Economy

Finance Ministry to lead talks for Bilateral Investment Trusts

Surabhi New Delhi | Updated on January 22, 2018 Published on December 30, 2015

Model pact seeks to exclude pre-investment activity

The Finance Ministry will head negotiations for Bilateral Investment Treaties (BITs) and investment chapters of other trade pacts to ensure industry and investment interests are protected.

“The Department of Economic Affairs will lead all negotiations on standalone BITs… along with representatives from the Ministries and Departments concerned, to ensure convergence between trade and investment issues,” said a recent circular by the Finance Ministry, adding that it will also lead discussions for investment chapters of Comprehensive Economic Cooperation Agreements, Comprehensive Economic Participation Agreements and Free Trade Agreements.

The decision comes soon after the draft text of the new model BIT was cleared by the Cabinet earlier this month.

Under earlier guidelines, the Finance Ministry, after taking inputs from the Ministry of Commerce and Industry and other Ministries, would negotiate and conclude the Bilateral Investment Promotion and Protection Agreements (BIPA) with other countries. Other trade pacts, including FTAs and Comprehensive Economic Cooperation Agreements are primarily dealt with by the Department of Commerce.

Significantly, the new BIT, which is expected to replace the existing 83 bilateral trade and promotion agreements signed by India, will not extend to pre-investment activities of foreign companies. This means that the Centre will give national treatment only to investments and not investors.

Experts said the provision is in line with India’s stand.

“This has been in discussion for long as many countries, even at forums such as the WTO, have sought national treatment for investors rather than investments. But India was never in favour,” said Nagesh Kumar, who heads the United Nations Economic and Social Commission for Asia and the Pacific’s (ESCAP) South and South-West Asia Office.

Additionally, the BIT will also not apply to measures by local government, law or measure regarding taxation, including measures taken to enforce taxation obligations, issuance of compulsory licences for intellectual property rights (IPRs), government procurement, subsidies and services supplied in the exercise of governmental authority by the relevant body or authority of a party.

The model pact also proposes to put a one year limitation clause for submitting claims for violation in domestic courts by investors. Claims have to be filed within one year of the date on which the investor got information that “the investment, or the investor with respect to its investment, had incurred loss or damage as a result.”

In case of claims for arbitration, the BIT has proposed a six-year limitation clause.

Published on December 30, 2015
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