Abstract
India’s new Model BIT is a response to the considerable concerns expressed by various sovereign states and civil society on the impact of Investor-State Dispute Settlement mechanism in affecting State autonomy and regulatory freedom. As a large developing country with a rising economy, the Indian experience offers the need to carefully circumscribe investor protection mechanisms especially considering the political and administrative governance challenges India has. The paper while arguing that the Indian experience offers one solution to balancing investor protection and state sovereignty, it reminds the concerned stakeholders of the challenges in negotiating or renegotiating India’s treaties based on the new Model BIT.
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Notes
Model Text for the Indian Bilateral Investment Treaty, Ministry of Finance, Government of India, Dec. 28, 2015, http://finmin.nic.in/the_ministry/dept_eco_affairs/investment_division/ModelBIT_Annex.pdf. See also Grant Hanessian and Kabir Duggal, The Final 2015 Indian Model BIT: ‘Is This the Change the World Wishes to See?, 30(3) ICSID Rev. (2016) (forthcoming).
Draft Indian Model Bilateral Investment Treaty Text, Government of India, https://mygov.in/group-issue/draft-indian-model-bilateral-investment-treaty-text/. See also Hanessian and Duggal, supra note 1.
See Agreement for Promotion and Protection of Investments, India-U.K.-N. Ir., March 14, 1994.
For a complete list of Indian BITs, see Bilateral Investment Promotion and Protection Agreements (BIPA), Ministry of Finance, Government of India, http://finmin.nic.in/bipa/bipa_index.asp; Trade Agreements, Ministry of Commerce and Industry, Government of India, http://commerce.nic.in/trade/international_ta.asp?id=2&trade=i.
See List of Countries With Whom Bilateral Investment Promotion And Protection Agreements (BIPA) Has Been Signed, Ministry of Finance, http://finmin.nic.in/bipa/bipa_index.asp.
United States Bilateral Investment Treaties, Department of State, http://www.state.gov/e/eb/ifd/bit/117402.htm.
See White Industries Australia Limited v. The Republic of India, UNCITRAL Arbitration, Final Award (November 30, 2011).
See Delhi: White Industries in the Spotlight, GAR, July 7, 2014 (“The Chief Justice in waiting, RM Lodha, was also at the event. He expressed reservations about the jurisdiction of investment treaty arbitration tribunals, while reinforcing Sathasivam's key message about the need to address delay in the court system…. Justice Lodha also suggested that such large compensation ought not to have been granted in White Industries solely on the grounds of delay by the Indian courts, particularly since they had ultimately granted justice. Fali Nariman, a well known Indian arbitration specialist, expressed a similar view. An arbitration award of the magnitude of the one in White Industries passed against the Indian government should have been critically scrutinized, he said.”).
See Saurabh Garg et al., The Indian Model Bilateral Investment Treaty: Continuity and Change, in Rethinking Bilateral Investment Treaties: Critical Issues and Policy Choices 71 (Kavaljit Singh and Burghard Ilge eds., 2016).
Id. at 70 (“The regime has to be viewed in the context of the comprehensive economic reforms package initiated by the Government of India in 1991. The initial motivation behind investment treaties was focused on a liberal economic outlook, where the government in addition to facilitating foreign investment, granted additional protection to investors through such treaties. As a result, since the early 1990s, treaties were signed by India at regular intervals with a range of developed and developing nations across the world.”).
See Kavaljit Singh, Assessing India’s Bilateral Investment Protection Agreement with UAE, MADHYAM, Oct. 27, 2014, http://www.madhyam.org.in/assessing-indias-bilateral-investment-protection-agreement-uae/ (“On December 12, 2013, India signed the agreement with the United Arab Emirates despite an ongoing official review of its existing BIPAs. In early 2013, the then government initiated the review and imposed a moratorium on all ongoing BIPA negotiations in the wake of public outcry over arbitration notices served by foreign investors (including Vodafone and Sistema) demanding billions of dollars in compensation for the alleged violation of existing agreements signed by India.”).
Garg et al, supra note 9, at 71–72 (“The review process of the Indian model began in earnest in July 2012, when a Central Government Working Group was constituted to revise the Indian model BIT of 1993. The drafting involved rigorous and thoughtful debates within Central Government Ministries and organizations about the nature and suitability of investment treaties. On the one hand, there were skeptics who argued for a total abandonment of the investment regime by eliminating investor-state dispute settlement (ISDS) altogether and according only national treatment to investors. Other stakeholders called for a more cautious approach that would leave the regime untouched based on the assessment that existing BITs created a normative framework by providing enforceable rights and protections for investors and changing the entire regime suddenly would expose the entire regime at risk. These debates were vigorous and enriched the democratic nature of the exercise. In the end, the drafters of the model BIT endorsed neither of the radical alternatives noted above. The drafting process can perhaps best be characterized as a continuous search of finding a middle path between the competing interests of investors to protect their investments and the right of governments to regulate in public interest.”).
See Analysis of the 2014 Draft Model Indian Bilateral Investment Treaty: Report No. 260, Law Commission of India, Aug. 2015. It is not fully clear who asked the Law Commission to analyze the Draft Model BIT and whether there was any consideration by the relevant ministries of these recommendations because several recommendations made by the Law Commission were not found in the 2015 Model BIT.
Prior to this, BITs were negotiated by the Department of Economic Affairs while FTAs were negotiated by the Department of Commerce and both had considerable differences at a policy level. This resulted in an overall inconsistent investment policy. See Kavaljit Singh, An Analysis of India’s New Model Bilateral Investment Treaty, in Rethinking Bilateral Investment Treaties: Critical Issues and Policy Choices 71 (Kavaljit Singh and Burghard Ilge eds., 2016). (“[N]egotiations on investment chapters of FTAs were handled [by] the Ministry of Commerce while standalone BITs were negotiated by the Ministry of Finance. This indeed is a welcome development as there have been several instances of differences on investment issues between these two ministries resulting in a lack of policy coherence.”). From an advocacy perspective, these differences in policy could be easily negated by the most-favoured-nation clause (MFN) that was contained in most Indian BITs and FTAs.
See ‘Bad for India Inc? Modi’s BIT Recast Causes Concern, GAR, August 25, 2016 (“Since the beginning of the year, India has served notice to 57 countries with which it has recently expired or soon-to- expire bilateral investment treaties, stating that it will replace them with new agreements containing less expansive protections… The government of Narendra Modi has said it intends to open negotiations to replace the treaties with new BITs, based on a model the government published last year. It has said it will also work with the other 25 countries with which it has BITs to agree joint statements clarifying perceived ambiguities in the texts.”).
See generally, India to stick to new model text to renegotiate investment treaties: Sitharaman, The Fin. Exp., June 8, 2016 {“According to the finance ministry, the text of the revised model BITs will be used for re-negotiation of existing BITs and negotiation of future BITs and investment chapters in Comprehensive Economic Cooperation Agreements/Comprehensive Economic Partnership Agreements or Free Trade Agreements (FTAs).”}.
The media has already reported some reservations based on the 2015 Model BIT. See US Wants Bilateral Investment Treaty With India Concluded Ahead of Modi’s Visit Next Month, The Hindu Bus. Line, May 9, 2016) (“the US is ready to address some of the concerns even though it has reservations on the government’s draft BIT model.”); Canada-India free trade agreement talks delayed, The Hindu (January 13, 2016) (“It is learnt that Canada has differences with India regarding clauses in the proposed FIPA including on the Investor-State Dispute Settlement (ISDS) mechanism. In case of any dispute, India wants investors to exhaust the domestic remedies before approaching international tribunals. But Canada is worried about judicial delays in India and wants flexibility to help investors approach international tribunals at the earliest. Also, Canada wants India to ensure protection of investment commitments made based on existing policies in case any roll-back/changes in those policies later hurt those investment plans.”).
See 2015 Model BIT, Art. 5. The 2015 Model BIT scales back several features that were provided in the Draft Model BIT. For example, an arbitral tribunal can now review if a measure is undertaken for “public policy” and deletes the clarification that the valuation date could never be moved to any future date under the Draft Model BIT. See generally Hanessian and Duggal, supra note 1.
See Indian Model Text of Bilateral Investment Promotion and Protection Agreement (“BIPA”) 2003, http://www.italaw.com/sites/default/files/archive/ita1026.pdf.
Agreement between the Government of India and the Government of the Kingdom of Denmark concerning the Promotion and Reciprocal Protection of Investments, signed September 6, 1995, ratified August 28, 1996.
Law Commission of India supra note 13, at 24. It is not fully clear what the Law Commission exactly means by this because no further explanation was provided.
White Industries Australia Limited v. The Republic of India, UNCITRAL Arbitration, Final Award (November 30, 2011), para 16.1.1(a) (“The Republic of India has breached its obligation to provide ‘effective means of asserting claims and enforcing rights’ with respect to White Industries Australia Limited’s investment pursuant to Article 4(2) of the [India–Australia] BIT [i.e., the MFN clause] incorporating 4(5) of the India–Kuwait BIT.”). The MFN clause has more generally been controversial in investor-state arbitration. See e.g., Eric De Brabandere, ‘Importing Consent to ICSID Arbitration? A Critical Appraisal of Garanti Koza v. Turkmenistan,’ Investment Treaty News (May 14, 2014): “The application of the most-favoured-nation (MFN) clause to investor-state dispute settlement provisions remains both an unsettled question in investment treaty arbitration, and a controversial one.”
Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law 166 (2012) (“An umbrella clause is a provision in an investment protection treaty that guarantees the observance of obligations assumed by the host state vis-à-vis the investor. These clauses are referred to as ‘umbrella clause’ because they bring contractual and other commitments under the treaty’s protective umbrella.”).
See Agreement for Promotion and Protection of Investments, India-Ger., Jul. 10, 1995, Article 13(2) (“Each Contracting Party shall observe any other obligation it has assumed with regard to Investments in its territory by Investors of the other Contracting Party, with disputes arising from such obligations being only redressed under the terms of the contracts underlying the obligations.”); Agreement for Promotion and Protection of Investments, India–Switz., Apr. 4, 1997, Article 13 (“Each Contracting Party shall observe any obligation it may have entered into with regard to an investment of an investor of the other Contracting Party. In relation to such obligations dispute resolution under Article 9 of this Agreement shall however only be applicable in the absence of normal local judicial remedies being available.”).
2015 Model BIT, Art. 3.2.
See Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability, (Dec.27, 2010), ¶ 343 (“The protection provided for by [the full protection and security clause] to covered investors and their assets is not limited to physical protection but includes also legal security.”).
2015 Model BIT, Art. 4.1.
Id., Chapter VI.
Id., Art. 12. See generally Hanessian and Duggal, supra note 1.
Reform of Investor-State Dispute Settlement: In Search of a Roadmap, UNCTAD Issue Note Number 3, (June 2013) 27 (“Recent examples of [International Investment Agreements] without [Investor-State Dispute Settlement] provisions are the Japan-Philippines Economic Partnership Agreement (2006), the Australia–United States FTA (2004) and the Australia–Malaysia FTA (2012). In April 2011, the Australian Government issued a trade policy statement announcing that it would stop including ISDS clauses in its future IIAs as doing so imposes significant constraints on Australia’s ability to regulate public policy matters”); see Gillard Government Trade Policy Statement: Trading Our Way to More Jobs and Prosperity, April 2011, http://www.dfat.gov.au/publications/trade/trading-our-way-to-morejobs-and-prosperity.pdf. Australia has subsequently included investor-state provisions in subsequent FTAs. See Douglas Thomson, Australia Agrees to Investor-State Provisions in Korea FTA, GAR, December 9, 2013.
2015 Model BIT, Arts. 15.1 and 15.2.
Id., Art. 15.2.
Id., Art. 15.4.
Id., Art. 15.5.
Id., Art. 15.5(v).
Id., Art. 29.
Luke Eric Peterson, South Africa Pushes Phase-Out of Early Bilateral Investment Treaties After at Least Two Separate Brushes With Investor-State Arbitration, IA Reporter, September 23, 2012.
The European Commission issued a draft text for the Transatlantic Trade and Investment Partnership (TTIP), which envisions the creation of judicial form for the resolution of disputes through a tribunal of the first instance and an appeals tribunal. See EU Negotiating Texts in TTIP, European Commission, http://trade.ec.europa.eu/doclib/docs/2015/november/tradoc_153955.pdf.
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Kabir Duggal—Attorney, Baker & McKenzie LLP; Lecturer-at-Law, Columbia Law School, New York, NY, USA. The views expressed are personal.
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Duggal, K. The changing landscape of investor-state arbitration in India. Jindal Global Law Review 7, 127–134 (2016). https://doi.org/10.1007/s41020-016-0028-5
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DOI: https://doi.org/10.1007/s41020-016-0028-5