Context
-
- India is reportedly revising its Model Bilateral Investment Treaty (BIT), originally adopted in 2015.
- The 2015 Model BIT emerged after several foreign investors initiated BIT claims against India.
- India subsequently terminated several existing BITs and used the 2015 model as the basis for negotiating new treaties.
- However, India has concluded only a handful of BITs based on the 2015 model, indicating limitations in its approach.
- The current debate is therefore about balancing foreign investment protection with the State’s right to regulate.
Why Revise the 2015 Model BIT?
A. Model is tilted towards State Regulation
The 2015 model strongly protects India’s regulatory autonomy.
This may reassure the State but can reduce the attractiveness of India as an investment destination because foreign investors seek:
-
- Legal certainty
- Predictable regulations
- Effective dispute settlement
- Protection against arbitrary State action
B. Investment Protection vs Regulatory Sovereignty
BITs essentially seek to balance two competing objectives:
Investor protection ↔ State’s right to regulate
The article argues that India’s model has tilted too heavily towards the latter.
C. Broader Investment Climate
Foreign investors may also face:
-
- High regulatory risks
- Governance concerns
- Delays in judicial processes
- Uncertainty in dispute resolution
Therefore, BIT reform can contribute to investment confidence and ease of doing business.
Two Dimensions of BIT Reform
A. Substantive & Procedural Reform
The article notes considerable attention has been given to:
-
- Making international arbitration more accessible for treaty claims.
- Strengthening substantive protections for foreign investment.
- Improving investment-facilitation measures.
B. Democratic Accountability
This aspect requires greater attention.
Investment treaties can significantly affect citizens because foreign investment may involve:
-
- Public resources
- Environment
- Land
- Infrastructure
- Public services
- Regulatory policies
If treaties are negotiated mainly by executive authorities behind closed doors, it can create a “democratic deficit.”
What is Democratic Deficit in BITs?
Democratic deficit = inadequate oversight and participation of citizens, Parliament and relevant stakeholders in treaty-making.
Possible problems:
-
- Limited parliamentary scrutiny
- Closed-door negotiations
- Insufficient involvement of experts and civil society
- Limited public consultation
International Examples
-
- United Kingdom and Australia: negotiated treaty texts are placed before Parliament before ratification.
- Norway: conducted public consultations on updated Model BIT drafts.
- Colombia: released its Model BIT for public consultation.
- India: its 2015 draft Model BIT was also placed in the public domain for comments.
What Should India’s New BIT Framework Achieve?
Investment-Friendly + Constitutionally Accountable
A revised framework should ensure:
Investor confidence + Policy space + Transparency + Democratic participation
It should:
-
- Provide credible protection to foreign investors.
- Preserve legitimate regulatory space.
- Improve dispute-resolution mechanisms.
- Reduce ambiguity in treaty provisions.
- Prevent arbitrary State action.
- Increase transparency in treaty negotiations.
Way Forward
-
- Establish a core expert group comprising international lawyers, economists, academics and foreign-investment specialists.
- Consult industry bodies, arbitrators, law firms and civil society.
- Release the draft Model BIT for public consultation.
- Place the final draft before Parliament and relevant parliamentary committees.
- Make consultation a meaningful participatory process, rather than a procedural formality.
- Incorporate safeguards against both investor abuse and excessive State discretion.
Conclusion
India needs a balanced reset of its BIT policy. The objective should not simply be to make the treaty more investor-friendly or State-friendly, but to create a framework that provides predictability to investors while preserving legitimate public-interest regulation. Investment protection must coexist with regulatory sovereignty and democratic accountability.
Spread the Word