Overview of the Investment Treaty
India and the UK are negotiating an investment treaty that includes a provision allowing companies to sue either government if they believe policy changes harm their investment or profits. This provision is part of a broader deal that will also include a free trade agreement.
What is Investor-State Dispute Settlement (ISDS)?
The Investor-State Dispute Settlement (ISDS) mechanism aims to protect businesses against unfair treatment under local laws. It enables companies to seek compensation if their investments are negatively impacted by government policies. This mechanism has faced criticism for potentially blocking climate change efforts, especially for fossil fuel companies seeking protection for their assets.
The UK’s Push for ISDS
Despite concerns, the UK is pushing for ISDS in the agreement with India. UK businesses want assurances of fair treatment under India’s legal system. The UK government is keen to ensure that British businesses are treated fairly when operating in India.
India’s Stance on ISDS
India has sought to limit ISDS in its treaties. In 2017, India scrapped its previous investment treaty with the UK and adopted a model that only allows ISDS after exhausting local legal channels. However, the current negotiations indicate that the UK has succeeded in including ISDS in this agreement.
Key Negotiation Topics
The two countries have been negotiating since 2022, with several issues still under discussion. These include tariffs on products like whisky, automobiles, and agriculture, along with pharmaceutical sector regulations. The ongoing talks aim to reach an agreement that benefits both sides.
UK’s Record with ISDS Claims
UK companies have never lost an ISDS claim. However, India has faced numerous ISDS cases in the past. Of the 30 cases filed against India since 2003, 8 were brought by UK companies under a previous agreement.
Trade Deal and Future Steps
Both governments are aiming to finalize the deal soon. Indian Commerce Minister Piyush Goyal recently visited London for further talks. Once completed, the treaty will strengthen trade and investment ties between the two nations.
