India-UAE Investment Promotion and Protection Treaty will come into effect from August 31

New Delhi| The bilateral investment treaty (BIT) signed between India and the United Arab Emirates (UAE) has come into force since August 31 this year, the government said on Monday. The BIT was signed in Abu Dhabi, United Arab Emirates, on February 13 this year and will come into effect from August 31, 2024, the finance ministry said.

The entry into force of this agreement with the United Arab Emirates provides continuity of investment protection to investors from both countries, as the Bilateral Investment Promotion and Protection Agreement (BIPPA) signed in December 2013 between India and the United Arab Emirates expired on 12 September this year.

According to the treaty, UAE investors must exhaust domestic remedies (at least three years) before initiating arbitration under the BIT. Earlier this time period was five years. Other key features of the agreement included provisions for a closed asset based definition of investment covering portfolio investment; Treatment of investments with an obligation not to deny justice, not to fundamentally violate due process, not to target discrimination and not to behave in a clearly abusive or arbitrary manner.

It also includes scope created for measures related to taxation, local government, government procurement, subsidies or grants and compulsory licenses; And if the investment is related to corruption, fraud, round tripping then investors will not be able to make claims. However, while providing protection to the investor and the investment, a balance has been maintained with respect to the State’s right to regulate, thereby providing adequate policy space.

The Treaty provides for protection of investments from acquisitions, provides for transparency, transfers and damages for loss. The UAE is the seventh largest country with a share of 3 per cent of the total foreign direct investment (FDI) received in India, with cumulative investment of around USD 19 billion from April 2000 to June 2024. The India-UAE BIT is expected to increase the level of comfort and confidence among investors as it will ensure minimum standards of behavior and non-discrimination, as well as provide an independent platform for dispute settlement through arbitration.

“This treaty is expected to pave the way for increased bilateral investment, which will benefit businesses and economies in both countries”, the ministry said The two countries have also implemented a free trade agreement, which has been in place since May 1, 2021.