India's New Bilateral Investment Treaty Template Set for Cabinet Approval
The Union Finance Ministry said a new template (model text) for Bilateral Investment Treaties (BITs) is ready and is expected to get Union Cabinet approval soon. It has been prepared over about one and a half years.
The new template aims to fix shortcomings of the 2016 Model BIT and give stronger protection to investors from both countries, making it more investor-friendly.
A key issue is the five-year rule: under the current model, a foreign investor must first use India's own courts and remedies for five years before starting treaty-based international arbitration against India. Many have sought a shorter period.
India has kept negotiating while the template is finalised. The latest agreement, with Saudi Arabia, already goes beyond the 2016 framework. India has also concluded agreements with the UAE, Oman and some Central Asian countries.
Talks are under way with Canada and Russia among others; the government expects to conclude agreements with at least three more countries by December 2026.
With more Indian companies investing abroad (Outward Direct Investment), India also wants strong protection for its own investors in other countries. The Ministry also said India-US trade deal talks are continuing, with the trade balance in India's favour a key concern for the US.
Bilateral Investment Treaty (BIT) and India's Model BIT (2016)
A Bilateral Investment Treaty is an agreement between two countries to protect investments made by each other's investors. If a company from one country builds a factory or buys a business in the other, the BIT promises fair treatment, protection against unfair seizure and freedom to move profits home. If the host country breaks these promises, the investor can take the matter to international arbitration. India's current guide for negotiating such treaties is the Model BIT text of December 2015, approved in 2016, which is much stricter than India's older treaties.
The 2016 model made India's treaties safe for the government but less attractive to investors, and few countries agreed to it. The new template, already reflected in the UAE and Saudi Arabia deals, aims to ease rules such as the five-year local remedies period so that India can sign more treaties and attract foreign investment while also protecting Indian companies investing abroad.
Investor-State Dispute Settlement (ISDS)
Investor-State Dispute Settlement (ISDS) is the system that lets a foreign investor sue the government of the country where it has invested. The case does not go to that country's ordinary courts. It goes to a panel of international arbitrators (an arbitral tribunal) under rules such as those of UNCITRAL (the UN Commission on International Trade Law). The investor's right to do this comes from a treaty such as a BIT.
The five-year wait before an investor can start arbitration is India's main shield against ISDS claims. Shortening it in the new template means India accepts a bit more legal risk in return for more investor confidence, and also gives Indian companies abroad a quicker path to arbitration when they face unfair treatment.
- New BIT template prepared over about 1.5 years; awaiting Union Cabinet approval
- It replaces the Model BIT text of December 2015, approved in 2016
- Current rule: 5 years of local remedies before treaty arbitration against India
- Latest treaty: Saudi Arabia (goes beyond the 2016 model); earlier agreements with UAE, Oman and some Central Asian countries
- Negotiations ongoing with Canada and Russia; at least 3 more agreements expected by December 2026
- India-UAE BIT: signed 13 February 2024, in force 31 August 2024, 3-year local remedies period
- India-Israel BIT: signed 8 September 2025, in force 4 July 2026
- India terminated around 70 older BITs in 2016-2017