Context

• India’s decision to revise its Model Bilateral Investment Treaty (BIT) nearly a decade after the 2015 framework comes at an important stage in the evolution of international investment law.
• The Union Budget 2025-26 announced the revamp to make the framework more investor-friendly.
• However, the objective is not simply to increase investor protection but to incorporate India’s experience since 2015 while responding to changes in the global investment regime.
• A revised Model BIT should promote investment, legal certainty, sustainable development and regulatory autonomy while limiting unnecessary litigation risks.

A Cautious Framework

• India’s 2015 Model BIT emerged amid concerns over investor-state arbitration, particularly after the White Industries Australia Limited v. Republic of India award in 2011.
• It adopted a cautious framework with a narrower definition of investment, carefully defined substantive protections, regulatory exceptions and a requirement to pursue domestic judicial and administrative remedies for five years before treaty arbitration.
• India’s subsequent treaty practice has become more flexible. The India-UAE BIT reduced the local-remedies period to three years, while the India-Israel Bilateral Investment Agreement, effective from July 2026, also provides a three-year period.
• These agreements demonstrate a gradual shift from the rigidity of the 2015 framework.
• A Model BIT should function as a starting point for negotiations, rather than an inflexible template.
• Individual agreements should retain flexibility to reflect the economic and legal circumstances of treaty partners.

What a New Model Must Factor In?

• Most Favoured Nation (MFN) Provision
  • The inclusion of a MFN clause requires careful consideration.
  • Most Indian investment treaties have excluded MFN provisions, limiting investors’ ability to invoke protections contained in other treaties.
  • If included, the clause must clearly define its scope. Maffezini v. Spain demonstrated how an MFN provision could potentially be used to access more favourable dispute-settlement arrangements from another treaty.
  • Conversely, Plama Consortium v. Bulgaria adopted a restrictive interpretation where such an extension was not clearly authorised.
  • India should therefore specify whether MFN provisions apply to dispute settlement, reducing interpretive uncertainty.
• Investor Obligations and Counterclaims
  • The revised model should also establish clearer investor obligations.
  • The India-Uzbekistan BIT permits a state to bring counterclaims against investors or investments in specified circumstances.
  • The new model could incorporate clearly defined responsibilities relating to compliance with domestic law and responsible investment.
  • Such provisions would create greater symmetry between investor rights and obligations while establishing a legal basis for legitimate state counterclaims.

Dispute Settlement Reform

• The five-year domestic-remedies requirement under the 2015 Model should be reassessed.
• The three-year periods in the India-UAE and India-Israel agreements indicate greater flexibility in India’s approach.
• The revised model could strengthen consultation, mediation and dispute-prevention mechanisms before arbitration.
• Early resolution could reduce litigation, costs and uncertainty while improving investor-state relations.

Need for Precision and Clarity

• The revised model should provide greater precision regarding expropriation and Fair and Equitable Treatment (FET).
• Ambiguous provisions can encourage conflicting interpretations and increase disputes.
• At the same time, investor protection should not undermine the state’s right to regulate in the public interest.
• The treaty should clearly distinguish legitimate regulation from compensable expropriation.
• Similarly, sustainable development and responsible investment should be supported by enforceable legal provisions wherever India intends to impose investor obligations rather than remaining merely aspirational principles.

Conclusion

• India’s Model BIT revision provides an opportunity to create a clearer, balanced and adaptable investment framework.
• The experience of the past decade suggests that excessive rigidity can restrict treaty flexibility, while vague protections can generate uncertainty.
• The revised model should incorporate India’s evolving treaty practice, clarify MFN provisions, reform dispute settlement, recognise investor responsibilities, strengthen dispute prevention and preserve regulatory policy space.
• A carefully designed Model BIT can strengthen India’s position in the changing global investment regime and enable it to play a greater role in shaping international investment rules.