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India has started negotiations over a new draft bilateral investment treaty, the final version of which is will replace existing investment protection agreements with 83 countries.
A group of officials from the finance and commerce ministries is in Canada for discussions on the treaty draft. This was the beginning of a long process with Canada and other nations, sources said.
Comments are being invited from the public till April 10 on the treaty draft. The government has kept tax disputes out of the draft to avoid arbitration. A proposal in the draft states if India deems a dispute to be tax-related, multinational companies cannot invoke the treaty in international arbitration.
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British telecom company Vodafone has invoked the India-Netherlands investment protection agreement seeking arbitration over a Rs 20,000-crore tax dispute. Finnish mobile handset maker Nokia has resorted to a similar treaty to resolve a tax claim. Cairn Energy, too, has sought compensation from India for a Rs 10,200 crore tax notice on Cairn India.
The treaty draft also proposes to make it difficult for foreign companies to seek arbitration. Tribunals will not have the jurisdiction to re-examine any legal issue settled by an Indian judicial authority. They also cannot question India's determination of whether a measure was taken for the public purpose or in compliance with its law.
