How does the early conclusion of The Bilateral Investment Treaty between India and USA benefit the two countries? What are the roadblocks in its path? (200 Words)

Bilateral Investment treaties(BIT’s) are agreements with other countries to ensure that an adequate safe business environment is provided for mutual investors abroad as well as encouragement of capital flows into their own countries. Early conclusion of BIT’s benefits both the countries because:
  1. Will create greater investment as well as job creation by creating a friendly environment
  2. Foster greater openness to investment, transparency and predictability thus supporting economic growth for both countries.
  3. Increase regulatory stability and decrease investor uncertainty. Protection of Intellectual Property Rights (IPR’s) will also be ensured thus increasing trade relations.
  4. Restricts the imposition of performance requirements and eases transfer of funds in and out of the host nation without delay
  5. Most Favored Nation (MFN) clause under BIT promotes free trade, lesser rules thereby enhancing economic growth
The roadblocks for successful Implementation of BIT are:
  1. Investor-State Arbitration: India faced Arbitration cases under previously signed BIT’s
  2. Sector-by-Sector Limitation of Foreign ownership
  3. Performance Requirements: India uses tools that discourage investments. For e.g. Foreign Investments are obliged to draw 30% of products they sell from small Indian providers
  4. Labor and Environment issues: BIT’s facilitate companies to move operations to an area with weakest environment and labor regulations
Why India is reluctant?
American companies are very keen on the BIT, as that will ensure protection of their investment under international law. From India’s perspective, it is argued that this might boost US investment flows to India, which is critical for the success of Make-in-India. India and the US started negotiating a BIT in 2008-09. However, these negotiations were interrupted when India decided to launch a review of its BITs and adopt a new model.
The major speed-breaker in US-India BIT negotiations is the lack of clarity on India’s stand on BITs. India discovered in 2011, more than 15 years after having signed the first BIT in 1994, that these treaties could be used by foreign investors to challenge sovereign regulatory measures of Indian state at international arbitral forums. This ‘late learning’ happened after India lost a BIT dispute in 2011 to White Industries, an Australian company.
Other issues:
  • India and the US have had been opposing each other at the WTO pertaining to poultry imports, solar panels
  • Recent fee hike in two major visa categories (H-1B and L1) by US has also added to the tension
  • India’s model BIT excludes most favoured nation clause, taxation, compulsory licences and intellectual property rights from its purview, which has not gone well to US
  • And the most controversial provision of investor-state disputes, it requires investors to pursue domestic courts for at least five years before resorting to international arbitration.



Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top