In October 2024, the government announced a new Bilateral Investment Treaty (BIT) between India and the UAE. The BIT has substituted the Bilateral Investment Promotion and Protection Agreement, which expired in September 2024. The countries’ aim is to ensure continuity of investment protection to their investors under international law and specifically in accordance with the terms of the BIT.

The India-UAE BIT can be perceived from different lenses. From a pure legal perspective, it represents India’s continued commitment to the international investment law framework in a renewed form. This is critical since the government terminated most of its BITs in 2015, after a comprehensive review which had commenced soon after an adverse award in White Industries vs Republic of India. The White Industries tribunal had found India liable to compensate an Australian investor due to the delay of Indian courts in enforcing the investor’s commercial arbitration award for several years.

Limited success

Further, while the government had also indicated a desire to negotiate new treaties, these were expected to be based on the government’s more conservative Model BIT 2015. However, the success of this model turned out to be limited. In 2021, a Parliamentary Committee found that a number of BITs signed post 2015 and those under negotiations to be inadequate. While other negotiations, such as with the UK, the European Union, and Australia are still ongoing, the progress has hardly been smooth. Negotiations with Canada are also currently paused. More generally, there appears to be a growing divergence between India and many of its Western negotiating partners about what their ideal BIT should look like.

From the successful negotiation of the India-UAE BIT, two inferences can be drawn. First, the ability of two powerful, non-Western states to find common ground and have a shared outlook on critical aspects of their economic relations. This is despite the BIT having several novel and potentially controversial provisions, such as an explicit prohibition of third-party funding for investors seeking to bring an arbitration claim against either country. It is thus plausible that the India-UAE BIT may set a template for future treaties signed by India with other similarly positioned countries or entities, such as the Gulf Cooperation Council and Russia.

Second, the BIT demonstrates India’s affinity to prioritise its economic ties over some previously-stated principled positions. Indeed, the India-UAE BIT takes a more relaxed approach than the Model BIT 2015 on several issues, such as the inclusion of portfolio investments as well as a reduced requirement of three (instead of five) years of local litigation in host territory’s courts before resorting to international arbitration. The signal is clear: for some countries whom India considers an unconditional friend, there exists ample room for flexibility.

The significance of the aforementioned development goes well beyond the legal realm. India and the UAE have shared mutually beneficial and cohesive relations for several years. The domain of trade and investment is not an exception to this growing camaraderie. Recent legal developments in India are now bolstering this relationship, by optimising the available legal tools. In early 2020, India declared the UAE as a reciprocating country for the execution of foreign judgments under the Indian Civil Code of Procedure, 1908. This means that subject to limited exceptions, judgments rendered by the UAE courts can now be far more easily enforced before Indian courts than before. This, in turn, would lead to an efficient settlement of any commercial disputes arising from India-UAE transactions and commercial relationships. These two developments can be expected to provide additional impetus to the already-strong economic and cultural ties between both the countries by encouraging a mutual exchange of capital and human resources.

The writer is Director General, Indian Council of Arbitration

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