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Investor Obligations in India’s New Bilateral Investment Treaties: Emergence of New Treaty Practice

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Asian Yearbook of International Economic Law 2022

Part of the book series: Asian Yearbook of International Economic Law ((AYIEL,volume 2022))

Abstract

Typically, Bilateral investment treaties (BITs) are unidimensional instruments that confer rights on foreign investors and impose obligations on host States. As the backlash against international investment law has intensified in the last few years, this structural aspect has come under increasing scrutiny. The argument is that BITs should also impose obligations on foreign investors to bring a semblance of balance. In view of this, the paper examines the issue of investor obligations in the case of India’s new investment treaty practice. After being sued by several foreign investors, India set on the path of developing a new Model BIT with the objective to strike a balance between investment protection and host State’s right to regulate. As part of this, India is developing a new treaty practice where obligations are imposed on foreign investors. However, these obligations are negative in nature often exist in the form of best endeavour clauses. The paper argues that India should develop its treaty practice so as to impose positive obligations on foreign investors.

Some parts of this paper draw from the following work of the author: Prabhash Ranjan, ‘Investor’s Obligation in Investment Treaties: Missing Text Or A Matter of Application’ in Jean Ho and Mavluda Sattarova (Eds) Investor’s International Law, 2021, Hart Publishing, an imprint of Bloomsbury Publishing Plc., pp. 125–148.

The author is grateful to Priyadarshani Venkatesh for her assistance.

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Notes

  1. 1.

    ‘Recent Developments in The IIA Regime: Accelerating IIA Reform’, UN Doc, 3, IIA Issues Note, 2021. https://unctad.org/system/files/official-document/diaepcbinf2021d6_en.pdf, p. 2.

  2. 2.

    ‘Investor–State Dispute Settlement Cases: Facts and Figures 2020’, UN Doc, 4, IIA Issues Note, 2021, https://unctad.org/system/files/official-document/diaepcbinf2021d7_en.pdf, p. 1.

  3. 3.

    Vandevlede (2010), pp. 45–60.

  4. 4.

    Vandevlede (2010), pp. 45–60.

  5. 5.

    Kurtz (2016), p. 55.

  6. 6.

    See Waibel et al. (2010); Franck (2005).

  7. 7.

    See Rodrik (2011); Stein (2016).

  8. 8.

    See generally Tepper with Hearn (2018).

  9. 9.

    Choudhury (2020).

  10. 10.

    Deva (2012).

  11. 11.

    ‘Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework’ UN Doc A/HRC/17/31, https://www.ohchr.org/documents/issues/business/a-hrc-17-31_aev.pdf.

  12. 12.

    Business and Human Rights Resource Centre, https://www.business-humanrights.org/en/binding-treaty.

  13. 13.

    Deva and Bilchitz (2017).

  14. 14.

    Also see Choudhury (2018).

  15. 15.

    ‘Human rights-compatible international investment agreements’ UN Doc A/76/238, https://undocs.org/A/76/238.

  16. 16.

    Id. at 3.

  17. 17.

    See Choudhury (2020); Ho (2019); Bernasconi-Osterwalder (2020).

  18. 18.

    Gathi and Puig (2019); Ho (2019).

  19. 19.

    Sattarova and Ho (2021), pp. 3–4.

  20. 20.

    Choudhury (2020); Sattarova (2019).

  21. 21.

    Model Text for the Indian Bilateral Investment Treaty, https://dea.gov.in/sites/default/files/ModelBIT_Annex_0.pdf.

  22. 22.

    2018 Treaty Between the Republic of Belarus and the Republic of India on Investment https://dea.gov.in/sites/default/files/BIT%20with%20Belarus.pdf (last accessed 27 September 2021).

  23. 23.

    2018 Bilateral Investment Agreement Between The India Taipei Association in Tapei and the Taipei Economic and Cultural Center in India https://dea.gov.in/sites/default/files/BIA%20between%20ITA%20and%20TECC.pdf.

  24. 24.

    2019 Bilateral Investment Treaty Between the Government of the Kyrgyz Republic and The Government of the Republic of India https://investmentpolicy.unctad.org/international-investment-agreements/treaty-files/5993/download.

  25. 25.

    2020 Investment Cooperation and Facilitation Treaty Between the Federative Republic of Brazil and the Republic of India https://dea.gov.in/sites/default/files/Investment%20Cooperation%20and%20Facilitation%20Treaty%20with%20Brazil%20-%20English_0.pdf.

  26. 26.

    For a detailed study of India’s BITs see Ranjan (2019).

  27. 27.

    White Industries Australia Limited v. Republic of India, UNCITRAL, Final Award (Nov. 30, 2011).

  28. 28.

    White Industries v. India, 16.1.1(a).

  29. 29.

    Vodafone issued an arbitral notice to India under the India-Netherlands BIT for a retrospective taxation measure, see Vodafone v. India, UNCTIRAL, Notice of Arbitration (not public) (Apr. 17, 2014); Cairn Energy also dragged India to arbitration under the India-UK BIT for a retrospective taxation measure. Recently an ISDS tribunal ruled in favour of Vodafone. Likewise, Cairn Energy PLC brought a successful claim against India on the issue of retrospective taxation.

  30. 30.

    CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited, and Telecom Devas Mauritius Limited v. Republic of India, PCA Case No 2013-09.

  31. 31.

    Ras al-Khaimah Investment Authority v. Republic of India (Rakia v. India), UNCTAD, 2016 https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/767/rakia-v-india.

  32. 32.

    Nissan Motor Co., Ltd. v. Republic of India (Nissan v India), UNCTAD, 2017 https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/828/nissan-v-india.

  33. 33.

    CC/Devas v. India.

  34. 34.

    CC/Devas v. India.

  35. 35.

    CC/Devas v. India.

  36. 36.

    Deutsche Telekom AG v Republic of India, PCA Case No. 2014-10, Interim Award, 13 December 2017.

  37. 37.

    Vodafone International Holdings BV v. Government of India [I], PCA Case No. 2016-35.

  38. 38.

    Cairn Energy PLC and Cairn UK Holdings Limited (CUHL) v. Government of India, PCA Case No. 2016-7, Award, 21 December 2020.

  39. 39.

    Bhasin and Manocha (2016).

  40. 40.

    Bhattacharjee (2012).

  41. 41.

    Model text for the Indian Bilateral Investment Treaty, https://dea.gov.in/sites/default/files/ModelBIT_Annex_0.pdf. Also see Ranjan and Anand (2017).

  42. 42.

    Government of India, Ministry of Commerce & Industry, Department of Industrial Policy & Promotion (2016) Lok Sabha Unstarred Question No. 1290 (25 July 2016), http://164.100.47.190/loksabhaquestions/annex/9/AU1290.pdf.

  43. 43.

    See Government of India, Department of Economic Affairs, https://dea.gov.in/bipa (accessed 10 August 2021). For a detailed discussion on India’s BITs see Ranjan (2019).

  44. 44.

    Government of India, Ministry of Finance, Department of Economic Affairs (2016) Office Memorandum – Regarding Issuing Joint Interpretative Statements for Indian Bilateral Investment Treaties (8 February 2016), http://indiainbusiness.nic.in/newdesign/upload/Consolidated_Interpretive-Statement.pdf (hereinafter: JIS Note).

  45. 45.

    Draft Model Text for the Indian Bilateral Investment Treaty, https://www.mygov.in/sites/default/files/master_image/Model%20Text%20for%20the%20Indian%20Bilateral%20Investment%20Treaty.pdf (hereinafter: Draft Model Indian BIT).

  46. 46.

    See World Duty Free Company Limited and The Republic of Kenya, ICSID Case No. ARB/00/7 (Award dated 4 October 2006); EDF (Services) Limited v. Romania, ICSID Case No. ARB/05/13 (Award dated 8 October 2009).

  47. 47.

    Metal-Tech Ltd. v. Republic of Uzbekistan, ICSID Case No. ARB/10/3, para. 372.

  48. 48.

    Metal-Tech Ltd. v. Republic of Uzbekistan, para. 373.

  49. 49.

    Vijayvergia and Belmannu (2020).

  50. 50.

    LCI Report (2015), p. 31.

  51. 51.

    LCI Report (2015), pp. 31–32.

  52. 52.

    LCI Report (2015), p. 32.

  53. 53.

    LCI Report (2015), p. 32.

  54. 54.

    LCI Report (2015), p. 32.

  55. 55.

    Inceysa Vallisoletana SL v. Republic of El Salvador, ICSID Case No ARB/03/26 (Award) (2 August 2006). Also see Fraport AG Frankfurt Airport Services Worldwide v. Philippines, ICSID Case No ARB/03/25 (Award) (16 August 2007).

  56. 56.

    Fraport AG Frankfurt Airport v. Philippines, para. 257.

  57. 57.

    Schreuer (2013); Tokios Tokeles v. Ukraine, ICSID Case No. ARB/02/18 (Decision on Jurisdiction of 29 April 2004 and Dissenting Opinion of President Prosper Weil), paras 83–6).

  58. 58.

    LCI Report (2015), pp. 35–36.

  59. 59.

    LCI Report (2015), pp. 35–36.

  60. 60.

    Footnote 4 of the final model BIT arguably would allow counterclaims. This point is discussed later in the chapter.

  61. 61.

    Krajewski (2020), pp. 119–120.

  62. 62.

    Cortec Mining Kenya Ltd et al v. Kenya, Award, ICSID Case No. ARB/15/29 (22 October 2018), para. 333; Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award (27 August 2008), paras. 138–139. Also see Choudhury (2020).

  63. 63.

    Krajewski (2020), p 119.

  64. 64.

    Article 11 India-Belarus BIT.

  65. 65.

    Article 11 India-Taiwan BIT.

  66. 66.

    Article 11 India-Kyrgyzstan BIT. See also Article 7(1) of the 2019 Netherlands Model BIT, which provides: “investors and their investments shall comply with domestic laws and regulations of the host State, including laws and regulations on human rights, environmental protection and labour laws.” The content of the obligations imposed on foreign investors will depend on the content of domestic laws. If domestic laws contain weak provisions on human rights or environmental protection, for example, then the corresponding obligations on the foreign investors will also be weak.

  67. 67.

    Article 11 of India-Brazil BIT.

  68. 68.

    Article 16 of Agreement between the Government of Canada and the Government of Burkina Faso for the Promotion and Protection of Investments.

  69. 69.

    Article 11(2) of Investment Promotion and Protection Agreement Between the Government of the Federal Republic of Nigeria and the Government of the Republic of Singapore. Also see Article 16 of the Canada-Guinea BIT; Article 15(3) of the Canada-Mali BIT.

  70. 70.

    Article 12 of India-Belarus BIT.

  71. 71.

    Article 12 of the India-Kyrgyz Republic BIT.

  72. 72.

    Article 12 of the India-Taiwan BIT.

  73. 73.

    Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic, ICSID Case No. ARB/07/26, 8 December 2016.

  74. 74.

    Urbaser v. Argentina, para. 1194.

  75. 75.

    Urbaser v. Argentina, para. 1199. For a critique of the reasoning employed by the Urbaser tribunal see Abel (2018), pp. 84–88.

  76. 76.

    Urbaser v. Argentina, paras. 1208 and 1210.

  77. 77.

    Choudhury (2017), pp. 469–470; Sattarova (2019), p. 24; Krajewski (2020).

  78. 78.

    Same formulation exists in some other Brazilian BITs such as Article 15(2) of the Brazil-UAE BIT and Article 15(2) of the Brazil-Guyana BIT.

  79. 79.

    See Article 9(2) of the Brazil-Malawi BIT.

  80. 80.

    Choudhury (2017).

  81. 81.

    Siemens AG v. The Argentine Republic, ICSID Case No ARB/02/8, Decision on Jurisdiction (3 August 2004), para. 81. Also see Gudgeon (1986).

  82. 82.

    See e.g. Azurix Corp v. The Argentine Republic, ICSID Case No. ARB/01/12, Award (14 July 2006), 261.

  83. 83.

    See Sattarova (2019).

  84. 84.

    See Vinuales (2017), p. 368; Choudhury (2020).

  85. 85.

    For more on how context can play a role in interpretation of investment treaties see Adel A Hamidi Al Tamimi v. Sultanate of Oman, ICSID Case No. ARB/11/33, Award (3 November 2015), paras. 387–390; David R. Aven and others v. Republic of Costa Rica, ICSID Case No. UNCT/15/3, Award, 18 September 2018, para. 412.

  86. 86.

    See also Urbaser v. Argentina; David R. v. Costa Rica.

  87. 87.

    Choudhury (2020).

  88. 88.

    Article 28(9) of the Common Market for Eastern and Southern Africa Investment Agreement.

  89. 89.

    See Article 26.3 of India-Belarus BIT 2018.

  90. 90.

    See footnote 1 of Article 25.3 of the Bilateral Investment Agreement between the Indian Taipei Association in Taipei and The Taipei Economic and Cultural Center in India, 2018.

  91. 91.

    See footnote 4 to Article 26.3 of the India-Kyrgyz Republic BIT.

  92. 92.

    Hepburn and Kabra (2017), pp. 98–99.

  93. 93.

    Hepburn and Kabra (2017), p. 99.

  94. 94.

    See Kalderimis (2010); Titi (2014), p. 56.

  95. 95.

    Ruggie (1982). Also see Lang (2006); Lang (2011).

  96. 96.

    Lang (2011), p. 393.

  97. 97.

    Lang (2011), p. 382.

  98. 98.

    Harvey (2007). Also see Ruggie (1982).

  99. 99.

    Stiglitz (2019).

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Ranjan, P. (2022). Investor Obligations in India’s New Bilateral Investment Treaties: Emergence of New Treaty Practice. In: Chi, M., Bungenberg, M., Bjorklund, A.K. (eds) Asian Yearbook of International Economic Law 2022. Asian Yearbook of International Economic Law, vol 2022. Springer, Cham. https://doi.org/10.1007/16517_2022_12

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