Institutional Innovation in Investment Treaties: The India-EFTA TEPA Model and Alternative Frameworks for Dispute Prevention – Wolters Kluwer

Report on India-EFTA Trade and Economic Partnership Agreement (TEPA) and Its Alignment with Sustainable Development Goals (SDGs)

Introduction

On 1 October 2025, India’s Trade and Economic Partnership Agreement (TEPA) with the European Free Trade Association (EFTA) entered into force, introducing an innovative institutional framework that transcends traditional investor-state dispute settlement (ISDS) mechanisms. TEPA operationalizes binding government investment commitments amounting to USD 100 billion over 15 years, supported by dedicated facilitation infrastructure—the India-EFTA Desk—and preventive dispute settlement mechanisms. This framework represents a pragmatic shift from arbitration-centric investment treaty design.

TEPA’s Strategic Shift and Sustainable Development Goals

TEPA addresses contradictions in India’s prior investment treaty strategies, particularly in light of costly arbitration losses in cases such as Vodafone (2012) and Cairn Energy (2020), which resulted in significant tax liabilities. The agreement’s design aligns with multiple Sustainable Development Goals, including:

• SDG 8: Promote sustained, inclusive economic growth and decent work for all through increased foreign direct investment (FDI) and job creation.
• SDG 9: Build resilient infrastructure and foster innovation by targeting priority sectors such as renewable energy, life sciences, engineering, and digital transformation.
• SDG 16: Promote peaceful and inclusive societies through transparent and accountable dispute resolution mechanisms.

Institutional Pillars of TEPA

1. Binding Investment Commitments and Government Credibility Signalling

1. Commitment Framework: Article 7.1 mandates EFTA states to direct USD 100 billion in FDI over 15 years, creating enforceable obligations subject to state-to-state dispute settlement.
2. Reciprocal Accountability: Both India and EFTA states share mutual responsibility, enabling India to initiate disputes if investment targets are unmet.
3. Sectoral Targeting: Focus on renewable energy, life sciences, engineering, and digital transformation aligns with SDGs by promoting sustainable industries and innovation.
4. Economic Impact: For example, Switzerland’s CHF 10 billion investment in India has generated over 146,000 jobs in precision industries, chemicals, and pharmaceuticals, supporting SDG 8.

2. Institutional Mechanisms and Preventive Dispute Architecture: The India-EFTA Desk Model

1. Single-Window Facilitation: The Desk provides pre-investment guidance, regulatory mapping, and implementation support to minimize information asymmetries and regulatory uncertainties.
2. Sector-Specific Guidance: Covers renewable energy certificate trading, compliance with renewable purchase obligations, drug approvals, medical device classification, and industrial licensing.
3. Efficiency Improvements: Clearance timelines reduced from 120-180 days to 45-60 days, accelerating capital deployment and supporting SDG 9.
4. Conflict Prevention: Early intervention mechanisms reduce potential disputes, saving litigation costs and fostering stable investment environments.

3. Dispute Resolution Frameworks and Operational Performance: Government-to-Government (G2G) Mechanisms

1. Diplomatic Negotiation Focus: TEPA replaces traditional ISDS arbitration with G2G consultations via Joint Committee structures, promoting cooperative problem-solving.
2. Mutual Responsibility: Enables India to address investor breaches of environmental and labor regulations directly with home states, reinforcing SDG 12 (Responsible Consumption and Production) and SDG 8 (Decent Work).
3. Operational Success: Between October and December 2025, TEPA witnessed significant investment interest in renewable energy and life sciences, with minimal disputes, indicating effective preventive architecture.
4. Global Influence: The TEPA model has attracted interest from emerging markets such as Brazil, Mexico, Vietnam, and UAE for adoption in bilateral negotiations.

Comparative Analysis and Implications for Bilateral Investment Treaty (BIT) Architecture

• Accountability: Binding government commitments ensure measurable accountability for both host countries and investors, addressing regulatory and environmental responsibilities.
• Conflict Prevention: Institutional facilitation mechanisms proactively prevent disputes, reducing litigation costs estimated between USD 5-7 million per side.
• Diplomatic Flexibility: G2G consultations maintain diplomatic relations and enable resolutions beyond monetary compensation, fostering long-term cooperation.
• Policy Recommendations for Emerging Markets:
  • Institutionalize facilitation mechanisms with clear response times and performance accountability.
  • Establish binding, gradual investment commitments focused on impactful sectors aligned with SDGs.
  • Design dispute prevention mechanisms preceding arbitration access.
  • Incorporate G2G mechanisms to balance investor protection with sovereign regulatory autonomy.

Conclusion

TEPA represents a transformative approach to international investment agreements by balancing investor protection with sovereign regulatory autonomy, aligning closely with Sustainable Development Goals. The agreement’s binding commitments, facilitation infrastructure, and government-to-government dispute resolution mechanisms collectively enhance government credibility, reduce regulatory uncertainty, and promote sustainable economic growth. The replicability of the TEPA model in other emerging markets signals a potential paradigm shift in investment treaty frameworks, emphasizing facilitation, accountability, and diplomatic resolution as central pillars for sustainable development and international cooperation.

1. Sustainable Development Goals (SDGs) Addressed or Connected

1. SDG 7: Affordable and Clean Energy
   • The article highlights renewable energy as a priority sector under TEPA, including renewable energy purchase obligations, grid connectivity protocols, and renewable energy certificate trading.
2. SDG 8: Decent Work and Economic Growth
   • TEPA’s binding investment commitments and facilitation mechanisms aim to increase foreign direct investment (FDI), create jobs, and promote sustained economic growth.
   • Example: Switzerland’s investment creating 146,530 jobs in precision industries, chemicals, and pharmaceuticals.
3. SDG 9: Industry, Innovation, and Infrastructure
   • Focus on life sciences, engineering, and digital transformation as priority sectors indicates promotion of innovation and infrastructure development.
4. SDG 16: Peace, Justice, and Strong Institutions
   • The article discusses the shift from investor-state dispute settlement (ISDS) to government-to-government (G2G) dispute resolution mechanisms, promoting peaceful and inclusive societies and effective institutions.
5. SDG 17: Partnerships for the Goals
   • TEPA represents international cooperation between India and EFTA, fostering partnerships to mobilize investments and facilitate sustainable development.

2. Specific Targets Under Identified SDGs

1. SDG 7: Affordable and Clean Energy
   • Target 7.2: Increase substantially the share of renewable energy in the global energy mix.
   • Target 7.a: Enhance international cooperation to facilitate access to clean energy research and technology.
2. SDG 8: Decent Work and Economic Growth
   • Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading, and innovation.
   • Target 8.5: Achieve full and productive employment and decent work for all women and men.
3. SDG 9: Industry, Innovation, and Infrastructure
   • Target 9.2: Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and GDP.
   • Target 9.5: Enhance scientific research, upgrade technological capabilities of industrial sectors.
4. SDG 16: Peace, Justice, and Strong Institutions
   • Target 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all.
   • Target 16.6: Develop effective, accountable, and transparent institutions at all levels.
5. SDG 17: Partnerships for the Goals
   • Target 17.3: Mobilize additional financial resources for developing countries from multiple sources.
   • Target 17.9: Enhance international support for implementing effective and targeted capacity-building in developing countries.

3. Indicators Mentioned or Implied to Measure Progress

1. Investment Volume and Job Creation
   • Indicator: Total foreign direct investment inflows (e.g., USD 100 billion binding commitment over 15 years, Switzerland’s CHF 10 billion investment and 146,530 jobs created).
2. Sectoral Investment Metrics
   • Indicator: Investment levels in renewable energy, life sciences, engineering, and digital transformation sectors.
   • Indicator: Implementation of Production-Linked Incentive schemes, state land allocation, renewable energy purchase obligations, and grid connectivity.
3. Dispute Resolution Efficiency
   • Indicator: Number of disputes arising under TEPA (noted as low or none in initial months), reduction in clearance timelines from 120-180 days to 45-60 days.
   • Indicator: Time taken to resolve regulatory bottlenecks and escalation procedures (e.g., escalation within 30 days to senior government authorities).
4. Institutional Performance and Accountability
   • Indicator: Functioning of the India-EFTA Desk model in providing pre-investment guidance and implementation support.
   • Indicator: Mutual accountability mechanisms between governments in investment commitments and dispute resolution.

4. Table of SDGs, Targets, and Indicators

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