UPSC Prelims Practice Questions — India’s Model BIT — a decade later, amid changes

Q1. With reference to how 'investment' is defined in investment treaties, consider the following statements: Which of the statements given above is/are correct?

  1. Moving from an asset-based to an enterprise-based definition widens the range of foreign holdings on which treaty claims can be brought.
  2. An enterprise-based definition ties treaty protection to an enterprise constituted and operating in the host State, rather than to every asset a foreign investor holds.
  3. An asset-based definition can bring portfolio holdings within the scope of treaty protection.
  • A. 2 only
  • B. 2 and 3 only
  • C. 1, 2 and 3
  • D. 1 and 2 only

Q2. Suppose a revised Model BIT text removes taxation from the list of subjects excluded from the treaty, while keeping the other features of the 2015 text. In this context, consider the following statements: Which of the statements given above is/are NOT correct?

  1. Tax measures affecting a covered investment could then be challenged as treaty breaches before an international arbitral tribunal.
  2. The State's exposure to arbitral claims arising from its fiscal policy would increase.
  3. Indian courts would lose jurisdiction to hear tax disputes involving foreign investors.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 3 only

Q3. Which of the following standards of protection for foreign investors are provided in India's 2015 Model BIT text?

  1. National Treatment
  2. Most-Favoured-Nation treatment
  3. Protection against expropriation
  4. Non-discriminatory treatment through due process
  • A. 1, 3 and 4 only
  • B. 2, 3 and 4 only
  • C. 1 and 3 only
  • D. 1, 2, 3 and 4

Q4. An investor from Country X with an enterprise in India complains that an Indian-owned firm in the same sector gets more favourable licensing conditions than it does. Which one of the following treaty standards does this complaint most directly engage?

  • A. Protection against expropriation
  • B. Free transfer of funds
  • C. National Treatment
  • D. Most-Favoured-Nation treatment

Q5. Consider the following facts. In White Industries vs India (2011), an Australian investor used the Most-Favoured-Nation clause of the India–Australia BIT to rely on the 'effective means' standard found only in India's BIT with Kuwait. The tribunal found India in breach and ordered it to pay compensation. India's later Model BIT text leaves out the MFN clause. Which of the following inferences can be drawn from the above?

  1. A clause in one investment treaty can enlarge a State's obligations by reference to its treaties with third countries.
  2. The award arose because Indian courts refused to accept jurisdiction over the investor's dispute.
  3. Leaving MFN out of the model closes the route used in this dispute to rely on a standard absent from the basic treaty.
  • A. 1 and 3 only
  • B. 1 and 2 only
  • C. 2 only
  • D. 1, 2 and 3

Q6. Consider the following assertion: A revision of India's Model BIT text would shape India's investment-protection commitments beyond standalone bilateral investment treaties. Which of the statements given above support/supports the assertion?

  1. The model text serves as the template for investment chapters in India's CECAs, CEPAs and FTAs.
  2. The model text is used for renegotiating India's existing bilateral investment treaties.
  3. The Union Budget 2025-26 announced that the model text would be revamped to make it more investor-friendly.
  • A. 1, 2 and 3
  • B. 1 only
  • C. 1 and 2 only
  • D. 2 and 3 only