Dispute Resolution Mechanism In Model Indian Bilateral Investment Treaty 2016

Dispute Resolution Mechanism In Model Indian Bilateral Investment Treaty 2016 – One Step Forward, Two Steps Backward?

Ms Gauri Gupta, Assistant Professor, Vivekananda Institute of Professional Studies, Delhi

ABSTRACT

India has emerged as a formidable economic and political forces in recent times. As per the UNCTAD world investment report (2018) India was among the top 10 FDI host economies in 2017 and 2018. States enter into Bilateral Investment Treaties (BITs) to promote FDI. BITs contains norms regulating sovereign conduct relating to FDI and dispute resolution mechanism to resolve claims arising because of violation of these norms. Negotiation of these BITs are often based on the contracting states’ model BIT. Investor state dispute settlement (ISDS) is a regular feature of BITs and enables foreign investors to sue a host country directly in front of trans-national tribunal. Initially Model Bilateral Investment Promotion and Protection Agreement (BIPA) 1993 and later Model BIPA 2003 were used by India for negotiating BITs. However increased used of ISDS to challenge various regulatory measures by host nations on one hand and huge monetary compensation being awarded to foreign investors and host nations being forced to pay such huge compensation on the other hand forced several states such as Brazil, South Africa, India among other states to revise their BIT programme.

India’s first encounter with ISDS was in 2011 in White Industries case. The claim was based on India-Australia BIT signed in 1999. This claim was followed by several other arbitration notices against India such as notice by Vodafone under India-Netherland BIT, Deutsche Telekom issued notice under India – Germany BIT, By Cell slapped notice against India under India-Cyprus BIT however the list doesn’t end here. Consequently India decided not only to terminate the existing BITs with 58 countries but also to review the model BIT 2003 and published a new model BIT in 2015. Moreover, it is in the process to align its ongoing BITs with model BIT 2015. India Model BIT 2015 retains ISDS with certain riders. Model BIT 2015 provides for qualified ISDS. Foreign investors are required to exhaust local remedies for a period of five years before commencing international arbitration.

The paper aims at critically analysing ISDS provisions provided in the new model BIT 2015. The paper also looks into the practices followed by South Africa in their approach to ISDS.