US team to push for easy investment laws

Economic Times | 3 Aug 2009

US team to push for easy investment laws

Amiti Sen, ET Bureau

NEW DELHI: A team from Washington will visit New Delhi next week to discuss liberalisation of investment laws that had taken a back seat due to
elections in both the countries.

Since this interaction will be a first on investment laws between the Obama regime and the new UPA government, both sides will test the waters to see how aggressively they can push their interests, a government official involved in the negotiations said.

“The interaction is scheduled for August 11. While the US stand on most areas being discussed under the pact is expected to be same as before, its priorities may have changed. If the new team is less aggressive on certain issues, the talks could get a boost,” the official said on the condition of anonymity.

The main contention in the bilateral investment talks last year was the US’ insistence on pre-investment national treatment for its investors. In such an arrangement, India will have to take responsibility for losses incurred by a US company before it actually invests here if the loss is due to a policy change.

So, if a US company spends money on market research before it invests here, India will be responsible for making good the losses if that company is unable to invest here due to a policy change or a government decision.

So far, India has extended only post-investment national treatment to countries with which it has investment promotion agreements. Under post-investment national treatment, once a foreign company invests in India, it will be subject to the same laws for investment protection that are applicable to domestic investors. However, it has no obligations for losses incurred by companies in the pre-investment stage.

“India is comfortable with extending post-investment national treatment. It does not want to be pushed into something it does not want to offer,” the official said. The US also wants that the bilateral treaty should allow a foreign investor to take a dispute with the host government to an international arbiter for settlement. The official said India has been opposing the proposal on the ground that it would lead to the country losing its sovereignty on the issue.

India has signed a number of bilateral investment promotion agreements with trading partners such as Australia, UK, France, Germany and Russia, but it has extended post-investment national treatment only to Singapore.

source: Economic Times