Conclusion

The concluding chapter shows that India’s approach towards BITs post 2010 has become protectionist. This protectionist approach towards BITs is divergent from India’s liberal foreign investment policy. India’s BIT practice needs to evolve in a manner that balances investment protection with the host state’s right to regulate. This is important as it would help India safeguard its regulatory power as a host nation and also to protect Indian investment abroad. India needs to evolve its investment treaty practice by developing BITs as tools that advance international rule of law and are modelled using the normativity of embedded liberalism. Embedded liberalism will represent a compromise between free markets and regulation, thus increasing the acceptability of BITs for all stakeholders such as foreign investors, the civil society and the sovereign state.

Mapping the Backlash

The chapter discusses how different actors or stakeholders such as the parliament, the government, civil society etc. started reacting to India’s BITs once India was flooded by ISDS claims. The reactions varied from asking the purpose of BITs, examining do BITs lead to greater FDI inflows, questioning the relationship between BITs and India’s right to regulate. There was a much deeper engagement with BITs in this phase than we saw in the ‘embracement’ phase. India launched the review of BITs in this phase and took certain decisions, which can be described as backlash against BITs. For instance, India terminated some of its BITs and also adopted a new Model BIT. The faith that India had showed towards BITs in the ‘embracement’ phase stood shaken.

India’s BITs

This chapter studies in detail the international law on foreign investment that India has accepted to be bound in the embracement phase. In this regard, the chapter studies the following provisions contained in India’s BITs and FTA investment chapters: definition of investment, which is an important jurisdictional provision; fair and equitable treatment; most favoured nation treatment; and full protection and security. The aforesaid provisions are common to all Indian BITs and FTA investment chapters. The chapter shows that many of the treaty provisions are broadly worded. In order to better understand the import of the language of these provisions, they will be situated within the broader jurisprudence of the ISDS. Depending on arbitral discretion, these broad and vaguely worded provisions are capable of interpretation that gives precedence to investment protection over the host state’s sovereign regulatory power, instead of striking a balance between the two.

Economic Liberalism

This chapter discusses the Balance of Payments (BoP) crisis of 1991 that led to the advent of economic reforms that changed the course of India’s economic trajectory for ever. As a conscious break from the past, India undertook many bold structural economic reforms. Liberalization of foreign investment was one of them. This ushered in an age of embracement of BITs and the willingness to be bound by those international law principles pertaining to foreign investment that India had opposed earlier. India started negotiating and signing BITs from 1992 with the clear objective of promoting and protecting foreign investment in India. In this phase, India had a marginal involvement in investor–state dispute settlement (ISDS) cases. Also, there was not much discussion on the impact of BITs on India’s right to regulate. The BITs singed in this period resembled the laissez faire liberalism model.

Economic Nationalism

This chapter looks at the evolution of India’s approach towards international investment law, against the backdrop of India’s overall and economic approach towards foreign investment. After independence, from the period of 1947–1965, India followed a relatively open and liberal foreign investment regime. Jawaharlal Nehru’s economic pragmatism ensured that India kept its doors open to foreign investment though the economic growth model was led by the public sector. India also consciously did not indulge in nationalization of foreign investment in total contradiction to what countries like Soviet Russia and China did. However, India turned towards the Left during Indira Gandhi’s times imposing restrictions on foreign investment. India’s approach towards international investment law, at least at the multilateral level, reflected the domestic approach towards foreign investment. At the bilateral level, India appeared more open to international law on protection of foreign investment although India did not sign a BIT during this phase.

India’s BITs

Continuing on the discussion on the key features of Indian BITs from the previous chapter, this chapter studies the following provisions in India’s BITs and FTA investment chapters: expropriation; monetary transfer provisions; general exception clauses; and the investor–state dispute settlement (ISDS) provisions. Like chapter 4, this chapter will also discuss these provisions against the background of ISDS jurisprudence that has emerged on these four issues. The chapter demonstrates that these provisions in many treaties are worded broadly and the determination of the content is subject to arbitral discretion. These broadly worded treaty provisions, subject to arbitral discretion, fail to balance investment protection and host state’s right to regulate. India was primarily a ‘rule taker’ in international investment law because most of these provisions in Indian BITs are borrowed from the BITs of ‘capital exporting’ countries that followed the laissez faire liberalism model.

The 2016 Indian Model BIT

This chapter studies India’s 2016 Model BIT, which the Indian government claims aims to balance investment protection with the state’s right to regulate. The chapter shows that barring some of the provisions like full protection and security and monetary transfer provisions, the Model BIT has not succeeded in reconciling the interests of foreign investors with the state’s right to regulate. The Model BIT contains a narrow definition of investment; an extremely narrow FET-type provision; excludes MFN clause and taxation measures from the purview of the BIT. Furthermore, the expropriation provision in the Model BIT blurs the line between lawful and unlawful expropriation; and provides a complicated and sequential ISDS making it extremely difficult for a foreign investor to make effective use of it. Furthermore, although the attempt of the Model BIT is to reduce arbitral discretion, many provisions still remain undefined and vague, thereby continuing to grant significant discretion to ISDS arbitral tribunals.

BITs Come Home to Roost but No Philip Morris Moment Yet!

This chapter studies closely the ISDS claims brought against India. A careful analysis shows the following: First, cases like White Industries v. India and Devas Multimedia v. India expose the broad and vague language of Indian BITs. Second and equally important is the fact that these cases show that none of the claims have been brought against India because India exercised her sovereign public power in good faith in order to attain an important public policy goal such as protection of the environment or promotion of public health etc. All these claims have arisen against India mainly due to bad regulation. Third, these ISDS claims also show the failure of the organs of the Indian State to be sufficiently sensitive to India’s BIT obligations. Fourth, a closer study of these cases especially of the cases brought by Vodafone and Cairn energy shows India’s hostile attitude towards ISDS.

Introduction

This chapter introduces bilateral investment treaties (BITs) and the debates surrounding BITs and investor–state dispute settlement (ISDS). It examines briefly the origin of BITs; their evolution and the current debates on the relationship between BITs and host state’s right to regulate. The chapter also documents the backlash against BITs and ISDS as evidenced in state practice and academic literature. Midst this global backdrop, the chapter introduces the Indian BIT programme and explains the rationale for studying India’s approach towards investment treaties. Given India’s deepening integration with the global economy, a massive BIT programme and the recent developments of India contesting the BIT regime due to increasing BIT cases, necessitates a detailed discussion of the Indian BIT regime.