[3rd October 2026] The Hindu OpED: India’s Model BIT: a decade later, amid changes

Mentor’s Comment

India’s treaty practice has already moved ahead of its model. The UAE, Uzbekistan and Israel agreements shortened the remedies period and allowed counterclaims while the 2015 text stayed unchanged. The revision matters only if it writes this practice into the model. If it does not, the model remains a reference that negotiators bypass.

Why in the News

The Union Budget 2025-26 announced that India’s Model Bilateral Investment Treaty (BIT) would be revamped and made more investor-friendly, and the revised model is reportedly finalised and awaiting Cabinet approval. The real question is not whether investors get more or less protection, but what India has learnt from a decade of treaty practice.

What is a Model BIT, and why was the 2015 version cautious?

1. What it is: A BIT protects one country’s investors in the other. A Model BIT is India’s opening template, like a standard contract form, showing the protections it offers and obligations it expects.
2. Why it turned cautious: The White Industries Australia Limited vs Republic of India award (2011) and worries about investor-state dispute settlement (ISDS), where investors sue states before international tribunals, made India defensive.
3. Design of the 2015 Model: It narrowed what counts as an investment and kept regulatory exceptions for state action. Investors had to exhaust local remedies for five years, using Indian courts first, before arbitration.
4. The takeaway: After nearly a decade, the revision decides whether India keeps this defensive design or trades some of it for investor confidence.

How has India’s own treaty practice moved since 2015?

1. New-generation agreements: Since 2015, India has concluded newer investment agreements with the United Arab Emirates (UAE), Uzbekistan and Israel.
2. Shorter local remedies: The India-UAE BIT and the India-Israel Bilateral Investment Agreement, in force since July 2026, cut the local remedies period to three years.
3. Greater flexibility: These treaties show India has already departed from its own model in practice.

How has the global investment regime changed?

1. UNCTAD’s shift: UN Trade and Development (UNCTAD) records treaties moving toward investment facilitation, making investing procedurally easier, with narrower protections. They rely less on ISDS.
2. UNCITRAL reform agenda: The UN Commission on International Trade Law (UNCITRAL) is examining a permanent tribunal with an appellate mechanism to correct errors. It is also studying rules on damages and dispute prevention.
3. Rule-shaper, not rule-taker: Scholar Makane Moïse Mbengue argues a developing state can shape investment law through its treaties, so India’s model must answer this new regime, not merely edit the old text.

How should the new model handle the MFN clause?

1. What MFN does: A Most Favoured Nation (MFN) clause lets one partner’s investor claim any better treatment India gives under another treaty. Most Indian treaties omit it, and a new clause needs precise scope.
2. Maffezini vs Spain: An investor used MFN to bypass an 18-month local-court requirement by borrowing friendlier dispute rules from another treaty.
3. Plama vs Bulgaria: The tribunal refused to import such dispute provisions where the treaty did not clearly allow it.
4. Carve-out practice: Recent treaties expressly exclude dispute settlement from MFN, so a waiting period cannot be bypassed.

What else must the new model get right?

1. Counterclaims: The India-Uzbekistan BIT lets a state file a counterclaim, suing the investor back in the same case. The new model can list investor obligations and when counterclaims apply.
2. Dispute prevention: The model can add consultation and dispute-prevention steps before arbitration, now discussed at UNCITRAL Working Group III (WG III).
3. Precise protections: Expropriation (the state taking an investment) and fair and equitable treatment (FET) (a broad promise of fair handling) need clear wording. Precise terms protect the state’s right to regulate.
4. Binding, balanced text: Responsible investment must be written as a legal duty, not a declaration. The model should be clearer for both sides and leave room to adjust each treaty.

Challenges

1. MFN imports: Tribunals have used MFN to import stricter standards. Eg. White Industries borrowed an “effective means” duty from the India-Kuwait BIT.
2. Tax claims: Easier arbitration exposes sovereign tax measures to challenge. Eg. The Vodafone and Cairn Energy awards of 2020.
3. Thin treaty network: India terminated most older BITs after 2016, so few partners hold treaties under any model.

Way Forward

1. MFN carve-out: The Department of Economic Affairs should exclude dispute settlement and procedural rights from any MFN clause.
2. Closed FET list: Define FET as a closed list of breaches, such as denial of justice and manifest arbitrariness.
3. Active WG III role: India should help design the permanent tribunal so its appellate review reflects developing country concerns.

Conclusion

India must write a model that reassures investors without surrendering the space to regulate in the public interest. Whether the Cabinet-approved text settles MFN scope and investor obligations, or leaves them to tribunals, will show if the decade’s lessons were learnt.