bilateral investment treaty (BIT) between India AND (UAE)

 Despite some departures, the India-UAE bilateral investment treaty establishes a continuity of India’s investment treaty practice

 इस आर्टिकल में 

1. BIT and  two objectives 
2. Some issues 
3. कितने जल्दी केस का निपटारा हो पाएगा भारत में ?? 
4. definition of investment in the India-UAE BIT
5.  Article 4 of the India-UAE BIT 
6. On some issues, the India-UAE BIT goes beyond the Model  

The bilateral investment treaty (BIT) between India and the United Arab Emirates (UAE) 

which was signed earlier this year was recently made public. 

This BIT, which will replace the 2014 India-UAE investment treaty, is critical. 

It reveals India’s latest investment treaty practice and might elucidate / explain India’s ongoing negotiations with the United Kingdom and the European Union. 

 BIT and  two objectives

First, it should balance the competing goals of investment protection and the state’s sovereign right to regulate. 

Second, it should contain provisions to reduce the discretion / self decision of investor-state dispute settlement (ISDS) tribunals.

Departures from the Model

Some issues

First, कम से कम तीन साल तक स्थानीय उपायों का इस्तेमाल करना होगा

it provides that a foreign investor must exhaust local remedies for at least three years before bringing an ISDS claim.

 This period in the Model BIT and subsequent BITs that India signed with countries such as Belarus and Kyrgyzstan is five years. 

Several countries lament that five years is too long. 

कितने जल्दी केस का निपटारा हो पाएगा भारत में ??

Indian judicial system, it is unlikely that a foreign investor’s legal dispute with the state would be resolved in five years.

. This gives foreign investors quicker access to ISDS, thus, bringing the pendulum somewhat back to the pole of investment protection. 

The function of investment treaties is to safeguard foreign investment from sovereign regulatory abuse. As long as India does not indulge in regulatory abuse it need not worry about ISDS claims.

Second, the definition of investment in the India-UAE BIT 

states that for an enterprise to qualify as an investment, and thus be eligible for treaty protection, 

it should possess key economic characteristics such as a commitment of capital, profit expectation, and risk assumption. 

Thus, by removing this subjective element from the definition of investment, India and the UAE have reduced arbitral discretion. 

.

Greater clarity

Third, Article 4 of the India-UAE BIT, which talks of ‘treatment of investments’

 specifically lists when state action will taken

• As denial of justice 
• when there is a fundamental breach of due process in dealing with investment. 

These grounds are mentioned in a similar provision in the Model BIT. 

However, in the Model BIT, these grounds are linked to customary international law (CIL) whereas in Article 4 of the India-UAE BIT, there is no reference to CIL.

A continuity

India-UAE BIT establishes a continuity of India’s investment treaty practice. 

For instance, the India-UAE BIT, like the Model, does not contain the most favoured nation (MFN) provision, which is a core non-discrimination standard in international economic relations. 

Likewise, state action on taxation 

is outside the scope of the India-UAE BIT. Thus, arguably, a foreign investor cannot challenge tax measures even if they are abusive. 

This maximises the state’s regulatory power at the cost of investment protection. 

Like the Model BIT, Article 14.6(i) of the India-UAE BIT bars the jurisdiction of an ISDS tribunal to review the ‘merits’ of a domestic court decision.

 Arguably, ‘merits’ 

means that ISDS tribunals should not act as a court of appeal. However, ‘merits’ can also have an alternative interpretation.

Since the investor will bring an ISDS claim on the same issue adjudicated by the domestic court, the state can plausibly argue that the case is on the ‘merits’ of the domestic court decision. 

On some issues, the India-UAE BIT goes beyond the Model

For instance, it specifically 

• disallows third-party funding 
• and the unavailability of ISDS if an allegation of fraud or corruption is made against the investor.

. Developed countries would be pleased with India’s softening of the five-year domestic litigation requirement. 

However, they would remain concerned about India’s continued stand of excluding MFN and taxation issues from the BIT’s ambit.

Source the hindu