Changing Dimensions of Investor-State Dispute Settlement in India:

Protecting the Regulatory Power of the 'Host-State'?

Animesh Das

 

ABSTRACT: Dispute settlement clauses in the recent Indian bilateral investment treaties (BITs) are far more inclined towards shielding the states’ regulatory power by limiting the tribunals’ jurisdiction. The India-Brazil BIT in particular has moved a step ahead to seize the power from the arbitral tribunals in awarding compensations. Since the beginning, most of the Indian BITs contained both investor-state dispute settlement (ISDS) and state-state dispute settlement (SSDS) clauses as investment dispute settlement mechanisms. But for the first time, India signed a BIT with Brazil on terms that investment disputes shall be settled (or prevented) only through the SSDS mechanism. Furthermore, the current BIT regime in India is heavily guarded with several checkpoints, such as the absence of the most favoured nation clause, keeping taxation related measures outside the purview of BITs, and the requirement to exhaust locally available remedies before invoking ISDS. The list is long and includes several other similar provisions. In short, it signifies that India’s approach towards ISDS in particular, and investment protection in general, is a movement from a sceptical position in the past to a protectionist one in the present. Therefore, to justify the above claim, the paper will attempt to study the background of ISDS in India, analyse the jurisdictional scope of the arbitral tribunals, the practicability of the exhaustion of local remedies (ELR) clause and the power of the arbitral tribunals to award compensation in case of loss suffered by the investors. The paper concludes that India’s approach towards ISDS as contained in the Indian BITs (those are based on the new model) and specially in the India-Brazil BIT of 2020 proves to be a step to protect the regulatory power of the host-states.