According to a government source, the possibility of introducing some carve-outs in the model BIT has been a topic of internal discussions among officials recently, ToI reported.
Also Read: India, UK business booms on hopes of a big deal in the works
Saudi Arabia’s Concerns
The issue gains prominence ahead of Prime Minister Narendra Modi’s upcoming visit to Saudi Arabia, where investment topics are expected to dominate the agenda. Specifically, Saudi Aramco’s plans to establish two refineries in India—one in Gujarat in partnership with ONGC and another in Andhra Pradesh with BPCL—could be a key focus.
Saudi Arabia has previously raised concerns about India’s model BIT, which has also hindered progress in negotiating a bilateral trade deal with the Gulf Cooperation Council (GCC).
UK Trade Negotiations to Revisit BIT Debate
The UK trade negotiators are also expected to revisit the issue next month, as the British government under Prime Minister Keir Starmer works to finalize a free trade agreement (FTA) with India. Negotiations have dragged on for over a decade and a half, often stalling due to differences over investment protections.In 2016, India introduced the current model BIT following its loss in the White Industries arbitration case in 2010. Subsequently, two UK-based companies, Cairn Energy and Vodafone, invoked arbitration under previous BITs after facing retrospective tax claims in India.Even the India-UK Infrastructure Financing Bridge, which aims to encourage British investment in projects like roads and green energy, has been bogged down by concerns over the current BIT framework.
UAE’s Precedent and EU Resistance
India made certain concessions while signing its FTA with the UAE, providing a potential precedent for future negotiations. However, trade partners like the UK and the EU remain steadfast in their demand for modifications to the investment chapter, expressing concerns about the lack of flexibility in India’s model BIT.
Sri Lanka and Other Nations Raise Issues
Sri Lanka has also flagged concerns about the model BIT in its engagement with India to expand the scope of their existing trade agreement. Meanwhile, countries like Singapore and South Korea still operate under earlier BITs. Indian officials have, however, indicated potential changes in their agreements with South Korea, though the details remain unclear.
India’s model BIT was introduced to provide a stronger defense for the government in arbitration cases after significant losses in previous disputes. The treaty’s stringent provisions focus on protecting India from liability, but they often deter foreign investors who seek robust legal protections.
While the government views the BIT as a negotiating tool, critics argue that its inflexibility may hinder India’s ability to attract foreign investment, especially in sectors critical to economic growth.
(with ToI inputs)