The Indian government is preparing to overhaul its Bilateral Investment Treaty (BIT) framework to make the country a more attractive destination for foreign investment. As part of the proposed reforms, foreign investors may soon be allowed to approach international arbitration after pursuing domestic legal remedies for two years, instead of the current five-year requirement.
The change is expected to be incorporated into a revised Model BIT, which is likely to be placed before the Union Cabinet soon. The updated framework will also give India greater flexibility to negotiate treaty provisions based on the strategic importance of partner countries and the nature of bilateral investment ties, rather than following a one-size-fits-all approach.
India introduced its existing Model BIT in 2016 after facing several international investment disputes. However, many foreign investors have viewed the framework as restrictive because of the lengthy requirement to exhaust domestic legal remedies before seeking international arbitration. The proposed reduction to two years aims to address these concerns while maintaining safeguards for India’s legal system.
The government hopes the revised treaty framework will improve investor confidence and help revive foreign direct investment (FDI) inflows, which have weakened in recent years. Officials believe a more balanced dispute resolution mechanism could enhance India’s competitiveness as global companies look to diversify their investment destinations.
If approved, the new Model BIT will serve as the basis for future investment treaties, allowing India to tailor agreements to different countries while providing a faster and more predictable dispute resolution process for foreign investors.
