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Talks with US on for Bipa-like trade treaty

Economic Times | 15 Feb, 2008

Talks with US on for Bipa-like trade treaty

Amiti Sen & Deepshikha Sikarwar, TNN

NEW DELHI: India and the US have begun discussions on an agreement to promote bilateral investment.

The treaty, which is likely to be on the lines of the bilateral investment promotion agreements (Bipa) India has with a number of other trading partners, including Australia, the UK, France, Germany and Russia, is in the initial stages of formulation. While the US is looking for no less than pre-investment national treatment for its investors, it might be difficult to convince India to have the same pre-investment regulations for US as for Indian investors.

Exploratory talks have taken place between representatives of the Indian and US governments on the proposed investment agreement earlier this week. In a meeting in New Delhi, the two sides made presentations to each other on the investment regimes prevailing in their countries.

Government sources told ET the negotiations were expected to be protracted as the US agenda was highly ambitious. The US model of a bilateral investment treaty seeks either national treatment or most favoured nation treatment (whichever is better) for US investors when they seek to initiate investment and throughout the life of that investment, subject to certain limited and specifically described exceptions listed in annexes or protocols to the treaties.

While India does give national treatment to foreign investors in the post-investment phase, it will be difficult to get a political consensus on meting out the same treatment in the pre-investment stage. Foreign investments in most sectors are thoroughly vetted by the government.

The US, in its bilateral investment treaty negotiations with other countries including Pakistan, is known to have pushed for a clause in the ‘pre-establishment phase of investment’ according to which, if a US investor suffers a loss when he is still in the process of establishing his business in the host country, he would have to be compensated through a court of law.

Such clauses would be unacceptable to India, as it was to Pakistan.

The US bilateral investment treaty model also lays down that investors should have the right to submit an investment dispute with the treaty partner’s government to international arbitration. There should no requirement to use that country’s domestic courts.

This would again be difficult for India to follow as it has been arguing for long at various forums including the World Trade Organisation that it does not want investment agreements to impinge on its sovereign power.

 source: Economic Times