India and the UK are making headway in reaching a consensus on dispute settlement, which has been the most contentious aspect of the Bilateral Investment Treaty (BIT) negotiations.
The objective is to ensure that the investment pact is concluded concurrently with the Free Trade Agreement (FTA) in goods and services, which is currently in the advanced stages of discussion.
Sources close to the matter have revealed that most of the issues pertaining to the BIT have been resolved. However, certain areas, like the Investor-State Dispute Settlement (ISDS), require further attention. Notably, both sides have shown greater flexibility in their approach during the ongoing negotiations.
The UK is adopting a more accommodating stance regarding international arbitration and may permit the utilization of local remedies with certain conditions. The concern surrounding the “exhaustion of local remedies” clause in the ISDS is primarily related to the prolonged duration it takes to resolve disputes in India, and hence, this issue needs to be addressed promptly. Investors cannot be expected to wait for a decade for resolution.
Negotiators involved in the India-UK FTA are striving to bridge the remaining gaps in areas such as market access for goods and services and rules of origin before the proposed visit of the British Prime Minister, Rishi Sunak, to India at the end of this month.
However, the discussions are still ongoing, and no official announcement has been made regarding the visit. All issues pertaining to the FTA have not been completely resolved yet, but efforts are being made continually. The situation remains in a state of anticipation. The implementation of the FTA is expected to contribute towards doubling bilateral trade between India and the UK and achieving a target of $100 billion by 2030.
Initially, India proposed a pact based on the Model Bilateral Investment Treaty designed by the Finance Ministry. However, the UK displayed lesser enthusiasm towards this proposal as it favoured allowing investors to pursue international arbitration without exhausting local legal remedies. The UK’s perspective was that international arbitration should commence without requiring recourse to local courts initially.
The source mentioned that a middle ground is anticipated to be reached regarding local remedies, addressing the UK’s concern over the prolonged time required for local dispute resolutions. While there was speculation about independently concluding the India-UK FTA before finalizing the BIT, current efforts are focused on securing the simultaneous conclusion of both agreements.
