MUMBAI: A revamped India-UAE bilateral investment treaty (BIT), which came into force on August 31, makes conditions for enhanced investment flows from the West Asian kingdom, analysts said. It breaks the template of text of the model treaty by offering protection to portfolio investments, and lets investors seek international arbitration after three years instead of five.
The treaty was signed on February 13 this year replacing the earlier Bilateral Investment Promotion and Protection Agreement (BIPPA) between India and UAE signed in December 2013 and expired on September 12, 2024.
“This (treaty) will give a boost to the greater degree of investments that India seeks to receive from the UAE. We discussed several emerging sectors like data centres and artificial intelligence,” commerce and industry minister Piyush Goyal said after the 12th meeting of India UAE High-level Task Force in Investments here on Monday.
Co-investing in renewable energy and transmission infrastructure for solar and wind power in India as well as significant ramp-up of UAE investments both in strategic sectors and core infrastructure opportunities are also envisaged under the new BIT.
The Model Text of the Indian Bilateral Investment Treaty was formulated in 2016 in response to several cases filed against India by investors like Vodafone and Cairn. As a result of the growing surge of BIT claims, India unilaterally terminated 68 of the 74 treaties it had signed till 2015 and sought renegotiations on the basis of the revised text. Only seven countries have signed BITs with India under the new model.
India’s generic text of model bilateral investment treaty has laid down that international arbitration by investors will only be resorted to after making attempts to sort them through India’s legal system for at least five years.
The India-UAE new investment treaty reduces this time period to three years. The UAE treaty also includes portfolio investments which can seek protection under the BIT. Portfolio investments include shares, stocks, units in trusts and other forms of equity participation. It also includes loans, bonds, debentures and other debt instruments. Debt securities and loans to the government or government-owned enterprises are out of the definition of investments for the purposes of the treaty.
The model text clearly mentions that portfolio investments by enterprises or in other enterprises and government securities will not be covered in the future bilateral investment treaties that India will sign.
The flexibility shown in the investment treaty opens up the door for signing similar agreements with other countries like the UK and European Union with whom talks are in advanced stages. Australia, Switzerland, Oman, Israel, Qatar, Tajikistan, Russia, Saudi Arabia, Mexico, Hong Kong, Mauritius are among a few other countries with whom talks for an investment treaty are in progress.
“India-UAE signals a shift towards a more open investment environment at the cost of regulatory sovereignty. While it may attract more UAE investment, it also raises the risk of higher arbitration claims against India. India would soon be approached by other countries to do sign BITs on similar liberal terms,” co-founder of Global Trade Research Initiarive Ajay Srivastava said.
The treaty, however, investors cannot claim damages for loss on their investments because of change in taxation policies of enforcement of taxation demand. It also preserves the right of the parties to the agreement to grant compulsory licences on intellectual property in line with the World Trade Organisation (WTO) agreements. Claim of losses due to government procurement and subsidies and grants are also out of the purview of the agreement.
Source: The Financial Express