The Indian government has recently announced the enforcement of a new Bilateral Investment Treaty (BIT) with the United Arab Emirates (UAE). This development is set to ensure the continuity of investment protection for individuals from both nations. The announcement comes in the wake of the expiration of the previous Bilateral Investment Promotion and Protection Agreement (BIPPA) between the two countries on September 12.
The UAE holds a significant position in India's foreign direct investment (FDI) landscape. It is the seventh-largest contributor, with a share of 3 per cent. The cumulative investment from the UAE to India from April 2000 to June 2024 is approximately $19 billion. On the other hand, India has also made substantial overseas direct investments in the UAE, amounting to $15.26 billion, which is 5 per cent of its total overseas direct investments for the period from April 2000 to August 2024.
The new treaty, dubbed 'India–UAE BIT 2024', is expected to enhance the confidence of investors and increase their comfort level. It assures a minimum standard of treatment and non-discrimination, while also providing an independent forum for dispute settlement through arbitration. The Ministry of Finance has emphasized that while the treaty provides protection for investors and investments, it also maintains a balance with the state's right to regulate, thereby providing adequate policy space.
The India-UAE BIT 2024 has several key features. It includes a closed asset-based definition of investment, coverage of portfolio investment, and treatment of investment with obligations for no denial of justice, no fundamental breach of due process, no targeted discrimination, and no manifestly abusive or arbitrary treatment. The treaty also provides for Investor-State Dispute Settlement (ISDS) through arbitration, with mandatory exhaustion of local remedies for three years. It also stipulates that no investor claim can be made in cases where investments are involved with corruption, fraud, or round-tripping.
The signing and enforcement of the BIT reflect the shared commitment of both nations towards enhancing economic cooperation and creating a more robust and resilient investment environment. This is further underscored by the fact that bilateral trade between India and the UAE is on track to surpass the $100 billion target well before 2030, marking a notable 12.7 per cent year-on-year increase. The UAE remains India's third-largest trading partner and second-largest export destination for the fiscal year 2022-23, as per a report by Primus Partners. In addition to the BIT, both countries have also implemented a free trade agreement, which came into force on May 1, 2021. This agreement, along with the BIT, is expected to further strengthen the economic ties between India and the UAE.
The enforcement of the India-UAE BIT 2024 marks a new chapter in the economic relationship between India and the UAE. It promises to provide a more secure and stable environment for investors, thereby potentially attracting more investments and fostering economic growth in both countries. The treaty also reflects the shared commitment of both nations towards economic cooperation and the creation of a robust and resilient investment environment. This development is a significant step forward in the strengthening of diplomatic ties and fostering a sense of mutual trust and respect between the two nations.
