Govt to overhaul bilateral treaties to woo foreign investors
Govt to overhaul bilateral treaties to woo foreign investors The Financial Express
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Revisiting Bilateral Investment Treaties to Create an Investor-Friendly Climate
The government has decided to review its approach to bilateral investment treaties (BITs) in order to create a more investor-friendly climate. This decision comes as the BIT text adopted by India in 2016 has not been widely accepted by key trading partners.
Reviewing the 2016 BIT Model
The Ministry of Commerce and Industry has been tasked with reviewing the 2016 BIT model. The Prime Minister’s Office has instructed the ministry to conduct wider consultations on the subject, including meetings with lawyers and experts.
The current review aims to address the concerns of investors and examine the issues related to dispute resolution and taxation in the BIT text.
Challenges and Impediments
Global investors have expressed dissatisfaction with the longer period mandated for dispute resolution through local means before seeking international arbitration. Additionally, the current BIT text does not provide redress on taxation matters, which can jeopardize investments.
Only 7 BITs have been signed based on the revised BIT text, while India is seeking such pacts with at least another three dozen countries. The BIT text has also become an impediment during India’s Free Trade Agreement (FTA) negotiations, including those with the UK.
Promoting Sustained Foreign Investment
The Finance Minister, Nirmala Sitharaman, stated in her interim-budget speech that bilateral investment treaties are being negotiated to encourage sustained foreign investment. India aims to attract $100 billion gross Foreign Direct Investment (FDI) per year in the next five years.
Allocation of Business Rules
Although investment treaties fall under the domain of the Department of Economic Affairs in the Ministry of Finance, the task of reexamining the text has been given to the Ministry of Commerce. This is because investment issues often arise during trade agreement negotiations.
Revised Model Text
The 2016 model treaty replaced earlier approaches that focused on protecting foreign investment rather than the regulatory powers of the state. The revised text was a response to the surge in BIT claims filed against India between 2011 and 2016. As a result, India unilaterally terminated 68 out of the 74 treaties signed until 2015 and sought renegotiations based on the revised text.
The countries that have signed BITs with India based on the revised text include the United Arab Emirates (UAE), Belarus, Brazil, Kyrgyz Republic, and Uzbekistan. However, none of the major FDI-source countries are on the list.
Current BIT Negotiations
India is currently discussing and negotiating BITs with various countries, including the UK, European Union, Australia, Switzerland, Oman, Israel, Qatar, Tajikistan, Russia, Saudi Arabia, Mexico, Hong Kong, Mauritius, and others. The European Free Trade Association (EFTA), with which India has signed an agreement for $100 billion investment in 15 years, may also request a BIT.
Challenges in the Model BIT
Experts point out that the model BIT requires investors to seek local solutions for at least five years before resorting to arbitration. This makes it challenging for other countries to enter into new BITs. In contrast, other countries’ BIT models do not impose such restrictions on taking disputes to international arbitration. Some countries even offer stability in the direct tax regime to protect investor interests. The predictability of direct taxes is sought by some countries in BITs to avoid disruptions in supply chains due to cost increases in one country.
Experts also highlight other flaws in the BIT text, such as the narrow definition of ‘investment,’ vague terms, and the omission of principles like ‘fair and equitable treatment’ and Most-Favored Nation status.
SDGs, Targets, and Indicators Analysis
1. SDGs Addressed or Connected to the Issues Highlighted in the Article
- SDG 8: Decent Work and Economic Growth
- SDG 16: Peace, Justice, and Strong Institutions
- SDG 17: Partnerships for the Goals
The issues highlighted in the article are related to creating an investor-friendly climate, revisiting bilateral investment treaties (BITs), and attracting foreign direct investment (FDI).
2. Specific Targets Under Those SDGs Based on the Article’s Content
- SDG 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7% gross domestic product growth per annum in the least developed countries
- SDG 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all
- SDG 17.3: Mobilize additional financial resources for developing countries from multiple sources
The article mentions the government’s aim to attract $100 billion gross FDI per year in the next five years, which aligns with SDG 8.1. It also discusses the need to review BITs to address concerns of investors, which relates to SDG 16.3. Additionally, the article highlights the importance of partnerships and negotiations with foreign partners to encourage sustained foreign investment, which connects to SDG 17.3.
3. Indicators Mentioned or Implied in the Article to Measure Progress towards the Identified Targets
- Amount of gross FDI attracted per year
- Number of revised BITs signed with key trading partners
- Number of successful investment facilitation provisions in trade agreements
The article mentions the target of attracting $100 billion gross FDI per year, which can be measured by tracking the actual amount of FDI received annually. The number of revised BITs signed with key trading partners can be used as an indicator to measure progress in addressing investor concerns. Additionally, the presence of investment facilitation provisions in trade agreements can indicate successful partnerships and negotiations.
Table: SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 8: Decent Work and Economic Growth | Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7% gross domestic product growth per annum in the least developed countries | Amount of gross FDI attracted per year |
| SDG 16: Peace, Justice, and Strong Institutions | Promote the rule of law at the national and international levels and ensure equal access to justice for all | Number of revised BITs signed with key trading partners |
| SDG 17: Partnerships for the Goals | Mobilize additional financial resources for developing countries from multiple sources | Number of successful investment facilitation provisions in trade agreements |
Behold! This splendid article springs forth from the wellspring of knowledge, shaped by a wondrous proprietary AI technology that delved into a vast ocean of data, illuminating the path towards the Sustainable Development Goals. Remember that all rights are reserved by SDG Investors LLC, empowering us to champion progress together.
Source: financialexpress.com
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