1 day ago
India’s Investment Treaties Shrunk After 2016 Model BIT
India changed its investment treaty rules in 2016.
One rule required foreign companies to use Indian courts for five years before seeking international arbitration.
Surjit Bhalla said this was much longer than the usual three-to-six-month consultation period.
He argued that the rule could make investors uncertain because court cases may take a long time.
India’s treaty network also became much smaller after the new framework.
The number of treaties in force fell from 73 in 2015 to eight by 2021.
Later agreements with the United Arab Emirates and Israel reduced the court requirement to three years.
Bhalla said India should consider both the money entering the country and investment that might be discouraged by unpredictable rules.
India’s investment treaties in force fell from 73 in 2015 to eight by 2021.
Surjit Bhalla criticized the Model BIT’s five-year domestic litigation requirement before international arbitration.
Treaties with the United Arab Emirates and Israel later reduced that requirement to three years.
Bhalla said 2025-26 gross FDI of $94.5 billion translated into net FDI of $7.65 billion.
He urged policymakers to focus on predictable treaty frameworks and potential future investment, not only headline inflows.
- Who
- Surjit Bhalla criticized India’s 2016 Model Bilateral Investment Treaty and its investment policy.
- What
- India’s investment treaty network contracted sharply, while the Model BIT imposed a lengthy domestic litigation requirement.
- Where
- The issue concerns India’s courts, investment treaties, and international arbitration arrangements.
- When
- The treaty decline occurred from 2015 through 2021; figures discussed by Bhalla covered 2025-26.
- Why
- Bhalla argued that the five-year litigation requirement and treaty uncertainty could discourage foreign investment.
Critics of the Model BIT
Treaty-policy position
Five-year litigation requirement
Critics of the Model BIT
Bhalla said requiring investors to litigate in Indian courts for five years is far longer than the usual three-to-six-month consultation period and may prolong uncertainty.
Treaty-policy position
India’s later treaties with the United Arab Emirates and Israel reduced the requirement to three years, and the government was reported to be considering a broader revision of the Model BIT; no detailed government defense of the original five-year rule was provided.
Shrinking treaty network
Critics of the Model BIT
Bhalla attributed the fall from 73 treaties in force in 2015 to eight by 2021 to the post-2016 framework and described it as obstructive.
Treaty-policy position
The articles report the treaty contraction and ongoing policy revision but do not provide a government explanation or defense for the decline.
Measuring foreign investment
Critics of the Model BIT
Bhalla argued that gross FDI headlines obscure repatriation, disinvestment, overseas investment by Indian companies, and reinvested earnings, leaving much lower net FDI.
Treaty-policy position
The reported gross inflow of $94.5 billion remains a major headline measure, although the articles do not present a separate government interpretation of the figures.
Key facts
- Treaties in force
- 73 in 2015, 29 in 2017, 16 in 2019, and eight by 2021.
- Domestic litigation requirement
- The 2016 Model BIT required investors to pursue Indian legal remedies for five years before international arbitration.
- Later treaty change
- India’s 2024 agreement with the United Arab Emirates and 2025 agreement with Israel reduced the requirement to three years.
- Gross FDI inflows
- $94.5 billion in 2025-26, according to figures cited by Bhalla.
- Repatriation or disinvestment
- Foreign investors repatriated or disinvested $53.6 billion.
- Indian investment abroad
- Indian companies invested $33.3 billion abroad.
- Net FDI
- $7.65 billion, according to Bhalla’s calculation.
Quotes
Surjit Bhalla
Economist and columnist criticizing India’s investment treaty framework
“India has been the most obstructionist member of the WTO. With the ‘Model’ BIT, it went on to construct the most obstructionist investment treaty in the world.”
businesstoday.in
“Before going to international arbitration, a foreign investor had to litigate in Indian courts for five years.”
businesstoday.in
Sources
Related news
India-Saudi Investment Pact Cuts Arbitration Remedy Window to Two Years
US report flags economic nationalism, corruption as India investment barriers
India Debates Reducing Reliance on Foreign Arbitration Institutions
Daiichi-Fortis Ruling Raises Concerns Over India’s Foreign Investment Climate
India Must Build Credible Arbitration Institution, Address Bias Concerns: Rohatgi
India’s 7% Growth Faces Capital, Investment and Judicial Hurdles
Motilal Oswal Names Top Auto Picks Amid September Growth
Voter Questions Burden of Proof in India’s SIR Revision
Why India Needs BRICS to Balance Washington and Beijing
India's BRICS Gains Mask China's Dominance and Export Weakness
