Recent Bilateral Investment Treaty (BIT) between India and the UAE
The BIT between India and the UAE, signed earlier this year, replaces the 2014 treaty and reflects India’s evolving investment treaty practices
It seeks to balance foreign investment protection with India’s right to regulate, addressing the challenges of investment disputes.
The treaty includes provisions to reduce the discretion of Investor-State Dispute Settlement (ISDS) tribunals, aiming for clearer and more predictable outcomes.
Key Departures from the Model BIT and Their Implications
The treaty requires investors to exhaust local remedies for three years before filing an ISDS claim (reduced from five years in India’s earlier Model BIT).
Implication: This shorter waiting period allows foreign investors faster access to ISDS, which may enhance investment protection.
The India-UAE BIT removes the requirement that foreign investments must be "significant for the host state's development," a subjective criterion in the Model BIT.
Implication: This makes it easier to define what constitutes an investment, reducing arbitral discretion and ensuring clearer investment protection.
The treaty specifies that state actions like denial of justice or breach of due process will amount to a treaty violation but without referencing customary international law (CIL).
Implication: This eliminates the vagueness associated with CIL, providing greater clarity for both investors and states and limiting arbitral discretion.
The treaty, like the Model BIT, does not include the most-favored-nation (MFN) provision, limiting non-discrimination in treatment.
State actions related to taxation are outside the scope of ISDS, meaning foreign investors cannot challenge tax measures under the BIT.
Implication: These provisions enhance India's regulatory autonomy but reduce the scope for investor protection in certain areas.
The BIT prevents ISDS tribunals from reviewing the "merits" of domestic court decisions, which could limit their ability to hear cases where domestic courts have already ruled.
Implication: This ensures that ISDS tribunals do not act as appellate courts, reinforcing the domestic judicial system’s primacy.
The BIT disallows third-party funding and excludes ISDS claims if fraud or corruption allegations are made against the investor.
Implication: This discourages frivolous claims and enhances the integrity of the dispute resolution process.
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