1 Introduction
The Indian economy has grown rapidly in recent years and remains a bright spot in the global landscape.2 Indeed, according to recent reports from the World Bank, India remains one of the largest emerging market economies in the world and is expected to continue its growth in the coming years.3 The United Nations Conference on Trade and Development’s (UNCTAD) latest world investment report ranks India among the top fifteen favourite foreign direct investment (FDI) host economies.4
2 India’s real GDP growth projections for 2021 and 2022 according to the OECD is 12.6% and 5.4% respectively. See ‘Strengthening the recovery: The need for speed’ OECD Economic Outlook, Interim Report, March 2021, https://www.oecd.org/economic-outlook#gdp-projections. The International Monetary Fund (IMF) has also revised upwards the growth forecast for the Indian economy to 11.5 per cent in 2021, thereby making it the only major economy projected to register a double-digit growth amidst the Covid-19 pandemic. See ‘IMF sees Indian economy growing 11.5% in 2021,’ Business Today, 26 January 2021, https://www.businesstoday.in/current/economy-politics/imf-sees-indian-economy-growing-115-in-2021/story/429159.html.
3 Real GDP growth for India is forecasted at 5.4% in 2021 whereas the world economy growth for the same fiscal year is forecasted at 4.0%. See ‘A World Bank Group Flagship Report – Global Economic Prospects’, January 2021, 4, https://www.worldbank.org/en/publication/global-economic-prospects.
4 See UNCTAD World Investment Report 2020, 16 June 2020, 11 et seq, https://unctad.org/webflyer/world-investment-report-2020.
Despite this exponential increase in FDI, India has between July 2016 and the end of 2020 unilaterally terminated 72 of the 83 existing bilateral investment treaties (BITs) with various States (including, for example, the UK, Germany, France, Switzerland, Sweden, Spain, Australia, and Mauritius). Separately, in February 2016, India proposed a joint interpretative statement to 25 States with which it had BITs whose initial period of validity had not then expired. The statement sets out India’s proposed interpretation of several provisions in those treaties, including the definitions of “investor” and “investment”; the most favoured nation (MFN), national treatment (NT), fair and equitable treatment (FET), and expropriation clauses; and the dispute resolution provisions. However, only two such statements have been concluded to date, as mentioned below.
Specifically, on 12 July 2017, the Indian government announced that its Cabinet had approved a “Joint Interpretative Note” to bring clarity to the interpretation of the existing BIT between India and Bangladesh.5 On 4 October 2017, India and Bangladesh in turn signed the Joint Interpretative Note in relation to their existing BIT.6 According to the Indian government, the Joint Interpretative Note “imparts clarity to the interpretation of the existing agreement” and that “with increasing [BIT] disputes, issuance of such statements is likely to have strong persuasive value before tribunals.” It also adds that this “pro-active approach by States can foster a more predictable and coherent reading of treaty terms by arbitration tribunals.”7 A similar joint interpretative statement was agreed between India and Colombia in October 2018.8
5 See Government of India Cabinet, Press Information Bureau, ‘Cabinet Approves Joint Interpretative Notes on the Agreement between India and Bangladesh for Promotion and Protection of Investments’, 12 July 2017, http://pib.nic.in/newsite/PrintRelease.aspx?relid=167345.
6 See Joint Interpretative Notes on the Agreement between the Government of the Republic of India and the Government of the People’s Republic of Bangladesh for the Promotion and Protection of Investments, 4 October 2017, https://dea.gov.in/sites/default/files/Signed%20Copy%20of%20JIN.pdf.
7 See Government of India Cabinet, Press Information Bureau, ‘Cabinet Approves Joint Interpretative Notes on the Agreement between India and Bangladesh for Promotion and Protection of Investments’, 12 July 2017, http://pib.nic.in/newsite/PrintRelease.aspx?relid=167345. See also ‘India’s BIT recast continues’ Global Arbitration Review, 19 July 2017 and Jarrod Hepburn, ‘Unable to Unilaterally Terminate a 2011 BIT, the Government of India Persuades Counter-party to Agree joint Interpretative Note to Clarify BIT’s Implications’, IAReporter, 17 July 2017, https://www.iareporter.com/articles/unable-to-unilaterally-terminate-a-2011-bit-the-government-of-india-persuades-counter-party-to-agree-joint-interpretive-note-to-clarify-bits-implications/.
8 See Joint Interpretative Declaration between the Republic of India and the Republic of Colombia on the Agreement for the Promotion and Protection of Investments between India and Colombia, signed on 10 November 2009, 8 October 2018, https://mea.gov.in/Portal/LegalTreatiesDoc/CO18B3453.pdf.
This development may be seen as following the increase in the number of cases brought by foreign investors against India in recent years9 as well as the unveiling of India’s new model BIT in January 2016 (the New Model BIT). As we explain further below, the New Model BIT varies from its earlier models and does away with some of the most hallowed principles underpinning the modern investment protection regime. Notably, the New Model BIT narrows the substantive treatment protections that foreign investors can conventionally rely on, and provides protection to foreign investors in more limited circumstances. The expectation is that the New Model BIT will serve as a template for the re-negotiations of India’s existing BITs and negotiation of future international investment protection agreements (IIAs).10 That said, given the limited number of new BITs negotiated by India since the launch of its New Model BIT, it is still too early to assess to what extent the New Model BIT will be adopted in the BITs negotiated by India in the future.
9 As of early 2018, India has 24 reported disputes filed against it to date, six of which were initiated since 2016. Only one new case, Korea Western Power Co (KOWEPO) v India, has since 2018 been commenced against India by a Korean investor; see UNCTAD’s website https://investmentpolicy.unctad.org/investment-dispute-settlement/country/96/india.
10 It should be noted that the New Model BIT is referred to as the “2015 Model BIT” by some commentators and the “2016 Model BIT” by others.
These developments seem to send conflicting signals to foreign investors at a time when the Indian government appears to be seeking to maintain and further develop a robust business environment, with various new campaigns having been launched in recent years to attract foreign capital into the country.
A comprehensive study of the interplay between India’s current foreign investment policies and the reforms it seeks to introduce to its framework of IIAs is beyond the scope of this chapter, which is far less ambitious. Instead, this chapter merely aims to present an overview of India’s overhaul of its IIA regime in the light of recent actions taken by the government, focusing on what India’s announcement and subsequent termination of its BITs may mean for foreign investors. The remainder of this chapter is in two parts. Section 2 provides an overview of the history and background to India’s foreign investment policies with a focus on the recent strategies implemented by the Indian government to boost India’s economic growth. Section 3 discusses the shift in the investment treaty landscape in India by reference to recent actions by the Indian government, including a glimpse of the notable features of the New Model BIT, and concludes with some thoughts on the future of investment treaty protection in India.