India Firm On Separating Investment Treaties From FTAs

New Delhi, Dec 23 (KNN) India has reaffirmed its commitment to keeping investment protection treaties separate from free trade agreements (FTAs), despite pressure from international trading partners to combine them, according to a senior government official.

This position reflects India's strategic approach to international trade and investment relations, shaped by past experiences with high-profile disputes.

The policy is currently being implemented in ongoing trade negotiations with several partners, including the United Kingdom, European Union, Australia, Peru, Sri Lanka, and Oman.

While these FTAs include chapters on investment facilitation, the more comprehensive Bilateral Investment Treaties (BIT) are being negotiated as standalone agreements, particularly evident in the discussions with the EU and UK.

This approach is exemplified in recent agreements, such as the investment treaty with the United Arab Emirates, which was concluded two years after their Comprehensive Economic Partnership Agreement (CEPA).

Similarly, the European Free Trade Association's Trade and Economic Partnership Agreement (TEPA) stands separate from its pending investment agreement, and ASEAN maintains distinct treaties for trade and investment.

India's position extends to multilateral forums, where it has opposed the China-backed Investment Facilitation of Development (IFD) agreement at the World Trade Organisation.

This stance emerged largely from India's experiences with international arbitration cases, including notable disputes with Vodafone and Cairn, which led to the termination of 60 out of 80 bilateral investment treaties.

Historical context reveals a different approach in earlier agreements. Of India's seven comprehensive FTAs, four agreements with Singapore, Korea, Malaysia, and Japan include investment protection chapters.

These existing commitments remain binding, as demonstrated by the Nissan arbitration case under the India-Japan FTA, which was ultimately resolved through negotiation in 2020.

This position contrasts with global trends, as recent major trade agreements typically incorporate investment protection chapters.

However, India's approach aligns with an emerging pattern among developed nations, which are increasingly stepping back from investor-state arbitration mechanisms.

This shift is evident in recent agreements such as those between the UK and New Zealand, UK and Australia, and the United States–Mexico–Canada Agreement (USMCA).

The trend is further highlighted by several European nations and the UK withdrawing from the energy charter treaty.

Looking forward, India plans to maintain its strategy of separate investment treaties that prioritise domestic legal remedies before international arbitration.

This framework allows for flexibility in negotiations, enabling the addition of provisions tailored to partner countries' specific requirements while protecting national interests.

(KNN Bureau)