India Pushes for Reformed BITs: Sitharaman Calls for Stronger Regulatory Powers
Finance Minister Nirmala Sitharaman has stressed the importance of ensuring that Bilateral Investment Treaties (BITs) align with national interests, particularly in the realm of regulatory powers, to protect developing nations from being exploited by wealthy investors.
New Delhi: Finance Minister Nirmala Sitharaman has stressed the importance of ensuring that Bilateral Investment Treaties (BITs) align with national interests, particularly in the realm of regulatory powers, to protect developing nations from being exploited by wealthy investors.
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Investment Treaties Should Guide Arbitrators in Resolving Disputes
In her address at the inauguration of the first PG Certificate Course on International Commercial & Investment Treaty Arbitration, Sitharaman highlighted concerns regarding arbitrators often overlooking the judicial decisions of host countries during arbitration proceedings. She pointed out that arbitrators have, in some instances, failed to take into account court-established findings of fraud or corruption in the host country, putting states in a difficult position when faced with arbitration outcomes.
“An investment treaty must not only provide better regulatory powers to nations but should also serve as guidance for arbitrators, ensuring that national interests and circumstances are taken into account when resolving disputes,” Sitharaman said.
National Interests and Regulatory Powers in Investment Treaties
Sitharaman emphasized that BITs should prioritize national interests and enhance regulatory powers for nations to ensure fair arbitration outcomes. This would help avoid situations where powerful investors manipulate the system to their advantage. The Finance Minister also pointed out that BITs should be negotiated as stand-alone agreements, rather than being bundled with Free Trade Agreements (FTAs), due to their unique impact on sovereign rights.
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Her statement comes as India is in the process of negotiating BITs with the UK, Saudi Arabia, Qatar, and the European Union (EU). The Government of India’s Budget for 2025-26 includes a proposal to revamp the existing model BIT to make it more attractive to foreign investors while safeguarding national interests.
Rising Concerns About Investor-State Dispute Settlement (ISDS) Cases
Citing reports from the United Nations Conference on Trade and Development (UNCTAD), Sitharaman revealed that there have been 1,368 registered investment treaty cases, with nearly 70% of these cases filed against developing countries. She expressed concern over the use of outdated BITs, which allow investors to exploit developing nations and seek unfair advantages.
“Some investors with deep pockets purchase cases from one of the arbitration parties and drag them on for an extended period, something no sovereign state can afford,” Sitharaman remarked, adding that the average amount sought by investors in Investor-State Dispute Settlement (ISDS) cases is $1.1 billion— a substantial financial burden for the Global South.
Protecting Sovereignty with Stand-Alone BITs
Sitharaman emphasized that BITs have critical implications for national sovereignty, particularly in areas such as taxation laws and public policy. She called for BITs to be carefully crafted with input from legal experts and specialists to ensure that the interests of developing countries are adequately protected in international arbitration proceedings.
