India-UAE Investment Promotion and Protection Treaty will come into force from August 31, Finance Ministry informed

On Monday, the government said the Bilateral Investment Treaty (BIT) signed between India and the United Arab Emirates (UAE) has come into force from August 31 this year. "The BIT was signed in Abu Dhabi, UAE on February 13 this year and it will come into force from August 31, 2024," said the Finance Ministry. 

As this agreement came into action, the UAE continues to protect investors from both countries, as the Bilateral Investment Promotion and Protection Agreement (BIPPA) signed between India and the UAE in December 2013 expired on September 12 of this year.

As per the treaty, the UAE investors are subject to a domestic remedy-a minimum period of three years before initiating arbitration under the BIT. The time period beforehand was five years. Other salient features of the agreement comprise the following: a closed asset-based definition of investment, including portfolio investment; treatment of investments regarding obligations not to deny justice, not to commit fundamental violations of due process, not to engage in targeted discrimination, and not to commit clearly abusive or arbitrary treatment.

This also extends to the following scope given to measures with respect to taxation, local government, government procurement, subsidies or grants, and compulsory licensing; and that investors will not be able to make claims insofar as the investment is linked to corruption, fraud, or round-tripping. While protection is accorded to investors and investments, there has been a balancing with respect to the State's right to regulate by giving a sufficient policy space.

This also forms part of the protection provided under the treaty, covering expropriation, transparency, transfer, and compensation for losses. The UAE happens to be the seventh largest country with a share of 3 percent in total FDI received in India; its cumulative investments from April 2000 to June 2024 stood at approximately USD 19 billion. The India-UAE BIT should raise the comfort level and confidence of investors, as there will be minimum standards of treatment and non-discrimination, besides an independent forum for dispute settlement through arbitration.

The treaty is expected to pave the way for increased bilateral investments and will augur well for businesses and economies of both countries," the ministry said. The two countries have also signed a free trade agreement, which came into effect on May 1, 2021.