Centre to amend BIT, cut local remedy wait for foreign investors

The government is set to amend India's model bilateral investment treaty (BIT) to allow international arbitration after one year of exhausting local remedies, instead of the current five-year clause, according to a finance ministry cabinet note seen by the Times of India. The note also proposes expanding the definition of investment from enterprise-based to asset-based, covering shares and equity instruments held for five years or more. The move aims to address a long-pending grievance of overseas investors, the report said.

The current five-year period was introduced in 2015 after India faced a record number of investor-state dispute settlement (ISDS) claims, including a loss to Australian firm White Industries. That revision led to India unilaterally terminating most of its BITs, and since 2018 only six countries have signed new BITs with India. The proposed changes would also include carve-outs for subsidies, local government measures, and compulsory licensing during public health emergencies.

In contrast, a commentary on Swarajya Magazine argues that India is waging a systematic war on arbitration through legislative, executive, and judicial overreach, damaging investor confidence despite government claims of improving ease of doing business. The article says the state's undermining of the arbitration framework has been collaborative and exhaustive, contradicting the government's stated goals.