India plans to sign fresh treaties with 47 countries in order to make foreign investments more transparent.
A senior Indian official has said that the Narendra Modi government recently sent letters to 47 countries, asking them to nullify the existing bilateral investment agreements and ink fresh treaties. He stressed that it would be mandatory for foreign investors to exhaust local judicial remedies before seeking arbitration under new accords.
The Indian government also prepared a model draft of new agreements that would serve as the template for all future investment agreements. The official, who wished to remain anonymous, informed the press that India would allow treaties, which have completed 10 years, to be lapsed so that it could negotiate a new text with its trade partners. New treaties will be negotiated as per the model treaty approved by the Indian Cabinet.
In recent times, 17 foreign investors, including Deutsche Telekom of Germany, Vodafone International Holdings BV, Sistema of Russia, Children’s Investment Fund and TCI Cyprus Holdings, dragged the South Asian country for international arbitration. Vodafone had served an arbitration notice to India, challenging the retrospective amendment to income tax law to tax its buyout of Hutchison Essar’s telecom operations in 2007. Their move prompted New Delhi to update the treaties, keeping with new economic situation. As tax-related issues, such as government procurement, taxation, subsidies, compulsory licenses and national security from the scope of agreement, were not covered by investment treaties, New Delhi was in deep trouble. Even, India lost an international arbitration case involving White Industries of Australia.
After facing legal problems, the Modi government has incorporated a specific provision in the new draft on the basis of which new agreements will be signed. According to the official, many of the 47 countries are European with whom treaties were signed more than a decade ago. However, treaties that have been signed recently, like one with the United Arab Emirates, will continue with the existing text and be revised later. The official further said that tax-related issues would be kept out of Bilateral Investment Promotion Agreements (BIPA). He explained that the main purpose of signing new BIPAs is to promote investment flows between two countries by assuring fair and equitable treatment on post-establishment basis through reciprocal provisions, like national treatment, most favoured nation treatment and mechanism for dispute resolution.
India has also decided to sign new Comprehensive Economic Co-operation Agreements, Comprehensive Economic Partnership Agreements and Free Trade Agreements with other countries on the basis of the revised model text for Bilateral Investment Treaty (BIT).