AUSTRALIAN GOVERNMENT TO REVIEW ITS BILATERAL INVESTMENT TREATIES

The Australian Federal Government has announced it is reviewing the bilateral investment treaties (BITs) to which Australia is a party.

BITs are typically entered into to promote and protect investments made between the BIT partner States. To that end, Australia is party to 15 BITs with each of Argentina, China, Czech Republic, Egypt, Hungary, Laos, Lithuania, Pakistan, Papua New Guinea, Philippines, Poland, Romania, Sri Lanka, Turkey and Uruguay.

These BITs typically contain provisions requiring Australia (and its counterpart) to: treat foreign investors fairly and equitably; not expropriate the foreign investor’s investment without adequate compensation; provide protection and security to the foreign investor’s investment; honour written agreements between the host State and foreign investors; not treat the foreign investors from the partner State any less favourably than investors from the host State or a third party State; and allow free transfer of funds related to an investment in and out of the State.

Presently, the Department of Foreign Affairs and Trade (DFAT) is seeking submissions by 30 September 2020 on, among other things:

  • the utility of BITs to Australian investors operating overseas;
  • the impact of BITs on foreign investment;
  • concerns with the provisions on BITs presently in force;
  • provisions in BITs which should be renegotiated; and
  • whether the BITs should be terminated.

This community engagement follows on from continued public debate in Australia (which we have commented upon previously) regarding the “investor-state dispute settlement” (or “ISDS”) provisions commonly found in BITs.  Some critics have argued these ISDS provisions, which enable arbitration proceedings to be commenced by foreign investors against Australia, give rise to an unjustified risk of costly and time-consuming arbitration claims made by investors.

The submissions will inform the Government’s position on whether to continue, amend, renegotiate or terminate the BITs to which Australia is a party, or replace them with comprehensive free trade agreements (which may or may not include ISDS provisions). We will issue an update once the submissions are published on DFAT’s website.

For more information, please contact Brenda Horrigan, Head of International Arbitration (Australia), Leon Chung, Partner, Chad Catterwell, Partner, Imogen Kenny, Solicitor, or your usual Herbert Smith Freehills contact.

Brenda Horrigan
Brenda Horrigan
Head of International Arbitration (Australia)
+61 2 9225 5536
Leon Chung
Leon Chung
Partner
+61 2 9225 5716
Chad Catterwell
Chad Catterwell
Partner
+61 3 9288 1498
Imogen Kenny
Imogen Kenny
Solicitor
+61 3 9288 1657

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