BILATERAL INVESTMENT TREATIES

(BIT)

A GENERAL OVERVIEW

ISHMEET KAUR OBEROI

3RD YEAR , BBA LLB(Hons.)
SYMBIOSIS LAW SCHOOL, PUNE
 INTRODUCTION
 BIT or Bilateral Investment Protection Agreements (BIPE) is the
investment treaty entered into by two parties namely the foreign
investors and the Host states in order to make an investment by one party
in the business ventures of the other.
 General Content Pattern followed in a BIT consists of a Preamble
containing the objective and purpose for which the BIT is entered for.

 Post the BIT are the Definition clauses which give way to standards of
protection and treatment of foreign investments - addressing standards
such as fair and equitable treatment, full protection and security,
national treatment, and MFN treatment.

 Provisions dealing with state measures such as nationalization,

expropriation or other similar measures, their permissibility under
specific circumstances, and compensation for losses incurred by foreign
investors form a core part of BITs and usually follow the standards of
protection.
MAJOR CLAUSES

 FAIR AND EQUITABLE TREATMENT

 FULL PROTECTION AND SECURITY
 NATIONAL TREATMENT
 MOST FAVOURED NATION TREATMENT
 INVESTOR STATE DISPUTE RESOLUTION CLAUSE
( Involves cooling off periods, negotiation, fork in the road
provisions precluding exercise of one remedy over the
other.)
LEGAL PROVISIONS

 International Centre for Settlement of Investment

Disputes (ICSID) Rules.
 United Nations Commission on International Trade Law
(UNCITRAL ) Arbitration Rules.
 ICC ARBITRATION RULES
 CASE LAWS
NAME
1) White Industries , (2002-
2011)
2) Flemingo DutyFree Shop
Private Limited v the Republic
of Poland, UNCITRAL, Award
(Aug. 12, 2016)
3) Vodafone Group Plc and
Vodafone Consolidated Holdings
Limited v. India (II)
5) Louis Dreyfus Armateurs v.
India
RULES APPLICABLE DECISION CASE STATUS
ICC Arbitration Rules Tribunal Awarded USD 4.08 in Decided.
favor of Claimant.
UNCITRAL Rules. BIT claims brought by Indian Decided.
investors viz. Flemingo Duty
Free Shop under the India-
Poland BIT resulting in an award
of USD 17.9 million in favour of
the investor.
UNCITRAL Rules. Claims arising out of a Pending.
retrospective transaction tax
imposed by the Government
over claimants' acquisition of
Indian-based Hutchison
Whampoa telecoms business.
UNCITAL An UNCITRAL arbitral tribunal Award not public.
dismissed a US$36 million claim
by a French investor, Louis
Dreyfus Armateurs SAS (“LDA“),
against India under the 1997
France-India bilateral
investment treaty (“BIT“).
 HIGHLIGHTS OF INDIA’S
MODEL BIT
 The 2016 India Model BIT provides for “re-affirming the right of Parties to regulate
investments in their territory in accordance with their law and policy objectives” – thereby
laying equal emphasis on permissibility of state regulation in addition to investment
protection.
 The Preamble in 2016 India Model BIT is extensive. In addition to promotion of bilateral
cooperation, it provides for promotion of sustainable development of the Parties. It
specifically lays out that Parties shall have the right to regulate the investments in
accordance with the law and policy objectives.
 2016 India Model BIT places no caveats on the validity of regulatory measures other than
the fact that they must be non-discriminatory.
 It provides a shared understanding of what would constitute direct and indirect
expropriation. And rules out the global exceptions of non arbitrariness and non
discrimination from the purview of exceptions under expropriation .
 It provides that direct expropriation would constitute formal transfer of title or outright
seizure. Indirect expropriation would occur if measure(s) substantially or permanently
deprives the investor of fundamental attributes of the property in its investment such as
right to use, enjoy and dispose the investment without formal transfer of title or outright
seizure.
 Additionally, it states that non-discriminatory regulatory
measures or awards by judicial bodies designed to
protect legitimate public interest or public purpose
objectives shall not constitute expropriation.
 Contract claims are outside the purview of dispute
resolution under the 2016 India Model BIT. An arbitral
tribunal constituted under the BIT can only adjudicate
upon disputes relating to breaches of the treaty under
Chapter II.
LOOPHOLES in the Model BIT
 Since, the Model BIT does not takes into account contractual
disputes, certain disputes would be nonarbitrable eg. if the
investment has been made through fraudulent misrepresentation,
concealment, corruption, money laundering or conduct amounting
to an abuse of process or similar illegal mechanisms the other party
cannot submit any claim for arbitration.
 Moreover, the treaty is silent on the applicability of any national
law of the host state that could be invoked.
 The tribunals does not have the power to sit on appeal on decisions
made by Indian Courts and since the Model BIT contains the
provision on ‘Conditions precedent for submission of claim’ thereby
mandating the exhaustion of local remedies, the tribunals facing an
investment treaty claim after such exhaustion would render the
exhaustion of domestic remedy a useless clause.
 The 2016 India Model BIT exempts taxation measures from the scope
of the BIT