Bilateral Investment Treaty [BTT]

By : Neha Dhyani

Updated : Apr 19, 2022, 6:05

A Bilateral Investment Treaty (BIT) specifies the rules and conditions for private investment by nationals and enterprises of one country in another. This type of investment is known as a foreign direct investment (FDI).

Bilateral Investment Treaty Features and Facts

  • Most Bilateral Investment Treaties provide a variety of assurances to investments made in the territory of one Contracting State by an investor from another Contracting State.
  • Fair and equal treatment, expropriation protection, free transfer of means, and full safety and security are all common features.
  • It includes an alternative dispute resolution process that allows an investor whose Bilateral Investment Treaty rights have been infringed to seek international arbitration.
  • On 25th November 1959, Pakistan and Germany signed the world's first Bilateral Investment Treaty (BIT).
  • Around 2500 Bilateral Investment Treaties are now in force, covering practically every nation on the earth.
  • In recent years, the number of bilateral investment treaties and preferential trade agreements has grown, with virtually every nation signing at least one.
  • Bilateral Investment Treaty is among those international investment treaties that are becoming more prominent in environmental friendly clauses.
  • As part of an effort to reform substantive standards of investment protection, states have tried to incorporate the authority to regulate in their new Bilateral Investment Treaties.
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India and Bilateral Investment Treaty

  • The first Bilateral Investment Treaty agreement between India and the United Kingdom was signed in 1994. Following that, it signed Bilateral Investment Treaty with around 80 countries.
  • An international tribunal ordered India to pay White Industries 4.10 million Australian dollars (plus interest and fees) under the 1999 Indo-Australia Bilateral Investment Treaty in 2011, shattering India's liking for Bilateral Investment Treaties.
  • The detriment had such an impact on the Indian government that it prompted it to evaluate its current Bilateral Investment Treaties. At the same time, India began receiving notices under multiple Bilateral Investment Treaties regarding retrospective tax changes and the cancellation of 2G licenses.
  • As a result, in 2015, India started drafting a new Model Bilateral Investment Treaty to replace the present model Bilateral Investment Promotion Agreement (2003).
  • The Bilateral Investment Treaty model was completed and released into the public domain in 2016. While it improves on the previous model Bilateral Investment Treaty, it still reflects the government's ambiguity, as it is unclear whether the government wants a Bilateral Investment Treaty to protect foreign investors or to reclaim sovereignty.
  • Furthermore, after the model Bilateral Investment Treaty was released in 2016, India has given notice of termination of the existing Bilateral Investment Treaty to at least 74 countries and issued two joint interpretational declarations with Columbia and Bangladesh.
  • These terminations have been ongoing since 2017, with a few Bilateral Investment Treaties set to expire when the notice time ran out in 2021.

India must take a balanced approach to its Bilateral Investment Treaty, with a strong ISDS clause. This would make it easier for Indian investors to defend their investments under international law if a country such as Sri Lanka breaks a contract.

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FAQs on Bilateral Investment Treaty

Q1. What is a Bilateral Investment Treaty?

Ans. Bilateral Investment Treaty (BIT) are agreements between two countries to promote and safeguard investments made by persons and firms from both countries in the other's territory.

Q2. When and between whom was the world's first Bilateral Investment Treaty signed?

Ans. On 25th November 1959, Pakistan and Germany signed the world's first Bilateral Investment Treaty.

Q3. When and with whom was India's first Bilateral Investment Treaty signed?

Ans. The first Bilateral Investment Treaty agreement between India and the United Kingdom was signed in 1994.

Q4. Currently, how many Bilateral Investment Treaties are active?

Ans. Currently, almost 2500 Bilateral Investment Treaties are active.