The model treaty provisions require foreign investors to exhaust domestic legal remedies for five years before seeking international arbitration to resolve disputes.

NEW DELHI: After years of discussion, government has finally got down to reviewing the model bilateral investment treaty (BIT), often cited as a roadblock to attracting investments.“The BIT is under review, and we are looking at…many other clauses based on our experience in the negotiations and based on global practices…it is a work in progress. Consultations are underway, and we are reviewing the Model BIT (Bilateral Investment Treaty),” economic affairs secretary Anuradha Thakur said at an NCAER conference.She said that the cabinet will soon decide on the changes. “We are looking at what are red flags and we have a negative list. We will set that aside and see what is the maximum we can put out there,” she said.Several countries — from Saudi Arabia to the UK and other European nations — have expressed concern over India’s BIT, which is seen to be too restrictive. A revamped model BIT was put in place in 2015 after setbacks during arbitration with companies. Very few countries have accepted the revised treaty as the finance ministry was holding out on amending it, despite a push from other govt agencies.The model treaty provisions require foreign investors to exhaust domestic legal remedies for five years before seeking international arbitration to resolve disputes.“One of the key aspects we need to keep in mind is the investor disputes that the country is facing. Trade negotiations and investment negotiations differ in an important way. Under investment protection treaties, investors can take a sovereign govt to arbitration,” Thakur said.In contrast, she said trade treaties have a state-to-state dispute settlement mechanism, where diplomatic relations and negotiations allow for greater flexibility and give-and-take.Investor protection has become even more important, especially now that outward direct investment from India is increasing, the secretary said.“In every negotiation, we have to ensure that our own investors and companies also receive adequate protection. This is an entirely new dimension in our negotiations. As Indian companies expand overseas, they will need protection in the countries where they invest. Therefore, some of these clauses may actually be useful to retain.” While FDI inflows soared to a record $95 billion during the last fiscal year, net FDI was estimated at $7.7 billion, an improvement from the $1 billion level in the previous year.