International investment law is the arena of international law that oversees relationships between states and foreign investors. The system of international investment law has no central treaty or institution unlike the WTO Trade System. This field of law contains more than 3200 bilateral investment treaties (BITs) and investment chapters in preferential trade agreements (jointly referred to here as investment treaties).
Investment treaties frequently permit foreign investors to straight away bring legal challenges against the government of the state, in which their investment is held, through a process known as investor-state dispute settlement (ISDS). Bilateral Investment Treaties are a very critical part of International Investment Law. Despite their innumerable number, investment treaties follow a sufficiently uniform structure and lay down relatively uniform principles for the treatment of foreign investors as well as build on a mutual dispute settlement mechanism which debatably results in a regime that is largely comparable to a multilateral system. Investment treaties typically grant investors the right not to be stolen from without compensation, to be treated fairly and equitably, to enjoy full protection and security, and to be treated no less favorably than national investors or investors from any third state. In addition, investment treaties offer foreign investors access to arbitration against the host state in order to bring claims, usually for damages, for breach of the obligations so laid down in the treaty. This permits them to opt out of domestic courts and to bring a claim under international law without the need for the investor’s home state to exercise diplomatic protection.
It would seem rational to think that the companies undertaking such businesses would only have to deal with local laws of the states and thus only have remedy in local courts, however, an increasing trend is to go to international panels, arbitration tribunals and courts set up specifically to deal with issues of foreign investment.
International investment law saw the major growth post-industrialization despite being one of the oldest aspects of international law and particularly during the present era of globalization. Post 1990s, the law has witnessed the rise of treaty law and mechanisms for investor-state dispute resolutions. Today it is one of the fastest rising branches of international law. The rationale behind the exponential growth in the present decade of this part of international law is owed to the high economic importance which foreign investment brings to the host state and the inclusive global economic development.
First BIT of India in 1993 was based on a model produced by a developed country where importance lied on protection of foreign investment, rather than internationally recognized regulatory powers of the state. In 1994, India signed its first BIT with the United Kingdom. The India-UK BIT served as the base model for India to negotiate further BITs. The Indian model of BIT, 2003 contained close semblance with the India-UK BIT. From 1994 to 2011, India had signed more than 80 BITs and ratified over 70.
After the White Industries case in 2011, India’s method to investment treaties began to undergo a change. The government detached India’s bilateral investment treaties with 58 countries – all pacts had been based on the 1993 pattern. From the period between 2011 and 2015, India signed only one BIT with the UAE.
In 2016, India lost its arbitration case in an international tribunal against Bengaluru-based Devas Multimedia Private Ltd for cancelling its space/satellite contract with the government-owned Antrix Corporation. This is a subsequent international tribunal to rule against the Indian government in the Antrix-Devas scam. The International Chamber of Commerce (ICC) tribunal found unanimously that Antrix’s violation of the contract was unlawful, and awarded Devas damages and pre-award interest of approximately 672 million US dollars, plus post-award annual interest accruing at 18 percent until the award is paid in full in an earlier decision of 2015. The Hague-based tribunal, which regularly takes cases involving states, including investment treaty claims brought under arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL), also found that India dishonored its treaty commitments to accord fair and equitable treatment to Devas’s foreign investors.
The government brought a new Model BIT in 2016 which came into force from April 2017 onwards. Special features of the New Model BIT are:
- The Model has implemented an ‘enterprise-based’ definition of investment under which investment is treated as the one made by an enterprise incorporated in the host state and hence, intellectual property assets are not considered.
- It let go of the Most Favoured Nation (MFN) status which was previously included.
- Actions of the state governments have been included.
- It connects the “Fair and Equitable Treatment” to international laws, intended at countering a broad interpretation and risk misuse.
- It comprises a new clause on non-discriminatory treatment for compensation of losses in situations like armed conflict, natural disasters and in the state of national emergency.
- It comprises a clause for transparency, demanding the Parties to ensure that all the laws, regulations, procedures and administrative rulings regarding matters covered in the BIT are published.
- It commands foreign investors to voluntarily adopt internationally recognized standards of corporate social responsibility (CSR).
- It stipulates that the aggrieved investor should use all local remedies as well as negotiations and consultations initiating arbitrations against the host State.
The change in the Investment policy imitates on the economy of the country as well as the International Commercial transactions. The GDP growth rate is at a five-year low. Domestic consumption is tumbling as well as the business confidence index has plunged. India has logged its highest unemployment rate in the last 45 years. Foreign direct investment (FDI) equity inflows to India in 2018-19 fell down by 1%. After an increase of 22% and 35% in 2014-15 and 2015-16, respectively, FDI equity inflows began narrowing down since 2016-17. The growth rate in this indicator has dropped to 9% and then to 3% in 2017-18.
BIT – The well-advertised improvement in India’s ease of doing business rankings has not meaningfully contributed to any rise in FDI. Particularly, this coincided with India’s decision, in 2016, to unilaterally terminate bilateral investment treaties (BITs) with more than 60 countries. This is around 50% of the total unilateral termination of BITs globally from 2010 to 2018. Unilateral termination of BITs on such a huge scale projects India as a country that does not respect international law. India has also recognized a new inward-looking Model BIT in 2016 that prioritizes state interests over protection to foreign investment. It came as a response to India being sued by several foreign investors before international arbitration tribunals.
It is suggested that a study be organized by the Government to look into the effect of the New Model BIT on the investment in the country. If the effect is adverse then changes and amendments may be made in the Model BIT to ensure that investment remains optimum in the nation so as to increase the international trade as well as the international commercial transactions.
Intern at Law Portal
College: Vivekananda Institute of Professional Studies, GGSIPU
 Stephan W Schill, The Multilateralization of International Investment Law (Cambridge University Press, 2009)
 Generally on investment treaties see Campbell McLachlan, Laurence Shore and Matthew Weiniger, International Investment Arbitration – Substantive Principles (Oxford University Press, 2007); Andrew Newcombe and Luis Paradell, Law and Practice of Investment Treaties (Kluwer Law International, 2009); Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edn, Oxford University Press, 2012)
 White Industries v. Republic of India, Final Award, November 30th, 2011.
 Antrix Corpn. Ltd. v. Devas Multimedia Pvt. Ltd., 2018 SCC OnLine Del 9338
Author: Akanksha Yadav,
Vivekananda Institute of Professional Studies, GGSIPU, Law Student