Finance Minister Nirmala Sitharaman announced that India has finalised a new bilateral investment treaty template with a five-year arbitration period, marking a significant shift from the previous framework. Speaking at the Munich Security Conference, Sitharaman confirmed that the new template is expected to get Cabinet approval soon and is designed to be more investor-friendly. The minister explained that the new template, being prepared over the last one-and-a-half years, seeks to address shortcomings in the model approved in 2016 and provide sharper protection to investors from both sides.
The Indian government is likely to sign a bilateral investment treaty (BIT) with Saudi Arabia under the new framework, marking a significant diplomatic and economic development. According to reports from The Times of India, this agreement will allow companies from the Gulf state to initiate international arbitration two years after they exhaust legal remedies in India. This represents a concession from the current five-year clause in the model BIT that was finalised by the government a year ago. The latest agreement goes beyond the 2016 framework and incorporates elements that are more sharply focused on protecting the interests of investors from both countries, as confirmed by Sitharaman at the Munich Security Conference.
The Union cabinet had discussed the model BIT last week, with officials indicating that Saudi Arabia is being provided a two-year window at a strategic time when Saudi Aramco is looking to invest in two refineries in the country, along with BPCL and ONGC. As reported by The Times of India, other investment plans are also lined up, making this BIT particularly significant for India's energy sector development. Sitharaman confirmed that India has continued negotiations on investment protection agreements even as the new template is being finalised, with negotiations underway with several countries, including Canada and Russia.
The government has concluded similar agreements with the UAE, Oman and some Central Asian countries, as confirmed by Sitharaman at the Munich Security Conference. Officials noted that 'We have a new template which will be approved (by cabinet) shortly. But in the meanwhile, we have not halted the process', indicating the government's commitment to maintaining active diplomatic engagement while finalising the updated framework. The minister expressed optimism about future agreements, stating that 'If things go well, by December we should be concluding agreements with at least three more countries', with negotiations with Canada could be concluded by December or early next year if they progress as expected.
The move comes as the Union cabinet will consider a proposal to reduce the period for exhaustion of legal remedies from five years. According to officials cited by The Times of India, while the original plan was to reduce the period to one year, the decision in case of Saudi Arabia may result in this being extended to two years. This suggests a more flexible approach to bilateral investment treaties based on specific partner country needs and investment commitments. The 2016 model bilateral investment treaty had replaced an earlier framework and became the basis for India's subsequent investment treaty negotiations, making the new template a significant evolution in India's investment protection strategy.
