The 2024 India-UAE BIT: A Mixed Bag?

Some key features of the 2024 India–UAE BIT are discussed below.

• Fair and equitable treatment: Most BITs generally contain a provision ensuring fair and equitable treatment of the investments, which has been interpreted to include a host of measures, such as protection against breach of legitimate expectations and failure to offer a predictable legal framework. The India-UAE BIT omits this provision and provides a narrower list of protections against: (a) denial of justice in any judicial or administrative proceedings; (b) fundamental breach of due process; (c) targeted discrimination on manifestly unjustified grounds; and (d) manifestly abusive or arbitrary treatment. These protections are far narrower than the wide scope of the standard FET clause.

• Most-favoured-nation clause: Unlike the 2014 BIT, the 2024 India-UAE BIT does not contain a most-favoured-nation clause. An MFN clause is typically present in BITs and protects an investor against less-favourable treatment when compared to investments of other foreign investors from a different State. In essence, it aims to provide a uniform standard of treatment across investors from different states — and was, therefore, frequently invoked by investors to "import" more favourable substantive and procedural provisions from other BITs. 

• National treatment: The India-UAE BIT contains a 'National Treatment' clause, which guarantees that the host state shall not accord less-favourable treatment to foreign investors than it accords to its own investors. However, this clause is restricted to treatment accorded by the 'sub-national government' — a state or union territory. This restriction recognises the federalist structure of both countries, where states and emirates enjoy autonomy in policy making. Therefore, an investor would need to show that the treatment accorded by a specific state (e.g. Maharashtra) to its investment is less favourable than accorded by the same state to a domestic investor.

• Right to repatriate funds: The BIT provides investors with a right to freely repatriate funds related to an investment (e.g. dividends, royalties, etc.) to their home state. However, the host state may restrict or prohibit a transfer through a good faith application of the law, including actions relations to insolvency, taxation, recovery of proceeds of crime, requirements to lock-in initial capital investments under the FDI policy, etc.

• Taxation measures: In line with the Model BIT, the 2024 India-UAE BIT also provides several policy exceptions to the host state. For example, state measures relating to taxation are excluded from its scope. This stems from India's loss in several investment treaty arbitrations in the last decade, wherein the investors, such as Cairn and Vodafone, successfully raised claims in respect of retrospective taxes levied by the Indian government.

• Investor obligations: The BIT also imposes reciprocal obligations on foreign investors to ensure compliance with local laws. Investors are also encouraged to voluntarily incorporate international standards of corporate social responsibility obligations in their practices and policies.

• Procedural requirements: In order to invoke a claim under the BIT, investors must first pursue local remedies in the local courts of the host state for at least three years, before commencing investor state arbitration under the BIT. Further, an investor must commence a claim before local courts within one year of the date on which the investor had knowledge of the breach, regardless of whether a longer limitation period is available under domestic laws. 

• Third-party funding: In a departure from industry practice, the BIT does not permit investors to use third-party funding for disputes under the treaty. This is a significant impediment for investors, as investment treaty arbitration is a long-drawn and expensive process, and investors are often able to bring claims only with the help of third-party funding.