India and international investment law: preserving, delegating, and reclaiming sovereignty

ABSTRACT

Sovereignty is an age-old concept that continues to occupy centerstage in international law discourse. This article attempts to look at India’s tryst with international investment law through the prism of sovereignty, positing it as the right of the state to regulate it in public interest. It divides India’s experience with international investment law in three phases – the periods of preserving (1947–1990), delegating (1991–2010), and reclaiming (2011 onward) sovereignty. The article shows how India’s rendezvous with international investment law moved from zealously guarding India’s sovereign space by not accepting international law on foreign investment in the first four decades of India’s independence to delegating sovereignty to international law on foreign investment from 1991 onward. However, the period from 2011 onward saw India reclaiming some of its ceded sovereignty by significantly altering its terms of engagement with international investment law.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

^1. For a general discussion on BITs see Rudolf Dolzer, Ursula Kriebaum, and Christoph Schreuer, Principles of International Investment Law (Oxford: Oxford University Press, 2012); Jeswald W. Salacuse, The Law of Investment Treaties (Oxford: Oxford University Press, 2015). The total number of BITs (signed but not enforced) by the end of 2020 stood at 2943. See “Recent Developments in the IIA Regime: Accelerating IIA Reform,” United Nations Conference on Trade and Development, https://unctad.org/system/files/official-document/diaepcbinf2021d6_en.pdf (accessed August 25, 2021).

^2. Dolzer, Kriebaum, and Schreuer, Principles of International Investment Law, 13.

^3. For example see Aniruddha Rajput, Protection of Foreign Investment in India and Investment Treaty Arbitration (Hague: Kluwer International, 2017); Grant Hanessian and Kabir Duggal, “The Final 2015 Indian Model BIT: Is This the Change the World Wishes to See,” ICSID Review – Foreign Investment Law Journal 32, no 1 (Winter 2017): 216–226.

^4. See also Prabhash Ranjan, India and Bilateral Investment Treaties: Refusal, Acceptance, Backlash (New Delhi: Oxford University Press, 2019).

^5. Martti Koskenniemi, “What Use for Sovereignty Today?” Asian Journal of International Law 1 (2011): 61–70.

^6. “Military and Paramilitary Activities in and Against Nicaragua,” Nicaragua v. United States of America, Merits, Judgment, I.C.J. Reports (1986): 14, para 212.

^7. Wenhua Shan, “From North-South Divide to Private-Public Debate: Revival of the Calvo Doctrine and the Changing Landscape in International Investment Law,” Northwestern Journal of International Law and Business 27 (2007): 631.

^8. Jorge E. Vinuales, “Sovereignty in Foreign Investment Law,” in Foundations of International Investment Law: Bringing Theory into Practice, ed. Zachary Douglas, Joost Pauwelyn, and Jorge E Vinuales (Oxford/New York: Oxford University Press, 2014), 317–18. See also Rashwet Shrinkhal, “Indigenous sovereignty and right to self-determination in international law: A critical appraisal,” AlterNative: An International Journal of Indigenous Peoples 17, no. 1 (2021): 71–82.

^9. Vinuales, “Sovereignty in Foreign Investment Law,” 319–20.

^10. Ibid.

^11. Georgios Dimitropoulos, “National Sovereignty and International Investment Law: Sovereignty Reassertion and Prospects of Reform,” Journal of World Investment and Trade 21 (2020): 71–103.

^12. Lone Wandahl Mouyal, International Investment Law and Right to Regulate (New York: Routledge, 2016), 31.

^13. Ibid.

^14. See also “The Case of the S.S. Lotus,” France v. Turkey, Judgement, Permanent Court of International Justice, September 7, 1927.

^15. The term “treatification” is borrowed from the work of Jeswald Salacuse. Salacuse, The Law of Investment Treaties.

^16. See Kenneth J. Vandevelde, The First Bilateral Investment Treaties: US Post War Friendship, Commerce and Navigation Treaties (New York: Oxford University Press, 2017).

^17. Salacuse, The Law of Investment Treaties, 98.

^18. Ibid., 100. See also F.A. Mann, “British Treaties for the Promotion and Protection of Investments,” British Yearbook of International Law 52 (1981): 241.

^19. “Bilateral Investment Treaties 1959–1999,” United Nations Council on Trade and Development, https://unctad.org/system/files/official-document/poiteiiad2.en.pdf (accessed March 30, 2023).

^20. Ibid.

^21. Convention on the Settlement of Investment Disputes between States and Nationals of Other States, October 14, 1966 (ICSID Convention).

^22. For a discussion on NIEO see Upendra Baxi, “The New International Economic Order, Basic Needs and Rights: Notes Towards Development of the Right to Development,”’ in Role of Law and Judiciary in Transformation of Society, ed. D.A. Desai (Kamlakar Prakashan: New Delhi, 1984). See also K.B. Lall, “India and the New International Economic Order,” International Studies 17 (1978): 435.

^23. S. Rao, “Bilateral Investment Promotion Agreements: A Legal Framework for the Protection of Foreign Investments,” Commonwealth Law Bulletin 26 (2000): 623–624. Also see Antony Anghie and B S Chimni, “Third World Approaches to International Law and Individual Responsibility in Internal Conflicts,” Chinese Journal of International Law 2, no. 1 (2003): 77–82.

^24. For more on ALCC (now AALCO), see “Asian African Legal Consultative Organization,” http://www.aalco.int/ (accessed March 30, 2023).

^25. “Principles Concerning Admission and Treatment of Aliens,” Asian Legal Consultative Committee, http://www.aalco.int/PRINCIPLES%20CONCERNING%20ADMISSION%20AND%20TREATMENT%20OF%20ALIENS.pdf (accessed August 31, 2022).

^26. “Permanent sovereignty over natural resources,” General Assembly resolution 1803 (XVII), December 14, 1962, https://www.ohchr.org/en/instruments-mechanisms/instruments/general-assembly-resolution-1803-xvii-14-december-1962-permanent#:~:text=1.,people%20of%20the%20State%20concerned (accessed March 10, 2018).

^27. Ibid., para 1.

^28. Yolanda T. Chekera and Vincent O. Nmehielle, “The International Law Principle of Permanent Sovereignty over Natural Resources as an Instrument for Development: The Case of Zimbabwean Diamonds,” African Journal of Legal Studies 6 (2013): 69–101.

^29. “Charter of Economic Rights and Duties of States,” United Nations General Assembly, A/RES/29/3281, December 12, 1974, https://legal.un.org/avl/ha/cerds/cerds.html (accessed March 30, 2023).

^30. P C Rao, “Charter of Economic Duties and Rights,” Indian Journal of International Law, 15 (1975): 351–369; S K Chatterjee, “The Charter of Economic Rights and Duties of States: An Evaluation After 15 Years,” International and Comparative Law Quarterly, 40, no. (3) (1991): 669–672.

^31. As cited in S.C. Jain, S.C. 1983, Nationalisation of Foreign Property, A Study in North-South Dialogue, (New Delhi: Deep and Deep Publications: 1983), 236–241.

^32. N. Schrijver, Sovereignty Over Natural Resources: Balancing Rights and Duties (Cambridge: Cambridge University Press, 1997), 106.

^33. R. P Anand, “Role of the ‘New’ Asian-African Countries in the Present International legal Order,” American Journal of International Law, 56 (1962): 383–406.

^34. ICSID, The History of The ICSID Negotiations, https://icsid.worldbank.org/resources/publications/the-history-of-the-icsid-convention (accessed March 30, 2023).

^35. Ibid; Ranjan, India and Bilateral Investment Treaties: Refusal, Acceptance, Backlash.

^36. See also History of the ICSID Convention, 469–470.

^37. Ibid.

^38. Ibid, 476.

^39. “Exchange of Notes Constituting an Agreement Between the United States of America and India Relating to the Guaranty of Private Investments,” Commonwealth Legal Information Institute, September 19, 1957, http://www.commonlii.org/in/other/treaties/INTSer/1957/8.html (accessed March 30, 2023).

^40. Ibid; Rao, “Bilateral Investment Promotion Agreements”

^41. “Exchange of Notes Constituting an Agreement.”

^42. “Budget 1991–92 Speech of Shri Manmohan Singh, Minister of Finance,” Ministry of Finance, July 24, 1991, https://www.indiabudget.gov.in/doc/bspeech/bs199192.pdf (accessed February 24, 2018); M.S. Ahluwalia, “The 1991 Reforms: How Home-grown Were They?,” Economic and Political Weekly 29 (2016): 39.

^43. Ahluwalia, “The 1991 Reforms,” 44–45.

^44. For more details, see Nagesh Kumar, “Liberalisation and Changing Patterns of Foreign Direct Investments,” Economic and Political Weekly 33, no. 22 (1998):1323–1324; Nirupam Bajpai and Jeffery Sachs, “Foreign Direct Investment in India: Issues and Problems,” HIID Development Discussion Paper No. 759, 2001, https://www.earth.columbia.edu/sitefiles/file/about/director/pubs/759.pdf; R. Nagaraj, “Foreign Direct Investment in India in 1990s,” Economic and Political Weekly 38, no. 17 (2003): 1701.

^45. Julien Chaisse and Georgios Dimitropoulos, “Domestic Investment Laws and International Economic Order in the Liberal International Order,” World Trade Review 22, no. 1 (2023).

^46. Anthea Roberts, Henrique Choer Moraes, and Victor Ferguson, “Toward a Geoeconomic Order in International Trade and Investment,” Journal of International Economic Law 22, no. 4 (December 2019): 655–676, https://doi.org/10.1093/jiel/jgz036.

^47. For more on international legalization, see Kenneth W. Abbott, Robert O. Keohane, Andrew Moravcsik, Anne-Marie Slaughter, and Duncan Snidal, “The Concept of Legalization,” International Organization 54, issue 3 (Summer 2000): 401–419.

^48. “Bilateral Investment Treaties 1959–1999.”

^49. “India – United Kingdom Bilateral Investment Treaty,” Investment Policy Hub, United Nations Conference on Trade and Development, March 14, 1994, https://investmentpolicy.unctad.org/international-investment-agreements/treaties/bilateral-investment-treaties/1968/india—united-kingdom-bit-1994- (accessed October 10, 2021).

^50. “India: Bilateral Investment Treaties (BITs),” Investment Policy Hub, United Nations Conference on Trade and Development, https://investmentpolicy.unctad.org/international-investment-agreements/countries/96/india (accessed October 10, 2021). See also Sheela Rai, “From Bilateral to Multilateral Investment Treaty,” Foreign Trade Review 36, no. 3–4 (2001): 66–120.

^51. See Anthea Roberts, “Power and Persuasion in Investment Treaty Interpretation: The Dual Role of States,” American Journal of International Law 104, no. 2 (April 2010):179–225.

^52. “White Industries Australia Limited v. The Republic of India,” United Nations Commission on International Trade Law, Rules, Final Award, November 30, 2011.

^53. Ibid., para 16.1.1 (a).

^54. Prabhash Ranjan, “India and Bilateral Investment Treaties – A Changing Landscape,” ICSID Review – Foreign Investment Law Journal 29 (2014): 419. See also Ranjan, “India and Bilateral Investment Treaties: Refusal, Acceptance, Backlash.”

^55. Vodafone issued an arbitral notice to India under the India – Netherlands BIT for a retroactive taxation measure. The ISDS tribunal ruled that India breached the fair and equitable treatment (FET) provision of the India – Netherlands BIT. See Vodafone International Holdings BV v. Government of India [I], PCA case no. 2016–35 (award not available publicly). Cairn Energy also dragged India to arbitration under the India – UK BIT for a retroactive taxation measure. The tribunal ruled against India holding that the imposition of taxes retroactively breached the FET provision in the India UK BIT. See Cairn Energy PLC and Cairn UK Holdings Limited v. The Republic of India, PCA Case No. 2016–7, award (December 21, 2020).

^56. Tenoch Holdings issued an arbitral notice against India under the India-Russia BIT and India-Cyprus BIT for withdrawal of approval to grant telecom licenses. See Tenoch Holdings Limited, Mr Maxim Naumchenko & Mr. Andre Poluektov v. The Republic of India, PCA case no. 2013–23. Although the BIT award is not in public domain, according to a press release issued by the Indian government, the BIT tribunal dismissed all the claims of the investor in their entirety. See “BIT Claims Against India Dismissed,” Ministry of Finance, https://www.italaw.com/sites/default/files/case-documents/italaw11106.pdf (accessed January 20, 2020).

^57. CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited, and Telecom Devas Mauritius Limited v. The Republic of India, PCA case no. 2013–09, award on jurisdiction and merits (July 25, 2016); Deutsche Telekom AG v The Republic of India, PCA case no. 2014–10, interim award (December 13, 2017).

^58. Ras-AI-Khaimah Investment Authority v. The Republic of India https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/767/rakia-v-india (accessed May 11, 2022).

^59. Nissan Motor Co. Ltd v. The Republic of India, PCA case no. 2017–37, decision on jurisdiction (April 29, 2019). India lost the case on the issue of jurisdiction. Some other notices of arbitration include the case of France’s Louis Dreyfus Armateurs (LDA) against India under the India – France BIT challenging a series of measures adopted by the Indian government that allegedly prevented the implementation of a joint venture project to modernize the port of Haldia in Kolkata, India. See Louis Dreyfus Armateurs SAS v. The Republic of India, PCA case no. 2014–26, final award (September 11, 2018). The tribunal ruled in favor of India.

^60. Author’s compilation from UNCTAD, Investment Policy Hub, India, https://investmentpolicy.unctad.org/investment-dispute-settlement/country/96/india

^61. Louis T. Wells, “Backlash to Investment Arbitration: Three Causes,” in The Backlash against Investment Arbitration: Perceptions and Reality, ed. Michael Waibel, Asha Kaushal, Kyo-Hwa Chung, and Claire Balchin (London: Kluwer Law International, 2010): 341.

^62. Prabhash Ranjan, “Investor-State Dispute Settlement (ISDS) Cases and India: Affronting Regulatory Autonomy or Indicting Capricious State Behaviour?,” Journal of International Trade Law and Policy 21, no. 1 (2022): 42–64. See also Prabhash Ranjan, India and ISDS: Affronting Sovereingty or Indicting Capriciousness (London: Routledge, 2024).

^63. “Major policy initiatives/achievements/highlights of the year 2016,” Department of Economic Affairs, Ministry of Finance, Government of India, http://dea.gov.in/sites/default/files/Year%20End%20Review%20Final%20.pdf (accessed December 2016): 16.

^64. “Model Text for the Indian Bilateral Investment Treaty,” Department of Economic Affairs, Ministry of Finance, Government of India, 2016, https://dea.gov.in/sites/default/files/ModelBIT_Annex_0.pdf.

^65. See “Bilateral Investment Treaties (BITs)/Agreements,” Department of Economic Affairs, Ministry of Finance, Government of India, https://dea.gov.in/bipa (accessed August 10, 2021). For a detailed discussion on India’s BITs see Ranjan, India and Bilateral Investment Treaties: Refusal, Acceptance, Backlash.

^66. For more on these so-called “survival clauses” in BITs, see James Harrison, “The Life and Death of BITs: Legal Issues Concerning Survival Clauses and the Termination of Investment Treaties,” The Journal of World Investment & Trade 13, no. 6 (2012): 928–950.

^67. “Cairn arbitration award | Nirmala says it’s her duty to appeal,” The Hindu, https://www.thehindu.com/business/Economy/cairn-arbitration-award-nirmala-says-its-her-duty-to-appeal/article33996150.ece (accessed March 5, 2021).

^68. See “Model Text for the Indian Bilateral Investment Treaty,” articles 15.1 and 15.2.

^69. See “Model Text for the Indian Bilateral Investment Treaty,” article 15.5(iii).

^70. See Dimitropoulos, “National Sovereignty and International Investment Law.”

^71. South Africa is a good example of this.

^72. The European Union and Canada are good examples of this.

^73. See Chaisse and Dimitropoulos, “Domestic Investment Laws and International Economic Order;” Jarrod Hepburn, “The Past, Present, and the Future of Domestic Investment Laws and International Economic Law,” World Trade Review 22, no. 1 (February 2023): 18–34.

^74. Chaisse and Dimitropoulos, “Domestic Investment Laws and International Economic Order,” 2.

^75. Ibid.

^76. Prabhash Ranjan, “A Domestic Law May Not Protect Foreign Investments in India,” Hindustan Times, https://www.hindustantimes.com/analysis/a-domestic-law-may-not-protect-foreign-investments-in-india/story-x4QNAT1o2jBtFhJ1Hq4C2M.html (accessed February 4, 2020).