India–UK BIT talks stalled over taxation carve-out and MFN status disagreements.
India refuses to include tax matters under investor-state arbitration.
United Kingdom pushing for MFN status, which India rejects in BIT context.
What’s Holding Back India-UK Investment Treaty Despite FTA Push
The pause on the BIT does not affect the broader trade relationship. India and the UK signed an FTA in July 2025, and that deal is expected to come into force around May this year
India and UK sign an FTA
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A proposed bilateral investment treaty (BIT) between India and the United Kingdom has quietly been set aside, with both sides unable to bridge fundamental differences over taxation carve-outs and most-favoured-nation (MFN) status, Moneycontrol reported. However, two countries are preparing to bring their free trade agreement (FTA) into force later this year.
A senior government official, told Moneycontrol that the BIT talks had effectively stalled over two recurring sticking points. The first is Britain's push for MFN status — a concept India regards as belonging to trade agreements, not investment treaties. The second is taxation, where New Delhi's position is non-negotiable: it will not allow tax matters to fall within the scope of a BIT, and therefore within reach of investor-state arbitration.
"The BIT with the UK is not happening because there are some clauses that are a concern for us," the official said. "One issue that comes up is taxation, and we keep saying we want a complete carve-out of taxation; we can't touch taxation in BITs, so that becomes a sticking point. Then there is MFN status, which they keep asking for. MFN is a trade concept, so why do we need it in a BIT? Neither side has taken up the issue of the BIT."
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The FTA Is a Separate Track
The pause on the BIT does not affect the broader trade relationship. India and the UK signed an FTA in July 2025, and that deal is expected to come into force around May this year. FTAs and BITs are distinct instruments, and the official noted that investment treaties tend to take considerably longer to conclude than trade agreements — a reflection of how much more contested the underlying legal and policy questions tend to be.
India is simultaneously pursuing BITs with at least five other partners. Talks are ongoing with the European Union, Bahrain and the Maldives, whilst negotiations with Saudi Arabia are described as progressing with some movement on positions from both sides. The EU, like the UK, has raised questions around taxation — an area where India's stance remains firm, though talks continue.