This paper talks about the existing scenario of Investor-State Dispute Settlement and its changing paradigm. In this era of increasing globalization and increasing cross-border trade, inter-state investments are growing steadily and along with it disputes between the investor and its host states. This is where Investment Arbitration comes in as a solution to afford the investors' protection from any decision or policy that may be adverse to their interests. Herein, I argue that a robust system of investment arbitration set up with the help of co-operation between two states may provide a conducive environment for more cross border investment and thus more FDI.
Table of Contents
1. GLOSSARY OF TERMS
2. INTRODUCTION
3. WHAT IS INVESTMENT ARBITRATION OR INVESTMENT TREATY ARBITRATION?
3.1 Meaning
3.2 Difference between International Commercial Arbitration (ICA) and Investment Arbitration/Investment Treaty Arbitration (ITA)
3.3 Consent of the host state for entering into Investment Arbitration
3.3.1 Bilateral Investment Treaties (BITs)
3.3.2 Free Trade Agreements (FTAs)
3.3.3 The Energy Charter Treaty
3.3.4 The ASEAN Comprehensive Investment Agreement
3.3.5 Human Rights Treaties
3.4 Various Arbitral Institutions that conduct Investment Arbitration
3.4.1 International Chamber of Commerce Paris
3.4.2 Stockholm Chamber of Commerce
3.4.3 London Court of International Arbitration
3.4.4 International Centre for Settlement of Investment Disputes
3.5 Enforcement of Foreign Arbitral Awards
3.5.1 The New York Convention
3.5.2 Other Multilateral Conventions
3.5.3 Bilateral Conventions
3.5.4 National Model Laws
4. BILATERAL INVESTMENT TREATIES AND FOREIGN DIRECT INVESTMENT
5. HISTORY OF BITs IN INDIA
5.1 Phase I From 1994 to 2010
5.1.1 BITs as instruments to attract foreign investments
5.1.2 Dabhol Power Project
5.2 Phase II From 2011 till continued....
5.2.1 The White Industries Case
6. CHANGING APPROACH OF INDIA TOWARDS INVESTMENT TREATIES
7. ANALYSIS OF INDIA’s NEW MODEL BIT AND ISSUES CONCERNING INVESTOR STATE DISPUTE SETTLEMENT (ISDS) AND INVESTMENT TREATY ARBITRATION (ITA)
7.1 Preamble
7.2 Definition of Investor and Investment
7.3 Scope and general provisions
7.4 A new approach to FET obligation
7.5 National Treatment
7.6 Absence of Most Favoured Nation
7.7 Umbrella and other Stabilisation clauses
7.8 Expropriation
7.9 Transfers
7.10 Liability of Investors
7.11 Exhaustion of local remEdies
7.12 Arbitral Tribunal
7.13 Appeals
7.14 State v. State
7.15 Exception Clauses
7.16 Review, Amendment & Termination
7.17 Analysis
8. CONCLUSION
9. REFERENCES
Objectives and Core Topics
The primary objective of this paper is to examine investment arbitration as a viable mechanism for sustaining and encouraging Foreign Direct Investment (FDI) in India, while analyzing India's evolving stance on Bilateral Investment Treaties (BITs).
- The conceptual framework and evolution of Investment Treaty Arbitration (ITA).
- The link between BITs and the influx of Foreign Direct Investment (FDI).
- India's historical approach to BITs and the shift from early models to the 2016 Model BIT.
- Analysis of major disputes, specifically the White Industries case, and their impact on India’s legal strategy.
- The design of India’s new Model BIT and its implications for investor-state dispute settlement (ISDS).
Excerpt from the Book
3.2 Difference Between International Commercial Arbitration (ICA) and Investment Arbitration/Investment Treaty Arbitration
Investment disputes differ in several respects from ordinary commercial disputes. Frequently the amount in dispute is remarkable and the issues may have considerable political implications. Disagreements often concern the objectives of the investment, the repatriation of revenues and the ultimate control and benefit of the investment. The investment may relate to vital infrastructure the completion of which is of significant importance for the national economy. The outcome of the dispute may also affect the general investment climate in a country. In addition, one party is a state vested with sovereign powers, which is nevertheless in need of foreign investment and is bound by international instruments.
These factors influence the conduct of the arbitration in various respects. In the composition of the tribunal the nationality of the arbitrators may become a more important issue than in ordinary commercial arbitrations. Concerning the applicable substantive and procedural laws there is a much stronger tendency to delocalise and apply principles of international law. Investment disputes can have a greater impact on parties other than those involved and thus may be more in the public domain. Investment disputes may relate to legislation which not only affects a specific investor but a complete class of investors, the relationship between the host state and the investor’s home state.
Recognising these diverse interests in the proceedings between Methanex Corporation v. United States the tribunal under NAFTA Chapter 11 allowed the submission of amicus curia briefs by non parties. It considered that in the absence of an express prohibition the decision on whether to allow such briefs fell within the tribunal’s procedural powers in' accordance with Article 15(1) UNCITRAL Rules. In exercising its discretion the tribunal took into account several factors, in particular the public interest in the case. This greater public interest is also evidenced by the policy adopted in relation to the publication of awards which is much more liberal than in commercial arbitration.
Summary of Chapters
1. GLOSSARY OF TERMS: Defines key legal and financial terminology used throughout the paper, such as Arbitration, ISDS, FDI, and FET.
2. INTRODUCTION: Explains the necessity of capital for economic growth in developing countries and introduces foreign investment as a vital external source.
3. WHAT IS INVESTMENT ARBITRATION OR INVESTMENT TREATY ARBITRATION?: Details the definition, consent mechanisms, key arbitral institutions, and the enforcement of foreign arbitral awards.
4. BILATERAL INVESTMENT TREATIES AND FOREIGN DIRECT INVESTMENT: Explores the empirical link between the ratification of BITs and the increase in FDI inflows into India.
5. HISTORY OF BITs IN INDIA: Traces the evolution of India's BIT program from its inception in the mid-1990s through two distinct phases of policy and application.
6. CHANGING APPROACH OF INDIA TOWARDS INVESTMENT TREATIES: Discusses the shifting perspective within the Indian government regarding the drafting and utility of investment agreements.
7. ANALYSIS OF INDIA’s NEW MODEL BIT AND ISSUES CONCERNING INVESTOR STATE DISPUTE SETTLEMENT (ISDS) AND INVESTMENT TREATY ARBITRATION (ITA): Provides a comprehensive critique of the 2016 Model BIT and its various provisions including FET, expropriation, and dispute settlement.
8. CONCLUSION: Summarizes the transition in India’s strategy and offers final recommendations on balancing investor protection with sovereign administrative power.
Keywords
Investment Arbitration, FDI, Bilateral Investment Treaties, BITs, India, Investor-State Dispute Settlement, ISDS, Fair and Equitable Treatment, National Treatment, Expropriation, Model BIT, White Industries Case, International Investment Agreements, Sovereignty, Dispute Resolution.
Frequently Asked Questions
What is the core subject of this paper?
The paper explores the role of investment arbitration as a mechanism to protect foreign investors and sustain Foreign Direct Investment (FDI) inflows in India, specifically through the lens of Bilateral Investment Treaties (BITs).
What are the central themes discussed?
The central themes include the legal evolution of Investment Treaty Arbitration (ITA), the practical correlation between BITs and FDI, and the tension between investor protection and national sovereign regulatory space.
What is the primary research question?
The study investigates whether the current and proposed BIT frameworks in India effectively balance the need for investor certainty with the government's requirement to maintain its regulatory and sovereign policy space.
Which scientific method is utilized?
The paper employs a legal and analytical approach, drawing on international law, investment treaty provisions, case studies (such as White Industries), and empirical data regarding FDI growth to critique India's treaty practice.
What does the main body cover?
The main body covers the definition of investment arbitration, the history of India's BIT program, a detailed analysis of the 2016 Model BIT clauses (like FET, expropriation, and transfers), and the impact of arbitration claims on India's policy.
Which keywords define this work?
The work is defined by terms such as Investment Arbitration, FDI, Bilateral Investment Treaties, ISDS, Fair and Equitable Treatment, and Sovereign Regulatory Power.
Why is the White Industries case highlighted?
The White Industries case is central because it was the first major ITA award against India, highlighting vulnerabilities in the MFN clause and triggering India's decision to audit and overhaul its entire BIT framework.
How does the new 2016 Model BIT differ from previous ones?
The 2016 Model BIT emphasizes a "State-driven" approach, significantly narrowing the definitions of investment and investor, removing the MFN clause, and limiting access to international arbitration to protect the state's sovereign policy space.
Does the author suggest India should become an ICSID signatory?
Yes, the author suggests that signing the ICSID convention would demonstrate India's long-term commitment to an investor-friendly regime and help harmonize its standards with established international law.
- Quote paper
- Sahastranshu Singh (Author), 2020, Investment Arbitration. A plausible mechanism to sustain FDI in India, Munich, GRIN Verlag, https://www.grin.com/document/583575
