Investment Facilitation Agreement

Investment Facilitation Agreement

What is in the News ?

• Backed by more than 100 countries (it does not include India), the proposed IFA is meant to create legally binding provisions aimed at facilitating investment flows.
• In addition to this, the legal obligations inter alia will require states to augment regulatory transparency and predictability of investment measures.
• Investment Facilitation Agreement agreement will be very different from investment protection agreements such as bilateral investment treaties (BITs) that allow foreign investors to bring claims against the host state for alleged treaty breaches.
• This is known as investor-state dispute settlement (ISDS).

Why India not a party to this ?

• Apprehension that foreign investors could use a future IFA to bring claims under the existing BITs.
• Moreover, Foreign investors may use the –Most favoured nation (MFN) provision in BITs: To import terms from the IFA that they believe to be more favourable than those provided in the underlying BIT.
• Additionally, there is ‘Umbrella clause’ in BIT: A clause that allows contractual and other commitments owed to a foreign investor to be brought under the treaty’s protective umbrella.

Why Should India Join ?

• Many BITs exempt an economic integration agreement from the application of MFN. Thus, the possibility of importing IFA provisions into the BIT is remote.
• Also, it is unlikely that an ISDS tribunal will accept the claim that a simple IFA violation breaches an investor’s reasonable expectations.
• Most new investment treaties avoid ‘umbrella clauses’ altogether
• Countries can amend their respective BITs to exclude the IFA from its scope.

Practice Questions for Prelims

Consider the following statements:
1. India has ratified the Trade Facilitation Agreement (TFA) of WTO
2. TFA is a part of WTO’s Bali Ministerial Package of 2013
3. TFA came into force in January 2016

Which of the statements given above is/are correct?
a) 1 and 2 only
b) 1 and 3 only
c) 2 and 3 only
d) 1,2 and 3

Ans. a)

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