Bharat Progress Report 2024: India, UAE Bilateral Investment Treaty Came Into Effect

The Bilateral Investment Treaty (BIT) between India and the United Arab Emirates (UAE), signed on February 13, 2024, in Abu Dhabi, has officially come into effect as of August 31, 2024. This treaty ensures continued investment protection for investors in both nations, replacing the earlier Bilateral Investment Promotion and Protection Agreement (BIPPA), which was signed in December 2013 and is set to expire on September 12, 2024.

Investment Relations Between India and UAE

The UAE holds a prominent position as India’s seventh-largest foreign direct investor, contributing approximately 3% of India’s total Foreign Direct Investment (FDI) inflows. Between April 2000 and June 2024, the UAE’s cumulative investment in India stood at around USD 19 billion.

Conversely, India has made significant investments in the UAE, totaling USD 15.26 billion during the same period. This accounts for 5% of India’s total Overseas Direct Investments.

Provisions of the New BIT

The BIT introduces a robust framework designed to enhance investor confidence and provide strong legal assurances. Key provisions include:

• Protection Against Expropriation: Ensures that investments are safeguarded from unlawful seizure.
• Transparency in Transfers: Facilitates the free transfer of funds related to investments.
• Compensation for Losses: Guarantees fair compensation in the event of disputes or economic loss.
• Closed Asset-Based Definition of Investment: Covers a wide range of investments, including portfolio investments, under a strict legal definition.
• Legal Safeguards: Protects against denial of justice and arbitrary treatment of investments.

Dispute Resolution Mechanism

A significant feature of the treaty is the inclusion of an Investor-State Dispute Settlement (ISDS) mechanism. This provision allows investors to seek international arbitration but only after exhausting local remedies for at least three years.

Additionally, the treaty includes carve-outs that preserve the right of both governments to regulate matters such as taxation, subsidies, and public welfare without compromising the protection offered to investors.

Strengthening Bilateral Economic Ties

The Ministry of Finance emphasized that the BIT represents a shared commitment to fostering a resilient investment climate while ensuring the economic sovereignty of both nations. By providing comprehensive protections and a transparent dispute resolution framework, the treaty aims to attract greater bilateral investments and bolster economic cooperation.

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