India's Model BIT revision: investor access and regulatory space

The brief in 5 cards

1. Context1 / 5

   The Union Budget 2025–26 promised to revise India's Model Bilateral Investment Treaty (BIT) to encourage sustained foreign investment. A report dated 25 September 2026 said the reviewed framework had been sent to the Cabinet Secretariat and was awaiting approval. Submission does not establish approval or the final terms.

   The existing model was approved in December 2015 and released in the following period, explaining references to the 2016 model. It followed disputes including White Industries v. India (2011): an Australian investor used the India–Australia treaty's Most-Favoured-Nation (MFN) provision to invoke an effective-means obligation in the India–Kuwait treaty. Prolonged judicial delay in enforcing an award breached that obligation.

   The model uses an enterprise-based investment definition, qualified protections, no MFN clause and a five-year local-remedies period, subject to an exception where effective remedies are unavailable. India subsequently terminated many older treaties. Protection for existing investments can nevertheless continue under treaty-specific survival clauses.

2. Key highlights2 / 5

   Recent agreements show that the model is a negotiating baseline whose terms can change.

   Feature	2015 Model BIT	India–UAE BIT	India–Israel BIA
   Local-remedies period	5 years	3 years	3 years
   Portfolio investment	Expressly excluded	Qualifying equity and debt covered	Qualifying equity covered
   MFN clause	Absent	Absent	Absent

   The UAE treaty entered into force on 31 August 2024. The Israel agreement was signed on 8 September 2025 and entered into force on 4 July 2026. Coverage remains subject to investment definitions and exclusions.

   The periods concern pursuit of local remedies before a dispute notice, rather than automatic permission to arbitrate immediately when time expires. The texts contain exceptions where effective domestic remedies are unavailable; the UAE and Israel texts also allow a shorter period when available remedies have been exhausted. Consultation and other procedural requirements still apply.

   Uzbekistan differs: Its treaty, signed on 27 September 2024 and effective from 15 May 2025, retains a five-year period. It expressly permits State counterclaims against investors, subject to treaty conditions.

   Policy trade-off: A shorter period can improve access to international dispute settlement, while reducing the time available for domestic resolution. Whether it increases claims depends on the treaty and dispute.

3. Key concepts3 / 5
   1. What are a BIT and a Model BIT?

   A BIT sets reciprocal investment protections between two States. A model is a negotiating template; it creates no automatic treaty rights. Obligations arise under agreements that enter into force.

   2. What are ISDS and local remedies?

   Investor-State Dispute Settlement (ISDS) lets a qualifying investor bring a treaty claim against a host State before an international tribunal, subject to consent and procedural conditions. Local-remedies clauses require domestic proceedings first, with treaty-specific periods and exceptions.

   3. What are MFN, FET and expropriation?

   MFN promises treatment comparable to that given to investors from third countries; importing other treaty protections depends on its wording. Fair and Equitable Treatment (FET) concerns fair State conduct, but its scope varies. Direct expropriation involves formal taking or transfer of title. Indirect expropriation can involve substantial deprivation without that transfer; loss of value alone does not establish it, and public-interest safeguards matter.

   4. What is the right to regulate?

   Treaties can protect policy space for health, the environment, taxation, financial stability and national security. Exceptions differ and must satisfy their conditions; invoking a public purpose does not automatically defeat every claim.

4. Note4 / 5

   UNCITRAL is the United Nations Commission on International Trade Law. Its Working Group III addresses ISDS reform, including proposals for a permanent investment tribunal and appellate mechanism, alongside work on procedure, damages and dispute prevention. A proposed permanent court should not be described as an operating institution.

   UNCITRAL's transparency rules support public access to treaty-based arbitration, subject to their application rules and consent requirements.

   UNCTAD, the United Nations trade and development body, promotes reform of international investment agreements through regulatory space, investment facilitation, cooperation, sustainable development and investor responsibilities.

   For India, these initiatives offer options for shaping dispute rules and preventing disputes. Building specialised teams for treaty negotiation, arbitration and dispute management is a policy recommendation.

5. Way forward5 / 5

   These are suggested measures for reform.

   • Make terms precise. Define investment, treatment standards, MFN, expropriation, exceptions and investor obligations clearly to reduce uncertainty in interpretation.
   • Balance access and domestic resolution. Combine proportionate local-remedies requirements with consultation and dispute prevention; distinguish genuine claims from abusive or frivolous claims.
   • Allow negotiated adaptation. Use the model as a baseline and assess each partner's agreement. The UAE, Israel and Uzbekistan treaties demonstrate different choices.
   • Judge development outcomes. Evaluate employment, skills and technology transfer alongside investment flows, supported by stronger negotiating and dispute-management capacity.

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