The finance ministry has circulated a note for the Cabinet’s consideration, an official said, adding that talks for bilateral investment treaties with four-five countries are underway. The existing Model BIT (bilateral investment treaty) was approved by the Cabinet in 2015.
“No tax-related provisions will be part of the framework as we are not willing to give up our sovereign right to taxation,” the official said, adding that foreign investors will also have to exhaust local remedies before initiating arbitration.
A bilateral investment treaty is an agreement between two countries to promote and protect investments made by their investors in the other’s territory. Under investment protection treaties, investors can take a sovereign government to arbitration.
The current framework requires a foreign investor to wait for five years before initiating a treaty-based arbitration against India.