The BIT, which replaces the earlier model agreement of 1993, explicitly stipulates that the treaty will not apply to government procurement, subsidies, services supplied in the exercise of governmental authority.
The model text of BIT, which has been uploaded on the Finance Ministry website, said it will not apply on "any law or measure regarding taxation, including measures taken to enforce taxation obligations".
The model BIT also excludes matters such as compulsory licences granted in relation to intellectual property rights to preserve the regulatory authority of the government.
"The new Indian model BIT text will provide appropriate protection to foreign investors in India and Indian investors in the foreign country in light of relevant international precedents and practices while maintaining a balance between the investor's rights and the government obligations," the government had said in a statement.
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The BIT, it is hoped, would increases the comfort level and boosts the confidence of investors by assuring a level- playing field and non-discrimination in all matters while providing for an independent forum for dispute settlement by arbitration.
It would also help project India as a preferred foreign direct investment (FDI) destination as well as protect out-bound Indian FDI.
The essential features of the model BIT include an enterprise-based definition of investment, non-discriminatory treatment, protections against expropriation, a refined Investor State Dispute Settlement (ISDS) provision requiring investors to exhaust local remedies before commencing international arbitration, and limiting the power of the tribunal to awarding monetary compensation alone.