1: An Introduction to Bilateral Investment Treaty concerning India and the UAE

- The Union Cabinet recently approved the signing and ratification of a Bilateral Investment Treaty (BIT) between India and the United Arab Emirates (UAE).

- This BIT aims to amplify bilateral economic engagement, which includes Foreign Direct Investment (FDI).

- The treaty forms part of International Investment Agreements (IIAs) under the umbrella of the United Nations Conference on Trade and Development (UNCTAD).

- The expected outcome of this BIT is the improvement of investor confidence, an increase in foreign investments and overseas direct investment opportunities, ultimately impacting positively on employment generation.

2: India's BIT Strategy and Position

- India has been actively negotiating Bilateral Investment Treaties (BITs) with various countries to synergize foreign direct investment (FDI).

- The recent Interim Budget emphasised India's strength in negotiating BITs with trade partners aiming at amplifying the inflow of FDI.

- India adopted a model BIT in 2016 intending to balance the rights of investors and the Government's obligations.

- India is now striding towards stronger economic integration with western nations like the United Kingdom (UK) and the European Union through Free Trade Agreements and investment treaties.

3: The Significance of BITs

- BITs increase the confidence of investors by offering a level playing field and non-discrimination in all aspects.

- BITs facilitate an independent forum for dispute settlement by arbitration.

- They can catalyse the inflow of FDI; for instance, India's FDI inflow from 2014-23 was a whopping $596 billion.

- BITs also contribute to economic growth and employment generation in the host country.

- They provide legal protection to investors, crucial for investments in countries with unpredictable or unstable domestic legal frameworks.

4: Challenges Associated with BITs

- BITs often create an unequal distribution of rights and obligations between developed (source of FDI) and developing countries (FDI recipients).

- BITs increase the risk of litigation, with some developing countries facing huge penalties from international arbitral tribunals due to alleged treaty violations.

- They sometimes present ambiguous legal standards and concepts.

- They can't address all issues investors face abroad, like American companies in China struggling with protecting and enforcing their intellectual property rights (IPR).

- BITs may lead to "Treaty Shopping", where investors take advantage of the most favourable nation clause to sue a host country under an unrelated treaty.

5: BITs - The Need for Balanced Negotiation and Implementation

- The current global economic and political trends suggest an imbalance in development, inequality, and injustice among the nations.

- BITs are seen as tools that assure investors of a level playing field and provide dispute settlement by arbitration.

- Yet, their negotiation and implementation require careful balancing of interests, addressing the challenges associated with them.

- The interests of both the investing and host countries should be balanced when negotiating and implementing BITs.