Column: Make BIT reviews transparent

Written by Prabhash Ranjan | Updated: May 29 2014, 09:55am hrs
The new Prime Minister, Narendra Modi, in a recent television interview, said that there is a need to review Indias foreign direct investment (FDI) policy. Any effort to review the FDI policy should include within its ambit the review of Indias Bilateral Investment Treaties (BITs). BITs are largely perceived as international legal instruments aimed at protecting and promoting foreign investmentcountries accept restrictions on the exercise of their public power in return for greater foreign investment flows. Prominently, BITs enable foreign investors to directly bring claims against host country at international arbitration forums. This BIT arbitration is not like ordinary commercial arbitration against a country challenging a private action such as contractual breaches, etc. Since BITs control the exercise of public power, all BIT arbitrations involve adjudication of public power of host country. Global evidence shows BIT arbitrations have included adjudication and review of a wide gamut of public functions like monetary policy, taxation measures, sovereign debt restructuring, environmental and health policies.

India started its BIT sojourn in 1994, as part of the economic reforms programme, with the aim to attract foreign investment. Till date, India has entered into more than 80 BITs with 72 of them being enforced. Most provisions of these BITs are foreign-investor friendly, capable of legal interpretations giving precedence to investment protection over exercise of regulatory power by Indian state. Till the end of 2010, there was negligible discussion in India on the interface between BITs and regulatory power despite growing global evidence about such interface from Latin America and elsewhere. However, two key developments post 2011 triggered a change in Indias position on BITs. First, towards the end of 2011, a BIT tribunal in the White Industries v India case, for the first-time, found that India violated its BIT obligations (India-Australia BIT). Second, other foreign investors, like Vodafone and Telenor, issued BIT arbitration notices to India, challenging various regulatory measures like imposition of retrospective taxation and cancellation of 2G telecom licenses. According to UNCTAD, there are about a dozen known BIT claims that have been made against India. The most recent addition to this is the BIT arbitration notice issued by Louis Dreyfus Armateurs, a French shipping services and maritime transportation company, after the firm pulled out from Haldia Port venture two years ago.

These two developments led India to decisively launch a process of review of BITs including the model text of its BIT, although academics working in the area, including this author, have been arguing for review of BITs given Indias susceptibility to such BIT claims much before White happened. Anyhow, the decision to review Indias BITs should be welcomed. However, the on-going BIT review process is not transparent. Apart from media reports and analyses by individual academics and experts, mighty little information is publicly available about the review of Indian BITs apart from the following single sentence explanation given on the website of Ministry of Financethe nodal ministry that deals with BITs in light of the recent developments including the legal implications, the Model text of BIT is being reviewed to understand the exact nature of demands and obligations under these treaties. What are these recent developments and what legal implications are being talked about is nowhere mentioned. Moreover, no information is publicly available regarding the processes that India is following in reviewing its BITs and developing a new model BIT. For example, are stakeholder consultations with industry, civil society, academia, etc being held Who is carrying out the review of BITs Is there an involvement of non-governmental subject experts or a process of seeking inputs from public at large

This is in complete contrast to the practices that have been followed in other countries, which have reviewed their existing investment treaties or have adopted new model BIT. For example, when US decided to adopt a new model BIT in 2009, an investment subcommittee to the Advisory Committee on International Economic Policy (ACIEP), comprising some 27 advisors, including participants from business and labour groups, academia, public policy groups, was established to advise on the BIT review. In addition to this, the Office of the United States Trade Representative (USTR) and the Department of State solicited inputs from interested groups and individuals by way of written comments and participation in a public hearing. Similarly, European Commission decided to have public hearings on the investment pact of the EU-US Transatlantic Trade and Investment Partnership in order to increase the transparency and the democratic legitimacy of such treaties.

Another major issue of lack of transparency relates to non-disclosure by the Indian government on how many foreign corporations have issued BIT arbitration notices to India, which regulatory measures have been questioned and what would be the likely impact of these rulings. The only source of information here again is media reports. There is also no disclosure regarding the quantum of damages demanded by foreign investors. For example, in late 2013, Deutsche Telekom, a German investor in Devas Multimedia, reportedly sought damages of over $1.6 billion from the Indian government for the cancelled satellite project between Antrix, Isros marketing arm, and Devas. There is also no mechanism, which gives an opportunity to access BIT arbitral awards issued against Indiathe award in White Industries v India, even after three years of the ruling, is not available on the website of the Finance Ministry, Ordinary citizens have a right to know about all BIT arbitration claims against India and the BIT review process because what is at stake is exercise of public power and public money. One expects that the new government will undertake the task of bringing transparency in the review of BITs.

The author teaches International Investment Law at the South Asian University, New Delhi. Views are personal