Critically analyse the treatment of investor-state dispute settlement (ISDS) in India's recent trade agreements.

ISDS allows a foreign investor to sue the host State directly before an international tribunal. Since the 2016 Model BIT, India has treated ISDS as a sovereignty risk to be contained rather than an investment incentive to be offered — a defensive posture that recent treaties only partially soften.

How recent agreements treat ISDS

• Narrowed arbitration route: the Model BIT requires investors to exhaust local remedies before commencing international arbitration and confines tribunals to awarding monetary compensation alone [1].
• Carve-outs in BITs: the India-UAE BIT (2024), in force 31 August 2024, uses a closed asset-based definition of investment and excludes taxation, local government, procurement, subsidies and compulsory licences from its scope [2].
• Omission in FTAs: newer trade pacts such as the India-EFTA TEPA (in force 1 October 2025) build an investment chapter around facilitation targets — USD 100 billion over 15 years and one million jobs — and government-to-government consultation, rather than an investor's right to arbitrate [3].

Merits of this approach

• Protects regulatory autonomy in taxation and public welfare — a genuine concern, given 37 dispute notices raised against India and an adverse award the Standing Committee on External Affairs called a real cost to the exchequer [4].
• Shifts emphasis from litigation to dispute prevention.

Limitations

• The defence is blunt: India terminated BITs with 77 countries, leaving only six older treaties in force, shrinking treaty protection precisely when capital was being courted [4].
• Prolonged recourse to slow domestic courts reads to investors as no remedy at all, pushing seats and institutions towards Singapore, London and Dubai.
• Institutional capacity lags — India relies on costly foreign counsel [4], and the Arbitration Council of India (2019 amendment) is yet to make institutional grading a decisive draw [5].

On balance, India's caution is justified but over-corrected. The Committee's own prescription — precise treaty drafting, pre-arbitration consultation, domestic counsel panels and early implementation of the Permanent Court of Arbitration arrangement [4] — offers the balanced path: defend policy space through better clauses, while making India a credible arbitration hub.