Investment Facilitation Agreement (IFA)

Investment Facilitation Agreement (IFA)

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April 11, 2023

Because of problems in the investor-state dispute settlement process, India did not participate in the recently concluded Investment Facilitation Agreement (IFA) discussions.

What exactly is an Investment Facilitation Agreement? - The IFA is a planned trade agreement by the World Trade Organisation. The goal is to facilitate investment flows in order to generate legally binding provisions. States must improve regulatory clarity and predictability of investment policies. Informal Dialogue - In 2017, a group of WTO Members from developing and least-developed countries initiated an Informal Dialogue on Investment Facilitation for Development.

Negotiations with the IFA - It was formally introduced as the 'Agreement on Investment Facilitation for Development' (IFD Agreement) in 2020 discussions.

Eligibility - All WTO Members are eligible to participate in this collaborative endeavour. But, India did not join the IFA negotiations which are backed by more than 100 countries.

What are India's concerns?

• Investor-state dispute settlement (ISDS) - Fearing investor-state dispute settlement claims, India has refused to participate in the investment facilitation agreement discussions.

• ISDS is a framework that allows individuals to sue nations for alleged discriminatory practises.

• ISDS is an international, neutral arbitration system.

• Future IFA - There is concern that foreign investors may utilise IFA to seek claims under current BITs.

• Most favoured country (MFN) - Foreign investors may exploit the MFN clause in BITs to borrow or import IFA terms.

• FET or, Fair and equitable treatment - Foreign investors utilise the BIT’s needing equitable & fair treatment to contest non-compliance with the IFA.

• Umbrella clause - Most new investment treaties exclude 'umbrella provisions' entirely, reducing the potential of investors suing nations for failure to meet IFA duties.

• ISDS tribunal - It is unlikely that an ISDS panel will accept the notion that simply failing to comply with IFA violates an investor's legitimate expectations.

How are India's bilateral investment treaties (BITs) doing?

• India's foray into BITs began in 1994, with the signing of its first with the United Kingdom.

• Bilateral Investment Treaties (BITs) are bilateral agreements between two governments to encourage and safeguard foreign private investment in each other's territory.

• Indian Model BIT - BITs were negotiated in accordance with the Indian Model BIT from 1993.

• India had BITs with 83 nations as of 2015.

• In 2016, the BIT model was finalised and made public.

Source - World Trade Organization at https://www.wto.org