Peeved EU delays talks on FTA with India

The European Union is keeping India guessing on its intention to resume talks on the proposed two-way free trade pact.

This is a possible indication of EU’s unhappiness over India’s refusal to extend the existing bilateral investment treaties (BIT) with the region beyond their expiry dates.

More than a month after the Commerce Ministry sought dates to re-start the stalled negotiations, there has been no communication from the EU Trade Commissioner’s office on the matter, a Commerce Ministry official told BusinessLine .

“There is complete silence from the EU’s side on resuming the negotiations despite Commerce Minister Nirmala Sitharaman seeking dates from the EU. It has been more than a month,” the official said.

Last year, New Delhi had asked all countries with which India has investment protection agreements, including the EU, to re-negotiate those pacts on the basis of the new draft text of BIT.

The draft text has been designed by the Finance Ministry to avoid a string of litigations that India has been facing over the last few years from global companies, but it has not gone down well with partner countries.

The EU did not get into negotiations with India to replace the existing individual BITs that the member countries individually have with India (which have already started expiring) with a single treaty encompassing the entire bloc, and is now feeling the pressure. “The EU said that the existing BITs should be extended till a new one is in place and it should precede the rest of the FTA being negotiated with India. The Finance Ministry refused to extend the treaties and now the EU is upset,” the official said.

New Delhi has communicated to Brussels that the proposed FTA — formally known as the Broad-based Trade and Investment Agreement (BTIA) — should be negotiated fast and as a BIT would also be part of the broad pact, it would sort out the problem at hand.

Negotiations on the FTA have been stuck for the past few years due to disagreement between the two sides over issues such as lowering of import duties on automobiles and alcohol by India and recognition of India by the EU as a ‘data-secure’ country.

“It seems that the EU is communicating to India its unhappiness with the arrangement on the BIT by delaying a response to our request on negotiating dates for the FTA talks,” the official said.

The most contentious issue in the model BIT is the proposed Investor-State Dispute Settlement Mechanism as it allows companies to seek international arbitration only when all domestic legal options have been exhausted.

The removal of taxation from the purview of BITs has also come in for criticism from foreign partners.

Sitharaman recently said that the countries which fail to re-negotiate investment protection agreement by April 1, 2017, will not get any benefit under any treaty.

There will be hiatus between the old agreement and the new one whenever that comes into place, which means that investors won’t have any additional protection.

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