Details of the India EU Free Trade Pact:
#GS II #International Relations
Topic – International Relations:
∙Context:
∙Piyush Goyal, the minister of commerce for the union, claims that it will take longer to negotiate a free trade agreement (FTA) with the union of 27 nations.
∙Mr. Goyal stated that the EU and two to three additional nations are currently involved in active negotiations for FTAs while speaking at the Technotex conference, which was organised by the
business association FICCI in this city.
∙Even with the best efforts of the government, there have been some regulatory obstacles in India for foreign investment.
∙A lawsuit was brought by investors against India: Many multinational corporations, including Vodafone, Cairn Energy, Nissan, White Industries, Telenor, Nokia, and Vedanta, have filed
lawsuits against India to force government to uphold the rights specified in the bilateral investment treaties (BITs). The main reason the EU wants an IPA with India is because of this.
∙Despite India’s history of unilaterally changing the law, investors from the EU are nonetheless protected under Indian law. To the detriment of the investor, it is possible to unilaterally alter
Indian law.
∙Indian courts’ protracted legal procedures agonisingly prolong the decision-making process. This leads to the desire for protection under international law.
∙Before the INDIA-EU Treaty is signed, what obstacles must be overcome?
∙Non-justiciable tax regulations: By declaring tax-related regulatory measures non-justiciable, India seeks to move taxation policy outside the ambit of the treaty. Given India’s recent
experiences with tax-related investment issues with Vodafone, Cairn Energy, and Nissan, the EU finds it difficult to accept this proposition.
∙A two-tiered judicial system In order to settle treaty issues between investors and the state, the EU’s investment plan for India suggests the establishment of a two-tier court like framework with an appellate process and tenured justices.
∙EU guidance for the MIC This idea is connected to the EU’s support for a multilateral investment court (MIC), which is currently the subject of debate at the United Nations Commission on
International Trade Law (UNCITRAL). The investor-state dispute settlement system currently in place, which is based on arbitration, has a number of problems that the MIC attempts to address.
∙Uncertainty surrounds India’s position on the creation of a mechanism comparable to an investment court. India has not formally participated in the UNCITRAL discussions for the
creation of a MIC.
∙What makes MFN and FET problematic?
∙EU wants most-favorable-nation (MFN) status: The EU’s investment plan includes an MFN clause to ensure that EU investors do not face discrimination in comparison to other foreign
investors.
∙India is against including the MFN clause because it is concerned that foreign investors may utilise it to engage in disruptive treaty shopping. On the other hand, India is against including the
MFN clause in its investment treaties. Negotiating for a qualified MFN provision rather than fully rejecting it can prevent this disruptive treaty shopping.
∙Making provisions for equitable and fair treatment (FET) The EU investment proposal contains this condition, however the Indian 2016 Model BIT does not.
∙Why is IPA necessary at this time?
∙The level of FDI is falling: FDI to India has fallen to a level of only 2% of GDP during the past ten years. The EU’s share of foreign investments in India increased from €63.7 billion in 2017 to
€87.3 billion in 2020, but it is still significantly less than its portion of investments in China (€201.2 billion) or Brazil (€263.4 billion).
∙Terminations of BITs have a negative effect. Several studies demonstrate that India’s unilateral move to terminate BITs has hurt FDI inflows into the country.
∙For India to achieve the aspirational milestone of having a $10 trillion GDP by 2030, the IPA with the EU must attract FDI.
∙Conclusion:
∙India must take care of its own affairs. Also, the standing committee on foreign affairs of the
Parliament has urged India to review the 2016 Model BIT.
Source – The Hindu
