The Prime Minister’s Office (PMO) has asked the commerce ministry to examine the model text of the bilateral investment treaty (BIT) and suggest modifications to further improve the ease of doing business, according to sources. The exercise assumes significance as only seven countries have accepted the existing model text treaty, and most of the developed nations have expressed their reservations on the text with regard to provisions like the resolution of disputes.
These investment treaties help in protecting and promoting investments in each other’s countries.
These pacts are important as India has earlier lost two international arbitration cases against British telecom giant Vodafone and Cairn Energy plc of the UK over the retrospective levy of taxes.
Sources said an internal discussion will be held on the model text of the treaty on Monday in the commerce ministry with experts and lawyers.
“There will be a presentation in the meeting. We are having an internal discussion on the issue. The PMO is looking into it and has asked the commerce ministry to provide a third-party perspective on the model text,” they said.
Although BIT is the subject matter of the finance ministry, the commerce ministry will try to elicit the views of the third party and suggest ways for consideration to higher authorities.
Investment facilitation is one of the chapters in the free trade agreement being negotiated by the commerce ministry.
The treaty is a key sticking point between India and the UK, as both countries are negotiating a free trade agreement and BIT.
According to experts, the four-European nation bloc EFTA (Iceland, Liechtenstein, Norway, and Switzerland) would also demand BIT.
India and the European Free Trade Association (EFTA) on March 10 signed a free trade agreement under which New Delhi received an investment commitment of USD 100 billion in 15 years from the grouping while allowing several products, such as Swiss watches, chocolates and cut and polished diamonds at lower or zero duties.
Economic think tank GTRI (Global Trade Research Initiative) has stated that as India aims to become the third-largest economy, it needs to align its treaties with global investment practices, address the negative perception caused by the mass treaty cancellations and reflect on its negotiation skills.
It has said India has cancelled 77 of its over 80 BITs by 2016, as they didn’t align with its interests.
“Now, it is renegotiating with 37 countries using the restrictive 2016 Model BIT, which may lead to protracted negotiations due to its narrow ‘investment’ definition, vague terms, omission of principles like ‘fair and equitable treatment’, and Most-Favoured Nation status,” GTRI co-founder Ajay Srivastava has said.
According to Srivastava, the model BIT demands investors seek local solutions for at least five years before arbitration, making new BITs challenging for other countries.
Finance Minister Nirmala Sitharaman, in her interim Budget speech on February 1, has said that India is negotiating bilateral investment treaties with different countries.
