EU dithers on renewing pact with India, uncertainties over investment protection after April
Financial Express | 11 January 2017
EU dithers on renewing pact with India, uncertainties over investment protection after April
With the EU yet to respond to India’s request for a renegotiation of the Bilateral Investment Promotion and Protection Agreements (BIPA) its member-nations had entered into with New Delhi earlier, uncertainties loom over protection to fresh investments made by companies in each other’s territory after April 1.
India has made it clear that all such bilateral investment agreements with other nations modelled after the earlier text will become null and void on April 1, 2017 and that both existing and fresh pacts have to be based on the new model text approved by the Cabinet (in December 2015), commerce and industry minister Nirmala Sitharaman said.
According to Sitharaman, India had informed the EU a year in advance about the expiry of the old pacts by the end of March, 2017, and the need for re-negotiating the investment agreements on the basis of the model investment text. Still, India is yet to get a date from the EU for starting the renegotiation process, she said. Under the European Commission (EC) framework of law, EU members have delegated their power to the EC in Brussels to negotiate on trade or investments on their behalf.
Analysts said while existing investors could enjoy protection for an additional 10-15 years even after the expiry of the agreement due to a sunset clause attached to these pacts (For instance, the agreement with Netherlands extends protection to investments made before the date of termination for 15 years more), fresh investments from April will not have such protection until the two sides renegotiate.
Last year, the EU had expressed concern on the fate of investment treaties between some of its members and India after the finance ministry had written to various countries, seeking a review of all such pacts within a year using the new investment text.
India had signed a total of 83 bilateral investment treaties (BITs) since 1994, including those with some of the EU members.
EU nations like Germany, France and Netherlands are among the top ten foreign direct investment sources for India since April 2000, while the UK–which has decided to exit the EU–is the third-largest source. Analysts have said India can have a separate pact with the UK now that the latter has decided to pull out of the EU. However, Sitharaman said the decision to renegotiate the treaties won’t impact the flow of FDI into India.
Separately, India also recently revised its Double Taxation Avoidance Agreement (DTAA) with Singapore, having tweaked its tax treaties with Mauritius and Cyprus earlier last year, as the country aims to plug the loopholes that were used by companies to avoid legitimate taxes.
New issues at WTO only after consensus
After meeting officials to review the country’s strategy for the WTO, Sitharaman said India wants new issues such as e-commerce and government procurement be incorporated in the WTO’s agenda only after member countries gather a consensus on them. When told that developed nations, including the US, are pitching for the inclusion of such new issues at the WTO, the minister said no consensus has emerged so far on them.
“New issues have to come in agenda only after consensus emerges on those. I do not think there is a consensus. Discussions are on but it is not in the agenda,” she said.
Key WTO members, including India, the US and some others, would meet on the sidelines of World Economic Forum meeting in Davos later this month. The next WTO ministerial is also scheduled take place in Argentina in December.
India to focus on TFA on services
The minister said her ministry has already worked on the text of a trade facilitation agreement (TFA) on services at the WTO and has also taken a legal vetting.
“We will certainly want to put TFA in services for discussion. We would take it up as an agenda as we approached the Ministerial meeting. We will be pushing ahead with this,” she added.
