3 min read Last updated: October 8, 2024 | 12:08 AM IST
As part of its recently signed investment treaty with the United Arab Emirates (UAE), India has reduced the time period for foreign investors to seek international arbitration from five years to three years, which is in line with the country’s model This is a deviation from the bilateral investment treaty (BIT).
Under the Investor-State Dispute Settlement (ISDS) mechanism, investors can resort to international arbitration if the Indian judicial system is unable to resolve the dispute within this shortened period.
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The investment agreement was signed in Abu Dhabi on February 13 and came into force on August 31, replacing the previous agreement.
India’s new arrangement includes stocks and bonds as protected investments, unlike the model BIT, which provides protection to foreign direct investment (FDI) and excludes portfolio investments such as stocks and bonds.
A BIT between India and the UAE will boost investor confidence, provide a predictable and stable tax regime, and help investors obtain redress if they feel they have not been getting a fair deal, the United Chamber of Commerce and Industry said. Minister Piyush Goyal said on Monday.
“On the various issues that we discussed today (Monday), some Indian companies have some issues with the UAE and similarly some UAE companies have some issues with India. The BIT will help provide a framework within which both countries can resolve these issues,” said Goyal, along with Sheikh Hamed bin Zayed Al Nahyan, He spoke to reporters after co-chairing the 12th UAE High-Level Co-Investment Meeting. Managing Director of Abu Dhabi Investment Authority (ADIA).
However, experts believe that the shortened time frame could weaken India’s ability to resolve disputes domestically and create more opportunities for international arbitration.
According to the Delhi-based think tank Global Trade Research Initiative (GTRI), while a BIT could attract more UAE investment, it also raises the risk of an increase in arbitration claims against India. Moreover, as India negotiates BITs with countries such as the UK and trading blocs such as the European Union, it will soon be approached by other countries to sign BITs on similar liberal terms.
GTRI said the inclusion of stocks and bonds as protected investments broadens the scope of the treaty and allows investors with passive financial holdings to access the ISDS mechanism. The report said, “This change increases India’s exposure to disputes over financial products, even those that do not contribute significantly to economic development, and moves India away from the model BIT’s focus on long-term investments.” “It will be.”
The Ministry of Finance made an official announcement on the agreement on Monday, saying the India-UAE BIT will build on investor confidence by guaranteeing minimum treatment and non-discrimination, as well as providing an “independent forum” for dispute resolution through arbitration. It is expected that this will increase the
“However, a balance has been struck with respect to the state’s right to regulate while providing investor and investment protection, thereby providing appropriate policy space,” the report said.
The UAE accounted for 3% of total FDI inflows and was India’s seventh largest source of foreign investment, contributing approximately $19 billion from April 2000 to June 2024. Similarly, India invests 5% of its total overseas investment in the UAE. , reaching $15.26 billion from April 2000 to August 2024.
BITs enable reciprocal investment promotion and protection: protection for foreign investors in India and Indian investors abroad. Such agreements aim to boost investor confidence and encourage foreign investment.
First publication date: October 8, 2024 | 12:08 AM IST