In the light of recent issues, critically examine why India needs to change replace its old Bilateral Investment Treaties with a new one and establish a mechanism to address BIT disputes.

Bilateral investment treaty is a treaty between two nations to set certain basic protections for foreign investors. For example, assurance of “fair and equitable treatment”. India signed its first BIT with the UK in 1994. Adverse arbitral award in the White Industries case opened floodgates of arbitration against India regarding BIT. Presently there are around 11 known against India arising out of BIT, including prominent Vodafone and Cairn claims on retrospective taxation. Most of existing BITs were signed to attract huge foreign investment India and therefore their provisions are tilted in favor of investors.
In order to handle such issues arising out of BIT and to renegotiate the terms due to changing economic scenarios government introduced a new Model BIT in 2015 as a model for future investments in India.However, Model BIT alone will not be enough to deal with issues arising out of investment treaties. Along with that India needs standard dispute resolution mechanism.
The high-level committee on dispute management headed by Justice B.N. Srikrishna recommended five-pronged dispute management strategy with a focus on dispute management procedures, a nodal agency representing the state, coordination at national and sub-national levels, counsel with special expertise and adequate funding for dispute resolution.
Also, the government should establish the channel of communication for investors to notify grievances to a nodal agency and a single point of contact. Also, there should be coordination among different states and central government.
Even after model BIT, dispute out of BIT will continue, therefore there should be pragmatic dispute management approach so that India can effectively manage such disputes.

Topics: GS-II: Bilateral Regional and Global Groupings and Agreements