Reassessing Risk and Protection Under the 2024 UAE-India Investment Treaty – Middle East Briefing

Report on the 2024 UAE-India Bilateral Investment Treaty: A Framework for Sustainable Development

Introduction: Aligning Investment with Global Goals

The United Arab Emirates-India Bilateral Investment Treaty (2024 BIT), effective August 31, 2024, establishes a new legal framework governing cross-border investments. This report analyzes the treaty’s provisions, highlighting its shift towards a compliance-driven regime that integrates principles of sustainable development. The 2024 BIT balances investor protection with the host state’s right to regulate in the public interest, reflecting a clear alignment with the United Nations Sustainable Development Goals (SDGs), particularly those concerning economic growth, institutional strength, and environmental protection (SDG 8, SDG 16, SDG 17).

Core Framework and Governance

Supersession of Previous Agreements

The 2024 BIT is the sole operative instrument for new and future investments, replacing the 2014 BIT. It will remain in force until August 31, 2034, providing a stable and predictable environment for long-term investments that contribute to sustainable infrastructure and economic diversification (SDG 9, SDG 8). Investments made prior to any termination are granted a 10-year sunset protection, contingent upon compliance with the treaty’s stringent criteria.

Revised Definitions for Investment and Investors

The treaty introduces precise criteria for qualifying investments and investors, designed to ensure that protections are extended only to legitimate, economically substantial enterprises.

Protected Investment Criteria

An investment must satisfy a three-part threshold test to qualify for protection:

• A commitment of capital or resources.
• An expectation of gain or profit.
• The assumption of risk.

The treaty explicitly includes portfolio investments, a significant departure from India’s previous model BIT. This inclusion can facilitate capital flows that support economic development (SDG 8). However, all assets must be legally established under the host state’s regulatory regime, reinforcing the importance of lawful conduct (SDG 16).

Investor Eligibility Requirements

Juridical persons must demonstrate “substantial business activity” in their home state to qualify as an investor. This requirement aims to prevent treaty shopping and ensure that investment flows originate from genuine economic enterprises, contributing to decent work and economic growth (SDG 8) in the home state. Factors include:

• Physical presence and duration of operations.
• Location of central administration and management.
• Number of employees.
• Tax residence and revenue generation.

Integration of Sustainable Development Goals (SDGs)

The 2024 BIT embeds sustainable development principles by granting states robust regulatory authority and imposing clear obligations on investors.

Preserving Regulatory Space for Public Policy

The treaty contains broad carve-outs that empower both nations to enact non-discriminatory measures to protect public welfare without triggering liability. This aligns directly with several SDGs:

• SDG 3 (Good Health and Well-being): Measures related to public health are explicitly protected.
• SDG 13, 14, 15 (Climate and Environment): States retain the right to regulate for environmental protection.
• SDG 16 (Peace, Justice and Strong Institutions): Measures to maintain public order and essential security are permitted.

Furthermore, protection can be denied if an investment is associated with illicit activities such as fraud, corruption, or money laundering, reinforcing the commitment to strong and transparent institutions (SDG 16).

Exclusions Supporting the Energy Transition

The treaty excludes concession contracts for non-renewable energy from its scope of protection. This provision signals a policy direction aligned with global efforts to transition towards sustainable energy systems, supporting SDG 7 (Affordable and Clean Energy) and SDG 13 (Climate Action).

Investor Protections and Obligations

Scope of Protections

Core investor protections are retained but are narrowly defined to prevent overly broad interpretations that could hinder legitimate regulation.

• Fair and Equitable Treatment (FET): This protection is limited to a closed list of state actions, including denial of justice, due process breaches, targeted discrimination, and manifestly abusive treatment.
• Full Protection and Security: This is restricted to the physical security of the investor and investment.
• Expropriation: The treaty protects against unlawful expropriation but clarifies that non-discriminatory regulatory measures designed to protect legitimate public interests, such as health and the environment, do not constitute expropriation.

The absence of a Most-Favored-Nation (MFN) clause prevents investors from importing more favorable terms from other treaties, ensuring the specific balance struck in this agreement is maintained.

Mandatory Investor Obligations

The 2024 BIT codifies investor responsibilities, making compliance a prerequisite for treaty protection. These obligations promote responsible business conduct in line with SDG 12 (Responsible Consumption and Production) and SDG 16 (Peace, Justice and Strong Institutions).

• Adherence to all host-state laws and regulations.
• A strict prohibition on corruption and bribery.
• Compliance with all applicable tax laws.

While not mandatory, the treaty encourages adherence to Corporate Social Responsibility (CSR) principles, further promoting sustainable economic practices (SDG 8).

Dispute Resolution Framework

Prerequisites for Arbitration

The treaty establishes a rigorous, multi-stage process for dispute resolution that prioritizes local remedies and amicable settlement, contributing to stronger domestic judicial systems (SDG 16). An investor must exhaust a sequence of steps before initiating arbitration:

1. Initiate local remedies within one year of becoming aware of the disputed measure.
2. Pursue local remedies for at least three years or until they are exhausted.
3. Serve a formal notice of dispute to the host state.
4. Engage in a minimum of six months of consultations and negotiations.
5. File for arbitration within specified time limits after the conclusion of local proceedings.

The framework also prohibits third-party funding and punitive damages, aiming to reduce speculative claims and ensure proceedings are focused on actual losses.

Enforcement Challenges

Potential challenges remain regarding the enforcement of arbitral awards. India has not designated the UAE as a reciprocating territory under its domestic laws, which may create hurdles for enforcing an award issued in the UAE within India’s jurisdiction.

Conclusion: A New Paradigm for Sustainable Investment

The UAE-India 2024 BIT represents a significant evolution in investment treaty practice, creating a framework that is both predictable for investors and protective of the host state’s right to pursue sustainable development objectives. By demanding lawful structuring, genuine economic substance, and full regulatory compliance, the treaty ensures that investment protection is conditional upon responsible conduct. This model aligns international investment law with the broader 2030 Agenda for Sustainable Development, requiring investors to integrate legal compliance and SDG principles into their core operational strategies.

Analysis of the UAE-India 2024 Investment Treaty and its Connection to SDGs

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 16: Peace, Justice and Strong Institutions
   • The article’s central theme is the establishment of a new legal framework (the 2024 BIT) to govern investment relations. This directly relates to building effective, accountable, and transparent institutions. The treaty outlines specific rules, investor obligations, and dispute resolution mechanisms, all of which are core components of strengthening the rule of law at an international level. It explicitly addresses issues like corruption and legal compliance, which are central to SDG 16.
2. SDG 17: Partnerships for the Goals
   • The UAE-India Bilateral Investment Treaty is itself a partnership between two nations. It represents a coordinated effort to create a stable and predictable policy environment for cross-border investment. The article discusses how this treaty creates policy coherence by balancing investor protections with the host state’s right to regulate for public interest, which is a key aspect of achieving sustainable development through partnerships.
3. SDG 8: Decent Work and Economic Growth
   • While not the primary focus, the treaty’s purpose is to govern cross-border investments, which are a fundamental driver of economic activity, productivity, and growth. By establishing a “stricter but more predictable framework,” the treaty aims to foster a stable environment for long-term investments that can contribute to sustained economic growth in both the UAE and India.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 16.5: Substantially reduce corruption and bribery in all their forms
   • The article explicitly states that treaty protection can be denied if “The investment involves fraud, corruption, money laundering.” Furthermore, it highlights that the treaty places “binding obligations on investors,” including a “Prohibition on bribery or undue payments to public officials.” This directly aligns with the goal of reducing corruption.
2. Target 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all
   • The entire treaty is an instrument of international law. The article details the strict, codified dispute resolution process, including mandatory local remedies, amicable settlement efforts, and arbitration procedures. This structured pathway, while rigorous, is a mechanism designed to provide access to justice for investors under the rule of law established by the treaty.
3. Target 17.14: Enhance policy coherence for sustainable development
   • The article describes how the treaty balances economic objectives with sustainable development concerns. It notes that protection may be denied if “The host state adopts non-discriminatory measures tied to public morals, health, environmental protection…” and that the definition of unlawful expropriation excludes “non-discriminatory regulatory measures designed and applied to protect legitimate public interests (environment, health, etc.).” This demonstrates an attempt to ensure that investment policy is coherent with broader public policy goals.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Indicator for Target 16.5: Inclusion of explicit anti-corruption clauses in international agreements.
   • The article provides direct evidence of this indicator. It confirms the 2024 BIT includes provisions that make treaty protection conditional on compliance with anti-corruption norms. The text specifies that protection is unavailable for investments involving “fraud, corruption, money laundering” and that investors have a binding obligation prohibiting bribery. The existence of these clauses in the treaty is a measurable indicator of progress.
2. Indicator for Target 17.14: Inclusion of clauses in international agreements that safeguard national regulatory space for sustainable development.
   • The article implies this indicator by detailing the treaty’s “broad carve-outs.” It mentions that the treaty allows host states to adopt “non-discriminatory measures tied to public morals, health, environmental protection.” The presence of these specific exceptions, which preserve the state’s right to regulate for public interest, serves as a clear indicator of policy coherence for sustainable development being integrated into the investment framework.
3. Indicator for Target 16.3: Existence of formal and binding dispute resolution mechanisms in international agreements.
   • The article extensively describes the treaty’s detailed dispute resolution mechanism. The step-by-step process, from initiating local remedies to commencing arbitration, is laid out in Section 7. The existence of this codified, multi-stage process within the treaty is a tangible indicator of an institution built to promote the rule of law and provide access to justice in the context of international investment.

4. SDGs, Targets and Indicators Identified in the Article

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