No More BITs and Pieces

A new model bilateral investment treaty should set up a reciprocal framework of investment rules

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A TYPICAL BILATERAL investment treaty (BIT) should balance the competing goals of investment protection and the state's sovereign right to regulate. The model BIT agreement that India announced in 2016 has failed on that front. In that context, Finance Minister Nirmala Sitharaman's assurance that the government would revamp the model BIT is more than welcome. The Model BIT framework was a response to a slew of unfavourable arbitration rulings—including Vodafone, Cairn, and Devas—with damages running into millions of dollars. The unusual aspect was that India declined to accept some of the adverse verdicts, resulting in at least two companies—Devas and Cairn—moving to seize the overseas assets of Air India (then government-owned) to give effect to the awards. India had also repealed 77 of 80 older BITs on fears that it was easier for the foreign investor to drag the Indian government to arbitration. The adoption of the 2016 model, however, is seen more as a knee-jerk protectionist measure rather than a nuanced approach to encouraging foreign investment.