Context: India is reportedly revising its 2015 Model Bilateral Investment Treaty (BIT), with the revised text expected to be placed before the Union Cabinet.
- The proposed revision follows the 2025 Union Budget announcement on revamping the 2015 Model BIT.
- The 2015 framework emerged after several foreign investors initiated BIT claims against India, prompting a broader review of India’s investment-treaty policy.
- Two major outcomes were the unilateral termination of several existing BITs and adoption of the 2015 Model BIT as the basis for negotiating new treaties.
Limitations of the 2015 Model BIT
- India has concluded only a limited number of BITs based on the 2015 model, indicating difficulties in attracting treaty partners.
- The model strongly prioritises the State’s right to regulate over protection of foreign investment, creating an imbalance between the two objectives.
- Capital-exporting countries have expressed concerns over the adequacy of legal protection available to their investors in India.
- These concerns are compounded by regulatory uncertainty, governance deficiencies and judicial delays, increasing perceived investment risks.
- The proposed revision should therefore seek to restore a better equilibrium between investment protection and regulatory sovereignty.
What Needs Reform?
Any BIT review involves two distinct dimensions:
1. Substantive and procedural reforms
- Make it easier for foreign investors to access international arbitration for treaty-based claims.
- Strengthen substantive protections available to foreign investors.
- Incorporate stronger investment-facilitation measures to improve the investment environment.
2. Reform of the treaty-making process
- The process through which the Model BIT is formulated is equally important because investment treaties can significantly affect citizens, businesses and the State’s regulatory space.
Democratic Deficit in Treaty-Making
- The “all-affected principle” of democracy suggests that people substantially affected by public decisions should have meaningful opportunities to participate in decision-making.
- A democratic deficit arises when treaties are negotiated primarily by executives, bureaucracies and technocrats with inadequate parliamentary or public oversight.
- It may involve limited parliamentary scrutiny and inadequate consultation with experts, industry, civil society and other stakeholders.
International Practices
- United Kingdom and Australia: Treaty texts are placed before Parliament before ratification, allowing parliamentary scrutiny and debate.
- Norway: Conducted public consultations on its updated Model BIT drafts in 2008 and 2015.
- Colombia: Released its Model BIT for public consultation.
- India (2015): Circulated the draft Model BIT for public comments, enabling wider expert participation.
India’s 2015 Experience
- The Law Commission of India (LCI) constituted an expert group to examine the draft Model BIT circulated in 2015.
- Its 260th Report recommended several changes to improve the draft.
- India adopted the final Model BIT in December 2015, although several LCI recommendations were not incorporated.
Need for a Wider Consultative Process
1. Independent Expert Group
- Constitute a core external advisory group comprising international investment lawyers, economists, academics, researchers and think-tank experts.
- The group can serve as an independent sounding board during formulation of the revised Model BIT.
2. Stakeholder Consultation
- Seek structured inputs from industry associations, arbitrators, law firms, civil society organisations and other relevant stakeholders.
- This can identify practical concerns regarding investor protection, arbitration and regulatory autonomy.
3. Public Consultation
- Prepare a draft and place it in the public domain for nationwide comments, following the approach adopted in 2015.
- Public consultation can improve transparency and incorporate perspectives beyond government and industry.
4. Parliamentary Scrutiny
- Place the draft Model BIT before Parliament for discussion, preferably with detailed examination by relevant Department-related Parliamentary Standing Committees.
- Parliamentary involvement would strengthen democratic legitimacy and institutional accountability in treaty-making.
Way Forward
- India’s revised Model BIT should simultaneously address investment protection, State regulatory autonomy and democratic legitimacy.
- Consultation should be substantive rather than a box-ticking exercise, with the government engaging seriously with both supportive and dissenting views.
- A transparent and participatory process can produce a treaty framework that is legally credible, investment-friendly, development-oriented and democratically legitimate.
