NEW DELHI: India’s separate Bilateral Investment Treaties (BIT) with 23 European Union (EU) member countries will soon expire one after the other and the absence of an investment protection pact will hurt Foreign Direct Investment (FDI) from EU to India, European Commission Vice President, Jyrki Katainen said.
The European Commission, therefore, wants India to agree to extend the expiry date of these BITs till an India-EU BIT is in place. Pointing out that the expiry of these BITs will begin with the one with the Netherlands in a fortnight, Mr. Katainen said such a situation will create a ‘legal vacuum’ — something that is troubling European companies looking to make huge investments in India.
The lack of a BIT adds to the risk premium and increases the cost of funds for investors — a situation that would result in European companies deciding to invest lesser in India than earlier planned, Katainen told reporters. “The easiest way to address this issue is to prolong the legal validity of the existing BITs till an India-EU BIT is in place. We have conveyed this to the Indian government,” said Mr. Katainen, who is the European Commission (EC) Vice-President in charge of jobs, growth, investment & competitiveness.
The EC Commissioner for Trade Cecilia Malmström had in May written to commerce minister Nirmala Sitharaman and finance minister Arun Jaitley that “the Indian Government has informed a significant number of EU Member States of its intention to terminate BITs concluded with them. These notices have been accompanied by a request to open negotiations for new investment agreements, based on India's new model (BIT) text.”
“Given that the EU Member States do not have the possibility to renegotiate the BITs with India, the unilateral termination of the existing BITs by India would entail serious consequences,” she had warned.
EC member nations such as Netherlands, Germany, Cyprus and France are among the top 10 countries from which India has got the maximum FDI during April 2000 to September 2016. The UK (which is yet to begin negotiations on the terms and conditions of withdrawal from the EU following the Brexit referendum), which invested 24 billion worth FDI into India during April 2000 to September 2016 is third on that list of top 10 nations, while Netherlands ($18.9 billion), Germany ($9.2 billion), Cyprus ($8.9 billion) and France ($5.3 billion) occupied sixth to ninth positions.
India had inked 83 BITs, including the ones with EU member countries. However, following instances of investors invoking some of these BITs and dragging India to international arbitration to seek huge compensation for “losses” suffered due to reasons including government policy changes, India had put on hold inking of new BITs. The Union Cabinet had in December 2015 given its nod for a new model BIT text saying, “The revised model BIT will be used for re-negotiation of existing BITs and negotiation of future BITs and investment chapters in Comprehensive Economic Cooperation Agreements/ Comprehensive Economic Partnership Agreements/FTAs.”
On other issues, Jyrki Katainen said the EC is keen to re-start negotiations on the proposed India-EU Free Trade Agreement (FTA). Though the FTA talks had begun in 2007, it has been deadlocked since 2013 after 16 rounds of negotiations. Katainen said the EU is ready to look into India’s concerns on European visa restrictions including those affecting mobility of skilled workers for short-duration work. The FTA negotiations have been stuck on issues including the EU's demand for greater market access in India for its automobiles and wines & spirits, as well as on India's demand for 'data security status' for its IT sector in the EU.
