Context

• India is reportedly revising its 2015 Model Bilateral Investment Treaty (BIT), a framework adopted after a series of disputes involving foreign investors.
• The revision is significant because BITs must reconcile two competing objectives: protecting foreign investment and preserving the State’s right to regulate in the public interest.
• India’s 2015 model strongly prioritised regulatory autonomy, but its limited success in concluding new BITs suggests that the framework may have moved too far in one direction.

Background: Why India Adopted the 2015 Model BIT

• India’s investment treaty policy underwent a major reassessment after foreign investors initiated several claims against India for alleged treaty violations.
• The resulting review produced two major policy decisions: India began terminating older BITs and adopted the 2015 Model BIT as the foundation for negotiating new agreements.
• The 2015 model reflected India’s desire to protect its policy space and regulatory sovereignty.
• It narrowed the scope of investor protections and imposed several procedural and substantive conditions before investors could pursue international claims.
• While these safeguards were intended to prevent frivolous or excessive litigation against the government, they also generated uncertainty among foreign investors.

A Model Out of Balance

• A successful BIT should establish a reasonable equilibrium between investment protection and the State’s right to regulate.
• India’s 2015 model, however, has arguably tilted too heavily towards regulatory autonomy.
• India has concluded only a limited number of BITs based on the model over the past decade.
• This suggests that potential investment partners have found its provisions insufficiently attractive.
• Concerns over regulatory uncertainty, weak governance mechanisms and delays in the judicial system further increase the risks faced by foreign investors.
• Consequently, India now needs to move the pendulum towards the centre. The revised model should provide stronger and clearer protections for investors while preserving legitimate governmental authority to regulate areas such as public health, environment, taxation, labour and national security.

The Democratic Deficit in Treaty-Making

• The second and often neglected dimension is the process through which the Model BIT is revised.
• International economic treaties can significantly influence citizens, businesses, public finances and governmental policymaking.
• Therefore, those affected by such agreements should have meaningful opportunities to participate in their formulation.
• This raises the issue of a democratic deficit. The term describes situations where important decisions are largely shaped by executive authorities, bureaucracies and technical experts without sufficient parliamentary or public scrutiny.
• A lack of transparency can weaken public confidence and exclude perspectives from academics, economists, lawyers, industry, civil society and other stakeholders.
• Since investment treaties can constrain future governments and influence domestic regulation, they should not be treated as purely technical or bureaucratic instruments.

International Practices and India’s Experience

• The United Kingdom and Australia, for instance, require negotiated treaties to be presented before Parliament before ratification, enabling legislative scrutiny.
• Norway conducted public consultations on its updated model BIT, while Colombia also released its model for public discussion.
• India itself followed a consultative approach in 2015 by circulating the draft Model BIT for public comments.
• The Law Commission of India subsequently constituted an expert group and examined the draft, making several recommendations in its 260th Report.
• Although India eventually adopted a revised model in December 2015, some of these recommendations were not incorporated.
• The 2015 experience demonstrates that consultation is possible, but the forthcoming revision should make it more comprehensive, transparent and consequential.

A Meaningful Consultative Process

• First, the government should establish an independent core group consisting of experts in international investment law, economics and foreign investment.
  • Academics, researchers, lawyers and specialists from think tanks could provide an external sounding board.
• Second, wider consultations should involve industry associations, arbitrators, law firms and civil society organisations.
  • Their practical experience can identify problems that may not be visible within government.
• Third, a draft Model BIT should be placed in the public domain for widespread consultation, allowing citizens and stakeholders to submit detailed comments.
• Fourth, the draft should be presented before Parliament and relevant parliamentary committees for discussion and scrutiny. This would strengthen legislative oversight and democratic legitimacy.

Conclusion

• India’s revision of its Model BIT is an opportunity to correct the imbalance in its investment treaty framework.
• A modern treaty should simultaneously provide credible investment protection, regulatory certainty and adequate policy space for the State.
• Yet a sound treaty is not determined only by its legal provisions; its legitimacy also depends on the process through which it is created.
• A transparent consultation involving experts, industry, civil society, the public and Parliament would strengthen both the quality and legitimacy of the revised Model BIT.
• By combining balanced investment protection with meaningful democratic oversight, India can build a treaty framework that is more attractive to investors, more accountable to citizens and more resilient in the long term.