[Ip-health] Bilateral investment treaties negotiations put on hold

Shailly Gupta shailly.gupta at geneva.msf.org
Tue Jan 22 05:56:26 PST 2013

BIPA talks put on hold


In a significant development, the Union Government has ordered a freeze of
all Bilateral Investment Protection Agreements (BIPA) negotiations till a
review of the model text of BIPA is carried out and completed. This follows
a spate of show cause notices on the Government by foreign companies seeking
to recover their investments under the agreement.

The freeze will continue till the Government reviews the model text of BIPA
is completed. The issue has figured in summit meetings with Russian
President Valdimir Putin having raised the issue in his annual meeting with
Prime Minister Manmohan Singh last month.

The spate of notices under BIPA began with the Vodafone case but the Supreme
Court's cancellation of the 2G licenses led to more companies following suit
with firm backing from governments where they are headquartered. The adverse
experience with BIPA with an estimated $5 billions hanging in balance could
dampen the Foreign Office's enthusiasm of inking the pact with a large
number of countries.

Fearing the Government could be flooded with more notices in future, the
Ministries of Finance and Commerce & Industry felt it was time India carried
out a review of the model text of BIPA and therefore decided to put on hold
all negotiations pertaining to BIPA till a thorough review is carried out.
"It has been decided to review the model text of BIPA in the light of
arbitration notice[s] received under different BIPAs. Therefore, pending
review of the model text, all BIPA negotiations have been kept on hold. The
government will proceed to negotiate BIPA agreements expeditiously once the
review is complete,'' said a communication by the Department of Economic

Vodafone was first off the blocks with a notice to the government stating
that it was covered under BIPA as an investor defined under Article 1(d) of
the treaty. Its Dutch subsidiary Vodafone International Holdings BV served
the notice. This was soon followed by another round of notices issued in the
aftermath of Supreme Court cancelling 122 telecom licenses resulting in
companies like Russian telecom giant Sistema, Norwegian telecom company
Telenor and UAE-based Etislat.   

Till date, India has signed BIPAs with 82 countries of which 72 treaties
have been enforced. The first BIPA was signed in 1994 with UK. Besides,
India has signed 17 Free Trade Agreements, Comprehensive Economic
Partnership Agreement (CEPA), Comprehensive Economic Cooperation Agreement
(CECA) and Preferential Trade Agreements (PTAs).

Among the companies that have s served notices under BIPA are Devas
Employees Mauritius [BIPA with Mauritius]; Sistema Joint Stock Financial
Corporation [Russia]; Telenor Asia [Singapore]; Capital Global Limited and
Kaif Investment Limited [both Mauritius based-investors in Loop Telecom
Limited under BIPA with Mauritius]; Vodafone International [the
Netherlands]; and, the Children's Investment Fund Management [the UK and

Following outcry by foreign investors and show cause notice issued by
Vodafone on the issue, the government had last year constituted an
inter-Ministerial Group (IMG) to look into the issue. The IMG had concluded
that international taxation issues don't come under BIPA. The IMG had also
concluded in the Vodafone case that the issue was not covered under the
India and the Netherlands BIPA. In fact, the feedback to the IMG from all
the Ministries had indicated that taxation issues were not covered under
BIPA. The group headed by Revenue Secretary also included Secretaries of the
Department of Economic Affairs, Law and Justice Ministry, Telecom Ministry
and the Ministry of External Affairs.

Shailly Gupta
Policy Advocacy Officer
Medecins Sans Frontieres
Access Campaign
C 236 Defence Colony
New Delhi, India
Tel: +91 11 46573730-31
M: 9899976108

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