BITs shouldn't bite: Let's rethink our bilateral investment treaties

Such a revamp of India's model BIT should focus on regulatory certainty and dispute prevention

- R.V. ANURADHA & PIYUSH JOSHI are partners at Clarus Law Associates, New Delhi.

India's budget for 2025-26 lays out a two-pronged approach to enhancing foreign investments: revamping India's model Bilateral Investment Treaty (BIT) to "encourage sustained foreign investment" and undertaking necessary "regulatory reforms" to ensure a light-touch regulatory framework based on principles and trust to "unleash productivity and employment." Both must go hand in hand.

The "model BIT" referred to is the one released by the government in 2016 to overhaul India's approach to BITs. While India had signed over 80 BITs between 1994 to 2011, it terminated 68 of them in 2016-17. Other countries did likewise, as the 1990s model followed globally was widely seen as outdated. India's reworked model BIT, however, did not find many takers. This is why the budget has proposed a relook.

A BIT is an agreement between two countries for the promotion of mutual investments that assures protection from arbitrary governmental action, compensation in the event of expropriation (or damage), guarantees of smooth fund transfers and dispute settlement mechanisms to resolve disputes between the governments of both countries, as well as between a country and a foreign investor.