PMO wants review text of bilateral investment treaties

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The Prime Minister’s Office (PMO) has directed the commerce ministry to review the model text of bilateral investment treaties (BIT) and propose enhancements to improve the business environment, according to media reports. This initiative is crucial as only seven nations have endorsed the current model text, with many developed countries expressing reservations, particularly regarding dispute resolution provisions.

BITs play a vital role in safeguarding and fostering investments between nations. They hold significance for India, especially after experiencing losses in international arbitration cases involving Vodafone and Cairn Energy plc due to retrospective tax levies.

According to media reports, the commerce ministry will conduct an internal discussion on the treaty’s model text with experts and legal professionals. They indicated that the PMO is actively involved and seeks an impartial assessment from the commerce ministry.

Although BITs typically fall under the jurisdiction of the finance ministry, the commerce ministry aims to gather diverse perspectives and propose recommendations to higher authorities.

Investment facilitation is a crucial aspect of the ongoing negotiations for a free trade agreement led by the commerce ministry. The BIT remains a contentious issue between India and the UK, especially amid their ongoing negotiations for a free trade agreement.

Experts anticipate that the European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway, and Switzerland, will also seek BIT inclusion.

Recently, India and EFTA inked a free trade agreement, securing an investment commitment of USD 100 billion over 15 years while facilitating trade in various goods.

Economic analysts emphasize the need for India to align its investment treaties with global standards to dispel negative perceptions stemming from previous treaty cancellations and to enhance its negotiation prowess.

With India renegotiating BITs with several countries using the restrictive 2016 Model BIT, experts foresee prolonged negotiations due to its narrow scope and exclusion of critical principles like ‘fair and equitable treatment’ and Most-Favoured Nation status.

Finance Minister Nirmala Sitharaman highlighted India’s ongoing negotiations for bilateral investment treaties with various countries during her interim Budget speech on February 1.