OPINION | India’s Model BIT Dilemma

Under pressure from EU, UK and partners, India is planning to revamp the model BIT of 2015 that has faced massive backlash.

Modi government eyes a new BIT framework to revive investor confidence in India.

Source : ABP Live

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Key points generated by AI, verified by newsroom

• India proposes new investment treaty to attract foreign capital.
• Previous 2016 model deterred investors, causing reputation decline.
• Strict clauses of 2016 model drew significant international backlash.

The Narendra Modi government is once again embarking on a challenging journey by proposing a new model for the Bilateral Investment Treaty (BIT). This initiative aims not only to enhance the flow of foreign investments into India but also to restore the country’s reputation as an attractive investment hub for international investors. This reputation has significantly declined since 2015, when New Delhi introduced a revised model that raised concerns among potential investors. By revisiting and refining its BIT approach, the government hopes to reestablish confidence in India’s investment climate and signal that the country is committed to fostering a more favourable environment for global capital.

BITs are formal agreements between two countries that serve to protect and promote investments made by investors from both nations. These treaties are established to create a stable and secure environment for foreign investments, providing assurances to investors that their rights will be safeguarded. These treaties typically include various provisions, such as the assurance of fair and equitable treatment, protection against expropriation without compensation, and the right to transfer funds freely. By imposing these conditions, BITs limit the host state's ability to interfere with or undermine the rights of foreign investors. This legal framework aims to bolster investor confidence and encourage cross-border investment flows.

A BIT, in essence, is designed to protect the interests of international investors in cases of disputes that may arise in the host country, ensuring that they have a reliable framework for seeking resolution. This protection is vital in promoting economic cooperation and fostering an environment conducive to international trade and investment.

In 2015, as India confronted a series of international lawsuits that were filed by multiple investors, which included high-profile cases like the Vodafone and Cairn Energy disputes, the Modi government unilaterally decided to scrap the existing BITs and come up with one BIT model in 2016. The previous BITs were based on the original model that was unveiled in 1993, which was largely favourable to international investors. The resulting 2016 model introduced more restrictive clauses to safeguard government policy. To prevent international tribunals from overruling domestic courts and policies, the 2016 framework introduced several strict provisions.

Till 2015, India signed BITs with 83 countries and regions based on the model BIT of 1993, and as amended in 2003. Out of these, 74 were ratified. Among these BITs, notice of termination has been issued to 68 countries and regions with request to re-negotiate based on the model BIT 2015. After the model BIT of 2015 was approved, India has signed four agreements of which two are in force. Since then the Ministry of External Affairs has been playing an active role in facilitating investment treaty negotiations. The Ministry has been coordinating between foreign governments, foreign missions and other departments and ministries for BIT negotiations, according to a statement issued by the MEA in March 2023.

However, in reality, the model BIT of 2015 faced a major backlash with several international investors rejecting the stringent provisions even as they urged New Delhi to negotiate fresh ones. International investors denounced the provision that mandated that foreign investors must exhaust all available domestic judicial and administrative remedies (typically for a minimum window of 2–5 years) before pursuing international arbitration. The 2016 model excludes the most-favoured-nation clause, which ensured India cannot be forced to extend favourable terms granted to one country to all other treaty partners – this became another sore point with the investors.

As a result, under the 2016 model India has been able to sign BITs with only a handful of countries – United Arab Emirates (UAE), Brazil, Belarus, the Kyrgyz Republic, and Uzbekistan. In September 2021, the Standing Committee on External Affairs had stated in its report that the number of BITs signed by India after 2015 and the number under negotiation are inadequate even as it recommended signing new BITs with the countries with which the country had such pacts. India continues to navigate disputes under existing older treaties.

However, now India has come under pressure from the European Union (EU), the United Kingdom (UK) and others, to negotiate BITs on easier terms.

While the India and the UK signed a landmark Comprehensive Economic and Trade Agreement (CETA) in July 2025, negotiations for a separate, parallel BIT have been paused over fundamental disagreements regarding taxation and MFN clauses. India strictly maintains that taxation must be excluded from BITs, whereas the UK continues to press for certain concessions. UK has also sought MFN status but India has said that the provision cannot be made part of the BIT.  

Like UK, the EU has also urged India to sign the long pending BIT, which is not part of the free trade agreement (FTA), the talks for which concluded in January this year and is now undergoing legal vetting. However, the negotiations to conclude a BIT remains pending over the same issues of domestic remedies and taxation.

In light of the escalating crisis in West Asia, which many analysts warn could lead to a global financial recession, it is crucial for India to develop a model BIT that is highly favourable to international investors. Such a treaty would not only bolster India's 'Make in India' initiative by attracting increased global capital inflows but also enhance the nation's reputation as a viable and accessible destination for business activities.

By crafting a BIT that prioritizes investor protection, ensures fair treatment, and streamlines the investment process, India can position itself as a competitive hub for foreign investment. This strategic move would not only strengthen the domestic economy through job creation and technological transfers but also signal to the global market that India is committed to fostering a conducive investment climate amid international uncertainties. The successful implementation of this model BIT could significantly improve India's standing in global business rankings, promoting confidence among investors and reinforcing the country’s aspirations for sustainable economic growth.

Nayanima Basu is a senior independent journalist.

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