The UAE is insisting on signing the Bilateral Investment Protection Agreement with India before making serious investment in the country including that of the proposed Etihad deal with Jet Airways. UAE’s demand for BIPA has informed at the meeting of the India-UAE task force on investmen at New Delhi.
Bilateral investment Treaties (BITs) are agreements between two Countries for the reciprocal promotion and protection of investments in each other’s territories by individuals and companies situated in either country. The basic purpose of BIPA is to protect the investment made in other countries. So far India has signed eighty two BIPAs with different countries.
The demand for the BIPA from UAE comes in the context of two developments. First is the cancellation of telecom licenses of Telenor and Sistema by the Supreme Court. Second factor which induces UAE to go for the BIPA is the troublesome environment prevailing in the country’s aviation sector. The scoop down of Kingfisher is a warning to investors even though the adverse environment may not last long.
It is already known that both foreign companie- Sistema and Telenor are going to file suit against India for the loss of their money due to the cancellation. The arbitration will be held at international courts on the basis of the Bilateral Investment Protection Agreement that India has signed with Singapore and Russia respectively
Also, the recent attempt to amend Section 9 of the Income Tax Act by the government in a retrospective manner has also generated fear and loss of confidence on the Indian system by many foreign companies. Investment bankers and dealers of cross national M&A have identified that the measure has generated aversion among foreign companies towards India.
On the other hand, BIPA has already emerged as a shield for cross national investments. Important part of the BIPA is that it is binding on the signatories for protecting the interest of investors. Already, the White Industries of Australia has filed a case against India and won AUS $ 4.08mn against Coal India Limited at the ICC (International Court for Arbitration). Similarly, Children’s Investment Fund of UK is going to sue the government on the same issue. For UAE, formation of BIPA with India and giving the Etihad –Jet deal a coverage under the agreement will be safe.
