Why is it in the news?
- The Union Cabinet of India has given approval for the signing and ratification of a Bilateral Investment Treaty (BIT) with the United Arab Emirates (UAE).
- This treaty aims to strengthen the confidence of investors and promote increased foreign investments and Overseas Direct Investment (ODI) opportunities in India.
More about the news
- The primary objective of the BIT with the UAE is to provide a framework for protecting investments made by nationals and companies of one state (India or UAE) in the other state (UAE or India, respectively).
- It is designed to create a conducive environment for bilateral investment flows by providing legal protections and guarantees to investors.
- The existing Bilateral Investment Protection Agreement between India and the UAE is set to expire in September 2024.
- The new BIT will replace this agreement and is expected to address any shortcomings while aligning with contemporary investment practices and international standards.
- The BIT is expected to facilitate growth and employment generation by attracting increased investments, particularly in key sectors such as real estate and renewable energy.
- UAE’s status as the fourth-largest investor in India during the fiscal year 2023 underscores the importance of enhancing investment ties between the two countries.
Evolution of India’s BIT Framework
- India has signed BITs with 83 countries from the period post-1991 economic reforms up to 2015, based on the Model BIT text of 1993.
- However, in 2015, the Union Cabinet adopted a new Model BIT text due to a rise in international arbitration cases under existing BITs.
- The Model BIT of 2015 serves as a template for (re)negotiations of BITs and investment chapters of Free Trade Agreements (FTAs) and Economic Partnership Agreements.
- Key provisions of the Model BIT of 2015 include an “enterprise” based definition of investment, national treatment ensuring similar treatment as domestic investors, voluntary incorporation of internationally recognized standards of Corporate Social Responsibility (CSR), and the requirement to exhaust local remedies before commencing international arbitration for the settlement of disputes.