New Delhi: The Indian government has started reviewing its existing model for Bilateral Investment Treaties as it looks to make the country a more attractive destination for foreign investors while continuing to protect its national interests. The move comes at a time when India is negotiating major trade and investment agreements with several countries and regions, including the European Union, the United Kingdom and Oman.
The review was confirmed by Ajay Seth, Secretary of the Department of Economic Affairs, during an event in New Delhi. He said the government is examining the current Bilateral Investment Treaty model to see whether changes are needed. Although he did not provide details about the possible amendments or a timeline for completing the review, the announcement has drawn attention because the treaty model plays a key role in shaping India's investment policy.
A Bilateral Investment Treaty is an agreement between two countries that offers legal protection to investors who invest in each other's markets. These agreements usually include safeguards against unfair treatment, unlawful seizure of assets and discrimination. They also provide ways to resolve disputes between investors and governments, helping create greater confidence among companies planning long term investments.
India adopted its current Model Bilateral Investment Treaty in 2015 after facing several international arbitration cases brought by foreign companies. The revised model introduced stricter conditions for investors seeking legal action against the government. One of its most notable provisions requires foreign investors to first pursue remedies through Indian courts before approaching international arbitration. The government said these changes were necessary to protect India's ability to regulate in the public interest and reduce costly legal disputes.
However, many foreign governments and international business groups have argued that the 2015 model places too many restrictions on investors and makes it difficult to negotiate new investment agreements. As a result, India has signed only a limited number of Bilateral Investment Treaties based on the current model, while negotiations with several countries have moved slowly.
The latest review is widely seen as an effort to strike a better balance between protecting investors and preserving India's right to regulate issues such as public health, environmental protection and national security. Legal experts believe the government may consider easing some of the conditions related to dispute resolution while still ensuring that policy decisions remain under national control.
The review also comes at an important time for India's economy. The government is working to attract greater foreign direct investment to support manufacturing, infrastructure, renewable energy, semiconductor production and advanced technology industries. Programmes such as Make in India and Production Linked Incentive schemes are designed to encourage multinational companies to establish production facilities in the country. A more investor friendly treaty framework could strengthen these efforts by providing greater legal certainty to international businesses.
Trade negotiations with the European Union are expected to be one of the areas where investment protection will receive significant attention. European companies have consistently called for stronger legal safeguards before making large investments in India. Similarly, while India and the United Kingdom recently concluded a landmark trade agreement, discussions on investment protection are expected to continue separately.
Another important factor is India's growing economic partnership with the European Free Trade Association, which includes Switzerland, Norway, Iceland and Liechtenstein. The agreement includes commitments for significant investment in India over the coming years, making a modern investment treaty framework increasingly important.
Industry experts believe that a revised treaty model could improve India's competitiveness at a time when countries across Asia are competing to attract global manufacturing and supply chain investments. Nations such as Vietnam and Indonesia have strengthened their investment frameworks in recent years, increasing competition for international capital.
At the same time, policymakers are expected to proceed carefully. Expanding investor protections too far could expose the government to expensive international legal claims, similar to those India experienced before introducing the 2015 model. Officials are therefore expected to seek a balanced approach that encourages investment while safeguarding the country's ability to make policy decisions in the public interest.
Although no draft of the revised treaty model has been released, the government's decision to begin the review signals its willingness to adapt to changing global economic conditions. Investors and trading partners will now be closely watching the review process, as its outcome could influence India's future investment agreements and strengthen its position as one of the world's leading destinations for foreign investment.