Ashton Whiteley: India's Treaty Terms deter Foreign Partners

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Ashton Whiteley: India’s revised foreign investment treaty terms discourage international partners.

Last year, India cancelled investment treaties with the governments of approximately 50 countries. Ashton Whiteley economists say the Asian country is now battling to bring some of those countries back on board due to new terms that make it difficult for them to pursue international legal assistance in disputes.

From New Delhi’s viewpoint the treaties, which are largely a throwback to the nineties when the nation was in dire need of foreign capital, left India too vulnerable to potential claims granted by international arbitrators.

In an effort to minimize that exposure, India has drafted a new set of treaty terms that analysts at Shanghai, China based Ashton Whiteley say can be likened to those utilized by large emerging market economies such as Indonesia and Brazil. Many of India’s foreign investment partners are not responding well to the more restrictive terms being proposed.

Ashton Whiteley analysts say that despite ongoing negotiations between India and its foreign partners for the past 10 months, little progress is being made. Representatives from countries including the European Union, Iran and Australia have told India that, although investors are keen to reach an agreement, the revised treaty terms offer too little protection.

The new model treaty terms offer no provision for investors to institute action for claims against India in the event of any tax-related issues or disputes stemming from actions by local government.

At this time, India is embroiled in more than 20 international arbitration cases and, if it loses, it might end up settling claims for damages to the value of billions of dollars.

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Jeff Wang
Market Watch Asia
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