{"id":372465,"date":"2026-09-23T20:39:31","date_gmt":"2026-09-23T15:09:31","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=372465"},"modified":"2026-09-23T20:39:31","modified_gmt":"2026-09-23T15:09:31","slug":"using-trade-treaty-policy-to-strengthen-commercial-arbitration","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/using-trade-treaty-policy-to-strengthen-commercial-arbitration\/","title":{"rendered":"Using Trade Treaty Policy to Strengthen Commercial Arbitration"},"content":{"rendered":"

UPSC Syllabus: Gs Paper 3- <\/strong>Indian Economy<\/p>\n

Introduction<\/strong><\/h2>\n

India\u2019s expanding network of Bilateral Investment Treaty (BIT)<\/strong> and Free Trade Agreement (FTA) <\/strong>is reshaping how it protects investment and manages disputes. Since the 1990s, India has moved from a broad BIT regime towards narrower agreements with stronger regulatory safeguards and domestic remedies. Recent FTAs also show limited reliance on conventional Investor-State Dispute Settlement (ISDS)<\/strong>. This creates an opportunity to use India\u2019s existing commercial arbitration framework to offer foreign investors credible dispute resolution while preserving regulatory autonomy and strengthening India\u2019s position as a trusted investment destination.<\/p>\n

Evolution of India\u2019<\/strong>s BIT Policy<\/strong><\/h2>\n
    \n
  1. BITs after economic liberalisation:<\/strong> India signed its first Bilateral Investment Treaty (BIT) with the United Kingdom in 1994<\/strong>, following the 1991 opening of its economy to foreign investment.<\/li>\n
  2. Rapid expansion of BIT network:<\/strong> By 2015, India had signed 83 BITs<\/strong>, including 74 then in force, mainly with capital-exporting countries.<\/li>\n
  3. Rise of investment disputes:<\/strong> India\u2019s first treaty claim emerged in the mid-2000s, followed by its first adverse award in White Industries<\/strong> in 2011.<\/li>\n
  4. Growing concern over ISDS:<\/strong> By 2015, India faced about 17 known BIT claims<\/strong>, increasing concerns over investor-state dispute settlement and regulatory constraints.<\/li>\n
  5. Adoption of Model BIT:<\/strong> In December 2015, India adopted a new Model BIT seeking investor protection while maintaining a balance between investor rights and government obligations<\/strong>.<\/li>\n
  6. Narrower post-2015 framework:<\/strong> The new approach introduced narrower definitions, stronger regulatory rights, extensive exclusions and mandatory domestic remedies before arbitration<\/strong>.<\/li>\n
  7. Shift towards new-generation BITs:<\/strong> Since 2016, India terminated 77 BITs<\/strong> and adopted new-generation agreements largely based on the 2015 Model BIT.<\/li>\n
  8. Continuing relevance of terminated BITs:<\/strong> Investments made before termination can remain protected under sunset or survival clauses, typically for 10\u201315 years<\/strong>, keeping some terminated treaties legally relevant.<\/li>\n<\/ol>\n

    From Investor-State Disputes to Commercial Arbitration<\/strong><\/h2>\n
      \n
    1. Regulatory sovereignty:<\/strong> Recent BITs give greater importance to India\u2019s right to regulate, while maintaining selected protections for foreign investors.<\/li>\n
    2. Recent treaty recalibration:<\/strong> The 2025 India\u2013Israel agreement<\/strong> retained regulatory safeguards while reducing the local-remedy period to three years and extending protection to portfolio investments.<\/li>\n
    3. Review of Model BIT:<\/strong> Budget 2025\u201326 announced a review of the 2015 Model BIT to make it more investor-friendly while retaining regulatory safeguards.<\/li>\n
    4. Recent expansion of trade agreements:<\/strong> India has entered into Comprehensive Economic Partnership Agreements (CEPAs)<\/strong> with the UAE and Oman, along with trade agreements with Australia and EFTA, expanding its investment and trade partnerships.<\/li>\n
    5. Changing role of ISDS:<\/strong> Recent Indian FTAs generally omit conventional Investor-State Dispute Settlement (ISDS), while newer BITs continue to provide investment dispute mechanisms with stronger conditions and domestic-remedy requirements.<\/li>\n
    6. Alternative dispute mechanisms:<\/strong> The European Free Trade Association (EFTA) agreement uses a government-to-government mechanism<\/strong> instead of conventional ISDS, supported by a dedicated India\u2013EFTA Desk.<\/li>\n
    7. Importance of commercial arbitration:<\/strong> The Arbitration and Conciliation Act, 1996<\/strong> already covers domestic arbitration, international commercial arbitration and enforcement of foreign awards.<\/li>\n
    8. Contractual disputes and ISDS:<\/strong> The India\u2013Uzbekistan BIT excludes disputes arising solely from contractual breaches, clearly separating commercial disputes from treaty-based investment claims.<\/li>\n<\/ol>\n

      Using BITs and FTAs to Strengthen Commercial Arbitration<\/strong><\/h2>\n
        \n
      1. Clarifying ISDS omission:<\/strong> Future FTAs could explain that the absence of ISDS reflects confidence in India\u2019s available domestic dispute-resolution mechanisms.<\/li>\n
      2. Providing an investor alternative:<\/strong> Commercial arbitration can offer foreign investors an alternative to Indian courts when disputes arise from contracts with State agencies.<\/li>\n
      3. Creating a middle ground:<\/strong> Stronger commercial arbitration can balance India\u2019s reservations about ISDS with investors\u2019 concerns about relying exclusively on domestic courts.<\/li>\n
      4. Recognising Indian arbitration in treaties:<\/strong> Future BITs could clarify that submitting an investment dispute to commercial arbitration in India can satisfy local-remedy requirements.<\/li>\n
      5. Separating funding rules:<\/strong> Restrictions on third-party funding in ISDS should not automatically apply to commercial arbitration because their underlying policy concerns differ.<\/li>\n
      6. Building regulatory space:<\/strong> Clear treaty language could allow Indian regulators to develop a comprehensive third-party funding policy for domestic commercial arbitration.<\/li>\n<\/ol>\n

        Way Forward<\/strong><\/h2>\n
          \n
        1. Balance investor protection and regulatory autonomy:<\/strong> India should bring its treaty framework closer to a balance between investor protection and the State<\/strong>\u2019<\/strong>s regulatory autonomy<\/strong>.<\/li>\n
        2. Strengthen domestic dispute resolution:<\/strong> Shorter domestic-remedy periods make efficient domestic institutions and predictable commercial arbitration<\/strong> increasingly important.<\/li>\n
        3. Review the Model BIT:<\/strong> The ongoing review should make the framework more investor-friendly while retaining necessary regulatory safeguards<\/strong>.<\/li>\n
        4. Create an external expert group:<\/strong> International lawyers, economists, academics and experts from research institutions and think tanks can provide independent advice during treaty review.<\/li>\n
        5. Ensure wider stakeholder consultation:<\/strong> India should seek views from industry bodies, arbitrators, law firms and civil society organisations<\/strong> before finalising the revised framework.<\/li>\n
        6. Enable public and parliamentary scrutiny:<\/strong> The revised Model BIT should be placed in the public domain for comments<\/strong> and examined by Parliament and relevant department-related parliamentary committees.<\/li>\n
        7. Make consultation meaningful:<\/strong> The process should genuinely consider different and dissenting views rather than becoming a box-ticking exercise<\/strong>, strengthening the democratic legitimacy of investment treaties.<\/li>\n
        8. Build investor confidence:<\/strong> India should aim for agreements that prevent disputes, efficient arbitration when disputes arise and predictable enforcement of arbitral awards<\/strong>.<\/li>\n<\/ol>\n

          Conclusion<\/strong><\/p>\n

          India\u2019s treaty policy is moving towards a balance between investor protection and regulatory autonomy<\/strong>. The next step is to connect this approach with strong commercial arbitration, clearer treaty provisions, wider consultation and predictable enforcement. Such reforms can improve investor confidence while strengthening India\u2019s domestic dispute-resolution system. This can support India\u2019s broader ambition of becoming a global arbitration hub<\/strong>.<\/p>\n

          Question for practice:<\/strong><\/p>\n

          Discuss how India can use its trade treaty policy to strengthen commercial arbitration and improve investor confidence.<\/p>\n

          Source: <\/strong>The Hindu<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

          UPSC Syllabus: Gs Paper 3- Indian Economy Introduction India\u2019s expanding network of Bilateral Investment Treaty (BIT) and Free Trade Agreement (FTA) is reshaping how it protects investment and manages disputes. Since the 1990s, India has moved from a broad BIT regime towards narrower agreements with stronger regulatory safeguards and domestic remedies. Recent FTAs also show… Continue reading Using Trade Treaty Policy to Strengthen Commercial Arbitration<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230],"tags":[216,8184,10498],"class_list":["post-372465","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","tag-gs-paper-3","tag-indian-economy","tag-the-hindu","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/372465","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=372465"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/372465\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=372465"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=372465"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=372465"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}