Strengthening India’s Bilateral Investment Treaties through Equitable Reform

India is a party to the International Covenant on Civil and Political Rights (ICCPR). Yet notably, it does not accept the Optional Protocol 1 attached to this Covenant. This Protocol allows individuals to bring India before the UN Human Rights Committee, provided they have exhausted all domestic remedies. Similarly, under the International Convention on the Elimination of All Forms of Racial Discrimination (ICERD), India does not recognize Article 14, which provides for an individual complaints mechanism. This stance is consistent across various multilateral human rights instruments. India regularly signs onto treaties but opts out of provisions allowing individuals to challenge the State internationally.

This steadfast policy is grounded in a principle long cherished by India: our domestic judicial system is robust enough to address any and all grievances internally. Indian courts have traditionally been viewed as capable, competent, and sufficient to provide remedies for violations of rights, rendering international judicial interventions unnecessary.

However, there is one glaring exception to this otherwise firm stance on international adjudication mechanisms: Bilateral Investment Treaties (BITs). Under these treaties, India uniquely (amongst its other treaties) allows foreign investors to present their disputes directly before international arbitration tribunals. This creates a paradoxical situation where private foreign entities possess more international remedies against India than Indian citizens themselves. Such a stark inconsistency calls for a re-examination of our BIT framework.

To understand the implications fully, consider notable international legal precedents like the Barcelona Traction and Diallo cases. In Barcelona Traction, Belgium sought to diplomatically protect its nationals who were shareholders in a Canadian company operating in Spain. The International Court of Justice (ICJ) ruled against Belgium, underscoring the principle that only the company's home state (in this case, Canada) could assert the company’s rights internationally. It also underscores that it is generally the rule that a State sues for the wrong done to its citizen (corporate or otherwise). It is not a citizen who gets a right to sue a State at an international forum for it.

These rulings highlight a fundamental asymmetry in international law. While home States face strict limitations when protecting business interests abroad, foreign investors benefit immensely from BITs, often bypassing local judicial mechanisms entirely. This structural imbalance becomes painfully apparent when one considers historical injustices like the Union Carbide disaster in Bhopal. Despite the catastrophic human and environmental tragedy caused by Union Carbide Corporation, India lacked an effective international mechanism to pursue claims against the American parent company overseas.

The current Indian Model BIT exacerbates this disparity. It provides expansive protections to investors without equally robust reciprocal protections for India. Under the Model BIT, investors can initiate claims against India internationally - a privilege India steadfastly denies even to its own citizens under international human rights instruments. In practical terms, the Model BIT creates an internationalized version of Article 32 of the Indian Constitution exclusively for foreign investors, granting them privileged and direct international access that domestic individuals and companies do not enjoy. In fact, India refuses to add mandatory ICJ dispute resolution clauses in most of its treaties with States. We don’t even like the idea that other States can take us to international court, but we seem to think it's okay for a private investor.

Given these disparities, it is essential to question whether the benefits of BITs genuinely justify this substantial concession of sovereign rights. Initially, BITs were adopted globally, including by India, to encourage foreign investments during a period when States directly facilitated overseas private capital flows. However, contemporary economic realities differ vastly. The private sector today holds significantly more capital than national governments, and private entities no longer depend on State facilitation to invest internationally.

Recent data underscores this point clearly. India has witnessed strong and consistent foreign direct investment (FDI) inflows even after systematically terminating multiple BITs since 2016. According to the Reserve Bank of India’s February 2025 Bulletin, India's FDI inflows grew from $55.56 billion in 2015-16 (before BIT terminations began) to $84.84 billion in 2021-22. Even amid global economic uncertainties, India attracted $71.27 billion in 2023-24. These statistics decisively demonstrate that BIT protections are not a primary factor driving investments into India. Rather, factors such as market potential, a skilled workforce, economic stability, and improving regulatory frameworks significantly outweigh any perceived advantage offered by BITs.

Given this context, one might logically question the continued necessity of BITs. Moreover, why shouldn't India have equal power under these treaties to hold foreign investors accountable for violations of international law? In case they violate environmental norms? Why should Indian citizens not be able to drag the investor’s home state to arbitration to seek compensation? The present BIT framework creates a one-sided legal structure. disproportionately favouring foreign capital at the expense of national regulatory autonomy and justice.

This imbalance becomes especially troubling in cases of major industrial disasters and environmental harm. If investors are granted the extraordinary privilege of a remedy in addition to local remedies and access to international arbitration, fairness demands that India should also have equivalent international avenues to enforce obligations and claim damages for substantial legal violations by foreign corporations operating within its borders. The other issue, of course, is the cost. These arbitrations are not cheap. They require expensive legal fees, and most of them are usually seated outside India. This is an expensive litigious process that India is agreeing to.

The current BIT policy warrants urgent parliamentary scrutiny. Parliament must rigorously assess not only whether BITs equitably balance investor protections and national sovereignty but fundamentally question their contemporary relevance. Are these treaties genuinely necessary given India’s demonstrable investment attractiveness independent of BIT protections? Does India still benefit sufficiently from these agreements to justify sacrificing critical sovereign rights?

A balanced BIT policy would allow India to hold investors equally accountable for breaches of local laws and international obligations, ensuring reciprocity and fairness. It would enable the Indian legal system to handle disputes comprehensively, reinforcing India's established policy that domestic courts are fully competent to resolve grievances, whether of Indian citizens or foreign investors.

Ultimately, the question for India's policymakers is clear and pressing: Should we continue subordinating our sovereignty under BITs, which primarily serve investors who no longer rely significantly on such treaties to facilitate their capital flows? Before further entrenching ourselves into these treaties, India must critically evaluate whether BITs align with national interests and provide reciprocal protections that preserve our regulatory autonomy and sovereign integrity.

India's approach to BITs should reflect a coherent policy that upholds judicial sovereignty, reinforces national autonomy, and ensures equitable accountability for both investors and the Indian State. It is time for Parliament to openly discuss, reconsider, and possibly recalibrate India's Bilateral Investment Treaty policy, placing the nation's sovereignty and the interests of its citizens firmly at its core.

About the authors: Ajay Kumar is a Partner and Shivali Srivastava is an Associate at Triumvir Law.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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