India wants to replace 47 BITs with a new BIT model

It has recently been reported that India has notified 47 countries with which it has concluded bilateral investment treaties (BITs) that those BITs will not be renewed, but rather should be replaced with its new model BIT text. This new model BIT text was adopted by the Indian government last year. Although, the specific countries are not named, the report claims that also some European countries are among them. The main aim of the new model BIT text is to exclude the possibility for foreign investors to use investor-state dispute settlement by requiring foreign investors to first exhaust all local judicial and administrative remedies before being allowed to use international arbitration (Art. 14.3). Considering the fact that the Indian judicial and administrative system is one of the slowest one in the world, this in effect boils down to a denial of access to international arbitration and thus to a denial of a fair, independent and speedy resolution of the dispute. Another aim of the “reform” contained in the new model BIT text is that any claims of foreign investors concerning tax measures are explicitly fully excluded (Art. 2(3)(iv)). This is a direct consequence of India’s retroactive imposition of huge tax bills on foreign companies (such as in the on-going Vodafone v. India case), which in turn have initiated investment arbitration proceedings against India in order to obtain compensation.

In short, with these new BITs India intends to increase its policy space, while at the same time reduce its risk of exposure of receiving claims by foreign investors. It remains to be seen whether or not the other countries will accept India’s new model BIT. Either way, foreign investor should take these developments as a serious sign that their investments in India are endangered. Consequently, foreign investors should seize now the window of opportunity to restructure their investments in order to maintain the most optimal BIT protection.

GIP AG is ready to assist you on how to obtain the best BIT protection.