Finance Minister Arun Jaitley will seek the Union Cabinet’s approval for a model investment protection agreement that will enable India to safeguard against offshore arbitration and international litigation from global companies and also resume talks with the U.S. on a Bilateral Investment Treaty (BIT).
One of the reasons talks between the two countries have been on hold since February 2014 is India’s move to get ready the model agreement that will guide all bilateral negotiations. Diplomatic sources concede that there are still many serious differences over the BIT, mainly on arbitration and IPR, but the two sides made headway when Assistant Secretary of State Nisha Biswal visited Delhi last Friday.
Once the BIT negotiations start up, diplomatic sources believe they could take up to six months to finalise, and up to about two years to ratify.
“Even so, it will have huge symbolic value for the relationship if we are able to announce something in the next meeting between the U.S. President and PM Modi,” the sources told The Hindu pointing to the aim of taking trade from $100 billion to $500 billion.
The talks could see progress in September when India and the U.S. hold their first upgraded strategic and commercial dialogue.
India’s move to insert the safeguards follows the initiation of more than 17 cases of international arbitration against it by global companies including Vodafone and Deutsche Telecom under bilateral investment agreements with various countries.
Many of these offshore arbitrations allege tax terrorism by Indian authorities for the retrospective tax notices they slapped against several global companies, while some were triggered by the Supreme Court’s cancellation of the 2G licences.
“India is unlikely to reverse any policy affecting investments made by foreign investors on Indian soil…We don’t normally roll back say foreign direct investment caps in any sector…however, if something necessitates rollbacks then the BIPPAs will protect the government against offshore arbitration…there will also be protection against allegations of tax terrorism,” a top government official told The Hindu.
The U.S. is keen to sign the BIT to provide comfort to American companies that they will not be treated unfairly in India. India sees it as another way of making itself a more attractive destination to foreign investors.
Ahead of President Obama’s January visit to India, U.S. Secretary of State John Kerry and Prime Minister Narendra Modi had discussed a BIT agreement on the sidelines of the Vibrant Gujarat Summit. The BIT, however, was not announced during the visit due to the absence of an approved model BIPPA.
The decision to upgrade the strategic dialogue to include commercial issues, however, was taken during President Obama’s January visit.
The commercial and strategic dialogue will be held on September 21-22 in Washington, just days before Mr. Modi lands in the U.S. to attend the UNGA. While no meeting has been finalised between him and President Obama yet, diplomatic sources in Delhi and Washington told The Hindu that officials are looking at the possibility of a meeting on September 28 in New York. If that doesn’t work out, the leaders are expected to meet at G20 in Turkey in mid-November.
In particular, in the talks held on Friday, the two sides looked at similar agreements India has already concluded with other countries.