India-UAE investment treaty will give recourse to investors in case of unfair deal: Goyal

The recently implemented India-UAE Bilateral Investment Treaty (BIT) will provide investors from both countries with an opportunity to seek recourse if they feel they did not get a fair deal and will also strengthen the investor confidence through a stable and predictable tax regime. Industries Minister Piyush Goyal said this.

“In the various issues that we have discussed today, some of our Indian companies feel that there are problems with the UAE and, similarly, some UAE companies might have problems with India . The ILO will help provide a framework through which both sides can resolve these issues,” Goyal said during his interaction with the media after the India-UAE Joint Working Group on Investment meeting on Monday.

Investment protection

The India-UAE BIT signed on February 13 in Abu Dhabi came into force with effect from August 31, 2024. “The application of this new BIT with the UAE provides continuity of investment protection to investors from both countries, as the previous bilateral investment promotion agreement. and the Protection Agreement (BIPPA) between India and the UAE signed in December 2013 expired on September 12, 2024,” according to an official statement.

While ensuring the protection of investors and investments, the balance has been maintained with regard to the state’s right to regulate and thus provides adequate policy space, the document adds.

The India-UAE BIT deviates from the Indian BIT model in two main ways, as it includes portfolio investments and reduces the exhaustion period of local remedies from five to three years, according to research organization Global Trade and Research Initiative (GTRI).

“Overall, the India-UAE BIT signals a shift towards a more open investment environment at the expense of some regulatory sovereignty. While this may attract more investment from the UAE, it also increases the risk of higher arbitration claims against India. India would soon be approached by other countries to sign BITs on similar liberal terms,” the analysis notes.

Main source of FDI

The signing of the BIT is significant as the UAE is the seventh largest source of FDI for India, with a 3 per cent share of the total foreign direct investment (FDI) received by the country, with investment cumulatively of around $19 billion between April 2000 and June 2024. India also makes 5 per cent of its total foreign direct investments in the UAE, to the tune of $15.26 billion between April 2000 and August 2024, adds the government press release.

The implementation of the BIT reflects the two countries’ shared commitment to strengthening economic cooperation and creating a stronger and more resilient investment environment, according to the statement.