Development Space In India’s Trade And Investment Agreements: A Fresh Look

By
James J. Nedumpara+

ABSTRACT
The paper examines India’s experience in regulating trade and investment, especially since
the initiation of trade and economic reforms in 1991. Political opposition in India to
assuming obligations under international treaties resulted in the adoption of various policy
flexibilities in areas such as public health and access to drugs, local content measures,
environmental standards, trade remedies and such other topics under the WTO. In recent
times, India has signed comprehensive economic partnership agreements with developed
economies such as Japan, South Korea and Singapore and is negotiating a trade and
investment agreement with the European Union (EU).
The paper provides an analysis of the focus and coverage of issues under these trade and
investment agreements and areas where India has negotiated development space or policy
autonomy. In addition, the paper discusses the recent claims made against India under
various Bilateral Investment Promotion Agreements (BIPA) and the safeguards adopted by
India while negotiating such new agreements, or renegotiating, or reviewing existing
agreements. Based on this approach this paper seeks to contribute to the project that attempts
to compare and contrast the multiple strategies adopted by Southern countries in regulating
trade and investment.

I. Introduction…………………………………………………………………………………124
II. India and the Debate on Development Space in Trade and Investment Agreements…...126
III. India and International investment Agreements…………………………………………129
a. BITs and Policy flexibility…………………………………………………………...130

123
IV. White Industries and the Renewed Debate on Policy Space……………………..131
a. Tightening the Scope and Content of ‘Investment’ ............................................. 134
b. Delineating the Contours of ‘Fair and Equitable Treatment’ .............................. 135
c. Defining the Limits of ‘Expropriation’ .................................................................. 137
d. Leaving Out ‘MFN Provisions’ .............................................................................. 139
e. National Treatment ................................................................................................ 141
f. Limiting Full Protection and Security .................................................................. 142
g. Crafting Public Policy Exceptions ......................................................................... 142
h. Preamble of Investment Treaties .......................................................................... 144
V. Conclusion………………………………………………………………………….144

I. INTRODUCTION

There is an eternal scepticism within India on the merits of actively participating in the
multilateral or regional trade and investment treaties. Although India is a founding member
of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization
(WTO), it is considered a reluctant liberaliser and an ‘inflexible’ negotiator in trade
negotiations. To an extent, this scepticism is a legacy of India’s socialist, import substitution
based model of development. For a country which laid its economic foundation on the
Nehruvian model of mixed economy and central planning, convincing the domestic
constituents of the merits of liberalisation of trade and investment can often be difficult. In
addition, losing some key disputes in the WTO in the late 1990s had significant political and
economic consequences.512 For India, losing the India –Patent (Mail box)513 case at the WTO

+ Associate Professor, Jindal Global Law School, Sonipat, India. I am grateful to Vandana Gyanchandani and
Rishab Raturi for research assistance. A slightly different version of this paper was presented at the 5 th Society
of International Law (SIEL) Conference at Berne, Switzerland in July, 2014. All errors remain mine.
512 See Gregory Shaffer, James Nedumpara and Assema Sinha, Indian Trade Lawyers and the Building of State

Trade-Related Legal Capacity, MINNESOTA LEGAL STUDIES, Research Paper No. 14-08 (2014),
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2390673 (Last Visited July 7, 2014).
513 Appellate Body Report, India- Patent Protection for Pharmaceuticals and Agricultural Chemical Products ,

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in 1999 and the compulsion to phase out the quantitative restrictions514 pursuant to its loss
before a WTO panel and Appellate Body was politically challenging. In the context of these
losses, justifying the benefits of undertaking additional obligations was politically untenable
for India. At the same time, its perennial balance of payment crisis, which heightened during
1990-91, left India with very little choice except to pursue economic liberalisation.
The scepticism has its own advantages. This scepticism and domestic backlash against
assuming international obligations on sensitive matters such as goods, services and
agriculture enabled India to play a crucial, and often pivotal, role in trade negotiations,
especially in multilateral trade negotiations. By the late 1990s India had established domestic
consultation mechanisms and had built up strong stakeholder capacity that helped India
participate in such negotiations in a more informed and meaningful way. India’s
understanding of the GATT dynamics and the multilateral trading system also equipped it to
adopt well-thought out, calibrated positions, especially in the Doha Round among other free
trade agreement negotiations.515
While there is overwhelming literature on India’s strategies and approaches to
pushing for equitable and development-friendly legal ordering in multilateral trade
negotiations, especially in WTO negotiations, very little attention has been paid to India’s
approach in negotiating bilateral investment treaties or other free trade agreements with
investment chapters. This was not a very significant issue for India until very recently.
However, a slew of challenges, or potential challenges against India under the bilateral
investment treaties (BITs) has rekindled the debate on whether India has carved out
sufficient policy space in the existing investment treaties and, more importantly, in the
proposed negotiations. Especially after the cancellation of telecom licenses by the Supreme
Court of India in February 2012 the Indian government has received a series of notices of

WT/DS 50/R and WT/DS 50/AB/R, (Dec. 19, 1997) (adopted Jan. 16, 1998) [Hereinafter India- Patents].
514 Appellate Body Report, India– Quantitative Restrictions on Imports of Agricultural, Textile and Industrial

Products, WT/DS/AB/R (Aug. 23, 1999) (adopted Sep. 22, 1999) [Hereinafter India- QR].
515 Amrita Narlikar, India and the World Trade Organization, THE WORLD TRADE ORGANIZATION: A VERY

SHORT INTRODUCTION, 270, 272 (Steve Smith et al eds., 2005).

125
dispute from a number of global telecom majors which had investments in India. (See Annex
I).
In this paper, I examine India’s developmental thrust in trade and investment treaty
negotiations and some of the areas where India had eloquently persuaded the multilateral
trading community of the equity and desirability of leaving sufficient policy space. After
tracing this history, the paper examines availability of policy space in India’s bilateral
investment agreements. The paper also examines the reasons that might have prompted India
to review its negotiating positions, especially in bilateral investment treaties, and
recommends a few policy flexibilities that India should insist upon in its current and future
negotiations.

II. India and the Debate on Development Space in Trade and Investment Agreements

There is a significant body of literature on the role of neo-liberal institutions such as the
WTO in developing countries.516 Liberal scholars consider the WTO and other preferential
trade and investment agreements as a mechanism for these countries to achieve prosperity
and economic welfare. Development scholars, on the other hand, contest the claims of liberal
trade scholars and argue that multilateral trade institutions such as the WTO could cripple
the regulatory autonomy of sovereign states and impose undesirable restrictions on them.
India, for long, pursued a cautionary approach to stay clear of the traps of an “asymmetric
system” of which it had significant misgivings. Although India had initiated economic
liberalization in the early 1990s, liberalization remained constrained in scope.517
India’s experience with the operation and implementation of the WTO Agreements, in a
way, reaffirmed some of India’s concerns. India was at the vanguard of negotiating

516 Alvaro Santos, Carving out Policy Autonomy for Developing Countries in the World Trade Organization:
The Experience of Brazil and Mexico, 52 VIRGINIA J. INT’L L., 551, 573 (2012); David Trubek, Reversal of
Fortune? International Economic Governance, Alternative Development Strategies and the Rise of BRICS ,
https://media.law.wisc.edu/s/c_638/3fwq9/eui_paper_final_june_2012.pdf.
517 Martin Wolf, India in the World, India’s Economy: Performance and Challenges, 369, 389 (Shankar Acharya

& Rakes Mohan eds., 2010).

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flexibilities within the Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS Agreement).518 Especially in the context of TRIPS, India used important flexibilities
such as the limits on patentable subject matter,519 expansive procedural opportunities to
challenge patents and restrictions on injunctive reliefs.520In fact, some scholars are of the
opinion that India’s set of exclusions to patentability is almost unknown everywhere else in
the world.521Further, India also adopted an exceptionally high threshold for inventive step
(non-obviousness) and mechanism for implementing mechanisms such as compulsory
licensing. TRIPS and pharmaceutical product patents brought politicians, parliamentarians,
NGOs and think tanks in for a transnational discourse on pharmaceutical patent law—a
discourse which was hitherto unknown in India.
Coming closely on the heels of the Patent- Mail Box case was another dispute concerning the
implementation of quantitative restrictions on a wide category of agricultural and consumer
items. The dispute settlement ruling in India-QR reignited the debate on trade agreements
and policy space in India. Notwithstanding the 1991 economic liberalization, India
continued to maintain import licensing and quantitative restrictions on products which
constituted nearly 30 percent of the tariff lines. The import restrictions were maintained on
balance of payment grounds, but provided protection to products generally manufactured by
the small scale industries (SSI) in India. Although a number of countries had maintained
quantitative restrictions on balance of payment grounds during the GATT period (1947-
1995), as a matter of practice, such restrictions were hardly challenged before the dispute
settlement panels. India defended the restrictions on the ground that pre-existing GATT
practice under Article XXIII precluded Member countries from approaching dispute

518 K M Gopakumar, Product Patents and Access to Medicine in India: A Critical Review of the Implementation
of the TRIPS Regime, 3 THE LAW& DEVELOPMENT REVIEW, 326, 338 (2010) (examining the role of
flexibilities for India under the TRIPS Agreement).
519 The most important exclusion is Section 3(d) of the Patent Act which forbids patents on both new uses of

known substances that do not enhance “efficacy”.

520 Amy Kapczynski, Harmonization and its Discontents: A Case Study of TRIPS Implementation in India’s

Pharmaceutical Sector, 97 CALIF. L. REV. 1571 (2009).

521 Id., at 1574 (noting that “India has mapped out an extraordinary array of TRIPS flexibilities, some of which

are unknown elsewhere in the world”).

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settlement panels on claims relating to balance of payment provisions under the GATT. The
panel as well as the Appellate Body maintained that the quantitative restrictions amounted to
a violation of Article XI: I of the GATT and that they cannot be justified under Article
XVIII:B of GATT, 1994. The Appellate Body stated that clear WTO rules could not be
disregarded in order to safeguard institutional balance between political and quasi-judicial
organs of the WTO.522 This case also brought a marked change in the substantive approach to
balance-of-payment issues, which some commentators have interpreted as a movement away
from the pragmatism of the GATT towards a more adjudicatory, “legalistic” approach.523
When India negotiated multilateral or other regional trade agreements, it exercised
extraordinary due diligence and broad-based stakeholder consultations. For example, at the
time of the Uruguay Round negotiations, the Indian Parliament appointed the I K Gujral
Committee524 to solicit views and prepare a report on the Dunkel Draft and to assess impact
of the WTO Agreement on India.525Several other Parliamentary Committees including the
Arjun Singh Committee were established to advise the government during the negotiating
phase (1987-1994).
The lessons learnt from these disputes prepared India to formulate clear negotiating positions
in the Doha Round trade negotiations and a host of other preferential trade agreements.
India also established domestic mechanisms and systems including vibrant investigating
agencies for administering antidumping and safeguarding duties. One could argue that India
had an effective mechanism in identifying and preserving policy space especially in
multilateral trade agreements.

522 Frieder Roessler, The Institutional Balance between the Judicial and the Political Organs of the WTO , NEW
DIRECTIONS IN INTERNATIONAL ECONOMIC LAW 325, 325-46 (Marco Bronckers & Reinhard Quic eds.,
2000).
523 Kennith W. Abbott, The Many Faces of International Legalization , 92 AM. SOC’Y INT’L PROC., 57(1998).

524 I K Gujral was the Prime Minister of India during 1997-98.

525 Parliament of India, Report of the Department-related Standing Committee on Commerce (Dec. 13, 1993)

(on file with author).

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 III. India and International investment Agreements

Traditionally, India is a strong believer in the multilateral trading system and has shown
an inclination for preferential trade agreements only in recent times. India has a long history
of participation in the multilateral trading system, being a founding member of both the
GATT and the WTO. Of late, India has also been actively pursuing various regional trade
agreements. (See Annex II). Some of the RTAs have been negotiated as part of the ‘Look East’
strategy. However, one could say that multilateralism is always the preferred route for
international economic cooperation for India.
After India initiated its major economic reforms in 1991, successive governments
introduced a series of measures to encourage foreign direct investment (FDI).526 India’s FDI
flows before initiation of the economic reforms i.e.in 1991 were $300 mn. In contrast, FDI
inflows into India in 2013 alone amounted close to $28 bn. ( See Chart below). At present,
FDI is permitted in most sectors with certain exceptions and subject to certain caps and
conditions. In sync with its neo-liberal economic policies, the government considered the
Bilateral Investment Promotion Agreements (BIPA) or Bilateral Investment Treaties (BITs) 527
as an effective mechanism to boost investor confidence. India has signed BITs with a number
of capital exporting countries including United Kingdom, Germany and Netherlands. As of
2013, India has signed 86 Bilateral Investment Promotion Agreements of which 72 are in
force.528 A vast majority of India’s BITs have been signed during the period 1996-2003. In
addition to the BITs, India has also signed four economic cooperation agreements with South
Korea (2009), Singapore (2005), Japan (2011) and Malaysia (2011). These economic
cooperation treaties are generally preferential trade agreements with investment protection
clauses.529

526 V.N. Balasubramanyam & David Sapsford, Does India Need a Lot More FDI? 42(17) ECONOMIC AND
POLITICAL WEEKLY, 1549 (2007).
527 Please note that BIPA and BITs are used interchangeably in this paper.

528 FTAs, Press Information Bureau, Ministry of Commerce and Industry, Government of India, (2012) ,

http://pib.nic.in/newsite/PrintRelease.aspx?relid=83799 (Last Visited June 29, 2014).

529 Bilateral Investment Promotion and Protection Agreements (BIPAs): List of counties with whom IPA has

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 Chart 1: India’s FDI inflows and outflows

a. BITs and Policy flexibility

It remains unclear whether Indian negotiators had seriously considered the potential
conflict between international investment regimes and the regulatory state during their
negotiating phase.530 It appears that the BIPA/BITs negotiations were generally undertaken
without sufficient deliberation or preparedness. In a way they were quietly done.531 Several
scholars and stakeholders have commented that there was negligible stakeholder
participation in the signing of BITs. This happened even after India had major disputes with
several U.S. investors in connection with the Dabhol power project.532In the context of the

been signed as on December 2013, Ministry of Finance, Government of India,

http://finmin.nic.in/bipa/bipa_index.asp (Last Visited June 25, 2014).
530 See Metalclad Corp. v. Mexico, ICSID Case No. ARB (AF) 97/1, Award (Aug. 30, 200) (dealing with a refusal

to issue a waste disposal permit); S. D. Myers Inc. v. Canada, Merits, 8 ICSID Report 4 (Nov. 13, 2000)
(concerning a ban on hazardous waste exports); Ethyl Corp. v Canada, Jurisdiction Award (June 24, 1998), 38
ILM 708 (1999) (concerning a proposed ban on ethyl as a carcinogenic substance).
531 Biswajit Dhar, Reji Joseph and T.C. James, India’s Bilateral Investment Agreements : Time to Review, Vol.

XLVII No. 52, ECONOMIC AND POLITICAL WEEKLY, 1192 (December 29, 2012), http://www.epw.in/special-
articles/indias-bilateral-investment-agreements.html (Last Visited July 7, 2014).
532 Enron, a U.S. based energy trading company, had invested US $3 billion in a 10-year Liquefied Natural Gas

Power Plant Development Project in India. This was the largest development project in India, and also the
single largest direct foreign investment in India’s history at the time of investment (1991). Work on the Dabhol
Power Plant (‘Dabhol’) near Mumbai, Maharashtra began in 1992, and the plant was scheduled to have become
operational by 1997. Dabhol was supposed to supply India with more than 2000 megawatts of electricity. But
endless disputes over prices and terms of the deal resulted in the eventual collapse of the venture.

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failed Dabhol power project, although India did not have any BIPA/BIT with the United
States, several U.S. investors sought arbitration under the India-Mauritius BIPA.533 In the
Dabhol matter, the foreign investors were compensated and the matter was settled.
In the above context, India adopted a Model BIT in 2003 which was by and large
based on the OECD model text of 1991. The Model BIT served as a template for its BITs
negotiations, especially for the fresh BIPAs/BITs. However, the model BIT was based on the
template developed by capital exporting countries. The OECD in its Investment Policy
Review notes that Indian BIPAs/BITs generally offered strong guarantees in the post
establishment phase on fair and equitable treatment, national treatment, expropriation and
free transfers as well as direct access to international arbitration.534 Some commentators even
opine that India was “over enthusiastic” in signing these treaties and the consequences of any
fallout from such treaties were not properly studied or explored by the government.535
However, treaty provisions of the BIPA/ BITs were hardly invoked by any foreign investor
until very recently.536
IV. White Industries and the Renewed Debate on Policy Space
Nothing explains India’s shock and dismay at the consequences of an investment
arbitration award better than the White Industries case.537 In 2010, White Industries, an
Australian company approached an ad hoc Tribunal established under the UNCITRAL Rules
under the India-Australia BIT. The Arbitral Tribunal rendered an award holding that India’s
‘inordinate delay’ in enforcing an arbitral award violated the “effective means” standard
incorporated by the Most-Favoured Nation (MFN) clause of the India-Australia BIT. White
Industries, the Australian investor, had obtained an award for over Australian $4 mn in 2002
against Coal India Limited (CIL) in connection with the supply of equipment and

533Jayati Ghose, Treacherous Treaties, 27 (24) FRONTLINE,

http://www.flonnet.com/fl2724/stories/20101203272409200.htm (Last Visited July 10, 2014).
534 Organization of Economic Cooperation and Development, OECD Investment Policy Review: India (2009).

535Id.
536 See Annexure I for details.
537White Industries Australia Limited v. The Republic of India, UNCITRAL, Final Award (30 November, 2011)
¶ 11.4.19. [Hereinafter “White Industries Arbitration Award”].

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development of a coal mine. The matter resulted in a protracted litigation for enforcement
and White Industries commenced arbitration proceedings in 2010. White Industries
contended that the delay violated the provisions on fair and equitable treatment (FET),
expropriation, MFN treatment, free transfer of funds and several other provisions of the
India-Australia BIT. The tribunal dismissed White Industries’ allegations related to violation
of FET, expropriation and free transfer of funds. Even on the claim of “denial of justice”, the
tribunal ruled in India’s favour. The tribunal, however, found India guilty of violating the
India-Australia BIT because the Indian judicial system was unable to deal with White
Industries’ jurisdictional claim in over nine years. The tribunal held that the delay by Indian
courts violated India’s obligation to provide White Industries with an “effective means of
asserting claims and enforcing rights.” This is despite the fact that the India-Australia BIT
does not mention or include such a duty for host states. The Tribunal allowed White
Industries to base their claim by importing the “effective means” provision from the India-
Kuwait BIPA.
The outcome in White Industries brought into the center-stage the importance of policy
space in trade and investment treaty negotiations. India’s preparedness in investment treaty
negotiations was noticeably inadequate when compared to its preparedness in trade
negotiations. In the WTO negotiations as well as in RTA negotiations, India had carefully
negotiated sufficient “wiggle room” or policy flexibility. In addition to TRIPS, which I have
already explained in this paper, India negotiated hard for policy autonomy in areas such as
subsidy disciplines in Agreement on Agriculture, reduction of duties under Non-Agricultural
Market Access (NAMA), Rules negotiations,538 exclusion of Singapore issues539 from the

538 Negotiations in the area of antidumping, subsidies and countervailing measures and safeguards are
collectively referred to as “Rules negotiations”.
539 The "Singapore issues" refers to four working groups set up during the World Trade
Organization Ministerial Conference of 1996 in Singapore. These groups are tasked with these issues:
transparency in government procurement, trade facilitation (customs issues), trade and investment,
and trade and competition.

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coverage of Doha negotiations etc.540However, it is noticed that in the area of Bilateral
Investment Treaties, the government did not explore the type of flexibilities which it had
examined for trade negotiations. As Mihaela Papa notes, the emerging economies were not as
organized and willing in the realm of international investment treaty negotiations and
dispute settlement as they were in the realm of WTO and international trade.541 While
renegotiation of these BITs may not be immediately feasible or practicable, the paper
examines the different areas where the existing BIPAs/BITs lack flexibility and how India
should adopt a BIT/BIPA which could cater to India’s development aspirations.
Sovereign states would always like to preserve their right to regulate. This objective can be
attained only if arbitrators give deference to the actions of the state agencies. Therefore, the
investment treaty language deserves special attention. Article 31 of the Vienna Convention
of the Law Treaties (VCLT)542 unambiguously states that, “[a] Treaty shall be interpreted in
good faith in accordance with the ordinary meaning to be given to the terms of the treaty in
their context and in the light of its object and purpose”. Deference to the language of the BIT
could alleviate the concerns of developing countries which are negotiating new agreements.
Furthermore, as argued elsewhere, ‘vague, broad, inconsistent, and inadequately drafted
provisions will defeat the interests of India particularly in the domain of regulatory
domain”.543 The following section identifies certain areas where India should consider the
availability of development space while it is engaged in formulating a new BIPA model.544

540 Ujal Singh Bhatia, G-20- Combining Substance with Solidarity and Leadership, REFLECTIONS FROM THE
FRONTLINE: DEVELOPING COUNTRY NEGOTIATORS IN THE WTO (Pradeep S. Mehta ed., 2012); Bernard Hoekman,
Operationalizing the Concept of Policy Space in the WTO: Beyond Special and Differential Treatment, 8 (2) J.
INT’L. ECON. LAW, 405, 405-424 (2005).
541 Mihaela Papa, Emerging Powers in International Dispute Settlement: From Legal Capacity Building to a

Level Playing Field, 3(3) J. INT’L DISPUTE SETTLEMENT (2012);

542 Vienna Convention on the Law of Treaties, done at Vienna, May 23, 1969, 1155 U.N.T.S. 331, 8 I.L.M. 679.

[Hereinafter “VCLT”].
543 Prabodh Saxena, Pathological Pace of Dispute Settlement in India: Implications of an International

Arbitration, 1 (1) JINDAL J. OF PUBLIC POLICY, 234, 244 (2012).

544 The Economic Times, India to Draft Model Treaty on MNCs’ Mediation Rush, Aug. 9, 2013.

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a. Tightening the Scope and Content of ‘Investment’

The scope and definition of investment is a threshold issue which triggers the applicability of
the investment treaty and the jurisdiction of an arbitral tribunal.
The 2003 Model BIPA adopted by India has included a broad asset-based definition of
investment. All of India’s BIPAs, except the India-Mexico BIPA, follow this broad asset-
based definition of investment.545 Such a definition would include every kind of asset
including direct investment, portfolio investment, intellectual property rights, rights to
money, business concessions conferred under law or contract etc.546
The definition of “investment” was an issue in the White Industries arbitration as well. India
argued during the arbitral proceedings that the mining contract between White Industries
and Coal India Limited was an “ordinary commercial contract for the supply of goods and
services” and that it did not constitute an investment. But according to the tribunal the
contract rights fell with the terms “right[s] to money or to any performance having a
financial value”. The tribunal further noted that White Industries’ commitment under the
Mining Contract “extended far beyond the provision of equipment and technical services”
since it provided its own working capital, equipment and technical know-how and assumed
financial risks for cost escalation and other penalties for inadequate performance.547
India’s experience in White Industries clearly demonstrates that an open-ended definition of
the term “investment” could bring a range of activities within the meaning of investment.
There have been proposals to include an “enterprise based definition of investment” in the
BITs. According to this approach, investment is limited to direct investments or investments
made through a locally established enterprise. Such a definition could ensure that only “real
and substantial business operations” within the territory of the host state could qualify as

545Prabhash Ranjan, India and Bilateral Investment Treaties – A Changing Landscape, 29 ICSID Review 2 –
FOREIGN INVESTMENT LAW JOURNAL, 420, 419-450 (2014), http://ssrn.com/abstract=2427568. [Hereinafter
Prabhash Ranjan, India and Bilateral Investment Treaties].
546 Id.
547 White Industries Arbitration Award, supra note 25, para. 7.4.10.

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 investment and consequently avail the benefits available under the BIPAs/BITs.

b. Delineating the Contours of ‘Fair and Equitable Treatment’

Fair and equitable treatment (FET) is a widely invoked principle in international

investment arbitration. In practice, it has been noticed that this principle has been given an
extremely wide interpretation to include concepts such as stability, transparency, legitimate
expectations, compliance with contractual obligations, procedural fairness, acting in good
faith, etc. For example, in TECMED S.A v. Mexico, the Tribunal held that the FET obligation
requires a host state to extend to foreign investors the legitimate expectations which the
investor had at the time of making the investments.548 As many as 71 out of 73 of India’s
currently active BIPAs incorporate the FET principle.549 Again, a vast majority of these
BIPAs do not define the substantive content of the FET or provide any additional guidance
regarding its meaning. This provides room for an expansive interpretation of India’s BIT
provisions.
As the content of the FET standard is largely uncertain, a claim of violation of FET serves
as a “catch-all” claim in practically every treaty based arbitration claim.550 As the Tribunal in
Gami v. Mexico551 noted, “the standard [of FET] is to some extent a flexible one which must
be applied to the circumstances of each case”. A flexible interpretation of FET could result in
incorporation of normative concepts developed in arbitral practice.552 In practice, a flexible
interpretation of FET has often prejudicially affected the interests of the host state.
A perusal of India’s BITs indicates that only a few BITs have linked the concept of FET with
the concept of ‘minimum standard of treatment of aliens’ (MST) under customary
international law. A notable example is the investment provision under India-Korea

548 Tecnicas Medioambientales Tecmed S.A (TECMED) v. United Mexican States, ICSID Case no. ARB/A/00/2, ¶
154 (May 29, 2003).
549 Prabhash Ranjan, India and Bilateral Investment Treaties, supra note 34.

550 Suzanne A. Spears, The Quest for Policy Space in New Generation of International Investment Agreements ,

13 (4) J. INT’L. ECON. L. 1037 (2010).

551 Gami Investments, Inc. v. The Government of the United Mexican States, UNCITRAL, IIC 109 (2004).

552 See, Waste Management Inc. v. Mexico, ICSID Case no. ARB(AF)/00/3, para. 98 (April 30, 2004).

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Comprehensive Economic Cooperation Treaty (CEPA). It states that the FET does not
require treatment in addition to or beyond what is required by the MST of aliens in
customary international law.553 There is an overwhelming view that linking FET to MST
under customary international law could provide greater regulatory autonomy to the host
state. The MST principle under customary international law is purportedly based on the Neer
standard which contemplates that conduct amounts “to an outrage, to bad faith, to wilful
neglect of duty, or to an insufficiency of governmental action so far short of international
standards that any reasonable or impartial man would readily recognize its inefficiency”554.
In Glamis Gold v. United States,555 a NAFTA Tribunal has held that the Neer Standard was
still the relevant standard to determine whether a country has violated the MST under
customary international law. Linking FET with MST of aliens under customary international
law is expected to raise the threshold for claims based on FET.
There are different approaches to limiting the scope of FET. One approach would be to
expressly exclude the reference to FET. For example, the India-Singapore CECA has omitted
any reference to “FET” or even “MST”. Another approach would be to clarify that the FET
standard is subsumed within and not autonomous of the MST.556 A third safeguard would be
to segregate the core elements of FET such as “denial of justice”, “due process” etc., and
incorporate these terms in the BIPAs/BITs with appropriate qualifications. For example,
prefixing qualifying terms such as “flagrant violation of natural justice”, “egregious violation
of due process”, “gross unfairness” etc. could ensure a standard that is more deferential
towards the host government. An appropriate qualifying term could eliminate the possibility
of arbitral discretion and enhance the threshold benchmarks. This could also be a suitable
safeguard against autonomous interpretation of fair and equitable treatment.

553 Comprehensive Economic Partnership Agreement, India- Republic of South Korea, done in Seoul, Aug. 7,
2009 [Hereinafter, “India- Korea CEPA (2005)], art. 10.4.
554 Neer v. Mexico, 4 R. Int's Arb. Awards, 60–62 (1926).

555 Glamis Gold, Ltd v United States of America, Award of 8 June 2009, [2009] 48 ILM 1039 (ICSID).

556 See Art. VI (1), Bilateral Investment Treaty, Spain- Mexico, done on Oct 10, 2006.

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c. Defining the Limits of ‘Expropriation’

Broadly, the concept of expropriation involves governmental taking of property for

which compensation is required to be paid. Although various Arbitral Tribunals have
defined the term “expropriation” in myriad ways, it is widely considered to include both
direct and indirect expropriation. Direct expropriation involves an outright transfer of title.
However, cases of such direct expropriations have become relatively uncommon. At the
same time, a web of administrative machinery and regulatory policing has led to frequent
incidents of indirect expropriations. All of the 73 BITs signed by India contain some
provisions on expropriation. A number of India’s BITs expressly state that an investment
shall not be nationalized or expropriated (direct expropriation) or subjected to measures
having ‘effect’ equivalent to expropriation (indirect expropriation) unless or until there is a
public purpose, and that in such cases fair and equitable compensation shall be promptly paid
to foreign investors.557
There is a broad feeling that most of the BITs signed by India are drafted in an extremely
open-ended manner. A bulk of the BITs do not provide much indication to arbitrators on
how to identify indirect expropriation barring the focus on the effect on investment. 558These
BITs could be risky for India because a large number of regulatory measures could be
challenged as expropriation as long as they have an effect on investment. 559According to a
study conducted by Prabhash Ranjan, only 16 out of 73 BITs signed by India provide
additional indicators that an arbitral tribunal may need to take into account while
determining claims of indirect expropriation.560 Additional indicators include factors such as
the character of the measure and the objective of the regulatory policy. On the positive side,
however, these 16 BITs provide that any non-discriminatory measures designed to protect
legitimate public welfare objectives do not constitute expropriation except in rare

557 Prabhash Ranjan, India and Bilateral Investment Treaties, supra note 31.
558 Id.
559 Id.
560 Id.

137
circumstances.561 These types of carve-outs—in the nature of Methanex562 type carve outs—
could be particularly helpful for developing countries such as India.
The discussion on expropriation will have special significance in the context of grant of
compulsory licenses on pharmaceutical products. In the context of the TRIPS Agreement,
specifically, India has long maintained that compulsory licensing was one of the flexibilities
available to developing countries to meet public health emergencies. Only four of the BITs
(Japan, Malaysia, Singapore and Korea) specifically exempt issuance of compulsory licences
concerning intellectual property from the purview of expropriation.563
For example, the recent grant of compulsory license to an Indian firm NATCO to
manufacture Nexavar, an anti-cancer drug has created significant controversy.564 The patent
is owned in this case by a German firm, Bayer AG. The compulsory license was granted after
the Indian Patent Office ruled that Bayer AG was selling the drug at an excessively high
price. According to the terms of the compulsory license, NATCO agreed to supply the drug
at Rs. 8,800 per month and to give the drug free of cost to at least 600 patients every year. It
is often argued that exclusivity is a central feature to any intellectual property and that grant
of compulsory license significantly devalues that asset and, therefore, has an effect equivalent
to expropriation under international law. However, nothing in India’s BITs prevents Bayer
from invoking investment treaty arbitration against India on the same.
Another major controversy was the amendment to the Indian Income Tax Act with
retrospective effect from 1962 (which is the date of original enactment of the Income Tax
Act) to assert the Central government’s right to levy capital gains tax on share purchases
involving overseas companies with business assets in India. The amendment was apparently

561 Id.
562Methanex Corp v. United States, Final Award 44 ILM 1345, Aug. 3, 2005(noting that a “non-discriminatory
regulation for public purposes, which is enacted in accordance with due process” is not expropriation).
563 Id.
564 Natco Pharma Ltd. v. Bayer Corporation, Decision of the Controller of Patents in Compulsory License
Application No. 1 of 2011 (March 9, 2012),
http://www.ipindia.nic.in/iponew/compulsory_license_12032012.pdf. [Hereinafter “Natco v. Bayer” or
“Decision of Controller of Patents”].

138
 to overcome a decision of the Supreme Court of India which ruled in favour of Vodafone, a
UK listed telecom group, regarding its liability to withhold taxes on its indirect acquisition of
Hutchinson Essar, an Indian mobile operator, in 2007.565 Indian tax authorities had imposed
tax on Vodafone for failing to deduct tax on its $11 billion payment to Hutchinson. In April,
2012, Vodafone served notice of dispute against the Indian government alleging that the
retrospective amendments would amount to violation of international legal protection.566
At a time when some of the legal notices could lead to full-fledged investment treaty
arbitration proceedings, it will be instructive to examine how India could minimize the
impact of these adverse claims. It will be impossible to exclude a language on direct and
indirect expropriation from any of India’s BITs. However, it is possible to expressly mention
that “only a permanent and complete, or near complete, deprivation of property” could
amount to expropriation. In certain cases such as Occidental v. Ecuador,567 it was sufficient
for the governmental measure to “affect the economic value of an investment” to constitute
expropriation. It will be prudent on the part of India to adopt a test which could take care of
sovereign functions such as taxation from being litigated before arbitral tribunals.

d. Leaving Out ‘MFN Provisions’

The Most-Favoured- Nation (MFN) principle has been used to import both substantive
and procedural provisions into BITs. There have been incidents in the past where MFN
clauses have been used to extend liability standards568 as well as bypass procedural
preconditions for arbitration.569 The significance of the MFN provisions came up for
significant scrutiny after the Tribunal’s finding in the White Industries case. The argument
in White Industries was that the failure of the Indian courts to deal with White Industries’

565 Vodafone International Holdings B.V. v. Union of India & Anr., Civil Appeal No. 733 of 2012.26529 of 2010.
566 See Raag Yadava et al, Vodafone and India: A Review of Claims in Investment Arbitration (National Law
School of India University Working Paper Series, 2012), https://www.nls.ac.in/resources/report.pdf.
567 Occidental Exploration and Production Co. v. Republic of Ecuador (Award) LCIA Case No. UN 3467

(UNCITRAL, 2004).
568 Asian Agricultural Products Ltd v. Sri Lanka, ICSID Case No. ARB/87/3.

569 Emilio Augustin Maffezini v. Kingdom of Spain, ICSID Case No. ARB/97/7.

139
jurisdictional claim for over nine years amounted to a breach of India’s obligation to provide
the foreign investor an "effective means of asserting claims and enforcing rights." Such an
“effective means” clause was not present in the India-Australia BIT. The tribunal stated that
White Industries could rely upon the ‘effective means’ provision present in the India-Kuwait
BIPA on the basis of the MFN provision of the India-Australia BIT.570 The Indian
government contended that relying upon the “effective means” provision in the India-
Kuwait treaty would "fundamentally subvert the carefully negotiated balance of the BIT".571
However, this plea was overruled by the tribunal stating that borrowing beneficial
substantive provisions from a third-party treaty would help achieve the result intended by
the incorporation of the MFN provision.
Barring two BITs, India has included the MFN principle in most of its investment
treaties. This principle is broadly worded with limited exceptions.572 These exceptions have
narrow application and are meant for taxation or other obligations in connection with free
trade agreements or exclusive custom zones or areas.573 Broad and unqualified MFN
provisions in Indian BITs opens up the possibility of foreign investors borrowing beneficial
treaty provisions from India’s other BITs, as was the case in White Industries.574
In the BITs/BIPAs that India has formalized thus far, a very broad application of MFN
provisions is very common.575 For example, the MFN provisions of the BIPA with France
accords “to investments of investors of other Contracting Party, including their operation,
management, maintenance, use, enjoyment or disposal by such investors, treatment which
shall not be less favourable than that accorded to investments of its investors, or than the

570 White Industries Arbitration Award, supra note 25.

571 Id, ¶.11.2.1.
572 Id.
573 See e.g., India-Switzerland BIT provide exception to MFN obligation under Article 4(2) and (3) while
according special advantages by virtue of FTA, Customs Union or a Common Market by virtue of an agreement
on the avoidance of the other Contracting Party.
574 Id.
575Biswajit Dhar, Reji Joseph, TC James, India’s Bilateral Investment Agreements: Time to Review, XLVII (52),
ECONOMIC AND POLITICAL WEEKLY, http://www.epw.in/special-articles/indias-bilateral-investment-
agreements.html (Last Visited June 25, 2014).

140
 most favourable treatment accorded to investments of investors of any third country,
whichever is more favourable”.576 For example, the concept of ‘like circumstances’ is
nowhere mentioned in the relevant non-discrimination provision.577 However, in a later
agreement entered into with Mexico, an attempt has been made to circumscribe the rights of
the foreign investor under the MFN and National Treatment clause by inserting the ‘like
circumstances’ requirement.578

e. National Treatment

The National Treatment obligation constitutes one of the core obligations under
international trade and investment law. The national treatment obligation measures the
state’s treatment of foreign investors against the treatment of similarly situated domestic
investors. A large majority of India’s BITs do not provide national treatment at the pre-
establishment stage.579 Interestingly, barring a few BITs such as the India-Mexico BIT, the
national treatment provisions do not contain the ‘like circumstances’ clause. 580 Absence of
this term allows foreign investments, which are not in like circumstances, to claim a breach
of the national treatment obligation.581 This expands the scope of national treatment
protection and reduces the regulatory space available to India to regulate foreign
investment.582 However, India’s recent CEPAs with Japan, Korea, Singapore and Malaysia
provide sector specific exceptions to the principle of national treatment.583 Foreign direct
investment in multi-brand retail has been a controversial issue in India. Accordingly, the
India-Korea CEPA has specifically excluded the retail trading sector from the application of

576 Id.
577
Agreement on the Reciprocal Promotion and Protection of Investments, India- France, Sep. 2, 1997, available at
http://finmin.nic.in/bipa/France.pdf.
578
Agreement on the Promotion and Protection of Investments, India-Mexico, May 21, 2007, available at
http://finmin.nic.in/bipa/Mexico.pdf
579 Prabhash Ranjan, India and Bilateral Investment Treaties, supra note 31.

580 Id.
581 Id.
582 Id.

583 Id.

141
 national treatment.584 This gives to India the regulatory space to enact laws that favour
domestic retailers over foreign (Korea) retailers. However, such sector specific exemptions do
not exist in the other 69 Indian BITs, which reduces the regulatory space for India. However,
where the national treatment obligation is specifically provided, it is important to provide a
tailored definition of the concept of ‘like circumstances’.

f. Limiting Full Protection and Security

The obligation to provide foreign investors Full Protection and Security (FPS) requires the
host State to exercise due diligence in protecting foreign investments from adverse acts of
private parties (for example, violence by private parties) and of instrumentalities of the state.
A major proportion of India’s BIPAs contain FPS provisions, although the meaning and scope
of this concept remain unclear. However, India’s recent agreements with Korea, Malaysia
and Japan have provided more certainty to this concept.585 These treaties link FPS to the
protection granted under customary international law. Rather than treating FPS as a stand-
alone requirement, it is a significant improvement to link this concept with the physical
security and protection available for aliens under customary international law.

g. Crafting Public Policy Exceptions

Public international law recognizes the right of states to exercise police powers, including
the enactment and enforcement of regulatory functions.586 The ability to carve out general
exceptions to treaty obligations is considered to be a valuable right. All 73 of India’s
currently existing BIPAs/BITs contain some general exceptions clause or a non-precluded
measure provision. Broadly, the general exceptions allow the respondent state to temporarily
deviate from its BIT obligations in situations that warrant giving precedence to various
public policy objectives over investment protection. In the case of India’s BIPAs it has,

584 India- Korea CEPA (2005).

585 Chester Brown, Commentaries on Selected Model Investment Treaties, 362 (2013).
586 Ian Brownlie, PRINCIPLESOF PUBLIC INTERNATIONAL LAW, 292-293 (2008).

142
however, been noticed that a majority of treaties provide only a narrow category of general
exceptions. Those exceptions allow deviations from the treaty only in situations of essential
security interest or in circumstances of extreme emergency. Stated differently, deviation
from treaty obligations is allowed only in extremely compelling circumstances. It is also
noticed that very few Indian BITs allow deviations from investment protection on significant
grounds such as public order, health and the environment or on such grounds as boosting
domestic industries in economically backward regions. There are, however, notable
exceptions as well. For example, the India-Singapore CEPA has general exceptions in the
nature of GATT Article XX or GATS Article XIV.587 The India-Malaysia CECA has included
national security exception related to the infrastructure sector, which was quite
innovative.588
An important, but less considered, area where India might need a public policy exception is
national food security. Although FDI is not permitted in the agriculture sector in India,
foreign investment in agro-processing industries is available. Feeding more than a billion
people is likely to be an increasing challenge for India and one can expect significant foreign
direct investment in food and agro-related industries in the foreseeable future. Although the
linkages between FDI and food security are not fully explored or understood, there are
certain suggestions in the field of international investment law that future BITs should
consider, including a public interest clause which could address food security issues,
especially in the context of food deficit countries.589

587 Comprehensive Economic Partnership Agreement, India- Singapore, done in New Delhi, June 29, 2005
[Hereinafter, “India- Singapore CEPA (2005)].
588 Comprehensive Economic Cooperation Agreement India- Malaysia, done at Kuala Lumpur, July 1, 2011 [

Hereinafter, “India- Malaysia CECA (2011) (exempting actions taken for the protection of critical public
infrastructure, including communications, power and water infrastructure from deliberate attempts intended to
disable or degrade such infrastructure)
589 Smith, Fiona and Häberli, Christian, Food Security, Foreign Direct Investment and Multilevel Governance in

Weak States, SOCIETY OF INTERNATIONAL ECONOMIC LAW (SIEL), 3rd Biennial Global Conference (June 25,
2012), : http://ssrn.com/abstract=2091209.

143
h. Preamble of Investment Treaties

Preambles often serve as an important guide to the interpretation of treaty provisions,

including their underlying purpose. As clarified by Article 31 (2) of the Vienna Convention
of the Law of Treaties (VCLT), the Preamble could inform the rest of the treaty and would be
a valuable ‘context’ in treaty interpretation. Indeed, references to non-investment policy
objectives should be formulated carefully as these provisions can provide a significant
amount of flexibility for a developing country such as India to pursue its development goals
in conjunction with providing investor protection. For example, the preamble of the India-
Singapore Comprehensive Economic Cooperation Agreement includes the following recitals,
“[r]eaffirming their right to pursue economic philosophies suited to their development goals
and their right to regulate activities to realize their national policy objectives”.590 The India-
Korea CEPA has also used a similar language in the preamble. It is worth noting that India-
Singapore CECA and India-Korea CEPA are very detailed economic cooperation agreements
and not essentially investment promotion and protection agreements.

V. Conclusion

As an established player in the international trading system, India had striven to

preserve policy autonomy in areas such as TRIPS, Agreement on Agriculture Rules, exclusion
of Singapore issues from the Doha Agenda and several other areas. However, the adoption of
a western-type investment protection model for a bulk of India’s BITs/BIPAs implies that a
broad spectrum of policy or regulatory measures that the government has taken, or may take,
could be brought up in international investment arbitrations. This paper has examined
various substantive provisions of India’s investment agreements and recommends the areas
where India should seek policy autonomy or development space. The paper has examined
the key elements of policy flexibility such as a tighter definition of investment, streamlining
the meaning of FET standards, limiting the scope of indirect expropriation, exclusion of MFN

590 Preamble, India- Singapore CECA (2005).

144
and national treatment clauses and selection of appropriate public policy exceptions. The
paper suggests the rejection of open-ended and undefined terms which could be susceptible
to expansive interpretation. Although, it may not be practically feasible and desirable to
terminate or review India’s BIPA at this stage, this paper recommends caution at least with
respect to India’s future trade and investment treaty negotiations and any review proposals.

145
 ANNEXURE I

ITANOTICE OF DISPUTE (INDIA)

Investor Facts BIT/Year of Claim ($) Sector

the claim
or award

Related to financing of Dabhol Plant. The India- Not Dabhol

CREDIT LYONNAIS case was settled under undisclosed terms. France BIT, Disclosed Power
SA, (NOW CALYON 2004 (ND) Plant
SA) [Energy]

Dabhol Power plant investment India- An amount Energy

OFFSHORE POWER Netherland of
PRODUCTION C.V., s BIT 2004 compensatio
TRAVAMARK TWO n sought
B.V., EFS INDIA- over $ 4
ENERGY B.V., ENRON billion. The
B.V., AND INDIAN dispute was
POWER settled as
INVESTMENTS B.V. part of a
(NETHERLANDS) successful
restructurin
g

CAPITAL INDIA The investor made a claim under the Clause Awarded US Energy
POWER MAURITIUS I UNCITRAL rules against the GOI against under the $94,700,000

146
AND ENERGY the investments made for the Shareholde with simple
ENTERPRISES development of Dabhol Power Plant. The r interest
(MAURITIUS) ICC International Court of Arbitration Agreement thereon at
COMPANY awarded US$94,700,000 with the simple - 2005 the rate of
interest thereon at the rate of 9% per 9% per
annum from 2 May 2002 to the date of annum.
this award for the breaches by
Maharashtra Development Cooperation
for the breaches of Shareholder
Agreement.

ERSTE BANK DER Investments in Dabhol Power Plant. 2004 ND ND

OESTERREICHISCHE Contents not disclosed.
N SPARKSSEN AG

BNP PARIBAS Investments in Dabhol Power Plant. 2004 ND ND

Contents not disclosed.

CREDIT LYONNAIS Related to financing of Dabhol Plant. The India- ND ND

SA, (NOW CALYON case was settled under undisclosed terms. France BIT
SA) 2004

OFFSHORE POWER Power plant investment with an amount India- ND ND

PRODUCTION C.V., of compensation sought over $4 billion. Netherland
B.V., EFS INDIA- The dispute was settlement as part of a s BIT 2004
ENERGY B.V., ENRON successful restructuring.
B.V., AND INDIAN
POWER
INVESTMENTS B.V.
(NETHERLANDS)

Investment related to financing of Dabhol India- ND Energy

147
ABN AMRO N.V Power Plant. The case was settled on Netherland
undisclosed terms. s BIT

CREDIT SUISSE FIRST The investment was related to the India- ND Energy
BOSTON financing of Dabhol Power Plant. The Switzerland
case was settled on an undisclosed terms. BIT 2004

ANZEF LTD. Investment related to financing of Dabhol India-UK Investment ND

Power Plant. The case was settled on BIT 2004 related to
undisclosed terms. financing of
Dabhol
Power
Plant.

STANDARD Investment related to financing of Dabhol India-UK ND Energy

CHARTERED BANK Power Plant and was settled on BIT 2004
undisclosed terms

WHITE INDUSTRIES Contractual dispute with Coal India India- $10 million Judicial
AUSTRALIA LIMITED escalated into an ITA with the Indian Australia with interest propriety
Government over the inordinate delay in BIT 2010 [decided] and
executing the claims by White Industries conseque
in the SC. ITA issued--- Dispute won by nce of
White Industries on the counts of MFN undue
obligation that India took under its BIT delay.
with Australia.
A tribunal can find a violation of the
‘effective means’ standard even when the
concerned BIT does not contain such a
provision as long as it contains a broad

148
 MFN provision, which some tribunals
will use to import investor guarantees
from other BITs. Such happened in this
dispute.

BYCELL Notice of dispute not made public. India-Cyrus ND Not made

BIT and public
India-
Russia BIT
2012

CC/DEVAS Notice of dispute not made public India- ND Not made

(MAURITIUS) LTD., Mauritius public
DEVAS EMPLOYEES BIT 2012
MAURITIUS PRIVATE
LIMITED AND
TELECOM DEVAS
MAURITIUS LIMITED

KHAITAN HOLDINGS ND India- ND ND

MAURITIUS LIMITED Mauritius
BIT 2013

ITA NOTICE OF DISPUTE (Cont’d)

Dispute Facts BIT Claim Sector

($)

VODAFONE Investor notified India under its BIPA with India- - Telecomm
GROUP PLC Netherlands apprehending a $2.2 bn tax demand Netherlan unications

149
[NETHERLANDS] on its buyout of Hutchinson Essar in 2007. Such ds BIPA
was a consequence of an amendment in Section 9
of the Income Tax Act, 1961 in the 2012-13 budget
retrospectively from the day of the
commencement of the Act after an adverse SC
decision that – overseas transactions involving
Indian assets could not be taxed. Indian tax
authorities have issued a demand notice on
Vodafone for failing to deduct tax on its $11
billion payment to Hutchinson
Telecommunications International for the
acquisition of Hutchinson Essar.

SISTEMA JFSC In consequence to the SC’s judgment on 2G India- $3.1 Telecomm

[RUSSIA] spectrum case, Sistema, a Russian company, Russia BIT billion unications
invoked its right under Article 9.1 of the bilateral worth
investment treaty between Russia and India by of
filing a notice of dispute against India. Sistema has invest
a joint venture with India’s Shyam Group – ment
Sistema Shyam Teleservices, in which the Russian at
government also has a stake of 17.14%. Among the stake
122 licences cancelled by the SC, 21 licences
belonged to Sistema Shyam TeleServices Ltd, in
which Sistema owns a 56.68% share. Sistema
stated that the cancellation of SSITL’s licences
following Sistema’s investment of billions of
dollars into the Indian cellular sector is contrary to
India’s obligations under the BIT, including

150
 obligations to provide investments with full
protection and security and obligations not the
expropriate investments. The company said that it
would arbitrate against the cancellation and
consequently protect its $3.1 billion investment.

THE CHILDREN TCI has a minority stake in Coal India (1% share- $20 Coal
INVESTMENT holding). It served an arbitration notice billion
FUND (TCI) [UK- questioning the Government of India’s direction to of
BASED HEDGE Coal India to delink the price of domestically profits
FUND] produced coal from imported prices while at
concluding fuel supply agreements with stake
independent power producers, a move that would
lower the price of coal sold by the firm. TCI
contends that Coal India’s profits will decline by
$20 billion and the interests of the minority
shareholders in the firm will be affected as a
result.

TELENOR Norwegian telecom operator Telenor lost its 22 2G India- $14 Telecom
(NORWEGIAN licences after the SC Judgment. It consequently Singapore billion
COMPANY) served a notice on the government, threatening CECA damag
international arbitration and claiming damages of es
nearly $14 billion (Rs. 70,000 crores). Telenor
invoked the provisions of India’s CECA with
Singapore to issue a notice seeking a solution from
the government within six months or drag the
matter for an international arbitration from failure
to protect its investment. Telenor stated that there

151
 could be future breach of CECA from the manner
in which these licences are now distributed
through auctions. The notice further stated that
the compensation has to be equivalent to the
market value of the expropriated investment at the
time of the decision which is 2 February 2012; the
day when the SC cancelled 122 licences issued
during ex-telecom minister .Telenor claims to
have invested close to $14 billion in its Indian
operations. However, the company has recently
declared to have dropped its decision to seek
arbitration given the set-off of Rs. 1,658 crore on
payments to be made for the new spectrum it won
after the quashing of its previous licences. Such a
set-off is for the payment made by its previous JV
partner, Unitech Wireless, towards its 22 licences
that were quashed by the SC.

AXIATA Malaysian telecom major, Axiata has notified an India- - Telecom

(MALAYSIA) investor arbitration notice to India. Axiata owns Mauritius
19.69% in Idea Cellular, claims that its BIPA
investments in India faces risk because of the SC
decision.

CAPITAL GLOBAL In October 2013, Khaitan Holdings Mauritius India- US$ Telecom
AND KAIF (KHML), a Mauritius-registered company owing Mauritius 1.4
INVESTMENT 26% equity in Loop Telecom initiated an BIT billion
(MAURITIUS) international arbitration notice against Indian
Government seeking a compensation of US $ 1.4

152
billion over the cancellation of its 21 telecom
licences by the SC. The SC while cancelling 12
licences of 22 telecom operators held that the
allotment of spectrum was unconstitutional and
arbitrary and directed the government to conduct
fresh auctions for sale of the spectrum within a
span of 4 months. The claim by the company
consist of $140 million investment in Loop
Telecom in 200 with 12 percent interest till the
claim is received, loss of $1 billion in shareholder
revenue and loss of $300 million in the market
value of 21 licences.

153
 ANNEXURE-II

Sl. No. Name of the Agreement and the participating countries Date of Signing

Till 1995

1. India - Bhutan Agreement on Trade, Commerce and Transit 17.01.1972 (revised on

28.7.2006)

2. Asia Pacific Trade Agreement (APTA) (Bangladesh, China, July, 1975 (revised Agreement
India, Republic of Korea, Sri Lanka) signed on 02.11.2005

3. Global System of Trade Preferences (G S T P) April, 1988

4. Revised Indo-Nepal Treaty of Trade 06.12.1991 (Revised on

27.10.2009)

1995-2000

5. Agreement on South Asian Free Trade Area (SAFTA) 04.01.2004

6. India – Sri Lanka 28. 12. 1999

2003 onwards

7. India – MERCOSUR 25.01.2004

8. India - Thailand FTA - Early Harvest Scheme (EHS) 01.09.2004

9. India - Singapore Comprehensive Economic Cooperation 29.06.2005

Agreement (CECA); Second Review of the Singapore CECA

10. India – Afghanistan 06.03.2003

11. India – MERCOSUR 25.01.2004

12. India – Chile; Expansion of Indo- Chile Preferential Trade 08.03. 2006
Agreement

13. India - Japan Comprehensive Economic Partnership 16.02.2011

Agreement
154
14. India - Malaysia Comprehensive Economic Cooperation 18.02.2011
 Agreement

15. India- Bay of Bengal Initiative for Multi-Sectoral Technical Negotiations ongoing
and Economic Cooperation (BIMSEC)

16. India-Gulf Cooperation Council (GCC) Free Trade Negotiations ongoing

Agreement (FTA)

17. India-South African Customs Union (SACU) Free Trade Negotiations ongoing
Agreement

18. India-Pakistan Trading Agreement Negotiations ongoing

19. India – New Zealand CECA Negotiations ongoing

20. India – Canada CEPA Negotiations ongoing

21. India – Australia CECA Negotiations ongoing

22. India – Indonesia CECA Negotiations ongoing

23. India – Israel Free Trade Agreement Negotiations ongoing

24. India – EU Broad Based Trade and Investment Agreement Negotiations ongoing

25. India– EFTA Broad Based Trade and Investment Agreement Negotiations ongoing

155