Renewed BIT ensures investment continuity between India and UAE

The Bilateral Investment Treaty (BIT) between India and United Arab Emirates (UAE) is renewed. The treaty was signed on February 13 this year, in Abu Dhabi, officially entered into force with effect from 31st August, 2024. The treaty replaces the Bilateral Investment Promotion and Protection Agreement (BIPPA), which was established in December 2013 and expired on September 12, 2024. The new BIT promises continuity in the protection of investments for investors from both nations, ensuring a secure environment for bilateral investments.
The UAE plays a vital role in India’s foreign investment landscape, being the seventh-largest contributor to Foreign Direct Investment (FDI) with a 3% share of India’s total FDI inflow. Between April 2000 and June 2024, the UAE’s cumulative investments in India amounted to approximately $19 billion. On the other side, India has made significant investments in the UAE, contributing around $15.26 billion from April 2000 to August 2024, which accounts for 5% of its total Overseas Direct Investments, according to information. The enforcement of the India-UAE BIT 2024 is expected to further strengthen this economic relationship, fostering greater investor confidence through a legal framework that assures fair treatment and non-discrimination.
One of the highlights of the new treaty is its focus on balancing investor protection with the state’s right to regulate. This ensures that while foreign investors are provided with legal safeguards, India and the UAE retain the necessary policy space to introduce reforms and regulations in the interest of their national economies. The BIT is seen as a critical tool to enhance the comfort level of investors, which in turn is expected to lead to an increase in cross-border investments between the two nations.
The India-UAE BIT 2024 includes several important features that reflect the evolving nature of international investment treaties. The treaty adopts a closed, asset-based definition of investment, covering portfolio investments, and ensures fair treatment, including protections against the denial of justice and arbitrary or abusive treatment. It also includes carve-outs for measures related to taxation, government procurement, subsidies, and compulsory licenses, providing both nations with the flexibility to pursue their domestic policy objectives.
In terms of dispute resolution, the BIT allows for Investor-State Dispute Settlement (ISDS) through arbitration but only after local remedies have been exhausted for a period of three years. This provision ensures that both nations’ legal frameworks are given precedence before resorting to international arbitration. Additionally, the treaty includes general and security exceptions, safeguarding the state’s right to regulate in areas such as national security and public interest. Importantly, the treaty also includes anti-corruption measures, barring investor claims if their investments are tied to corruption, fraud, or illegal financial practices such as round-tripping.
The treaty further enshrines principles of national treatment and non-discrimination, ensuring that investors from both nations are treated on par with domestic investors. It also includes provisions to protect investments from expropriation, ensuring that investors are compensated fairly in cases of asset seizure, while also providing for transparency and the free transfer of funds related to investments.

(Business Correspondent)