India-UAE investment treaty implemented from Aug 31, 2024: FM Sitharaman

The government on Monday said bilateral investment treaty (BIT) signed between India and the UAE has been enforced from August 31 this year.

The BIT was signed on February 13 this year at Abu Dhabi, UAE, and it entered into force with effect from August 31, 2024, the finance ministry said.

Enforcement of this pact with the UAE gives continuity of investment protection to investors of both the countries, as the earlier Bilateral Investment Promotion and Protection Agreement (BIPPA) between India and the UAE signed in December 2013 expired on September 12 this year.

As per the treaty, the UAE investors must have to exhaust domestic remedies (for at least three years) before commencing arbitration under the BIT. The time period earlier was five years.

The other key features of the pact included provisions of closed asset-based definition of investment with coverage of portfolio investment; treatment of investment with obligation for no denial of justice, no fundamental breach of due process, no targeted discrimination and no manifestly abusive or arbitrary treatment.

It also includes the scope carved out for measures such as those related to taxation, local government, government procurement, subsidies or grants and compulsory license; and no investor claim in case investments is involved with corruption, fraud, round tripping.

However, while providing investor and investment protection, balance has been maintained with regard to the state's right to regulate and, thereby providing adequate policy space.

The treaty provides for protection to investments from expropriation, provides for transparency, transfers, and compensation for losses.

The UAE is the seventh largest with a share of 3 per cent in the total foreign direct investment (FDI) received in India, with cumulative investment of about USD 19 billion from April 2000-June 2024.

India also made 5 per cent of its total overseas direct investments in the UAE to the tune of USD 15.26 billion from April 2000-August 2024.

India-UAE BIT is expected to increase the comfort level and boost the confidence of the investors by assuring minimum standard of treatment and non-discrimination while providing for an independent forum for dispute settlement by arbitration.

"The treaty is expected to pave the way for increased bilateral investments, benefiting businesses and economies in both countries," the ministry said.

Both countries have also implemented a free trade agreement, which came into force on May 1, 2021.