Finance Minister Nirmala Sitharaman on Saturday emphasised that future bilateral investment treaties (BITs) should prioritise national interests concerning regulatory powers and provide clear guidance to arbitrators handling disputes.
She stated that such treaties should be negotiated independently rather than as part of free trade agreements (FTAs).
Speaking at the inauguration of the first postgraduate certificate course on international commercial and investment treaty arbitration in New Delhi, she noted that issues related to BITs are unique to sovereign nations and require specialised attention.
Sitharaman pointed out that arbitrators have often disregarded judicial decisions of host countries, undermining national sovereignty in arbitration proceedings.
She stressed that investment treaties should not only reinforce regulatory powers but also help restore confidence in arbitration mechanisms by ensuring arbitrators consider the specific circumstances of nations.
India is currently negotiating BITs with the United Kingdom, Saudi Arabia, Qatar and the European Union.
The government had announced in the 2025-26 Budget that the existing BIT framework would be revamped to attract more foreign investors and create a more investor-friendly environment.
The move comes as several countries have raised concerns over certain provisions of the current model BIT, particularly in relation to dispute resolution.
Sitharaman underlined the significance of BITs for national sovereignty, stating that they must be structured as stand-alone agreements, separate from FTAs.
She highlighted the need for tax law specialists and policy experts to be involved in the negotiation process to ensure treaties are beneficial to the country.
Citing a report from the United Nations Conference on Trade and Development (UNCTAD), Sitharaman noted that there have been 1,368 registered investment treaty cases, with nearly 70 per cent of them filed against developing nations.
She described this as a concerning trend, as many of these cases are based on outdated treaty provisions that allow investors to unfairly exploit legal frameworks to their advantage.
She also raised concerns about the growing influence of third-party funding in arbitration, where financially strong entities purchase claims from one of the parties involved and extend litigation for prolonged periods.
She noted that sovereign states often lack the resources to engage in prolonged legal battles across multiple jurisdictions, while well-funded parties use these mechanisms to their benefit.
Although not all cases follow this pattern, Sitharaman said that there are enough examples from developing countries to highlight the issue.
According to Sitharaman, the average claim sought by investors in Investor-State Dispute Settlement (ISDS) cases is approximately $1.1 billion, imposing a significant financial burden on developing nations.
She argued that large corporations have used ISDS mechanisms to challenge government policies, environmental regulations and public interest laws, often to the detriment of national governance.
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