BITs should be negotiated separately from FTAs, keep nations’ interests in mind: FM Sitharaman

“Issues related to the BIT are so unique to the sovereign that we think BIT should be negotiated standalone rather than make it as a part of FTA agreement. We think that BIT and its ramifications are so important for the sovereignty of the country, it is important for us to have a standalone BIT, with specialists who deal with taxation laws and elements of policies which are inherent to policy making to be handled separately with due expertise,” the Minister said while speaking at the inauguration of the PG Certificate Course on International Commercial & Investment Treaty Arbitration in Delhi.

Commenting on the time period for local remedies, Sitharaman said that it becomes a contentious issue while negotiating the BIT as some nations wouldn’t even want to give more than six months. “That is an issue on which BIT becomes contentious where they wouldn’t even want us to give more than six months, sometimes one year, if they are kind, for local remedies. Within one year, for an Indian investor, or for an Indian claimant, to seek the court here within India and then say I have exhausted all the available legal options, and I have to now go for an international arbitration, is next to impossible. And even this becomes an arguing, contesting, and negotiating point when you are sitting at the BIT table,” she said.

She further said that nations are becoming weary of international arbitrations and are moving away from the established models of arbitration. “Many nations like Australia are moving away from the traditional model of arbitration of Investor-State Dispute Settlement (ISDS). The recent practice of Australia-UAE investment treaty is a good guiding example of this shift wherein the dispute settlement mechanism is State-to-State Dispute Settlement (SSDS). It is no longer the ISDS, UAE and Australia have arrived at it between themselves,” she said.

Arbitrators have often ignored the judicial decisions of the host country, she said, adding that the investment treaty must not only provide better regulatory powers to the nations but must also serve as guidance to arbitrators to restore faith in arbitration.

Citing data from UNCTAD reports, Sitharaman said there have been 1,368 registered investment treaty cases and on an average, almost 70 per cent are pursued against developing nations based on the old-generation treaties. “That’s a worrying element for the developing countries. It allows the investors to maliciously seek unfair benefits from them,” she said. The average amount sought by investors in ISDS cases is $1.1 billion, which remains a considerable burden for the Global South, she said.

There are some commercially-interested deep pocket parties who buy out the case from one of the arbitration parties and they can run this for a long period, which no sovereign state can afford fighting in different jurisdictions, she said, adding that in the end, the case is then won by the party with a deep pocket. “It’s not the same for all cases but there are anecdotal examples from many developing countries,” she said. Corporations have also used ISDS mechanisms via investment treaties to challenge government policies, environmental regulations and public interest laws, she said.

Sitharaman said as per the Budget announcement, India will continue to build an investor friendly regime by revamping the model BIT of 2016 keeping in mind the interest of the nation. Multiple Western trade partners have cited burdensome investment treaty norms during ongoing negotiations. The Budget for 2025-26 has announced revamping the current model BIT to make it more investor-friendly and attract sustained foreign investment. India is currently in talks with the UK and the European Union for an investment treaty and is also expected to negotiate a BIT with the European Free Trade Association (EFTA) region.