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BILATERAL INVESTMENT TREATIES (BIT) A GENERAL OVERVIEW
ISHMEET KAUR OBEROI 3RD YEAR , BBA LLB(Hons.) SYMBIOSIS LAW SCHOOL, PUNE
INTRODUCTION
BIT or Bilateral Investment Protection Agreements (BIPE) is the investment treaty entered into by two parties namely the foreign investors and the Host states in order to make an investment by one party in the business ventures of the other. General Content Pattern followed in a BIT consists of a Preamble containing the objective and purpose for which the BIT is entered for.
Post the BIT are the Definition clauses which give way to standards of protection and treatment of foreign investments - addressing standards such as fair and equitable treatment, full protection and security, national treatment, and MFN treatment.
Provisions dealing with state measures such as nationalization, expropriation or other similar measures, their permissibility under specific circumstances, and compensation for losses incurred by foreign investors form a core part of BITs and usually follow the standards of protection.
MAJOR CLAUSES
FAIR AND EQUITABLE TREATMENT
FULL PROTECTION AND SECURITY
NATIONAL TREATMENT
MOST FAVOURED NATION TREATMENT
INVESTOR STATE DISPUTE RESOLUTION CLAUSE
( Involves cooling off periods, negotiation, fork in the road provisions precluding exercise of one remedy over the other.)
LEGAL PROVISIONS
International Centre for Settlement of Investment Disputes (ICSID) Rules.
United Nations Commission on International Trade Law (UNCITRAL ) Arbitration Rules.
ICC ARBITRATION RULES
CASE LAWS NAME
RULES APPLICABLE
DECISION
CASE STATUS
1) White Industries , (20022011)
ICC Arbitration Rules
Tribunal Awarded USD 4.08 in favor of Claimant.
Decided.
2) Flemingo DutyFree Shop Private Limited v the Republic of Poland, UNCITRAL, Award (Aug. 12, 2016)
UNCITRAL Rules.
BIT claims brought by Indian investors viz. Flemingo Duty Free Shop under the IndiaPoland BIT resulting in an award of USD 17.9 million in favour of the investor.
Decided.
Claims arising out of a retrospective transaction tax imposed by the Government over claimants' acquisition of Indian-based Hutchison Whampoa telecoms business.
Pending.
An UNCITRAL arbitral tribunal dismissed a US$36 million claim by a French investor, Louis Dreyfus Armateurs SAS (“LDA“), against India under the 1997 France-India bilateral investment treaty (“BIT“).
Award not public.
3) Vodafone Group Plc and Vodafone Consolidated Holdings Limited v. India (II)
5) Louis Dreyfus Armateurs v. India
UNCITRAL Rules.
UNCITAL
HIGHLIGHTS OF INDIA’S MODEL BIT
The 2016 India Model BIT provides for “re-affirming the right of Parties to regulate investments in their territory in accordance with their law and policy objectives” – thereby laying equal emphasis on permissibility of state regulation in addition to investment protection.
The Preamble in 2016 India Model BIT is extensive. In addition to promotion of bilateral cooperation, it provides for promotion of sustainable development of the Parties. It specifically lays out that Parties shall have the right to regulate the investments in accordance with the law and policy objectives.
2016 India Model BIT places no caveats on the validity of regulatory measures other than the fact that they must be non-discriminatory.
It provides a shared understanding of what would constitute direct and indirect expropriation. And rules out the global exceptions of non arbitrariness and non discrimination from the purview of exceptions under expropriation .
It provides that direct expropriation would constitute formal transfer of title or outright seizure. Indirect expropriation would occur if measure(s) substantially or permanently deprives the investor of fundamental attributes of the property in its investment such as right to use, enjoy and dispose the investment without formal transfer of title or outright seizure.
Additionally, it states that non-discriminatory regulatory measures or awards by judicial bodies designed to protect legitimate public interest or public purpose objectives shall not constitute expropriation.
Contract claims are outside the purview of dispute resolution under the 2016 India Model BIT. An arbitral tribunal constituted under the BIT can only adjudicate upon disputes relating to breaches of the treaty under Chapter II.
LOOPHOLES in the Model BIT
Since, the Model BIT does not takes into account contractual disputes, certain disputes would be nonarbitrable eg. if the investment has been made through fraudulent misrepresentation, concealment, corruption, money laundering or conduct amounting to an abuse of process or similar illegal mechanisms the other party cannot submit any claim for arbitration.
Moreover, the treaty is silent on the applicability of any national law of the host state that could be invoked.
The tribunals does not have the power to sit on appeal on decisions made by Indian Courts and since the Model BIT contains the provision on ‘Conditions precedent for submission of claim’ thereby mandating the exhaustion of local remedies, the tribunals facing an investment treaty claim after such exhaustion would render the exhaustion of domestic remedy a useless clause.
The 2016 India Model BIT exempts taxation measures from the scope of the BIT
ISHMEET KAUR OBEROI 3RD YEAR , BBA LLB(Hons.) SYMBIOSIS LAW SCHOOL, PUNE
INTRODUCTION
BIT or Bilateral Investment Protection Agreements (BIPE) is the investment treaty entered into by two parties namely the foreign investors and the Host states in order to make an investment by one party in the business ventures of the other. General Content Pattern followed in a BIT consists of a Preamble containing the objective and purpose for which the BIT is entered for.
Post the BIT are the Definition clauses which give way to standards of protection and treatment of foreign investments - addressing standards such as fair and equitable treatment, full protection and security, national treatment, and MFN treatment.
Provisions dealing with state measures such as nationalization, expropriation or other similar measures, their permissibility under specific circumstances, and compensation for losses incurred by foreign investors form a core part of BITs and usually follow the standards of protection.
MAJOR CLAUSES
FAIR AND EQUITABLE TREATMENT
FULL PROTECTION AND SECURITY
NATIONAL TREATMENT
MOST FAVOURED NATION TREATMENT
INVESTOR STATE DISPUTE RESOLUTION CLAUSE
( Involves cooling off periods, negotiation, fork in the road provisions precluding exercise of one remedy over the other.)
LEGAL PROVISIONS
International Centre for Settlement of Investment Disputes (ICSID) Rules.
United Nations Commission on International Trade Law (UNCITRAL ) Arbitration Rules.
ICC ARBITRATION RULES
CASE LAWS NAME
RULES APPLICABLE
DECISION
CASE STATUS
1) White Industries , (20022011)
ICC Arbitration Rules
Tribunal Awarded USD 4.08 in favor of Claimant.
Decided.
2) Flemingo DutyFree Shop Private Limited v the Republic of Poland, UNCITRAL, Award (Aug. 12, 2016)
UNCITRAL Rules.
BIT claims brought by Indian investors viz. Flemingo Duty Free Shop under the IndiaPoland BIT resulting in an award of USD 17.9 million in favour of the investor.
Decided.
Claims arising out of a retrospective transaction tax imposed by the Government over claimants' acquisition of Indian-based Hutchison Whampoa telecoms business.
Pending.
An UNCITRAL arbitral tribunal dismissed a US$36 million claim by a French investor, Louis Dreyfus Armateurs SAS (“LDA“), against India under the 1997 France-India bilateral investment treaty (“BIT“).
Award not public.
3) Vodafone Group Plc and Vodafone Consolidated Holdings Limited v. India (II)
5) Louis Dreyfus Armateurs v. India
UNCITRAL Rules.
UNCITAL
HIGHLIGHTS OF INDIA’S MODEL BIT
The 2016 India Model BIT provides for “re-affirming the right of Parties to regulate investments in their territory in accordance with their law and policy objectives” – thereby laying equal emphasis on permissibility of state regulation in addition to investment protection.
The Preamble in 2016 India Model BIT is extensive. In addition to promotion of bilateral cooperation, it provides for promotion of sustainable development of the Parties. It specifically lays out that Parties shall have the right to regulate the investments in accordance with the law and policy objectives.
2016 India Model BIT places no caveats on the validity of regulatory measures other than the fact that they must be non-discriminatory.
It provides a shared understanding of what would constitute direct and indirect expropriation. And rules out the global exceptions of non arbitrariness and non discrimination from the purview of exceptions under expropriation .
It provides that direct expropriation would constitute formal transfer of title or outright seizure. Indirect expropriation would occur if measure(s) substantially or permanently deprives the investor of fundamental attributes of the property in its investment such as right to use, enjoy and dispose the investment without formal transfer of title or outright seizure.
Additionally, it states that non-discriminatory regulatory measures or awards by judicial bodies designed to protect legitimate public interest or public purpose objectives shall not constitute expropriation.
Contract claims are outside the purview of dispute resolution under the 2016 India Model BIT. An arbitral tribunal constituted under the BIT can only adjudicate upon disputes relating to breaches of the treaty under Chapter II.
LOOPHOLES in the Model BIT
Since, the Model BIT does not takes into account contractual disputes, certain disputes would be nonarbitrable eg. if the investment has been made through fraudulent misrepresentation, concealment, corruption, money laundering or conduct amounting to an abuse of process or similar illegal mechanisms the other party cannot submit any claim for arbitration.
Moreover, the treaty is silent on the applicability of any national law of the host state that could be invoked.
The tribunals does not have the power to sit on appeal on decisions made by Indian Courts and since the Model BIT contains the provision on ‘Conditions precedent for submission of claim’ thereby mandating the exhaustion of local remedies, the tribunals facing an investment treaty claim after such exhaustion would render the exhaustion of domestic remedy a useless clause.
The 2016 India Model BIT exempts taxation measures from the scope of the BIT
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