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Srikrishna Committee - BIT Disputes Resolution

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August 24, 2017

Why in news?

The Srikrishna committee’s report was recently released, with a focus on recalibration of the Indian BIT regime.

What is a BIT?

  • It is an agreement establishing the terms and conditions for private investment by nationals and companies of one state in another state.
  • Government of India has signed BITs with 83 countries.
  • They are based on a model BIT formulated by India in 2016.
  • The model BIT provides the framework for new negotiations with its trading partners.
  • The distinctive feature of model BIT is that they allow for an alternative dispute resolution mechanism called ‘Investor-state dispute settlement’.

What were the key recommendations of the Srikirishna Committee?

  • Justice B.N. Srikrishna committee was constituted to prepare a road map to make India a hub of international arbitration.
  • It recommended the creation of the post of an ‘international law adviser’ (ILA) to advise the government on international legal disputes, particularly BIT disputes.
  • Creation of an inter-ministerial committee (IMC), with officials from the Ministries of Finance, External Affairs and Law for better managing BIT disputes was also called for.  
  • It also mentioned the possibility of establishing a BIT appellate mechanism and a multilateral investment court.
  • It recommended hiring of external lawyers and appointing counsels having expertise in BITs to boost the government’s legal expertise.
  • It called for the creationg of designated fund to fight BIT disputes.

What are the shortcomings?

  • Framework - The call for appointing an ‘Law Adviser’ will amount to duplicating the existing arrangement.
  • Presently, the Legal and Treaties (L&T) division of the External Affairs Ministry is mandated to offer legal advice to the government on all international law.
  • It would be sensible to have  the a member from the Commerce Ministry in the proposed IMC as it works for invester protection but it was not recommended.
  • Narrow window - The report named the investor-state dispute settlement (ISDS) mechanism as robust.
  • But it provides for only a narrow 90 day window for filing of BIT arbitration.
  • The report is also silent on many other jurisdictional limitations given in Article 13 in the ‘Indian model BIT’ that also limit the usefulness of ISDS.
  • Critical issues such as appointment of arbitrators, transparency provisions, enforcement of awards, standard of review were also overlooked.
  • The commission’s mandate was to focus on on all the three parts of BIT arbitration namely –
  • BIT arbitration has three aspects namely:
    1. Jurisdictional (such as definition of investment)
    2. Substantive (such as provision on expropriation)
    3. Procedural (ISDS mechanism).
  • But it focussed only on the procedural aspect.

 

Source: The Hindu

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