DMPQ-. Define bilateral investment treaty. Explain it’s significance for India’s development.

Bilateral investment Treaties (BITs) are agreements between two Countries (States) for the reciprocal promotion and protection of investments in each other’s territories by individuals and companies situated in either State.

It was in mid 90s that the BITs were initiated by the Government of India. The pretext was to offer favourable conditions and treaty based protection to the foreign investors and investments. For example, the India-Singapore Comprehensive Economic Cooperation Agreement (CECA) provides for exemption on import duties for investment in infrastructure sector, which would eventually attract the investors from abroad to invest in the growing economy of India with enhanced securities against adverse changes, thus promoting investment inflow. Though it is difficult to quantify the benefits of BITs, it invariably results in increased investments inflows, encourage s transfer of technology and modern management skills.

A look at various BITs to which India is a party will make it clear that each BIT is quite different from the other in its own way although there are many common characters present. These common characters are in form of specific rights. The basic premise is that the government will not put the investors and their investments to risks which are either unreasonable or inappropriate.

India had an unpleasant experience with the Dahbol Project which led to a least 2 BIT claims by the project companies, as well as 7 BIT claims by the project lenders. All of these 9 claims against India have since been settled.  Post the dispute, India has been contemplating to amend its BITs so as to attenuate the protections accorded to foreign investors under the BITs. Nothing has been evident so far on the papers. However, in light of increasing knowledge and publicity of BITs and increasing number of companies being interested to know more about it and use it in actuality a lot has to be seen in near future.


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