Revamp Of Model Bilateral Investment Treaty In Works, To Be Presented To Cabinet Soon: Secy

The Finance Ministry is reviewing its Model Bilateral Investment Treaty to make it investor-friendly and will approach the Cabinet for approval soon, Economic Affairs Secretary Anuradha Thakur said on Friday.

"The BIT is under review, and we are looking at...many other clauses based on our experience in the negotiations and based on global practices...it is a work in progress. Consultations are underway, and we are reviewing the Model BIT (Bilateral Investment Treaty)," she said at an event organised by economic think tank NCAER.

A bilateral investment treaty is an agreement between two countries to promote and protect investments made by their investors in the other's territory. It provides foreign investors certain guarantees, and when disputes arise, the agreement typically allows investors to take the host country to international arbitration.

"One of the key aspects we need to keep in mind is the investor disputes that the country is facing.

"Trade negotiations and investment negotiations differ in an important way. Under investment protection treaties, investors can take a sovereign government to arbitration," she said.

In contrast, she said trade treaties have a state-to-state dispute settlement mechanism, where diplomatic relations and negotiations allow for greater flexibility and give-and-take.

Keeping this in mind, she said, investor protection has become even more important, especially now that outward direct investment (ODI) from India is increasing.

"In every negotiation, we have to ensure that our own investors and companies also receive adequate protection.

"This is an entirely new dimension in our negotiations. As Indian companies expand overseas, they will need protection in the countries where they invest. Therefore, some of these clauses may actually be useful to retain," she said.

Taking all these factors into account, she said, the Model BIT is currently under review, and it will soon be placed before the Cabinet for a decision.

The existing Model BIT was approved by the Union Cabinet headed by Prime Minister Narendra Modi in 2015.

Revamping the model BIT assumes significance as few countries have accepted the existing model tax treaty, and most of the developed nations have expressed reservations on the tax with regard to provisions like resolution of disputes.

These investment treaties help in protecting and promoting investments in each other's countries.

Asked if overreach of investigative agencies is a reason for flight of capital, Thakur said gross foreign direct investment reached a record while net FDI declined slightly last year.

She dismissed fears that the decline in net FDI is due to overreach of law enforcement agencies, including the ED, saying most of such actions are procedure-driven and transparent.

Frivolous and excessive action are reined in, she added.

She also said that FDI comes into countries for many reasons, and broadly it comes from different destinations looking for returns, looking for stability.