India's Model Bilateral Investment Treaty (BIT) Review

India's Model Bilateral Investment Treaty (BIT) Review: Protecting Indian Overseas Investments While Attracting Global Capital

(Based on Article in Indian Express dated 8th August 2026)

Introduction

India is undertaking a comprehensive review of its Model Bilateral Investment Treaty (Model BIT) to align its investment policy with the changing realities of the global economy. Traditionally, India's BITs focused primarily on protecting foreign investors investing in India. However, with Indian companies increasingly investing abroad, the Government is now seeking to ensure that India's overseas investors also receive adequate legal protection in foreign jurisdictions.

The revised Model BIT, expected to be considered by the Union Cabinet, seeks to strike a careful balance between protecting national regulatory space, encouraging foreign investment, safeguarding Indian outward investments, and strengthening India's position in global investment negotiations. The discussion below is based on official Government statements, Ministry of Finance publications, Department of Economic Affairs (DEA) documents, Government press releases and publicly available policy documents.

I. Background and Historical Evolution

Bilateral Investment Treaties (BITs)

A Bilateral Investment Treaty is an international agreement between two countries that establishes legally binding rules for promoting and protecting investments made by investors of one country in the territory of the other.

Typical protections include:

• Fair and equitable treatment
• Protection against unlawful expropriation
• National treatment
• Most Favoured Nation (MFN) treatment (where applicable)
• Free transfer of investment-related funds
• Investor-State dispute settlement mechanisms

The objective is to encourage cross-border investment by providing legal certainty and investor confidence.

India's Early BIT Programme

India signed its first BIT in 1994 with the United Kingdom.

Over the next two decades, India entered into nearly 90 BITs with developed and developing countries.

These agreements aimed to:

• attract foreign capital,
• improve investor confidence,
• support industrial growth,
• integrate India with the global economy.

Need for Review

Several international arbitration claims were filed against India under older BITs.

Some high-profile disputes raised concerns regarding:

• expansive interpretation of treaty protections,
• excessive investor rights,
• constraints on domestic policymaking,
• large financial liabilities for governments.

Following these experiences, India introduced a new Model BIT in 2015, substantially revising the framework.

II. Why is the Model BIT Being Reviewed Again?

The global investment landscape has changed significantly since 2015.

Today:

• Indian multinational companies are investing abroad on an unprecedented scale.
• Indian firms require legal protection in host countries.
• Global supply chains are undergoing restructuring.
• Countries are redesigning investment treaties to balance investor protection with sovereign regulatory powers.

Recognising these developments, the Government has initiated another review of the Model BIT.

III. Key Features of the Proposed Review

According to official statements, the revised framework is expected to include several important changes.

Protection of Overseas Direct Investment (ODI)

A major new objective is protecting Indian companies investing abroad.

Indian firms now invest substantially in:

• manufacturing,
• pharmaceuticals,
• information technology,
• renewable energy,
• infrastructure,
• mining,
• financial services.

Future BIT negotiations are expected to safeguard these investments.

Reconsideration of Local Remedies Requirement

The 2015 Model BIT required foreign investors to exhaust domestic legal remedies for five years before approaching international arbitration.

The Government is reviewing this provision.

Reports indicate that a shorter period may be considered to improve India's attractiveness as an investment destination while preserving judicial sovereignty.

Flexible Treaty Structure

Officials have indicated that the Government is reviewing multiple treaty provisions rather than only one clause.

The revised model may:

• identify sensitive provisions,
• adopt a more flexible approach,
• retain safeguards for national interest,
• simplify negotiations with partner countries.

IV. Why Outward FDI Matters

India is no longer only an investment destination.

It has also become an important source of global investment.

Indian companies increasingly invest overseas in:

• technology,
• mining,
• renewable energy,
• logistics,
• pharmaceuticals,
• manufacturing,
• financial services.

Protecting these investments has become an important national economic objective.

V. Domestic Political and Economic Impact

Greater Investor Confidence

Modern investment treaties improve legal certainty for:

• Indian investors abroad,
• foreign investors entering India.

Higher Foreign Investment

Balanced investment treaties may encourage:

• long-term FDI,
• manufacturing investment,
• technology transfer,
• infrastructure financing.

Stronger Indian Multinationals

Legal protection encourages Indian companies to expand internationally.

This supports India's emergence as a global economic power.

Employment Generation

Greater investment contributes to:

• industrial expansion,
• export growth,
• skilled employment,
• higher incomes.

Improved Ease of Doing Business

A transparent investment framework complements ongoing reforms in:

• taxation,
• contract enforcement,
• digital governance,
• commercial dispute resolution.

VI. Geopolitical Significance

Investment treaties increasingly influence international economic diplomacy.

The revised BIT framework may help India:

Strengthen Trade Partnerships

BITs complement Free Trade Agreements (FTAs) by providing investment protection.

Enhance India's Global Competitiveness

A balanced treaty framework improves India's attractiveness among competing investment destinations.

Support Global Expansion of Indian Companies

Indian enterprises investing overseas gain greater legal protection against arbitrary governmental actions.

Strengthen India's Role in Global Supply Chains

Reliable investment rules encourage multinational corporations to integrate India into their production networks.

Reinforce Strategic Economic Partnerships

Investment agreements deepen long-term cooperation with partner countries across sectors such as infrastructure, manufacturing, energy and digital economy.

VII. Challenges

Several issues must be addressed during the review process.

• Balancing investor protection with sovereign regulatory powers.
• Preventing frivolous arbitration claims.
• Ensuring consistency with India's constitutional framework.
• Protecting environmental and labour regulations.
• Negotiating mutually acceptable treaty provisions.
• Maintaining investor confidence while preserving policy flexibility.

VIII. Way Forward

India's revised Model BIT should adopt a balanced and future-oriented approach.

Priority areas include:

• Protecting both inward and outward investments.
• Simplifying dispute-resolution mechanisms while preserving judicial oversight.
• Providing greater legal certainty for investors.
• Aligning BIT provisions with India's Free Trade Agreements.
• Expanding investment partnerships with strategic economies.
• Strengthening domestic commercial courts and arbitration institutions.
• Enhancing transparency and stakeholder consultation during treaty negotiations.
• Promoting India's image as a stable, rules-based and investment-friendly economy.

Conclusion

The review of India's Model Bilateral Investment Treaty represents an important evolution in the country's investment policy. As India transforms from primarily an FDI recipient into a significant global investor, the Government seeks to protect Indian enterprises investing overseas while continuing to attract high-quality foreign investment. A modern, balanced and transparent BIT framework can strengthen investor confidence, promote economic growth, support India's expanding multinational companies and reinforce the country's role in global trade and investment networks. By carefully balancing sovereign regulatory authority with credible investor protection, the revised Model BIT has the potential to become a key pillar of India's long-term vision of Viksit Bharat 2047.