Why in news?
India is planning to consider some of the demands of Canada regarding the model Bilateral Investment Treaty (BIT).
What is BIT?
- It is an agreement establishing the terms and conditions for private investment by nationals and companies of one state in another state.
- Government of India has signed BITs with 83 countries.
- They are based on a model BIT formulated by India in 2016.
- The model BIT provides the framework for new negotiations with its trading partners.
What are the demands of Canada?
- ISDS - Canada has been insisting on concessions in the inter-state dispute settlement (ISDS) mechanism.
- ISDS mandates that all domestic options need to be exhausted (i.e settlement via domestic courts) before a company can go for international arbitration.
- Since there are no time-lines for settling the cases, Canada wants more options in case domestic courts take long time in settling disputes.
- MFN - Canada has demanded an upgrade to a ‘Most Favoured Nation ‘(MFN) status which will provide for more economic relaxations.
- Along with this it also asked for a MFN-forward clause.
- This means that whatever concessions that India may extend in future to other trading partners will automatically extended to Canada.
- Ratcheting - It is also demanding a ratcheting provision.
- This is to make sure that the benefits arising from future liberalisation of India’s domestic policies are automatically extended to Canada, and vice-versa.
- CEPA - It also wants tp fasten the negotiations of ‘Comprehensive Economic Partnership Agreement’ (CEPA).
- CEPA is a comprehensive free trade agreement under which two trade partners significantly reduce or eliminate Customs duties, besides liberalising trade in services and investment norms.
Why is India considering the demands?
- Model-BIT has given flexibility for negotiations that began earlier.
- BIT with Canada was already under negotiations when the model BIT text was passed.
- Investments from Canada have also been steadily increasing and are expected to go up further once the BIT and the CEPA are in place.
- So there is a possibility for considering these demands.
- At the same time India is also cautious as it does not want to get involved in international arbitration cases with foreign companies nor to sacrifice its domestic policy space.
Source: Business Line
