NEW DELHI: The government on Wednesday approved the Bilateral Investment Promotion and Protection Agreement (BIPA) with Saudi Arabia, offering investors a shorter two-year timeline to exhaust domestic remedies before initiating international arbitration, sources told FE.
This is the first such provision among a handful of new-generation bilateral investment treaties signed in the last couple of years.
On July 13, FE reported that foreign investors are set to get a faster arbitration route, with India agreeing in negotiations with Saudi Arabia to a two-year local-remedies exhaustion requirement, providing investors enhanced access to the Investor-State Dispute Settlement (ISDS) mechanism.
The five-year requirement to exhaust local legal remedies was introduced under the 2015 BIT framework, largely in response to the investor-state tax disputes India faced at the time. However, the Centre is now overhauling the restrictive framework to attract foreign investment amid weakening capital inflows since 2023.
In the last couple of years, India has reduced the timeframe for exhausting local legal remedies from five years to three years for investments from the United Arab Emirates and Israel.
With substantial mutual investments between the two countries, the India-Saudi Arabia BIPA would provide legal certainty, protect the interests of investors from either country in the territory of the other, and promote further expansion of mutual investments, sources said.
In the BIPA with Saudi Arabia, investor-friendly provisions covering treatment of investment, non-discriminatory treatment, expropriation and free transfers would boost investor confidence, sources said.
“The Agreement carefully balances investor protection with the State’s right to regulate in the public interest, thereby preserving sufficient policy space for sovereign governance,” an official said.
The BIPA will further strengthen the economic pillar of the India-Saudi Arabia partnership, facilitate greater investment engagement and contribute to deeper and mutually beneficial economic cooperation between the two countries.
The BIPA with Saudi Arabia assumes importance as the West Asian country had previously expressed its intention to invest about $100 billion in India. Saudi Arabia is a major investor through its sovereign wealth fund, the Public Investment Fund (PIF), which has assets worth about $1.2 trillion. Last year, India granted Saudi Arabia’s sovereign wealth fund PIF and its subsidiaries tax exemption on dividends, interest and long-term capital gains (LTCG) on investments in infrastructure assets as part of its outreach to attract long-term capital.
Source: The Financial Express
