India’s Stand on ISDS

Why in news?

India and some other countries have rejected an informal proposal made by the EU and Canada to work towards a multilateral pact on investments at the World Trade Organisation that would have an Investor-State Dispute Settlement (ISDS) mechanism built into it.

What new proposal has been made?

• The EU and Canada have got into an investment agreement in which they have got the much contentious ISDS which allows corporates to take sovereign governments to international arbitration.
• They now want it to be the template for a multilateral agreement.
• Investor-state dispute settlement (ISDS) or investment court system (ICS) is a system through which individual companies can sue countries for alleged discriminatory practices.
• ISDS is a neutral, international arbitration procedure. Like other forms of commercial, labour, or judicial arbitration, ISDS seeks to provide an impartial, law-based approach to resolve conflicts.
• The proposal for a global investment pact, made at an informal breakfast meeting of Trade Ministers of select countries in Davos last week, was rejected by India, Brazil, Japan and Argentina.

What is the need for ISDS?

• To resolve investment conflicts without creating state-to-state conflict
• To protect citizens abroad
• To signal to potential investors that the rule of law will be respected

Why India rejects?

• It is only after all options for settling disputes between a sovereign government and a corporate in domestic courts have been exhausted do we want to allow the issue to be taken up in international courts.
• It should be part of a bilateral agreement and not a multilateral agreement.
• The EU, in a bilateral meeting with India, also indicated that it would hold free trade talks with India only after concluding a new bilateral investment treaty (BIT) with India.
• Last year, New Delhi had asked all countries with which India has investment protection agreements, including the EU, to re-negotiate those pacts on the basis of the new draft text of BIT.
• EU did not do so and the existing BITs with existing members are set to lapse in April.

Category: Prelims and Mains | GS – II | International Relations

Source: Business Line