Investor-state dispute settlement (ISDS) is a system through which investors can sue countries for discriminatory practices concerning foreign direct investment. The protection provided by ISDS acts as a lever to boost foreign investment. ISDS is an instrument of public international law and is included in a number of bilateral investment treaties (BITs). India has supported idea of an appellate review in the ISDS because Article 29 of the Indian model BIT mentions it.
What is India’s stance on ISDS mechanism?
- Historical Perspective: India has had a history of mixed experiences with ISDS cases. The country has faced several investment arbitration cases, some of which have resulted in unfavourable outcomes, leading to concerns about sovereignty and regulatory autonomy.
- Balancing Investor Rights and Public Interest: India has expressed a desire to strike a balance between protecting foreign investors’ rights and safeguarding its ability to regulate in the public interest. The government is cautious about ISDS provisions that could potentially undermine its policy space in areas like public health, environmental protection, and social welfare.
- Policy Reforms: India has undertaken policy reforms to attract foreign investment and create a more conducive investment climate. While doing so, it has also sought to negotiate investment treaties that incorporate safeguards to mitigate the risks associated with ISDS, such as allowing claims only for expropriation without adequate compensation
How can review mechanism benefit India?
- Legal Certainty: An appellate review mechanism can enhance legal certainty for India. It provides a structured process for reviewing arbitral decisions, reducing the unpredictability associated with ISDS outcomes.
- Deterrent Against Frivolous Claims: Knowing that there is an appellate review process can serve as a deterrent against frivolous or unjustified claims by investors, reducing the burden on India’s legal system and resources.
- Enhanced Credibility: Embracing an appellate review mechanism demonstrates India’s commitment to a fair and transparent international investment regime. This can enhance its credibility as an investment destination and promote investor confidence.
Conclusion:
India’s quest to establish a rule-based global order should support an appellate review which will usher in greater confidence for states and investors in international investment law. This reform could also help India push for the restoration of the WTO appellate body towards achieving the goal of a fully and well-functioning dispute settlement system at the WTO.
