Revamped Model Bilateral Investment Treaty May Soon Get Cabinet Nod

The new model bilateral investment treaty framework is ready and is likely to get Cabinet approval soon, government sources said.

The finance ministry has sent the draft note to the Cabinet Secretariat for the approval of the Cabinet headed by the Prime Minister, the sources said.

The revamped model of bilateral investment treaty will streamline India's negotiation procedures and ensure investor protection, sources said.

The existing Model BIT (bilateral investment treaty) was approved by the Union Cabinet in 2015.

Sources said that there are a few red lines, which the government is not willing to cross while designing the new model BIT.

"No tax related provisions will be part of the framework as we are not willing to give up on the sovereign right on taxation," sources said.

At the same time, local legal provisions will also not form a part of it as the government intends to keep judiciary out of the purview of bilateral investment treaty.

A bilateral investment treaty is an agreement between two countries to promote and protect investments made by their investors in the other's territory. Under investment protection treaties, investors can take a sovereign government to arbitration.

With Outward Direct Investment (ODI) from India increasing, there is a need to ensure that domestic investors and companies investing abroad also get adequate protection.

The current framework requires a foreign investor to wait for five years before initiating a treaty-based arbitration against India.

This means that if a foreign investor has a dispute with India, it should first pursue domestic remedies for five years before bringing a claim under the agreement.

In the last few years, there has been growing opposition to this five-year period, with many seeking to lower it.

In the last few years, India has signed bilateral investment treaties with Israel, Uzbekistan, and the United Arab Emirates. In total, India has signed nearly 90 bilateral investment treaties.

In the Budget for 2025-26 (Apr-Mar) the government had proposed revamping the existing framework.

"To encourage sustained foreign investment and in the spirit of 'first develop India', the current model bilateral investment treaty will be revamped and made more investor-friendly," Finance Minister Nirmala Sitharaman had said in her Budget speech.

India is currently negotiating a bilateral investment treaty with 4-5 countries, including Canada and the UK.