Centre for Internet & Society

As efforts are on to step-up discussions on the proposed Bi-lateral Investment Treaty (BIT) between India and the US , concerns are being raised on the dispute settlement mechanism between an investor and the State.

Article was published in the Business Line on June 13, 2012

The already existing bi-lateral treaties and their enforcement through investor-State-dispute mechanisms already undermine the domestic policy space and the justice system in our country, said 15 public interest organisations in a joint-letter to the Prime Minister, Dr Manmohan Singh.

“The investor-State dispute clause in such agreements clearly grants foreign companies the right to initiate dispute settlement proceedings against the Government in secret arbitration forums outside the Indian judicial system,” the letter said.

Illustrating this, the letter cited recent disputes threatened by foreign investors, including: the tax-related challenge of British telecom company Vodafone; UK hedge fund; the Children's Investment Fund's threat to sue India over its policy to regulate the price of coal in India; and Russian telecom company Sistem and Norwegian telecom company Telenor's threat to sue over the cancellation of 2G licenses of their joint ventures.

India's first recorded investor-State dispute — Enron vs the Maharashtra Government — was initiated by a consortium of US companies including Enron, under the India-Mauritius BIT, which has already resulted in a billion dollar arbitration award against India, the letter said.

The Government needs to be consistent with its approach of excluding investor-to-State dispute clauses from investment agreements, reportedly under negotiation with the EU and other countries, said the letter signed by organisations across the board — the Bharatiya Krishak Samaj, Centre for Internet and Society and Centre for Trade and Development.

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