Strengthening UAE-India Economic Partnership: The 2024 Bilateral Investment Treaty

The 2024 UAE-India Bilateral Investment Treaty replaces the 2013 Bilateral Investment Promotion and Protection Agreement (BIPPA) that expired in September this year. We discuss key provisions of the BIT that aims to balance investor protections with state regulatory autonomy.

By Archana Rao and Melissa Cyrill

The United Arab Emirates (UAE) and India have a longstanding economic relationship that has grown significantly in recent years, particularly with bilateral initiatives aimed at boosting trade, investment, and digital integration. A crucial milestone in this relationship was the signing of the new UAE-India Bilateral Investment Treaty (BIT) during Indian Prime Minister Narendra Modi’s visit to the UAE in February 2024. This BIT replaces the UAE-India Bilateral Investment Promotion and Protection Agreement (BIPPA) signed in 2013, ensuring continuous protection for investments following BIPPA’s expiration on September 12, 2024.

In addition to the BIT, other agreements, including a Memorandum of Understanding (MoU) for digital infrastructure and payment integration between the UAE’s AANE and India’s UPI systems, have further cemented ties. The combined effect of these initiatives is a resilient investment environment benefiting businesses and investors from both countries.

Key features of the UAE-India bilateral investment treaty

The 2024 UAE-India BIT is designed to balance foreign investment protection with the regulatory rights of the host country. Major provisions include:

1. Broad definition of investment: Unlike previous models, the BIT uses an asset-based definition of investment, which includes portfolio investments, aligning more closely with international norms.
2. Investment treatment standards: Provisions ensure protection against denial of justice, discrimination, and arbitrary treatment, promoting a stable environment for investors.
3. Full protection and security: The BIT emphasizes physical security for investors and investments under the principles of international law.
4. National treatment: This clause ensures equal treatment for investors from both countries, offering rights similar to those granted to domestic investors.
5. Exemptions and carveouts: Areas such as taxation, government procurement, subsidies, and compulsory licensing are exempt from BIT provisions, providing states with policy-making flexibility.
6. Investor-State Dispute Settlement (ISDS): The 2024 BIT reduces the mandatory duration to exhaust local legal remedies from five to three years before arbitration can be initiated, enhancing access to fair dispute resolution.
7. Anti-corruption measures: The BIT excludes investments associated with corruption, fraud, or round-tripping from protection.
8. Regulatory rights: Recognizing the importance of public interest, the BIT upholds each state’s right to regulate.
9. Third-party funding prohibition: In a move aligned with India’s legal doctrine, third-party funding of investor disputes is prohibited, promoting ethical legal processes.

Improving investor facilitation with the amended BIT

The 2024 BIT signals India’s commitment to deepening ties with the UAE, a key foreign investor that has contributed approximately 3 percent of India’s foreign direct investment (FDI) inflows—around US$19 billion from 2000 to 2024. The treaty comes as India renews its focus on international investment following a decline in active bilateral treaties after the 2016 Model BIT.

The food processing facility in Gujarat, funded by a US$2 billion UAE investment, exemplifies the positive impact of these agreements. The project, a result of the 12th UAE-India High-Level Joint Task Force on Investments, is expected to enhance India’s food security infrastructure, generate jobs, and increase farmer incomes while positioning India as a major food exporter to the UAE and the Gulf.

India’s future strategy also involves free trade agreements (FTAs) with other countries, like the UK and EU, with provisions inspired by the UAE-India BIT serving as a legal framework for enforcement. The BIT reflects India’s more adaptable negotiation approach, particularly by adjusting the requirement to exhaust local remedies from five years to three, facilitating smoother negotiations for FTAs.

Best practices for investors in Emirati and Indian markets

1. Understand legal protections: The UAE-India BIT’s dispute settlement provisions offer an improved framework for investment protection, reducing local remedy exhaustion periods and ensuring fair treatment. Investors should be familiar with these protections and utilize them effectively.
2. Adopt anti-corruption standards: As the BIT excludes investments tainted by corruption, investors must adhere to strict due diligence and compliance practices to protect their investments and mitigate legal risks.
3. Align with digital integration initiatives: With the integration of the UPI and AANE platforms, companies from India and UAE can facilitate smoother transactions and capitalize on digital infrastructure opportunities. Embracing digital payment systems can streamline operations and improve customer engagement.
4. Navigate sectoral exemptions carefully: Areas like taxation, government procurement, and subsidies fall outside BIT provisions, so investors should seek clarity on local regulations and explore specialized legal support for sector-specific compliance.
5. Plan for long-term growth: The UAE’s investments in India’s food processing sector and digital initiatives represent a model for sustainable and scalable growth. Investors in both countries can explore similar long-term opportunities, particularly in logistics, technology, and infrastructure.
6. Monitor bilateral developments: With both countries aiming for US$100 billion in trade by 2030, ongoing engagement between UAE and India will continue to unlock new avenues. Staying informed on updates from task forces and trade agreements can help investors anticipate regulatory shifts and respond proactively.

Conclusion

The UAE-India BIT 2024 exemplifies a comprehensive approach to strengthening economic partnerships. By securing investor rights while allowing regulatory flexibility, the treaty sets a new standard for investment relations. As India progresses toward deeper economic integration with global partners, the BIT with the UAE underscores a balanced legal framework that encourages foreign investment while respecting national interests—an essential foundation for enduring cross-border commerce.

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