Union Cabinet approved revised Model Text for Indian Bilateral Investment Treaty


Who: Revised Model Text for Indian Bilateral Investment Treaty
What: Approved by Union Cabinet
When: 16 December 2015

The Union Cabinet, presided by the Prime Minister Narendra Modi, on 16 December 2015 gave its approval for the revised Model Text for the Indian Bilateral Investment Treaty (BIT).

The revised Indian model text for BIT will replace the existing Indian Model BIT.  The revised model BIT will be used for re-negotiation of existing BITs and negotiation of future BITs and investment chapters in Comprehensive Economic Cooperation Agreements (CECAs)/ Comprehensive Economic Partnership Agreements (CEPAs) / Free Trade Agreements (FTAs).

Highlights of revised Model Text for the Indian BIT

The new Indian Model BIT text will provide appropriate protection to foreign investors in India and Indian investors in the foreign country, in the light of relevant international precedents and practices.

Besides, it will maintain a balance between the investor’s rights and the Government obligations.

Relevance of Bilateral Investment Treaty

A BIT increases the comfort level and boosts the confidence of investors by assuring a level playing field and non-discrimination in all matters while providing for an independent forum for dispute settlement by arbitration.

In turn, BITs help project India as a preferred Foreign Direct Investment (FDI) destination as well as protect outbound Indian FDI.

The essential features of the model BIT include:

An enterprise based definition of investment

Non-discriminatory treatment through due process

National treatment

Protections against expropriation

A refined Investor State Dispute Settlement (ISDS) provision requiring investors to exhaust local remedies before commencing international arbitration

Limiting the power of the tribunal to awarding monetary compensation alone

The model excludes matters such as government procurement, taxation, subsidies, compulsory licenses and national security to preserve the regulatory authority for the Government.