India and the United Arab Emirates (UAE) have signed a Bilateral Investment Treaty (BIT) on February 13, 2024, to further promote and protect investments between the two countries. The treaty was witnessed by Prime Minister Narendra Modi and UAE’s President Sheikh Mohamed bin Zayed Al Nahyan.
What is a BIT?
A BIT is an agreement between two countries that establishes the terms and conditions for private investments by nationals and companies of one country in another country. A BIT typically covers issues such as the admission, treatment, protection, and dispute resolution of foreign investments.
Why is the India-UAE treaty important?
The India-UAE BIT is a significant agreement that is expected to have a positive impact on bilateral economic relations. By providing greater certainty and protection to investors, the BIT is expected to increase investment flows, create jobs, and promote economic growth in both countries.
According to the official statement, the BIT is expected to improve the confidence of investors, especially large investors, resulting in an increase in foreign direct investment (FDI) and overseas direct investment (ODI) opportunities. The statement also said that the approval is expected to increase investments in India and is likely to help in realising the goal of Atmanirbhar Bharat by encouraging domestic manufacturing, reducing import dependence, increasing exports etc.
The UAE is one of India’s largest trading partners and a major source of FDI. India received an FDI of USD 16.7 billion from the UAE between April 2000 and September 2023. The two countries have also implemented a free trade agreement in May 2022. The UAE’s Ministry of Investment recently signed three memoranda of understanding (MoUs) with India to expand bilateral investment cooperation in the renewable energy, food processing, and healthcare sectors.
The India-UAE BIT is also expected to enhance cooperation in emerging sectors such as aerospace, artificial intelligence, and education. The treaty is in line with India’s new model BIT that was adopted in 2015 to balance the interests of investors and host states.
Key features of the India-UAE BIT
Some of the key features of the India-UAE BIT are:
- The treaty applies to all investments made by investors of either country in the territory of the other country, whether made before or after the entry into force of the treaty.
- The treaty provides for national treatment and most-favoured-nation treatment to investors of both countries, subject to certain exceptions and reservations.
- The treaty includes provisions on fair and equitable treatment, full protection and security, expropriation, compensation for losses, transfers of funds, subrogation, denial of benefits, essential security interests, taxation measures, prudential measures etc.
- The treaty establishes a mechanism for investor-state dispute settlement (ISDS) through arbitration under the rules of the United Nations Commission on International Trade Law (UNCITRAL) or any other mutually agreed rules.
- The treaty also provides for state-state dispute settlement (SSDS) through consultations and negotiations, followed by arbitration if necessary.
- The treaty has a duration of 10 years and shall continue in force unless terminated by either party by giving a written notice at least six months before the expiry of the initial or any subsequent term.
Recent Blog : e-Jagriti Portal Integrates AI for Efficiency