Background and salient features of Bilateral Investment Promotion and Protection 
Agreement (BIPA)


As part of the Economic Reforms Programme initiated in 1991, the foreign investment policy of the Government of India was liberalised and negotiations undertaken with a number of countries to enter into Bilateral Investment Promotion & Protection Agreement (BIPAs) in order to promote and protect on reciprocal basis investment of the investors.  Government of India have, so far, signed BIPAs with 68 countries out of which 53 BIPAs have already come into force and the remaining agreements are in the process of being enforced. In addition, agreements have also been finalised and/ or being negotiated with a number of other countries.


 The objective of Bilateral Investment Promotion and Protection Agreement is to promote and protect the interests of investors of either country in the territory of other country.  Such Agreements increase the comfort level of the investors by assuring a minimum standard of treatment in all matters and provides for justifiability of disputes with the host country.

The salient features of BIPA are :

(i)       Under Article 1, “Investment” is defined as every kind of asset, including Intellectual Property Rights (IPRs) in accordance with laws and regulations of the country in which the investment is made. This Article also defines, inter alia, “investor”, “returns” and “territory”.

(ii)      In Article 2, the scope of the Agreement extends to investments made by the investors of the either Contracting Party whether made before or after coming into force of the Agreement.

(iii)      In Article 3, each Contracting Party is required to encourage and create favourable conditions for, and fair and equitable treatment to investors and allow admission of investment in accordance with its laws and policies.
 

(iv)     Article 4 provides  for   extending   National   Treatment  and Most   Favoured  Nation (MFN) treatment to foreign investments, with an MFN treatment in addition for investors. National Treatment requires each government to accord to investments, treatment no less favourable than that accorded to investments of its own investors or investment of investors of any other third State.  Departures from MFN and NT will be permissible on matters concerning taxation, existing or future customs unions or similar international agreement.  
 

(v)        Article 5 of the Agreement provides that nationalization or expropriation shall not be resorted to except in public interest in accordance with law, on a non-discriminatory basis, and against compensation. Nationalization or expropriation shall also be subject to review by a domestic judicial or other independent authority. A protocol has also been added to explain the term “expropriation” in Article 5.  This protocol is intended to protect the investors from “creeping” or “indirect” expropriation, on the one hand, and the Contracting Party from frivolous litigation, on the other.
 

(vi)     Article 6 enumerates the special conditions under which compensation for losses is to be paid.  
 

(vii)     Under Article 7 each country shall grant to investors of the other country, free transfer of investments and returns without unreasonable delay and on a non-discriminatory basis.
 

(viii)    Article 8 contains a subrogation clause which requires each Government to recognise rights and claims which may have been subrogated by investors of the other country to its Government or designated agency.
 

(ix)     Under Articles 9 and 10, there are elaborate dispute resolution mechanisms to resolve disputes between an investor and a host Government as well as between the two Governments.  For settlement of disputes between an investor and the host Government, provisions have been incorporated for prior negotiations to resolve disputes as well as for domestic adjudication, conciliation and international arbitration.

(x)      Article 11 provides for entry and sojourn, subject to laws and regulations of the host Government, of personnel for the purpose of engaging in activities connected with investments.
 

(xi)     Article 12 provides the provisions of denial of benefits of the Agreement.
 

(xii)     Under Article 13, all investments shall, subject to the Agreement, be governed by the laws in force in the territory of the Contracting Party in which the investment is made.  This Article also emphasizes the right of host country to take appropriate actions for the protection of its essential security interest or in circumstances of extreme emergency.  

(xiii)    Article 14 provides for precedence to other rules if they are intended to provide more favourable treatment to the investors of either Contracting Party. 
 

(xiv)    Under Article 15, provisions have been made for entry into force of the Agreement. 
 

(xv)     Finally Article 16 provides that the Agreement shall remain in force initially for a period of 10 years. It shall thereafter deemed to be automatically extended and continue to remain in force until the expiry of one year from the date on which either Government gives written notice of termination to the other. To protect existing investments, it has been provided that in respect of investments made before the termination of the Agreement, its provisions shall continue in effect with respect to those investments for a period of 15 years after the date of termination.
 

The Indian model text of BIPA is annexed.