>\n\n\n\n<li>Build investor confidence in domestic legal institutions, including strengthening commercial courts and contract enforcement.<\/li>\n\n\n\n<li>Promote the employment of procedures of mediation, conciliation and resolution of disputes between States as an alternative to expensive arbitration.<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.thehindu.com\/business\/Industry\/revamp-of-model-bilateral-investment-treaty-in-works-to-be-presented-to-cabinet-soon-secy\/article71319094.ece\" target=\"_blank\" rel=\"noopener\"><strong>TH<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong> Context <\/strong><\/p>\n<li class=\"ms-5\"> The GoI is evaluating its Model Bilateral Investment Treaty (BIT) to make the investment treaty environment more investor-friendly and conducive, while safeguarding India\u2019s sovereign regulatory space. <\/li>\n<p><\/p>\n<p><strong> What is a Bilateral Investment Treaty (BIT)? <\/strong><\/p>\n<li class=\"ms-5\"> A Bilateral Investment Treaty (BIT) is an agreement between two countries to facilitate and protect investments by investors from one country into the other. <\/li>\n<li class=\"ms-5\"> The BIT provides legal safeguards, for example protection from expropriation, fair treatment and dispute settlement procedures. <\/li>\n<p><a href=\" https:\/\/www.nextias.com\/ca\/current-affairs\/08-08-2026\/model-bilateral-investment-treaty \" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-81106","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/81106","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=81106"}],"version-history":[{"count":2,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/81106\/revisions"}],"predecessor-version":[{"id":81109,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/81106\/revisions\/81109"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=81106"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=81106"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=81106"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}