Silence on Investor –State Disputes Debate

The Law Commission of India's 260th report contains a seemingly innocuous suggestion to include a clear clause for consent to arbitrate investment disputes in India's 2015 draft Model Bilateral Investment Treaty. There is an intriguing absence of any explanation for this suggestion, which is curious, especially when viewed in the context of the global public debate on investor-state dispute settlement clauses. This suggestion requires robust public debate in India and must not silently sail past.

Bilateral investment treaties (BITs) are treaties concluded typically with the intention of creating a stable and favourable investment climate. They contain treaty standards which function as “constitutionalising norms” regulating sovereign conduct in relation to foreign investment. Controversially, many of these BITs give foreign investors the right to initiate arbitration against the host state (that is, the state hosting the investments) to adjudicate violations of these treaty standards. This system is often referred to as investor–state dispute settlement (ISDS).

While BITs have been around for more than five decades now, the first of which was concluded between Pakistan and Germany in 1959, they have come into the public spotlight of late because they are seen as taking away the states’ sovereign right to ensure measures in public interest. India manages an active BIT programme and has concluded 83 BITs till August 2015 (PIB 2015). Globally, approximately 3,200 BITs remain in force (UNCTAD 2015). Negotiation of these BITs are often based on the contracting states’ model BIT.