New Delhi, Nov 19: The government plans to replace bilateral investment protection treaties with a new pact that seeks to plug loopholes and enhance legal protection of foreign investors in India as well as Indian investments abroad.
Finance Ministry is moving Cabinet with a draft of a new agreement called the Bilateral Investment Treaty (BIT) saying there is a need to revisit existing BIPAs as they do not take into account the socio-economic objectives of government policy.
The need for a review of BIPA framework arose following several multinational companies invoking the treaty against the government, sources privy to the development said.
Global telecom firms which had lost their 2G licences following a Supreme Court judgement, have slapped notices on the government citing breach of bilateral investment protection pacts.
Besides, companies like Vodafone and Nokia which are tangled in tax dispute too had evoked the BIPA and sent notices to India. The model text of BIPA has been prepared to balance the objective of investor protection and the interest of nation, they said.
With respect to systemic issues, the new model introduces rules on conflict of interest regarding arbitrations and transparency.
The model excludes taxation matters, sources said. Under the new model of BIT, investor who have substantial business activities in the home State would be protected by the treaty. The proposed BIT would remain in force for a period of 10 years.