India asks 68 countries to renegotiate ISDS in bilateral investment treaties

March 21, 2023: The Times of India has reported that India issued termination notices to 68 countries for Bilateral Investment Treaties (BITs) with a request to renegotiate on the basis of the model agreement formulated in 2015.

These 68 BITs were based on a 1993 model which had been amended in 2003. Alarmed at actions taken against it using the Investor-State Dispute Settlement (ISDS) provision in these BITs, the Indian government developed a new model for investment treaties in 2015. India has a further six BITs under the old model, but these are not yet open for a notice of termination. There are two BITs negotiated since 2015, on the new model, and these are in force.

Minister of State for External Affairs Rajkumar Ranjan Singh said the government has signed a host country agreement with the Permanent Court of Arbitration (PCA) for establishing a regional office in India. His Ministry is now working with the United Nations Commission on International Trade Law (UNCITRAL), the PCA and other agencies to develop their capacity to manage international arbitration challenges.

Under the 2015 model, the controversial Most Favoured Nation clause was removed, and the scope of National Treatment and Fair and Equitable Treatment clauses is considerably narrowed.

Although ISDS – which allows investors to initiate international arbitration against states and thereby bypass domestic courts entirely – has been retained, access to ISDS comes only after the exhaustion of the relevant domestic courts for the resolution of an investment dispute.

The 2015 model provides an exhaustive list of economic, environmental and social measures which are exempt under the treaty. This includes taxation, intellectual property rights and measures to protect macroeconomic stability.

The current move to terminate 68 BITs follows a 2016 attempt to terminate 57 BITs. The India-Australia BIT was terminated by India on March 23, 2017, but it has an extraordinary grandfather clause that means its provisions apply to investments made before that date for another 15 years. The Indian Adani coal company threatened to use ISDS to sue the Australian government if its investments made before the termination were harmed by government regulation.

The Interim Australia – India Economic Partnership Agreement signed in 2022 did not have an Investment Chapter and so did not contain ISDS. AFTINET is campaigning to have ISDS excluded from the current negotiations for the Australia – India Comprehensive Economic Cooperation Agreement, which will have an Investment Chapter. The Labor government has a policy to exclude ISDS from new trade agreements and to review ISDS clauses in previous agreements.