Treaties as Infrastructure: Using India's BITs and FTAs to Strengthen Commercial Arbitration

The Lift Line

Investors do not only ask what they will earn; they ask what happens when things go wrong. A treaty network can help India answer that question at home.

Why This Editorial Matters for Your Exam

Most answers on FTAs discuss tariffs, services and rules of origin. This piece, by the Director General of the Indian Council of Arbitration, takes the less-studied angle: dispute resolution. It connects India’s investment treaty policy (GS2, international agreements) with the Arbitration and Conciliation Act, 1996 and the goal of making India an arbitration hub (GS3, investment climate). It pairs with our report on the India-New Zealand FTA’s entry-into-force date.

GS Paper 2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests; judiciary and alternative dispute resolution. GS Paper 3: Investment models; effects of liberalisation; ease of doing business.

Background and Context

India’s recent treaties, as listed by the author:

Why India narrowed ISDS. India’s older BITs gave investors broad access to international arbitration. After adverse outcomes, beginning with White Industries v. India (2011), the first BIT award against India, and the arbitrations over retrospective taxation, India adopted a Model BIT in 2015. It narrowed the definition of investment, dropped the most-favoured-nation clause, and required investors to exhaust local remedies before ISDS. India then terminated most of its older BITs and began negotiating new ones on this model.

India’s arbitration law. The Arbitration and Conciliation Act, 1996, based on the UNCITRAL Model Law (1985), covers domestic arbitration, international commercial arbitration and enforcement of foreign awards. It was amended in 2015, 2019 and 2021. The 2019 amendment inserted Part IA to create an Arbitration Council of India to grade arbitral institutions and accredit arbitrators; a Hindu report linked in the piece noted six years on that the Council had not been constituted, and none has been notified since.

The Analysis

1. The first adjustment: explain the missing ISDS. India’s recent FTAs generally leave ISDS out. The author points to the European Union and Australia, whose negotiators explained that investment protection was unnecessary “given the level of trust in the respective legal systems of both parties”. India’s future FTAs, he argues, should say in the text or preamble that the absence of ISDS is justified by the availability of commercial arbitration in India. That, together with legislative reform and pro-arbitration courts, offers a middle ground between the State’s reservations about ISDS and investors’ wish to avoid litigating in Indian courts.

2. The second adjustment: count arbitration as a local remedy. India’s BITs separate treaty claims from contract claims. The India-Uzbekistan BIT, for instance, excludes “disputes arising solely from an alleged breach of a contract” between the State and an investor. They also require investors to take claims first to the domestic courts or administrative bodies of the host State. That wording appears to exclude commercial arbitral tribunals seated in India, and the author sees no cogent policy reason for it. Future BITs should say that an investor can meet the requirement by taking the substance of the dispute to arbitration in India.

3. The third adjustment: confine the funding bar to ISDS. India’s recent BITs indicate that the government does not favour third-party funding of ISDS claims. The author accepts the logic: ISDS claims touch sovereign decisions and can chill regulation. But that logic does not apply to commercial arbitration between businesses. Treaties should make clear that the ISDS bar does not signal that such funding is impermissible in Indian commercial arbitration, so that regulators can build a coherent funding policy consistent with global practice.

4. Why it matters: arbitration as economic infrastructure. Investors deciding where to put capital ask “what happens when a relationship breaks down”. A country that answers convincingly has “a significant economic advantage”. India need not make every treaty an arbitration treaty; small drafting changes can make commercial arbitration part of the infrastructure behind its trade and investment relationships.

The precision that earns marks. Distinguish the two tracks. ISDS is investor versus State under a treaty, before an international tribunal. Commercial arbitration is party versus party under a contract, governed in India by the 1996 Act. The author’s argument is that India’s treaty practice on the first should be used to strengthen the second.

Data and Institutions Vault

Prelims-grade facts:

Arbitration law in India:

• The Arbitration and Conciliation Act, 1996 is based on the UNCITRAL Model Law on International Commercial Arbitration, 1985.
• Part I covers arbitration seated in India; Part II covers enforcement of foreign awards under the New York Convention (1958) and the Geneva Convention.
• The 2019 amendment inserted Part IA to create the Arbitration Council of India, to grade arbitral institutions and accredit arbitrators.
• The India International Arbitration Centre, first named the New Delhi International Arbitration Centre, was set up by an Act of 2019.
• The Indian Council of Arbitration was established in 1965; the author is its Director General.

Investment treaty policy:

• India adopted a Model BIT in 2015, requiring investors to exhaust local remedies before invoking investor-State arbitration.
• White Industries v. India (2011) was the first investment treaty award against India, under the India-Australia BIT.
• India’s BITs signed in 2024 and 2025: UAE (2024), Uzbekistan (2024), Israel (2025).
• The India-EFTA TEPA (March 2024) links India with Switzerland, Norway, Iceland and Liechtenstein.

Prelims, the traps:

• ISDS is investor versus State under a treaty; commercial arbitration is between contracting parties under the 1996 Act.
• The Arbitration Council of India is provided for by law but has not yet been constituted.
• The New York Convention is about enforcing foreign arbitral awards, not about investment protection.

⚠️ Watch the trap: EFTA is not the European Union. The India-EFTA TEPA covers four non-EU countries; the India-EU FTA is a separate negotiation.

The Debate

Treaty drafting can help. Clarifying language costs little, reassures investors about where disputes will be heard, and signals confidence in India as a seat without reopening ISDS, which India has deliberately narrowed.

Treaty drafting is not enough. Investors judge a seat by how quickly its courts enforce awards and how rarely they interfere. Delays in enforcement, challenges to awards and an Arbitration Council that exists only on paper matter more than preambles. A related Hindu report linked from the piece is headlined “India’s aviation arbitration cases will still fly off overseas”.

The balanced verdict. The author’s proposals are complements, not substitutes, for domestic reform. The treaty text can point investors towards India-seated arbitration; only predictable enforcement will keep them there.

How to Think About This

Ask where a dispute will actually be decided. Every trade or investment agreement implies an answer: in the host State’s courts, before an international tribunal, or before an arbitral tribunal chosen by the parties. When a country narrows one route, as India narrowed ISDS, the pressure moves to the others. In any answer on investment climate, trace that displacement and ask whether the remaining route is credible. The same logic applies to tax disputes, commercial courts and regulatory appeals.

Diagram-in-Words

Takeaway Box

• New treaties: BITs with UAE, Uzbekistan (2024) and Israel (2025); FTAs with EFTA, the UK, Oman and New Zealand.
• 2015 Model BIT: narrower protection, exhaustion of local remedies before ISDS; recent FTAs omit ISDS.
• Three fixes: explain the absence of ISDS; let India-seated arbitration count as a local remedy; confine the third-party funding bar to ISDS.
• Domestic base: Arbitration and Conciliation Act, 1996 (UNCITRAL Model Law); Arbitration Council of India (Part IA, 2019) still not constituted.
• Goal: turn the treaty network into infrastructure for trust and make India an arbitration hub.

Sources: The Hindu, PIB

Source: Treaties as Infrastructure: Using India's BITs and FTAs to Strengthen Commercial Arbitration — Ujiyari.com | Free UPSC & State PCS Editorial Analysis