India-Israel BIT
What’s in the news?
- The Bilateral Investment Agreement (BIA) between India and Israel, signed in 2025, has entered into force.
- Israel is the first Organisation for Economic Co-operation and Development (OECD) member state with which India has signed this strategic agreement, in accordance with India’s new model for investment treaties in 2015.
Organisation for Economic Co-operation and Development:
- OECD is an intergovernmental organization of 38 member countries that discuss and develop economic and social policy.
- OECD members are typically developed, high-income economies with a high Human Development Index (HDI).
- India is not a member of OECD.
- Headquarters: Paris, France
- The agreement is expected to boost investments, provide greater certainty and protection for investors, and facilitate the growth of trade and mutual investments.
- India and Israel are strategic partners, with annual bilateral trade standing at nearly $4 billion.
- Between 2000 and 2025, Indian investments in Israel reached $443 million, while Israel’s foreign direct investment in India amounted to $334.2 million.
What are BITs?
- Bilateral Investment Treaties, also known as International Investment Agreements (IIAs), are reciprocal, legally enforceable treaties designed to protect foreign private investments by establishing minimum guarantees, such as fair and equitable treatment, protection from expropriation (act of a government claiming privately owned property), etc.
- India signed its first BIT with the UK in 1994. By 2015, India had signed 83 treaties based on the Indian Model BIT of 1993.
- A Model BIT is a template or standardized text that a country uses as a basis for negotiating and drafting its actual bilateral investment treaties with other countries.
- However, this older regime was asymmetrical; while granting extensive rights to investors, it was silent on the obligations of foreign investors.
Revised Model BIT 2015:
- To address these challenges, India adopted a revised Model BIT in 2015. Consequently, the government terminated several existing treaties to renegotiate them under the new terms.
Key Features of the Revised Model:
- The new model aims to balance investor protection with the government’s sovereign right to regulate.
- It introduced a refined Investor State Dispute Settlement (ISDS) provision requiring investors to exhaust domestic legal remedies for at least five years before resorting to international arbitration.
- The Model BIT encourages foreign investors to voluntarily adopt internationally recognized standards of corporate social responsibility (CSR).
- It adopts an ‘enterprise-based’ definition of investment which means that an investor would have to be an incorporated legal entity in compliance with the domestic law to qualify as an investment.
- One of the most important features of the amended model is that it dropped the Most Favoured Nation (MFN) clause, a provision frequently used by foreign investors to litigate against India.
- The MFN clause is a fundamental principle of non-discrimination in international economic relations, ensuring that any benefits granted to one country are automatically extended to others.