The 2016 Model Bilateral Investment Treaty (BIT) is a template or framework designed by the Government of India to guide its negotiations for new investment treaties with other countries. It is a concept that replaced the previous, more investor-friendly 1993 Model BIT (amended in 2003). The new model was adopted in December 2015 and became operational in 2016. Its creation was a direct response to several adverse international arbitration disputes, such as the 2011 White Industries case and cases involving Vodafone and Cairn Energy, which exposed India to significant financial liability and raised concerns about its regulatory sovereignty.
The model, which contains thirty-eight articles across seven chapters, works by tilting the balance in favor of the host state, India. A key mechanism is the mandatory requirement for foreign investors to exhaust local remedies within India’s domestic legal system for a minimum period of five years before they can initiate international arbitration (Investor-State Dispute Settlement or ISDS). It also adopts a narrow, 'enterprise-based' definition of 'Investment' (Article 1.4) and explicitly excludes the Most-Favoured-Nation (MFN) clause and a general Fair and Equitable Treatment (FET) standard, which were common in older BITs. Furthermore, it includes a strong "Right to Regulate" clause, ensuring that state actions for public interest, such as public health or environmental protection, are not considered a breach of the treaty.
The 2016 Model BIT connects to the broader international law concepts of BITs and ISDS. Following its adoption, India terminated approximately 75 of its existing BITs in 2016 and 2017. While the model remains the basis for new agreements with countries like the Kyrgyz Republic and Brazil, it has recently been under review to make it "more investor-friendly". Recent treaties, such as the 2024 India-UAE BIT, have already shown changes, including a shorter three-year local remedies expiration period, indicating that the model is being amended in practice.