1. Dispute Settlement under the Indian Model BITs
Anirudh Wadhwa
Partner, Wadhwa Law Chambers

2. Dispute Settlement in BITs (Generally)
Most critical aspect in the BIT
BITs give substantive rights to investors. Practical enforcement of those rights is dependent upon dispute settlement provisions.
Investors have private right of action against the Host State
Disputes governed by terms of the BIT and international law, and not law of Host State

3. Dispute Settlement in BITs (Generally)
Two methods
Non-binding methods (negotiation, mediation, conciliation)
Binding investment treaty arbitration before a Tribunal
Ad Hoc with/without Rules (UNCITRAL)
Institutionally administered (ICC)
Institutionally governed (ICSID)

4. Model BITs (Generally)
Model BITs serve 3 purposes
“Basis for negotiation”
Form the starting point for negotiations for entering into future BITs
“Signalling effect”
It is a valuable signal/indicator as to the policy of the State regarding protection of investor rights
“Guidance in interpretation”
The stand of a particular State country on a particular issue is apparent from the text of a model BIT. In the event there is a departure from such stand in the final/executed BIT – it is helpful for interpretation

5. Indian Model BIT 2003 Investor-State Dispute Settlement [Article 9]
Attempt at amicable settlement (6 months)
If there is no settlement, then upon agreement of parties, to Domestic Courts or Conciliation
In absence of agreement, to Investment Arbitration
ICSID; or
ICSID Additional Facility; or
Ad hoc under UNCITRAL Arbitration Rules.
State-State Dispute Settlement [Article 10]
“Interpretation or application” of the BIT

6. 2015 Model BIT (Background)
1994 – India signed the first BIT with the UK
Till 2011, India did not have to deal with BIT Claim
In 2011 – Award in White Industries case
Since then over 17 notices have been served on the Indian government
Prompted the government to come out with a “Draft Model BIT” in 2015

7. 2015 Draft Model BIT (Major Policy Re-allignment)
Stark re-alignment of policy from “investor friendly” to “regulator friendly”. Clear from the Preamble to the 2015 Model BIT which provides –
“Reaffirming the right of Parties to regulate Investments in their territory in accordance with their Law and policy objectives including the right to change the conditions applicable to such Investments; and
Seeking to align the objectives of Investment with sustainable development and inclusive growth of the Parties;”

8. 2015 Draft Model BIT (Dispute Resolution)
Chapter IV (Dispute Resolution Provisions)
Only ad hoc UNCITRAL arbitration (14)
Prohibition on use of dispute resolution mechanism to obtain “money” from the Host State (14.1)
Limits to jurisdiction (14.2)
“Exhaustion of local remedies rule” (14.3)
Express permissibility for counter-claims (14.3)
Conflicts of interest of arbitrators (14.6)
Transparency Guidelines (14.8)

9. 260th Law Commission Report
LCI examined the 2015 Model BIT in 260th Report
“The Report is presented with a view to assist the Government in achieving a balanced negotiating text, that takes into consideration the protection of Indian investors investing abroad, as well as safeguarding the regulatory powers of the State.”
Fundamental points were made for consideration of the Government.
Article 14 – certain drafting and clarificatory changes were proposed

10. 260th Law Commission Report (contd.)
Pre-arbitration processes
Mandatory pre-condition or directory?
Neutrality of arbitrators
Exhaustive standard needed
Inclusion of IBA Guidelines on Conflicts of Interest

11. 260th Law Commission Report
Criticism for rules of exhaustion of local remedies/ any legal issue finally settled by judicial authority of Host State cannot be reviewed [Undoing White Industries v India]
Against the Articles of State Responsibility [Judiciary as an organ of a State]
“It is hard to contemplate too many scenarios where an investor would comply with the provision for exhaustion of local remedies and yet overcome the jurisdictional bar imposed by Article 14.2(2).”

12. 2015/2016 Model BIT (Overview)
Investor-State Dispute Settlement [Chapter IV]
Departures from the 2015 Draft Model BIT
Article 14 (Stay of Proceedings)
Article 15 (Conditions Precedent)
Exhaustion of local remedies
Best efforts to amicably resolve
Limitation – 6 years from cause of action, 1 year from exhaustion of local remedy
Prior notice to arbitrate (90 days prior)

13. 2015/2016 Model BIT (Overview)
Departures from the 2015 Draft Model BIT
Article 16 (Submission to Arbitration)
ICSID
ICSID Additional Facility
Ad Hoc (UNCITRAL Rules)
Article 27 (Finality and enforcement of awards)
Claim considered to arise out of “commercial relationship” and expressly recognised to be enforceable under New York Convention, 1984
Article 29 (Appeals Facility)
Upon Agreement of States

14. Conclusions Policy of Indian Government has been oscillating
2003 Model BIT was investor friendly – but provisions were “vague” and little guidance was provided for the arbitral tribunal
2015 Draft Model BIT – attempt by Government to assert its regulatory power and went too far
2015/2016 Model BIT represents a turnaround – balanced and more nuanced
BITs yet to be concluded with important investor countries like USA etc.

15. Dispute Settlement under the Indian Model BITs
THANK YOU.
Anirudh Wadhwa
Partner, Wadhwa Law Chambers