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In a deviation from its model bilateral investment treaty (BIT), India has agreed to reduce the local remedies exhaustion period – the time period after which international arbitration can be sought by investors – to three years from five years in the India-UAE BIT implemented on August 31, 2024.
The India-UAE BIT also includes portfolio investments, such as stocks and bonds, broadening the scope of the treaty.
The BIT signed and implemented between India and the UAE will provide investors in both countries the ability to get recourse in case they feel they haven’t got a fair deal and also raise investor confidence through a stable and predictable tax regime, Commerce & Industry Minister Piyush Goyal has said.
“In the various issues that we discussed today, some of our Indian companies believe that there are some issues with the UAE and likewise some UAE companies may have issues with India. BIT will help provide a framework, by which both sides can resolve these issues,” Goyal said interacting with the media after the meeting of the India-UAE joint task force on investment on Monday.
Investment protection
The India-UAE BIT signed on February 13 at Abu Dhabi entered into force just over a month ago. “The enforcement of this new BIT with UAE gives continuity of investment protection to investors of both the countries, as the earlier Bilateral Investment Promotion and Protection Agreement (BIPPA) between India and UAE signed in December 2013 expired on September 12, 2024,” per an official statement.
While providing investor and investment protection, balance has been maintained with regard to State’s right to regulate and thereby provides adequate policy space, it added.
The India-UAE BIT departs from India’s Model BIT in two key ways, as it includes portfolio investments and reduces the local remedies exhaustion period from five years to three, according to research body Global Trade and Research Initiative (GTRI).
“Overall, the India-UAE BIT signals a shift towards a more open investment environment at the expense of some 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 sign BITs on similar liberal terms,” the analysis noted.
Key FDI source
The signing of the BIT is significant as UAE is the seventh largest FDI source for India with a share of 3 per cent in the total foreign direct investment (FDI) received by the country with cumulative investment of approximately $19 billion from April 2000-June 2024. India also makes 5 per cent of its total Overseas Direct Investments in UAE to the tune of $15.26 billion from April 2000 - August 2024, the government statement added.
The enforcement of the BIT reflects both nations’ shared commitment towards enhancing economic cooperation and creating a more robust and resilient investment environment, it said.
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