An analysis of India's bilateral investment treaties

Abstract

As the economies opened up and global trade picked up, the trade between developed and developing countries became inevitable. In such a case, where all the countries did not have a very strong, clear position regarding policies for investments, the demand of an assurance for protection of foreign investments became an important pre-requisite for any country to attract investments. This resulted in many countries entering bilateral treaties for investment protection with their economic trade partners, to ensure provision of safe business environment for investors of contracting countries. Bilateral Investment Promotion and Protection Agreement (BIPA) is one such bilateral treaty which is defined as an “agreement between two countries (or States) for the reciprocal encouragement, promotion and protection of investments in each other's territories by the companies based in either country (or State).” The agreements are aimed to create favourable environment as assurance for protection of investment to foster greater investment other countries. These agreements are drafted for mutual benefit of both the contracting parties and are directly expected to and aimed for proving momentum to business activities and hence economic prosperity of both the parties. These bilateral treaties consist of specific standard elements and are used as tool to provide a legal basis for protecting the rights of the investors in the countries involved. They act as an assurance to the foreign investors for a guaranteed fair and equitable treatment, full and constant legal security and dispute resolution through international mechanism that will be provided for protection and growth of their investment and them. Post-liberalisation in 1991, as India changed its stance towards foreign investments, the Government chose BIPAs as an instrument to promote foreign investment in the country. Accordingly, the Government undertook negotiations with a number of countries and entered into Bilateral Investment Promotion & Protection Agreements (BIPAs) with them. This was done with a view to provide predictable investment climate to foreign investments in India as well as to protect Indian investments abroad. The Government of India has, so far, signed BIPAs with 72 countries out of which 50 BIPAs have already come into force and the remaining agreements are in the process of being enforced. In addition, agreements have also been finalised and/ or being negotiated with a number of other countries.