Report No. 260

Analysis of the 2015 Draft Model Indian Bilateral Investment Treaty

Chapter-I

Background to the Report

1.1 India's bilateral investment treaty (BIT) programme1 is part of a larger trade and investment agenda of the Indian government to boost investor confidence and increase investment flows into and out of the country. India launched the programme by signing its first BIT with the United Kingdom (UK) in 1994, signing nearly 50 BITs over the next decade or so.

Around 2003, India decided to review its BIT programme, and created a Model BIT2 (referred to as the '2003 Model' in this Report). The 2003 Model formed the basis for conducting subsequent BIT negotiations between India and other countries.

1 Bilateral Investment Treaties (BITs) are sometimes also referred to as Bilateral Investment Promotion and Protection Agreements (BIPAs) by the Indian finance ministry (see
http://finmin.nic.in/bipa/bipa_index.asp). For the sake of consistency, this Report maintains the term 'BIT' or 'BITs' throughout.

2 India 2003 Model BIT, available at: http://www.italaw.com/investment-treaties . The reference to 2003 is based on the date provided by the ITA law website, i.e., the source for the model text.

1.2 India has signed 83 BITs till date,3 of which 74 are in force. India has also entered into Free Trade Agreements which have a dedicated chapter on investment, that are substantially similar to the standalone BITs. Eleven such FTAs with a chapter on investment are in force as on date.4

3 Gourab Banerji; GAR Investment Treaty Know-How, India (Adwaita Sharma, George Pothan and Sriharsha Peechara), 2015.

4 Gourab Banerji; GAR Investment Treaty Know-How, India (Adwaita Sharma, George Pothan and Sriharsha Peechara), 2015.

1.3 At present, India is negotiating FTAs containing investment chapters with Indonesia, Australia, Mauritius, New Zealand,5 and the European Union.6 It is also negotiating a BIT with Canada.7 An ongoing negotiation with the United States on a BIT began in 2009, but is yet to conclude; although a 2013 summit meeting of the US President and the Prime Minister of India saw the two leaders reaffirming their commitment to conclude a high-end BIT aimed at fostering openness to invest.8

5 Ministry of Commerce and Industry, 'India's Current Engagements in RTAs', Government of India, available at:
http://commerce.nic.in/trade/international_ta_current.asp

6 Luxembourg for Early Conclusion of India-EU FTA, Economic Times, 16 October 2012, available at:
http://articles.economictimes.indiatimes.com/2012-10-16/news/34498965_1

7 Canada-India Foreign Investment Promotion and Protection Agreement (FIPA) Negotiations, available at:
http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/fipa-apie/india-inde.aspx?lang=eng

8 Joint Statement on Prime Minister's Summit Meeting with President Barack Obama in Washington D.C, Ministry of External Affairs, Government of India, 27 September 2013, available at:
http://www.mea.gov.in/bilateral-documents.htm?dtl/22265

1.4 From 1994, when India started its BIT programme, until the end of 2010, BITs in India did not attract much attention. India also had only marginal involvement with Investment Treaty Arbitration (ITA), which refers to the dispute resolution mechanism available under BITs.9 During this period, India was involved in only one ITA dispute, and even this dispute did not result in an ITA award (there are, however, a few non-ITA arbitral awards).

Capital India Power Mauritius I v. Maharashtra Power Dev. Corp., Case No. 12913/MS, Award (ICC Int'l Ct. Arb. 2005), available at:
http://italaw.com/documents/Dabhol_award_050305.pdf;
Expropriation Claim of Bank of America (Trustee), Contract of Insurance No. F041, Memorandum of Determinations at 25 (OPIC 2003), available at:
http://www.opic.gov/sites/default/files/docs/BankofAmericaColumbia032404.pdf

9 Deepak Raju and Prabhash Ranjan, 'BIT of a problem down under', Indian Express, 17 October 2011, available at:
http://archive.indianexpress.com/news/bit-of-a-problemdown-under/860705/

1.5 The period after 2010 saw a surge in India's involvement with ITA.11 Towards the end of 2011, India received its first adverse award in relation to a BIT in the White Industries Australia Limited v. Republic of India Case.12 The tribunal found that India had violated its obligations to the investor under the India-Australia BIT. This Award holds significance as the first known ITA Award against India.13

11 Prabhash Ranjan, Can BIT Claims Be Made Against India for the Actions of the Indian Judiciary?, National Law University of Jodhpur Law Review, Volume 1, 2013, pp 87-92.

12 In the Matter of an UNCITRAL Arbitration in Singapore under the Agreement Between the Government of Australia and the Government of the Republic of India on the Promotion and Protection of Investments between White Industries Australia Limited and the Republic of India, available at:
http://www.italaw.com/sites/default/files/case-documents/ita0906.pdf

13 For more on this award, see Prabhash Ranjan, 'The White Industries Arbitration: Implications for India's Investment Treaty Programme', Investment Treaty News, April 2012, Volume 2, Issue 3, pp 13-14, available at:
http://www.iisd.org/pdf/2012/iisd_itn_april_2012_en.pdf;
Manu Sanan, 'The White Industries Award: Shades of Grey', Journal of World Investment and Trade, 2012, Volume 13, Issue 4, pp 661; Patricia Nacimiento and Sven Lange, 'White Industries Australia Limited v. Republic of India', ICSID Review, Fall 2012, Volume 27, Issue 2, pp 274-280.

1.6 Besides the White Industries award, India has received numerous ITA notices from various investors and under various BITs. Claims by foreign investors against India have included challenges to various regulatory measures such as cancellation of telecom licences and imposition of retrospective taxes. As on date, there are fourteen known pending proceedings of claims brought against India.14

14 Gourab Banerji; GAR Investment Treaty Know-How, India. (Adwaita Sharma, George Pothan and Sriharsha Peechara), 2015; Indian Tax Dispute, 10 April 2015, available at:
http://www.cairnenergy.com/index.asp?pageid=27&newsid=471;
Business Standard, 'Cairn Energy files arbitration notice in Indian tax dispute', 12 March 2015, available at:
http://www.business-standard.com/article/companies/cairn-energy-files-arbitration-notice-in-indian-tax-dispute-115031100955_1.html

1.7 As a result of the adverse White Industries award and the ITA notices under different BITs,15 there is renewed focus on India's BIT programme. For instance, questions have been raised about balancing investment protection with India's regulatory power, compelling India to re-think its BIT programme.16

15 Gourab Banerji; GAR Investment Treaty Know-How, India. (Adwaita Sharma, George Pothan and Sriharsha Peechara), 2015.

16 Prabhash Ranjan, 'India and Bilateral Investment Treaties - A Changing Landscape', 2014, ICSID Review, pp 1-32.