India & IFA or, Investment Facilitation Agreement

India & IFA or, Investment Facilitation Agreement

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India declined to associate with the recently held Investment Facilitation Agreement (IFA) negotiations due to the discrepancies in the investor-state dispute settlement assertions.

Description of Investment Facilitation Agreement

• IFA is type of trade agreement which was introduced by the World Trade Organization (WTO).

• Aim – To make legally binding arrangements by promoting investment flows.

• It needs states to improve on their predictability and regulatory transparency of investment scopes.

• IFA negotiations – In 2020, it was formally launched as an IFD Agreement, i.e., Agreement on Investment Facilitation for Development

• Eligibility – The participation is open for all existing WTO members.

• India – Although backed by over 100 countries worldwide, India refrained from joining the IFA negotiations.

What are India’s concerns?

• Investor-state Dispute Settlement (ISDS) – India refrained from joining IFA negotiations due to the contentious ISDS.

• ISDS is a mechanism using which countries can be sued by claiming discriminatory practices through individual companies.

• ISDS is an international and neutral arbitration process.

• Future IFA – There are fears that overseas investors may invoke IFA to settle claims under existing Bilateral Investment Treaties (BITs).

• Most Favoured Nation (MFN) – Overseas investors can invoke MFN clauses in BITs to import or borrow preconditions from the IFA.

• Fair and Equitable Treatment (FET) – Overseas investors can make use of FET provisions contained in BITs to dispute IFA non-compliance.

• Umbrella clause – Almost all investment agreements refrain from ‘umbrella clauses’ fully thereby minimizing the chances of investors to sue states for not complying with IFA requirements.

• ISDS Tribunal – It is unclear whether an ISDS tribunal will entertain an argument that mere IFA non-compliance breaches the authentic expectations of an investor.

India position with respect to Bilateral Investment Treaties (BITs)

• India first engaged with BITs in 1994 when the country signed the same with the United Kingdom.

• BITs are types of mutual agreements for the protection and promotion of overseas private investments between two nations in each other’s jurisdictional area.

• India had BIT arrangements with 83 nations till 2015.

• A model BIT was conceived and delivered for public consumption in 2016.

Sources: • The Hindu│ IFA Negotiations

• WTO│ IFA Agreements