India-UAE Bilateral Investment Treaty: Innovative Elements in Future BIT Agreements
The 2024 India-UAE Bilateral Investment Treaty (BIT) marks a significant shift in India's approach to investment treaties, reflecting a commitment to modernized investment protection while preserving regulatory autonomy and promoting economic cooperation.
Key Changes in the 2024 India-UAE BIT
- Narrower Protection Standards: Unlike earlier treaties, the 2024 BIT omits the principles of "fair and equitable treatment" and "most-favored nation" treatment, providing a narrower suite of protection for investors. This new framework aims to clarify and simplify protections while ensuring strategic concessions to key trading partners like the UAE.
- Reduced Waiting Period for Local Remedies: The treaty shortens the mandatory waiting period for exhausting local legal remedies from five years to three years. This change reflects a more flexible yet cautious approach, balancing the need to protect public funds and reduce legal costs with the option for investors to seek international arbitration.
- Selective Concessions: The 2024 BIT demonstrates India's strategy of offering selective concessions to important trading partners. This approach allows for tailored negotiations that align with India's economic interests without compromising its regulatory space.
Reflection of India's Approach
India's approach to BITs has evolved significantly since 2016, when it began to rebalance its investment treaty regime. Key aspects of this approach include:
- Protection of Public Interests: India seeks to safeguard public funds by requiring investors to exhaust local legal remedies before pursuing international arbitration, reducing costly legal battles.
- Balancing Investor Confidence: The country aims to attract foreign investment while maintaining domestic policy space, ensuring that investor rights are balanced with regulatory needs.
- Customized Partnerships: India uses BITs to craft partnerships tailored to the economic strengths of its partner countries, allowing for more flexible and strategic agreements compared to multilateral frameworks.
Additional Provisions in the 2024 BIT
- The 2024 BIT guarantees national treatment with a carve-out for discrimination between national and foreign investors/investments for legitimate regulatory purposes.
- The treaty imposes a series of new obligations on investors, including an explicit obligation to refrain from engaging in bribery or related offenses, provide information required by the relevant laws, and incorporate internationally recognized corporate social responsibility standards in their operations.
- In the 2024 BIT, a tribunal can only award monetary compensation which is limited to actual loss, and incidental and consequential damages including future losses are excluded.
- The 2024 BIT guarantees full protection and security limited to the physical security of the investment.
- Awards made under the 2024 BIT shall be considered to be commercial for purposes of Article 1 of the NYC.
- The treaty introduces a precondition to exhaust local remedies for a period of three years before initiating investment arbitration, less onerous than the 2016 Model BIT's five-year local remedies period.
- Any natural or juridical person can be an investor under the 2024 BIT, and it includes any entity controlled directly or indirectly by the relevant government or sub-national government in the definition of investor.
- The 2024 BIT omits two key standards of protection commonly found in many other investment treaties: fair and equitable treatment and most-favored nation.
- Each party is required to provide for the enforcement of an award made under the 2024 BIT under its domestic laws.
- The treaty guarantees protection against direct and indirect expropriation with specific stipulations as to the standard of compensation to which the investor would be entitled.
- Arbitrations must be seated in a country that is party to the New York Convention (NYC).
- The 2024 India-UAE bilateral investment treaty replaced the 2013 BIT and came into force on August 31, 2024.
In conclusion, the 2024 India-UAE BIT represents a strategic shift in India's investment treaty policy, emphasizing a balance between investor rights and public interests, while fostering economic cooperation and promoting customized partnerships with key trading partners.
- The 2024 India-UAE BIT, focusing on business and finance, showcases India's commitment to investing by offering a tailored approach that balances investor confidence with regulatory autonomy.
- As part of this new investment treaty, India has set standards in the industry by realigning protection principles, promoting economic cooperation, and ensuring regulatory space for key partners such as the UAE.
