Scroll Top


A bilateral Investment Treaties refers to an agreement between nations that establishes terms and conditions of investment done by private investors or government between the two counties[1]. It gives better access to investors in foreign markets and fair prices to invest in other countries. Since

A bilateral Investment Treaties refers to an agreement between nations that establishes terms and conditions of investment done by private investors or government between the two counties[1]. It gives better access to investors in foreign markets and fair prices to invest in other countries. Since BITs offer these benefits to investors, it leads to the growth and development of a country and its economy.


These model treaties became popular in the 20th century after the Second World War when the developed countries wanted protection against their investments in the developing countries against dispossession. These treaties were first known as Friendship, Commerce and Navigation Treaties (FCNs).[2] Around 2500 Bilateral Investment Treaties are currently active worldwide.[3] This database is maintained by United Nations Conference on Trade and Development (UNCTAD).

Firstly, the Bilateral Investment Treaties aim at protecting investment by creating regulations so that the recipient country is not swayed or suppressed by the investors or the investing countries. It imposes regulation so that the investors also receive fair and equitable treatment and are not discriminated against or manipulated. These treaties also offer repatriation to the investing countries. This is done by the agreement made between the two nations. Secondly, it also allows investors to bring up cases for relief against the countries in which they have invested their money if the policy of the beneficiary country is not in agreement with the BITs which were agreed upon.

Another feature that is unique to India and some other countries is the applicability of these treaties. It means that with regard to the applicability of the BITs, the Indian BITs generally apply to existing and future investments pursuant to the date on which India entered into the BIT. Other than that, BITs of India also contains very broad and flexible definitions of investment and investors.


Bilateral Investment Treaties promote and protect foreign trade and investment by creating a legal framework. The primary purpose of such treaties is to attract investors by providing them with a framework for investment and a sense of security, that the investment is safe. These treaties aim to give the right to the investors as well as to the beneficiary country. These treaties hence try to strike a balance between the investors and the countries so that minimum dispute arises. Even if any dispute arises, the dispute resolution mechanisms are used to find a settlement between the parties. BITs also encourage the implementation of market-oriented domestic policies that treat private investment in an open, transparent, and non-discriminatory manner. These treaties support the creation of international law standards that are consistent with investment and protection of such investment.


The Bilateral Investment Treaties often cover the following clauses. Even though the benefits of BITs cannot be said to be explicit, it works as an impetus for foreign investment inflows and technological exchanges.

  1. Fair and Equitable Treatment and Full Protection & Security: Almost all the BITs around the world ensure Fair and equitable treatment to investors. It ensures some basic advantage to investors in the host country. Though this concept may vary in different countries, it ensures some basic rights such as a stable and predictable legal structure. Other than that it also ensures protection, safety and security to the investors.
  2. National treatment and Most-favoured-nation treatment: Some BITs contain the clause of giving advantage to the donor country or individual investor. These countries are entitled to be treated as favourably as they treat their own investors. It may also grant Most Favoured Nation treatment to such investing countries.
  3. Expropriation: BITs prohibits expropriation and nationalism of investments. BITs give only limited rights for the expropriation of investments.
  4. Dispute settlement mechanisms: This means that BITs allow for alternative dispute resolution mechanisms under Investor-State Dispute Settlement (ISDS).

In the mid-90s, Bilateral Investment Treaties were initiated by the Government in India.[4] India signed its first Treaty in 1994 with the UK and the latest one was with Brazil in 2020. Currently, India has 86 Bilateral Investment Treaties. BITs are one of the main methods for Foreign Direct Investment. India has also been ranked in the top 10 countries in terms of Foreign Direct Investment in 2019. In 2016, India launched a Model Bilateral Investment Treaty which aims to act as a model to new treaties and for renegotiating the existing treaties. But this model poses some risks. This model has narrowed the definition of investment. Another clause that adds to the apprehension of the investors is the exhaustion of the domestic remedy clause. It means that before going for dispute resolution to ISDS, all the domestic remedies have to be explored. This leads to wide and untamed powers to the beneficiary country. Even though this Model tries to attract foreign investors, it should also attempt that the agreements of the BITs are simple and it is easy to invest in India. BITs should try to boost the Ease of doing business in India.[5] This can be done with an inclusive definition of investment and investors so that any investor can invest in our country.


Even though BITs try to make investing easy and regulated, there are some drawbacks too. Some BITs are vague and ambiguous which lead to a dispute in case of non-performance of investment or such problems. This leads to the involvement of ISDS which may result in time consumption that could have been easily avoided by clear and explicit terms. Other than this, there also has been criticized by many NGOs stating that these treaties are designed to protect the investors and often ignore environmental issues, labour rights and availability of natural resources.


Bilateral Investment Treaties boost the inflow of investment in a country. India needs to align its BITs with international standards. The policies of the treaties should also attract investors into investing in our country. As worldwide organizations are trying to move their ventures from China to other countries, it is a helpful opportunity to re-examine the Model BIT from the present status which uses protecting method and attempt to make it a more practical one.

Author(s) Name: Swarna Yati (Dr. Ram Manohar Lohiya National Law University, Lucknow)


[1] Sadig AA, “Do International Investment Agreements Promote Foreign Direct Investment?” (2011) 4 International Journal of Trade and Global Markets 25.

[2] Leal-Arcas R, International Trade and Investment Law: Multilateral, Regional and Bilateral Governance (Edward Elgar 2011)

[3] Jacobs M, “Transnational Corporations and the Proliferation of Bilateral Investment Treaties: More than a Bit Influential” (2016) 8 Transnational Corporations Review 93.

[4] Dutta A, “Bilateral Investment Treaties : A Comparative Analysis of India and China” [2012] Indian Institute of Management Bangalore 99 <> accessed 2021

[5] Cerna L and Czaika M, “Rising Stars in the Global Race for Skill? A Comparative Analysis of Brazil, India, and Malaysia” [2020] Migration Studies

Related Posts