BIT Models – One Treaty to Rule Them All: Why India Needs a Single, BIT Models
Why Investment Treaties Matter
When countries want to trade with each other or invest in each other’s economies, they often sign special agreements called bilateral investment treaties (BITs). Bit models – These treaties are like rulebooks. They tell investors and governments how to behave. For example, a BIT may promise that a foreign company will not be unfairly treated, and that it can take disputes to international courts if needed. In return, it also protects the host country’s right to make laws in areas like health, environment, and safety.
India has signed many such treaties since the 1990s. But in recent years, it has faced a problem. Some of these BITs allowed foreign companies to sue India in international tribunals—even when India was simply trying to protect public interests. This led to a big rethink. In 2015, India came up with a new model BIT—a kind of master template to guide all future BITs.
Now, some experts suggest that India should adopt two different model BITs: one for countries where it receives investment (as a capital importer), and another for countries where it invests money (as a capital exporter). But not everyone agrees. In fact, many legal scholars warn that this “two-BIT” idea is dangerous and confusing. This essay argues that adopting dual BIT models would create legal ambiguity, harm India’s global standing, and deter investors; and that a unified, balanced treaty ensures stability.
Bilateral Investment Treaties: International Frameworks for Foreign Investment Protection
Bilateral Investment Treaties (BITs) serve as crucial international legal instruments that establish the terms and conditions for private investment between two countries. These agreements provide a comprehensive framework of protections and guarantees for investors operating in foreign territories, creating a more predictable and secure environment for cross-border capital flows. BITs have become increasingly important in the global economic landscape, with thousands currently in force worldwide, shaping international investment law and influencing capital movement between developed and developing nations.
BITs Are More Than Just Contracts
A key reason why India should not have two different BIT models is that BITs are not like everyday business contracts. As explained in Principles of International Investment Law (3rd edition, Oxford University press, 2022 ) by Dolzer, Kriebaum, and Schreuer, BITs are part of a wider international legal system. They are not simply tools to attract investment—they are instruments of legal order that shape global rules and expectations. The authors say that the requirement of “stability and consistency” is essential to the rule of law in the context of international investment (p. 205).
This means that if a country like India starts creating different rules for different partners, it will look inconsistent. Investors and other countries may not trust it. They may worry that India changes its rules whenever it suits its own interests. They also explain that investment treaty arbitration seeks to protect values such as legal certainty, the rule of law and good governance. When India sends mixed messages through two separate BIT models, it undermines these very values. And international courts may interpret India’s changing behaviour in a way that works against India in disputes.
Ranjan’s Warning: Do not Mix Messages
Professor Prabhash Ranjan, in his article “The BIT Model India Needs” (Indian Express, April 16, 2025), makes this point very clearly. He critiques the proposal made by Rajesh Kumar Singh and Karamjeet Kaur (IE, March 17, 2025, “Thinking a BIT differently”) to adopt two different BIT models. According to Ranjan, this approach seems logical at first but is ultimately unwise. Why? Because India’s role in the global economy is not fixed.
For example, in 1994, India signed a BIT with the UK as a capital importer. But by 2021–2022, India had become a major investor in the UK. Ranjan explains that India also sends and receives capital from many other countries. So, dividing countries into neat groups of importers and exporters does not work anymore.
Ranjan also points out a serious risk: inconsistency in legal principles. For example, India’s 2015 model BIT requires investors to first go through local courts for five years before turning to international tribunals. This gives India more control over disputes. But if India were to offer easier arbitration access to investors in other treaties, that would create two standards. This would show that India does not have a stable legal policy. It may even weaken its position in multilateral negotiations like those at the United Nations Commission on International Trade Law (UNCITRAL).
Nedumpara’s Argument: BITs Shape India’s Global Identity
The book India’s Bilateral Investment Treaties 2.0: Perceptions, Emerging Trends, and Possible Architecture (Springer, 2024), edited by James Nedumpara, agrees strongly with Ranjan. Nedumpara argues that BITs help shape a country’s legal identity and reputation. They are not just one-time deals. If India starts creating different models for different partners, it could be seen as unprincipled and unreliable.
According to the book, international investment agreements do more than just define the rights and responsibilities of investors and states—they also help shape how India is perceived in the global legal and economic system. Countries and investors closely observe how India conducts itself across all its treaties. If India adopts different treaty standards for different partners, it may be seen as inconsistent or self-serving. This could prompt other countries to demand similar concessions, ultimately weakening India’s leverage in future negotiations.
Another important point is the MFN clause (Most-Favoured Nation). If one treaty gives a benefit, others may ask for it too. So, even if India wants to keep a defensive model with one country, that country may use MFN to ask for the better deal India gave to someone else. As the book explains, this strategy could expose India to broader obligations than intended and defeat the very rationale behind a dual-model strategy.
The world economy today is complex. India is not just a developing country anymore. It invests abroad and receives investment. As the book India’s Bilateral Investment Treaties 2.0 puts it, the old idea of dividing countries as capital importers or capital exporters is increasingly outdated. India is now a dual-status country. For example, it both invests in and receives investments from countries like the UK, Germany, and Singapore.
This makes it harder to apply a simple two-model rule. If India sticks to a single, consistent model BIT, it will be easier to manage relationships with all these countries. It also makes India look like a mature and responsible global actor. The book suggests that a modern BIT should include clear definitions, protections for public interest, and fair dispute resolution. This balanced model protects both investors and governments. It matches global trends and makes India’s policies more predictable.
Sornarajah’s Perspective: Do not Be a Push-Over
In The International Law on Foreign Investment (Cambridge University Press, 2010), M. Sornarajah explains that many older BITs were designed to protect investors—mainly from rich countries. He argues that these treaties were not neutral. Instead, they were created “to ensure investment protection” and favoured powerful capital-exporting states (p. xv). Sornarajah warns that if developing countries are not careful, they can lose control over important laws. For example, if a country wants to protect the environment or raise labour standards, foreign companies might sue the government under the BIT. He explains that ISDS mechanisms have become a means of undermining state regulatory power.
However, he also notes that things are changing. New BITs are including protections for the public interest: “There is an evident retreat from the perception that investment protection is the only purpose of the investment treaty” (p. xvi). This means that more countries are moving towards balanced treaties that allow them to protect their people while still welcoming investment.
India should not go backwards by adopting a messy two-model system. Instead, it should follow this global movement and design one good BIT model that meets all its needs.
Learning from Others: Poulsen’s Research
Lauge N. Skovgaard Poulsen , in the article “Bounded Rationality and the Diffusion of Modern Investment Treaties” (International Studies Quarterly, March 2014, Vol. 58, No. , pp. 1-14), gives a useful history lesson. He shows how countries like South Africa signed early BITs without really understanding them. According to him, “[South Africa’s] government wanted to believe the treaties ‘worked’, which in turn had an impact on how it sought and processed information” (p. 8). But later, South Africa faced real problems. Investors used the treaty rules to challenge South Africa’s policies, including those meant to fix inequality after apartheid. Only then did South Africa realise it had made a mistake. The government started cancelling old BITs and rewriting them carefully.
Poulsen warns that once a country shows a pattern of inconsistent treaties, it becomes hard to change direction. International tribunals use that pattern to judge the country’s future cases. So, if India starts using two very different models, it could end up setting a dangerous precedent that will hurt it later.
A Smarter Solution: One Strong, Balanced BIT
All the evidence points to one conclusion: India should not adopt two separate BIT models. The risks—legal confusion, damaged reputation, loss of bargaining power, and reduced investment—are too high. Instead, India should focus on creating a single, balanced model that is fair to investors but also protects India’s right to make laws for public good.
Prabhash Ranjan, in his book India and Bilateral Investment Treaties: Refusal, Acceptance, Backlash (Oxford University Press, 2019), calls for a model that is balanced, fair and equitable and protects India’s regulatory space without giving carte blanche to the state to act arbitrarily. He recommends clear rules, well-defined exceptions, and proper procedures for dispute settlement. This would make India’s treaties both strong and fair. Such a model would not only build investor trust but also allow India to stand tall in global forums. It would help India shape the future of investment law, rather than be pushed around by others.
Conclusion: One Model, Many Wins
In today’s world, international investment is about much more than money. It is about rules, trust, and global cooperation. India has a big role to play—but to do that, it needs to be consistent, principled, and smart.
Having two different BIT models might seem flexible, but it is actually confusing and dangerous. It weakens India’s legal position and sends the wrong message to the world. As Prabhash Ranjan and other leading experts agree, the solution lies in one strong, balanced BIT model. That is the path to long-term stability, fairness, and international respect.
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The Source’s Authority and Ownership of the Article is Claimed By THE STUDY IAS BY MANIKANT SINGH
