The government is aiming to finalise new bilateral investment treaties (BITs) with the European Union (EU), Saudi Arabia, Switzerland, Oman and the Maldives in the next two to three months, offering enhanced flexibility to foreign investors including a shorter timeline to exhaust domestic remedies before initiating international arbitration.
Simultaneously, the Cabinet will consider the proposed BIT 4.0 regime, which revises the model text for a better balance between sovereign interests and foreign investment as well as creates a flexible framework for future negotiations. A flexible model would allow India to tailor provisions based on the partner country’s strategic importance and investment ties, sources said.
FE reported recently that the domestic-remedy timeframe could be reduced to two years, depending on bilateral negotiations. Recently, India reduced the timeframe from five years to three years for investments from the United Arab Emirates and Israel.
“We are not offering five years to anyone any more. The negotiations are starting with three years,” an official said, referring to the departure from the 2015 Model BIT.
The five-year requirement was introduced in the 2015 framework largely in response to the investor-state tax disputes India faced at the time, but the Centre is now overhauling the restrictive framework to attract foreign investment amid weakening capital inflows since 2023.
However, as under the 2015 Model BIT, taxation disputes will remain outside the purview of the investment treaties. The government is now identifying only the essential red lines and providing greater flexibility elsewhere.
The overhaul goes beyond dispute resolution and revises several other provisions, drawing on lessons from recent agreements. Investment treaties with the UAE and Israel, for example, depart from the 2015 model, extending protection to portfolio investments in shares, bonds and other financial assets, which were excluded under the earlier framework.
Attracting FDI is a top priority for the government as the country’s burgeoning infrastructure sector needs large-scale private investment. Gross FDI inflows rose 17.3% to $94.5 billion in FY26 from $80.6 billion a year ago. However, net FDI inflows stood at $7.7 billion in FY26 from around $1 billion the previous year.
The restrictive 2015 BIT model was adopted after a series of high-profile arbitration disputes, including those involving Vodafone and Cairn, which challenged India’s retrospective tax demands through international arbitration. Those cases prompted the Centre to terminate most of its older BITs. The tougher 2015 framework, however, found few takers.