Why India has paused bilateral investment treaty talks with UK
What's the story
India and the United Kingdom have put their bilateral investment treaty (BIT) negotiations on hold. The suspension comes amid disagreements over the UK's demand for most-favored-nation (MFN) status and tax concessions. A senior government official told Moneycontrol that India is tipped to stick to its position of excluding taxation from BITs while negotiating with other trading partners.
Negotiation challenges
Why MFN status was needed in BIT questioned
The official said, "The BIT with the UK is not happening because there are some clauses that are a concern for us." They added that one of the sticking points is taxation, with India wanting a complete carve-out of taxation from BITs. The official also questioned why MFN status, which is a trade concept, was needed in a BIT.
Continued discussions
India continues to negotiate BITs with other countries
Despite the pause in talks with the UK, India continues to negotiate BITs with at least five other countries. These include the European Union (EU), Bahrain, and Maldives. Talks are also underway with Saudi Arabia, where some flexibility on positions has been observed. The official said, "FTAs can be concluded faster than BITs," indicating India's strategy to prioritize free trade agreements over bilateral investment treaties at this stage.
BIT framework
India's model BIT excludes taxation, subsidies, and government procurement
India's model BIT aims to strike a balance between protecting investors and maintaining sovereign regulatory powers. It excludes sensitive areas such as taxation, subsidies, and government procurement to maintain policy space. This reluctance to include taxation in BITs is driven by India's focus on sovereignty and retaining full control over fiscal policy, while avoiding investor claims through arbitration on tax matters.