Cabinet set to clear revamped Bilateral Investment Treaty as India woos foreign capital
New framework likely to retain provisions on taxation and exhaustion of local remedies; negotiations underway with four to five countries
- Sep 25, 2026,
- Updated Sep 25, 2026 12:15 PM IST
The Union Cabinet is expected to clear a revamped model Bilateral Investment Treaty for India soon, with the framework likely to continue including provisions on taxation rights and recourse to domestic legal remedies.
“The draft text of the new BIT framework has been finalised and sent to the Union Cabinet for approval. It should happen soon,” government sources said, adding that the framework will continue to protect India’s sovereign rights on taxation and domestic courts, with some red lines remaining non-negotiable.
“We will not include tax in the BIT, as Parliament has the sovereign right to decide taxation policy,” they noted. Similarly, international arbitration should be available only after local legal remedies are exhausted.
“Under the BIT, local legal remedies will have to be the first option for dispute resolution. Investors cannot go straight to international arbitration,” they noted.
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Bilateral investment treaties are reciprocal agreements between two countries that set rules for private foreign direct investment into each other’s territories.
Even as the framework awaits Union Cabinet approval, India has already initiated negotiations with four to five countries based on the new model BIT. Sources said four BITs are currently being finalised, and government teams have been asked to expedite negotiations on these treaties.
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The BIT negotiations are understood to include talks with Canada, Russia and the UK, and are also expected to support trade agreements with the European Union.
India last finalised a model BIT in 2015, under which investors were expected to exhaust all local remedies for dispute resolution before moving to international arbitration. However, investors have often described it as restrictive.
The government has been working on a new BIT framework as it seeks to boost capital flows into the country and finalise free trade agreements with several countries to support exports.
The Union Cabinet is expected to clear a revamped model Bilateral Investment Treaty for India soon, with the framework likely to continue including provisions on taxation rights and recourse to domestic legal remedies.
“The draft text of the new BIT framework has been finalised and sent to the Union Cabinet for approval. It should happen soon,” government sources said, adding that the framework will continue to protect India’s sovereign rights on taxation and domestic courts, with some red lines remaining non-negotiable.
“We will not include tax in the BIT, as Parliament has the sovereign right to decide taxation policy,” they noted. Similarly, international arbitration should be available only after local legal remedies are exhausted.
“Under the BIT, local legal remedies will have to be the first option for dispute resolution. Investors cannot go straight to international arbitration,” they noted.
ALSO READ | 'We're looking at the red flags': DEA secy hints foreign investment rules may become more investor-friendly
Bilateral investment treaties are reciprocal agreements between two countries that set rules for private foreign direct investment into each other’s territories.
Even as the framework awaits Union Cabinet approval, India has already initiated negotiations with four to five countries based on the new model BIT. Sources said four BITs are currently being finalised, and government teams have been asked to expedite negotiations on these treaties.
MUST READ | Dressed up a flawed system: Surjit Bhalla on why India struggles to attract foreign investors
The BIT negotiations are understood to include talks with Canada, Russia and the UK, and are also expected to support trade agreements with the European Union.
India last finalised a model BIT in 2015, under which investors were expected to exhaust all local remedies for dispute resolution before moving to international arbitration. However, investors have often described it as restrictive.
The government has been working on a new BIT framework as it seeks to boost capital flows into the country and finalise free trade agreements with several countries to support exports.