Bilateral Investment treaty

Subject: IR

Context:

• India will try and keep its taxation laws out of the ambit of all Bilateral Investment Treaties (BITs) and comprehensive economic pacts that it negotiates.
• In-principle decision was taken some time back to phase out all “unequal bilateral investment treaties” which could see companies like Vodafone, Cairn, etc., seeking arbitration against Indian tax demands.

Concept:

• Bilateral investment Treaties (BITs) or Bilateral Investment Protection Agreements (BIPAs) are agreements between two countries for the reciprocal promotion and protection of investments in each other’s territories by individuals and companies situated in either State.
• They provide treaty based protection to foreign investment.
• The BITs are thus bilateral agreements by countries to protect the investment by each country’s investors in the other country. Though they are signed by governments, their beneficiaries are business entities.
• India has inked 86 such bilateral treaties, the latest being with Brazil in 2020.
• However, there have been many cases of the penalty awarded by an International Dispute Settlement (ISDS) tribunal served against India.
• This led to a review of the BITs and in 2016 India launched the Model BIT.
• It aims to act as a base for negotiating new BITs with other States, as well as for re-negotiation of the existing ones.
• Main reason for bringing the Model BIT was the constant suing of the country by foreign firms. India was one of the most sued country during 2015 and 2016.