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India’s Proposed New Bilateral Investment Treaty (BIT) Framework [Prelims Bits]

02 Sep 2026

Tags: Prelims   Economic and Social Development

Source: The Hindu

Context: India is considering a re-modelling of its BIT framework, including a narrowly defined qualified Most-Favoured-Nation (MFN) provision to balance investor protection with India’s regulatory interests.

  • Qualified MFN: May give foreign investors specified additional benefits available under India’s other treaties, but does not permit broad claims based on third-country treaties.
  • MFN rule: India’s 2015 Model BIT removed the earlier open-ended MFN approach.
  • Investor–State Dispute Settlement (ISDS): Proposed domestic litigation window may be reduced from 5 years → 1 year.
  • Post-BIT protection: Proposed to increase from 5 years → 10 years after treaty termination/expiry.
  • Definition of investment: Proposed to expand to include portfolio investments and other financial assets.
  • Third-party litigation funding: Proposed to be prohibited.
  • Fair and Equitable Treatment (FET): The open-ended FET standard of the earlier framework will not be restored.
  • MFN principle: Generally requires a country to accord investors/trading partners treatment no less favourable than that given to comparable investors/partners from another country. A qualified MFN limits this obligation to specifically defined circumstances.

Prelims Question

Q1. Consider the following statements:

Assertion (A): A qualified Most-Favoured-Nation (MFN) clause can provide foreign investors certain treaty benefits available to investors from third countries without necessarily allowing unrestricted reliance on all provisions of India's other investment treaties.

Reason (R): A qualified MFN provision defines in advance the circumstances or categories of benefits for which MFN treatment can be invoked.

Which one of the following is correct?

(a) Both A and R are correct, and R is the correct explanation of A
(b) Both A and R are correct, but R is not the correct explanation of A
(c) A is correct, but R is incorrect
(d) A is incorrect, but R is correct

Answer: (a)

Explanation: A qualified MFN provision is narrower than an open-ended MFN clause. It can provide specified treaty benefits while limiting the possibility of investors importing favourable provisions from unrelated third-country treaties.

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