Finance Minister Nirmala Sitharaman on Saturday emphasised the need for Bilateral Investment Treaties (BITs) to be negotiated as standalone agreements rather than being included as a chapter in Free Trade Agreements (FTAs).
She argued that keeping BITs within FTAs turns them sometimes into a mere “negotiating card” rather than a focused, well-structured framework for investment protection and ensuring sovereign space is not ceded.
Speaking at an event organized by National Law University (NLU) Delhi to mark the launch of a PG Certificate Course on International Commercial & Investment Treaty Arbitration in the capital, Sitharaman highlighted that BITs have critical sovereignty implications and should be handled independently by experts including that of taxation laws and policymaking.
“BIT and its ramifications are so important for the sovereignty of the country that it is important for us to have a BIT standalone with specialists who deal with taxation laws and other policies inherent to policymaking,” Sitharaman said.
Moving forward, the framework of investment treaties should capture the national interest particularly regulatory powers, strengthen guidance for arbitrators in resolving disputes keeping in mind nation’s interests and circumstances, she added.
Need for Institutional Mechanism in Arbitration
Sitharaman also underscored the necessity for a structured response mechanism to handle international arbitration notices issued to India. She suggested the creation of Quick Response Teams (QRTs) comprising senior bureaucrats from relevant ministries to immediately assess and strategize India’s legal and policy response to arbitration cases.
“We currently do not have an established institutional mechanism. Of course, bureaucrats come together and quickly take up the matter. Even they sometimes need inputs from experts familiar with global arbitration environments to advise and guide them forward,” she noted.
The proposed Standard Operating Procedure (SOP) would ensure that, upon receiving an arbitration notice, the Finance Ministry, Law Ministry, the Ministry of External Affairs (MEA) and relevant Ministry can coordinate swiftly. This would help mitigate potential legal and financial risks arising from arbitration disputes.
Sitharaman’s remarks come at a time when India has been revisiting its approach to investment treaties after facing multiple international arbitration cases in recent years. The country has already terminated several outdated BITs and has been negotiating new agreements based on a revised model BIT of 2016, which emphasizes state sovereignty and balanced investor rights.
“Even 2016 BIT template has been found inadequate to meet our requirements. This BIT is being improved upon when we sign newer agreements”, she said.
In the recent budget, Sitharaman had announced a revamp of the current model BIT to make it more investor-friendly and attract foreign players.
“To encourage sustained foreign investment and in the spirit of ‘first develop India’, the current model BIT will be revamped and made more investor-friendly”, Sitharaman said in her budget speech.
