Bilateral investment treaties must ensure arbitrators don`t ignore national interest: FM Nirmala Sitharaman
Finance Minister Nirmala Sitharaman has highlighted the need for bilateral investment treaties (BITs) to capture national interest in relation to regulatory powers and serve as a guide to arbitrators in resolving disputes to prevent investors with deep pockets from exploiting developing countries.
Speaking at the inauguration of the first PG Certificate Course on International Commercial & Investment Treaty Arbitration here, Sitharaman pointed out that arbitrators have often ignored the judicial decisions of the host country. While arriving at an arbitration outcome, even findings related to crimes like fraud and corruption which have been established through the court of law in the host country, put the states in a conflicting position to accept the award, she explained.
“An investment treaty must not only provide better regulatory powers to the nations but must also serve as guidance to arbitrators to restore faith in arbitration. I strongly believe, moving forward, the framework of investment treaties should capture: - National interests in relation to regulatory powers - Strengthened guidance for arbitrators in resolving disputes, keeping in mind nations’ interests and circumstances as well,” the Finance Minister said.
She emphasised that issues related to a Bilateral Investment Treaty (BIT) are unique to the sovereign and hence BIT should be negotiated stand-alone rather than as a part of an FTA agreement.
The Finance Minister’s statement comes at a time when India is negotiating BITs with the UK, Saudi Arabia, Qatar, and the European Union (EU).
The Government in Budget 2025-26 announced revamping the current model BIT to make it more investor-friendly and attract foreign players.
Citing UNCTAD reports, Sitharaman said there have been 1,368 registered investment treaty cases. On average, most of these cases -- almost 70 per cent of them are pursued against developing nations based on the old-generation treaties and that's a worrying element for developing countries. It allows the investors to maliciously seek unfair benefits from them, she said.
Some commercially deep-pocket parties buy the case from one of the arbitration parties and they run this for a long period, which no sovereign state can afford to fight in different jurisdictions. Then, at the end of the day, the case is won by the party with a deep pocket. It's not the same for all cases but there are anecdotal examples from many developing countries, the Finance Minister observed.
The average amount sought by investors in Investor-State Dispute Settlement (ISDS) cases is $1.1 billion, which remains a considerable burden for the Global South.
Corporations have used Investor-State Dispute Settlement mechanisms via investment treaties to challenge government policies, environmental regulations and public interest laws, Sitharaman explained.
She said that BIT and its ramifications are very important for the sovereignty of the country, therefore it's important for us to have a stand-alone BIT with specialists who deal with taxation laws, as well as policy experts.
