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Minefields in Investment Relations
The Government of India and the Government of Andhra Pradesh are facing an arbitration suit due to the cancellation of bauxite mining approvals in Visakhapatnam. A case has been filed by the investment authority of Ras Al-Khaimah, a member of the United Arab Emirates, that set up a joint venture company in the state to refine bauxite. This is the latest in a series of legal actions by foreign investors in the country. The claim, being made under an India–UAE bilateral investment agreement and the investor–state dispute settlement mechanism therein, will test India’s efforts to attract foreign investments and impact centre–state relations.
When economic reforms were announced in India in 1991, the country’s foreign investment policy was also liberalised. In 1993, the Government of India (GoI) developed a model bilateral investment promotion and protection agreement (BIPA) to encourage prospective investors from foreign countries. It was based on the Organisation for Economic Co-operation and Development’s Draft Convention on the Protection of Foreign Property, 1967. BIPA is a form of bilateral investment treaties (BITs). From 1994 to 2013, India has signed 83 BIPAs with countries around the world.1
In March 2013, the then Union Minister of State for Finance Namo Narain Meena announced that the government was going to review India’s BIPAs. This was partly due to a number of cases filed against India by foreign investors under the BIPAs (Table 1). These investment treaty arbitrations (ITAs) led to the review of India’s BITs by the government. No new BIPAs were to be signed by India until the review process was over (Table 2). Curiously, one exception was made for the India–United Arab Emirates (UAE) BIPA, which was signed in December 2013.
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