Finance Minister Nirmala Sitharaman has emphasized the need for Bilateral Investment Treaties (BITs) to safeguard national interests, ensuring that arbitrators respect a country’s regulatory powers and judicial decisions.
Furthermore, she warned that investors with deep pockets often exploit developing nations by leveraging outdated treaties and arbitration mechanisms.
Concerns Over Arbitration And Sovereignty
In addition, speaking at the inauguration of the first PG Certificate Course on International Commercial & Investment Treaty Arbitration, Sitharaman highlighted that arbitrators frequently disregard judicial decisions from host countries.
“An investment treaty must not only provide better regulatory powers to nations but must also serve as guidance to arbitrators to restore faith in arbitration,” she said.
She Stressed The Importance Of:
•Protecting national interests in regulatory matters
•Ensuring arbitrators consider host country rulings
•Negotiating BITs separately from Free Trade Agreements (FTAs) to maintain sovereignty
India’s BIT Negotiations And Policy Shift
India is currently negotiating new BITs with the UK, Saudi Arabia, Qatar, and the European Union (EU).
The Union Budget 2025-26 has also announced a revamp of India’s Model BIT to make it more investor-friendly while preventing unfair litigation against the country.
BITs Favoring Wealthy Investors Pose Risks To Developing Nations
Citing UNCTAD reports, Sitharaman pointed out that 70% of the 1,368 registered BIT cases have been pursued against developing nations, making them vulnerable to unfair legal battles.
•Investor-State Dispute Settlement (ISDS) cases demand an average of $1.1 billion, placing a heavy financial burden on developing economies.
•Some financially powerful entities buy arbitration cases and prolong litigation, making it difficult for sovereign states to sustain legal battles.
•Corporations have used ISDS mechanisms to challenge environmental regulations, taxation policies, and public welfare laws.
Call For Stand-Alone BITs With Specialized Oversight
Sitharaman underscored the need for stand-alone BITs negotiated by specialists in taxation, trade laws, and policy, rather than including them within broader trade agreements.
“The ramifications of BITs are crucial for a nation’s sovereignty, and therefore, they should be structured to prioritize national interests and prevent legal exploitation by powerful investors,” she concluded.
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