India is likely to sign a bilateral investment treaty (BIT) within the next few months with the US, Canada or Cambodia. BIT, the model draft of which was cleared by the Union Cabinet in December 2015, is expected to eventually replace the existing bilateral investment protection and promotion agreements (BIPPAs) that India has signed with 72 nations. India will also sign BITs with countries it has had no comprehensive investment agreements with before, including the US.
BIT keeps taxation out of its ambit with the idea that foreign companies finding themselves in a tax row with the government will not be able to invoke the investment treaty their parent country has signed with India, as is the case with BIPPA. A bilateral investment treaty (BIT) is an agreement establishing the terms and conditions for private investment by nationals and companies of one state in another state. This type of investment is called foreign direct investment (FDI). BITs are established through trade pacts.
Most BITs grant investments made by an investor of one Contracting State in the territory of the other a number of guarantees, which typically include fair and equitable treatment, protection from expropriation, free transfer of means and full protection and security. The distinctive feature of many BITs is that they allow for an alternative dispute resolution mechanism, whereby an investor whose rights under the BIT have been violated could have recourse to international arbitration, rather than suing the host State in its own courts. This process is called investor-state dispute settlement. The world’s first BIT was signed on November 25, 1959 between Pakistan and Germany, according to Wikipedia.
It would be interesting to see what impact the adoption of the new model would have on the ongoing India-US BIT negotiations, as India’s model differs from the US. The US has already indicated that it has reservations regarding India’s new model BIT, likely making it difficult for Indian negotiators to convince their American counterparts to accept the Indian viewpoint on these issues… Newly negotiated BITs based on the new model would mean less treaty protection for Indian investment abroad. This is especially important considering that outward foreign investment from India has increased significantly over the past few years, writes Prabhash Ranjan at http://thewire.in