Indian Government launches international research project on the impact of Bilateral Investment Treaties on investment flows from/to the country

India entered into its first bilateral investment treaty (BIT), with the United Kingdom, in 1994, as part of a strategy to attract inbound foreign direct investment (FDI).  Having begun to open its economy in the 1990s, India today is a major investment destination.  The Modi government has been keen to attract further investment, including with its “Make in India” campaign.

However, in recent years, a variety of events has led to India being the recipient of a large number of claims by investors under BITs. By 2016, India was one of the most frequently-named respondent states in BIT proceedings.  Following its first loss in a BIT arbitration in 2011 (the White Industries case, discussed here.  Note: India has recently won its first BIT case, discussed here), the stance of the Indian government towards BIT protections for inbound investors appeared to harden, leading it to send notices in 2016 to terminate BITs with 58 countries, including 22 EU countries (discussed here).  This followed its publication of a new 2015 Model BIT (discussed here).  For the remaining BITs not cancelled in 2016/2017 (seemingly because they were within their initial terms), India has circulated a proposed joint interpretative statement to the counterparties to these BITs seeking to align the ongoing treaties with its 2015 Model BIT.

There are no known instances of states agreeing to a new treaty based on India’s 2015 Model BIT, although it was reported last year that the Indian government had approved a joint interpretative note to apply to India’s BIT with Bangladesh

In the meantime, the Indian government, through the Centre for Trade and Investment Law (CTIL), a think-tank established in 2016 by the Ministry of Commerce and Industry, in collaboration with Dr. Rishab Gupta, Partner, of Shardul Amarchand Mangaldas & Co., has instituted a survey on experiences and attitudes towards BIT protections, and their importance to FDI flows into and out of India.  This outbound element is an important aspect of the analysis as Indian businesses are increasingly involved in FDI outside India, and may wish to take advantage of BIT protections over their investments.

A link to the survey can be found below, which we understand will remain active until the end of October 2018. The survey contains 10-12 questions which vary depending on the initial answers regarding the location and type of entity responding.

http://survey.sogosurvey.com/r/r1ocQs

The outcome of the questionnaire together with the rest of the study results are scheduled to be publicly released by the end of 2018. All stakeholders with experience of or insight into the BIT regime applicable to India are encouraged to participate.

For further information, please contact Nicholas Peacock, Head of the India Disputes Practice, or your usual Herbert Smith Freehills contact.

Nicholas Peacock
Nicholas Peacock
Partner
+44 20 7466 2803

Recent Developments in India-related International Arbitration

Herbert Smith Freehills has issued the latest edition of its Indian international arbitration e-bulletin.

In this issue we consider various court decisions, which cover issues such as the applicability of the Arbitration Amendment Act 2015, binding non-signatories to an award, enforcement of an award before the National Company Law Tribunal, and the continued pro-arbitration approach of the Indian courts. In other news, we consider the continued rise of institutional arbitration in India, a detailed analysis of the proposed amendments to the Arbitration Act, as well as India-related bilateral investment treaty news (and other developments).

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Tribunal awards India first BIT case win, dismissing claims of French investor

An UNCITRAL arbitral tribunal has reportedly dismissed a US$36 million claim by a French investor, Louis Dreyfus Armateurs SAS (“LDA“), against India under the 1997 France-India bilateral investment treaty (“BIT“). The award is not public at this time, but press reports state that LDA has also been ordered to pay approximately US$7 million in respect of India’s substantial legal expenses.

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English Court rejects Ukraine’s attempt to set aside enforcement order on grounds of state immunity

The English Court (the “Court“) has dismissed an application by Ukraine to set aside a court order permitting Russian investor, PAO Tatneft, to enforce an arbitral award against Ukraine.  Ukraine argued that it was immune from the Court’s jurisdiction by virtue of the State Immunity Act 1978. The Court found that Ukraine had not waived its right to rely on state immunity arguments, despite not having raising them in the arbitration. However, it found that Ukraine had agreed to submit the disputes in question to arbitration under the Russia-Ukraine Bilateral Investment Treaty (the “BIT“) and was therefore not immune from proceedings in connection with the arbitration by virtue of s9(1) of the State Immunity Act 1978 (“SIA“).

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Delhi High Court refuses to grant injunction restraining Vodafone’s second BIT arbitration against India

In a decision dated 7 May 2018, the Delhi High Court dismissed the Government of India’s application to declare Vodafone’s second BIT arbitration proceedings in relation to the retrospective tax liability imposed on Vodafone’s 2007 acquisition of Hutchison Whampoa’s Indian operations an abuse of process, and in so doing declined to grant a permanent injunction restraining Vodafone from continuing those arbitration proceedings. The Court granted liberty to India to bring the issue before the Tribunal in those second proceedings (under the India-UK Bilateral Investment Protection Agreement) for that Tribunal to decide on the alleged abuse of process on its own merits.

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The new draft Dutch BIT: what does it mean for investor mailbox companies?

The Netherlands has released a new draft investment treaty for public comment (“Draft BIT“).  If adopted, the Draft BIT may raise questions about the Kingdom’s attractiveness for foreign investors who have long taken advantage of Dutch treaty protections by structuring their investment via companies in the Netherlands.  The Netherlands proposes to use the new model as a basis for renegotiating its existing BITs with non-EU states, and, as such, the new draft’s more restrictive provisions may be significant for existing investors with protection under existing BITs, as well as those considering future investments. Key features of the Draft BIT are considered below.

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The English court sets aside a Tribunal’s findings of lack of jurisdiction under a BIT

In a decision dated 2 March 2018 (the “Decision“), the English High Court has set aside parts of an award on jurisdiction (the “Award“) from a London-seated arbitration (the “Arbitration“) concerning claims brought by GPF GP S.a.r.l (“Griffin“) against Poland under the bilateral investment treaty between the Belgium-Luxembourg Economic Union and Poland (the “BIT“).

In so doing, the Court upheld Griffin’s application under section 67 of the 1996 English Arbitration Act (the “Act“), in which Griffin submitted that the Award issued by the tribunal (the “Tribunal“) on 15 February 2017 contained two separate errors as to substantive jurisdiction, namely:

     (i)          the Tribunal’s determination that it did not have jurisdiction over Griffin’s claims for breach of the Fair and Equitable Treatment (“FET“) standard in the BIT; and

    (ii)          the Tribunal’s determination, in respect of Griffin’s claims for indirect expropriation, that it had jurisdiction to consider only the effects of one specific allegedly expropriatory event, namely a decision of the Warsaw Court of Appeal, and not all the prior conduct of Poland.

All of Griffin’s claims should now proceed to the liability phase in the Arbitration. Poland has, however, expressly reserved the right to argue the compatibility of the BIT with EU law and any rights it may have in the context of the decision of the Court of Justice of the EU (“CJEU“) in the case of Achmea v Slovakia, which was issued just a few days after this judgment, on 6 March 2018.

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Recent developments in India-related international arbitration

Herbert Smith Freehills has issued the latest edition of its Indian international arbitration e-bulletin. In this issue we will consider Indian court decisions, including the arbitrability of allegations of fraud and non-arbitrability of trust disputes by the Supreme Court. We have also considered various decisions in which the Delhi High court shows restraint in relation to interfering with offshore arbitrations, while also making decisions that demonstrate the observance of formalities by the court which could be construed as not pro-arbitration, including refusing to enforce an arbitration clause in an unsigned agreement. In other news, we consider the rise of institutional arbitration in India and India-related bilateral investment treaty news. Further, we discuss the imminent launch of a new edition of our Guide on India-Related Contracts Dispute Resolution.

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Is the recently signed Morocco-Nigeria BIT a step towards a more balanced form of intra-African investor protection?

On 3 December 2016, Morocco and Nigeria signed a new bilateral investment treaty (the "BIT"), with the overarching aim of strengthening "the bonds of friendship and cooperation" between the two States.  The BIT (available here) is yet to be ratified and to enter into force. 

The BIT takes an interesting and in some ways innovative approach to the balance of rights and obligations as between investors and the respective host States, placing emphasis on the promotion of sustainable development and expressly safe-guarding the State's discretion to take measures to meet policy objectives.  As compared to traditional investment treaties, the BIT imposes additional obligations on investors and appears to seek to address, to a degree, the criticism that such investment treaties have been too heavily geared towards protecting investor interests. 

We explore below some of the more unusual aspects of the BIT, and consider the innovative nature of the BIT by comparison to other intra and extra-African treaties concluded in recent years.   

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Head of India Arbitration Practice, Nick Peacock, comments on India’s Final Text for its Model BIT for CNBC TV18’s “The Firm”

As reported in our recent India E Bulletin here, India has unveiled the final version of its Model Text for the Indian Bilateral Investment Treaty (Model BIT).  The Model BIT serves as a template for negotiation by India of bilateral investment treaties and free trade agreements.  India is a significant global trading and investment partner to many countries.  It is currently negotiating a number of free trade and economic co-operation agreements  (including with the EU, Canada and Australia).

Head of the India Arbitration Practice, Nick Peacock was invited to comment on the Final Model BIT for CNBC TV18’s The Firm, India’s only television programme covering corporate law, M&A, financial regulation, tax and audit matters.

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