• India is revising its 2015 Model Bilateral Investment Treaty (BIT), with the new draft expected before the Union Cabinet soon — aiming to be more investor-friendly and boost declining FDI while protecting Indian companies investing abroad.
• Key issue: should the revision involve greater parliamentary consultation and democratic oversight, rather than being handled only by the executive?

What is a BIT?

• A reciprocal agreement to promote and protect private investments between two countries, legally enforceable under international law, tracked by UNCTAD.
• Standard protections: National Treatment, Fair and Equitable Treatment (FET), protection from Expropriation, and Investor-State Dispute Settlement (ISDS).

• White Industries v. India (2011): India’s first adverse ISDS award — exposed how court delays could become a treaty breach.
• Vodafone and Cairn Energy disputes: arose from retrospective taxation; India faced a large compensation award in Cairn’s case and scrapped retrospective taxation in 2021.
• By 2015, India faced ~17 known BIT claims, rising further since — leading it to conclude broad investor protections could seriously constrain the state’s right to regulate.

Limitations of the 2015 Model BIT

• Narrow investment definition: excluded portfolio and some indirect investments.
• 5-Year Local Remedy Rule: investors had to exhaust Indian courts first — a major obstacle given judicial delays.
• Reduced protection: MFN clause removed; FET narrowed to a limited list.
• Broad exemptions: taxation, subsidies, procurement, compulsory licences and national security largely excluded.
• Result: India signed very few BITs under this model; recent India-UAE and India-Israel BITs signal a shift toward a more balanced approach.

• International economic treaties affect citizens through jobs, prices, regulatory space and revenue — invoking the “all-affected principle.”
• Democratic Deficit: insufficient oversight of technocrats/executive negotiating treaties behind closed doors — showing up as weak parliamentary supervision and absent external consultation.
• Indian position: treaty-making is mainly an executive power (Article 73); Parliament can legislate to implement treaties (Article 253), but usually gets involved only after signing, not before.

Global Best Practices

• UK & Australia: treaty texts go before Parliament before ratification. Norway & Colombia: public consultation while framing Model BITs.
• India: invited public comments on its 2015 draft; the Law Commission’s 260th Report gave recommendations, not all adopted.

• Balancing Investor Protection and State Regulation: too much protection limits the state’s regulatory freedom; too much state power (as in 2015) discourages FDI.
• India as a Capital Exporter: with growing outbound investment, India needs treaties protecting both inbound and outbound investors.
• Federalism: treaties can affect State List subjects via Article 253 — consulting States strengthens cooperative federalism.
• Domestic Reforms Matter Too: faster courts and predictable regulation are as important as the treaty text itself.

India’s revision of the 2015 Model BIT is a welcome step to boost investment. But reform should focus not only on what the treaty says, but also on how it is made — parliamentary scrutiny, expert advice and public consultation can make it more transparent, legitimate and durable.