Bilateral Investment Treaty

• Vaid's ICS, Lucknow
• 22, Jan 2022

Why in  News?

The report of the Standing Committee on External Affairs on ‘India and bilateral investment treaties (BITs)’ was presented to Parliament.

It comes a decade after India lost the first investment treaty claim in 2011 (White Industries v. India) and became a watershed moment for India and transformed the trajectory of India’s BIT landscape triggering sweeping changes such as unilateral termination of these treaties.

India’s approach towards BITs:

1. Foreign investors have sued India around 20 times for alleged BIT breaches. This made India the 10th most frequent respondent-state globally in terms of investor-state dispute settlement (ISDS) claims from 1987 to 2019 (UNCTAD).
2. India adopted a new Model BIT in 2016, which marked a significant departure from its previous treaty practice.
3. India is in the process of negotiating new investment deals (separately or as part of free trade agreements) with important countries such as Australia and the U.K.

Missed opportunity

1. A very large proportion of ISDS claims against India is due to poor governance.
2. Changing laws retroactively (which led to Vodafone and Cairn suing India)
3. Annulment of agreement in the wake of imagined scam (taking away S-band satellite spectrum from Devas)
4. Judiciary’s fragility in getting its act together (sitting on the White Industries case for enforcement of its commercial award for years).

Recommendations the Committee 

1. Articulated its discontentment at the fact that India has signed very few investment treaties after the adoption of the Model BIT.
2. It recommends that India expedite the existing negotiations and conclude the agreements at the earliest because a delay might adversely impact foreign investment.
3. The committee recognises the potential of BITs in luring foreign direct investment (FDI).
4. India should sign more BITs in core or priority sectors to attract FDI.
5. India’s Model BIT be fine-tuned and should be recalibrated keeping two factors in mind: tightening the language of the existing provisions to circumscribe the discretion of ISDS arbitral tribunals that offer broad interpretations.
6. It should strike a balance between the goals of investment protection and the state’s right to adopt bonafide regulatory measures for public welfare.
7. There is a need to bolster the capacity of government officials in the area of investment treaty arbitration.
8. It recommends the need for an institutionalised mechanism for capacity-building through the involvement of public and private universities that have competence in this field.
9. The government should establish chairs in universities to foster research and teaching activities in international investment law.

Facts for Prelims :

Xenotransplantation :

David Bennett, a 57-year-old from Baltimore, Maryland, the U.S. became the first person to receive a heart transplant from a genetically-modified pig.

2. It is any procedure that involves the transplantation, implantation or infusion into a human recipient of either (a) live cells, tissues, or organs from a nonhuman animal source, or (b) human body fluids, cells, tissues or organs that have had ex vivo contact with live nonhuman animal cells, tissues or organs.
3. Pig immune system is different from humans for the simple reason that the porcine organs are anatomically similar to those of humans.
4. The donor pig underwent 10 genetic modifications, by which the genes responsible for the rapid rejection of foreign organs by the human body were inactivated or knocked out.
5. Gal Safe pigs, or pigs that had undergone editing to knock out a gene that codes for Alpha-gal (a sugar molecule) were used.
6. Alpha-gal can elicit a devastating immune response in humans.
7. These pigs have 10 of their genes genetically modified to reduce the possibility of rejection.