By Julien Chaisse & Arjun Solanki

Introduction

Recently the Union Minister of India said that India requires Rs 50-60 lakh crore in FDI to overcome the corona-hit economy.[1] Foreign Investors are facing many challenges by the Indian bureaucracy which makes the situation hard for them to survive in this market.[2] Recently, the Indian government tightened the FDI norms for investors from neighbouring countries.[3] India also banned 59 Chinese apps with huge investments in India.[4] Other than this, the present Modi government has on many occasions announced that India should boycott foreign products and prefer those which were made by Indian companies.[5] All these factors together make it extremely difficult for foreign investors to survive in the Indian market.

However, in these difficult times, India need not forget the importance of FDI. The present discussions at WTO regarding the Investment Facilitation Agreement could benefit India by providing rules favourable to both the foreign investors and the state. All India needs to do is join the discussions and put forward its point of view, and start negotiating.

In this article, we will first discuss the benefits of Investment facilitation, and protection of interests of host state. Second, Investment facilitation agreement under the shed of WTO. Third, India should move forward to attend WTO discussions on the agreement and negotiate an agreement with favourable provisions for itself.

Making investment across borders faster, cheaper and more predictable

The term Investment facilitation refers to steps adopted by a state to enhance the investment framework by providing an investment friendly climate in the business and legal world. The WTO Joint Ministerial Statement understanding of “Investment facilitation” are focused more on streamlining and expediting administrative procedures and requirements.[6] The most common principles of an international framework for investment facilitation are transparency, predictability, and efficiency.[7]

IIAs provide rules on market access and investment protection under ISDS. It can also be referred to as the spinal cord of International investment regime. Nevertheless, they have been biased towards foreign investors as very little responsibility is given to them, on the other side, host states have to enforce many binding rules. We can see the growth in invocation of ISDS by foreign investors to settle disputes. But investment facilitation under the aegis of WTO does not put any emphasis on dispute settlement mechanisms. It aims at smooth FDI flow without any changes to host state’s rules.[8]

Investment facilitation will no doubt benefit a country through speedy investments. Moreover, the WTO should also focus on providing the host state with a dispute settlement mechanism so that their interests could also be protected.

Towards a WTO Investment Facilitation Agreement

To enhance international cooperation between domestic and international institutions, WTO is planning to establish a multilateral framework on investment facilitation. A Joint Ministerial Statement on Investment Facilitation for Development is issued by 43 WTO member states in the latter half of 2017, the purpose of the statement is to start a ‘structured discussion’ on the topic and create a multilateral framework on investment facilitation. Moreover, a great number of participants have purposefully avoided discussion related to some noteworthy issues, for instance, market access, investment protection and ISDS, as they are extremely controversial to be discussed among WTO members. All WTO member states have been invited by present members to the discussion, to keep up with open, transparent, and inclusive nature of this initiative.[9]

India’s focus should shift to negotiating a better investment facilitation agreement

India has opposed the view of WTO to take investment facilitation under its shed. According to India, these are bilateral matters and cannot be decided at multilateral forums. Investment facilitation is supposed to deal with domestic laws/policies of a country to attract FDIs inflows, but if it gets under the shed of WTO then it will limit the regulation of domestic laws/policies.[10] Moreover, the proposed Investment Agreement under the aegis of WTO deals only to smooth the FDI flows and exclude protection of foreign investment.[11]

India has supported investment facilitation for a long time and also approved the key aspects of investment facilitation among BRICS countries in 2017.[12] India established an investment facilitation mechanism with EU in 2017. This mechanism is aimed at promoting EU investments in India and removing any procedural impediment.[13] India is of the view that the investment facilitation mechanism provided by WTO is different from that of BRICS as the WTO mechanism would restrict the domestic laws/policies of a state because of the binding commitments on market access and ISDS.  Contrary to this, India refused to an informal discussion started by Canada and EU regarding a multilateral investment agreement with ISDS in WTO.[14] A Multilateral Investment Agreement with ISDS at WTO have many advantages like transparency and a consolidated agreement for a better jurisprudence. India also opposed the addition of investment facilitation agreement to the agenda of ministerial conferences.[15] Legal experts like Prabhash Ranjan have suggested that India should have joined Canada and EU to establish a multilateral investment agreement because of the upcoming position of India as an exporter.[16] According to the Indian government, a foreign investor should first exhaust local remedies and only then move to international tribunal. The Indian government hugely focusses on SSDS and their opinion of ISDS is inaccurate and fallacious. This view could also be supported by the fact that India unilaterally terminated over 60 BITs that entails ISDS provision. If India needs to grow and recover from a corona-hit economy then it has to support the WTO Investment Facilitation Agreement. It is expected from India to move forward to negotiate a better deal for itself before it’s too late.

Conclusion

Increasing and expanding FDI is pivotal to overcome the impact of coronavirus pandemic. The postponement of Ministerial Conference to 2021 have increased the chances for a concluding agreement as both states and investors, now have sufficient time to discuss the topics of disagreement with the WTO.[17] In the meantime, India should join the discussions as an investment facilitation agreement by WTO will help attract more investment and one must not discard the close proximity between investment and global trade.

Julien CHAISSE

JC

Dr. Julien Chaisse is Professor at the City University of Hong Kong, School of Law. He is an award-winning scholar and a globally recognized authority on the intersection between international economic law (trade, investment, and tax), international dispute resolution, and the transnational law of globalization. His scholarship, which includes a dozen books and over 60 articles and book chapters, has been cited by international courts/tribunals, as well as U.S. Courts.

Dr. Chaisse is an active member of the World Economic Forum (“Tax and Globalization Working Group” and “Data Policy Platform”). Dr. Chaisse serves as Advisory Board member of both the Asian Academy of International Law (AAIL) and World Free Zone Convention (WFZC). He also serves as Director of the Dot Trademark Policy Committee (DTPC), co-founder of the Internet Intellectual Property Institute (IIPI), and Member of the Hong Kong’s Government Board of Review (Inland Revenue Ordinance). Dr. Chaisse is an advisor & partner to the United Nations ARTNET on FDI and member of the Academic Forum on Investor-state Dispute Settlement.

Dr. Chaisse is also an experienced arbitrator and a sought-after consultant/expert to international organizations, governments, law firms, and private investors. He has advised international organizations and governments on private and public international law issues (including concessions contracts, special economic zones, investment structuring, state and international organization immunities, and WTO accession) and assisted with the drafting of legislation in Austria, Azerbaijan, Canada, Ivory Coast, France, Georgia, Mali, Morocco, Pakistan, and Vietnam.

Prior to joining City University School of Law, Dr. Chaisse taught at the Chinese University of Hong Kong (2009-2019) where he served as research centre director and PhD & MPhil Program director. He earlier worked as deputy head of the team analysing the rules for multilateral trade and investment agreements at the World Trade Institute (Switzerland, 2006-2009), lecturer at elite school Sciences Po Aix (France, 2004-2006), and as a diplomat for the French Ministry of Foreign Affairs (Embassy of France in India, 2001-2004).

Web profile:

https://www.cityu.edu.hk/slw/people/people_chaisse_julien.html

Arjun Solanki

pic

Arjun Solanki is an associate in the International Trade Law Department of World Trade Advisors (WTA) group. Mr Solanki has published on various aspects of international arbitration and investment law. Mr Solanki holds a Bachelor of Arts and Bachelor of Legislative Laws degree from University School of Law and Legal Studies, Guru Gobind Singh Indraprastha University (New Delhi).

[1] ‘India needs ₹ 50-60 lakh crore foreign investments to bolster coronavirus-hit economy: Gadkari’ (The Hindu, 2 July 2020) <https://www.thehindu.com/business/Economy/india-needs-50-60-lakh-crore-foreign-investments-to-bolster-coronavirus-hit-economy-gadkari/article31970047.ece>.

[2] Sonam Chandwani, ‘Challenges Foreign Companies Face When Setting Up Business in the World’s Fastest Growing Economy’ (Entrepreneur Asia Pacific, 29 October 2018) <https://www.entrepreneur.com/article/322480>.

[3] ‘The decision to tighten FDI norms for investors from neighbouring countries timely: Experts’ (The Economic Times, 19 April 2020) <https://economictimes.indiatimes.com/news/economy/policy/the-decision-to-tighten-fdi-norms-for-investors-from-neighbouring-countries-timely-experts/articleshow/75233910.cms?from=mdr>.

[4] ‘India bans 59 Chinese apps including TikTok, Helo, WeChat’ (The Economic Times, 6 July 2020) <https://economictimes.indiatimes.com/tech/software/india-bans-59-chinese-apps-including-tiktok-helo-wechat/articleshow/76694814.cms?from=mdr>.

[5] ‘Self-reliant India: The bounce of vocal for local’ (The New Indian Express, 26 May 2020) <https://www.newindianexpress.com/opinions/2020/may/26/self-reliant-india-the-bounce-of-vocal-for-local-2147966.html>.

[6] Jesse Coleman, Brooke Güven, Lise Johnson, and Lisa Sachs, ‘What Do We Mean by Investment Facilitation?’ (Columbia Center for Sustainable Development, 21 February 2018) <http://ccsi.columbia.edu/2018/02/22/what-do-we-mean-by-investment-facilitation/#_ftn1>.

[7] Ana Novik and Alexandre de Crombrugghe, ‘Towards an International Framework for Investment Facilitation’ (OECD Investment Insights, April 2018) <https://www.oecd.org/investment/Towards-an-international-framework-for-investment-facilitation.pdf>.

[8] Dr Axel Berger, Sebastian Gsell and Dr Zoryana Olekseyuk, ‘Investment Facilitation for Development: A New Route to Global Investment Governance’ (2019) 5 German Development Institute Briefing Paper <https://www.die-gdi.de/uploads/media/BP_5.2019.pdf>.

[9] Tomohiko Kobayashi, ‘Incorporating Investment in Services into the World Trade Organization Framework by’ in Julien Chaisse, Leïla Choukroune, and Sufian Joseph (eds.), Handbook of International Investment Law and Policy (Springer Nature Singapore, 2021).

[10] ‘India not for discussing investment facilitation issues at WTO’ (The Economic Times, 14 May 2017) <https://economictimes.indiatimes.com/news/economy/foreign-trade/india-not-for-discussing-investment-facilitation-issues-at-wto/articleshow/58667265.cms?from=mdr>.

[11] Sheela Rai, ‘Investment facilitation: what might we be led into?’ (Deccan Herald, 10 July 2019) <https://www.deccanherald.com/opinion/panorama/investment-facilitation-what-might-we-be-led-into-746103.html>.

[12] ‘Outlines for BRICS Investment Facilitation’ (31 August 2017) <http://www.brics.utoronto.ca/docs/170831-investment.html>.

[13] European Union & India establish an Investment Facilitation Mechanism, 14 July 2017.

[14] ‘Multilateral Investment Pact: India against Canada EU bid on investment agreement at WTO’ (The Indian Express, 24 January 2017) <https://indianexpress.com/article/business/business-others/multilateral-investment-pact-india-against-canada-eu-bid-on-investment-agreement-at-wto-4488472/>.

[15] Raghavan, Chakravarthi (2017), “Investment Facilitation proposals and India’s objections”

[16] Prabhash Ranjan, ‘India should reconsider its stand on investment in WTO’ (The Wire, 13 February 2017) <https://thewire.in/external-affairs/india-investment-agreement-wto>

[17] ‘Investment Facilitation – A WTO Negotiation That Can Yield Positive Returns for Investors’ (Akin Gump, 6 May 2020) <https://www.akingump.com/en/news-insights/investment-facilitation-a-wto-negotiation-that-can-yield-positive-returns-for-investors.html>.

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