Bilateral Groupings & Agreements are a type of formal, legally binding concept that establishes cooperation and sets out rights and duties between two sovereign states or parties. This mechanism, known as bilateralism, allows two nations to coordinate on specific issues, contrasting with multilateralism, which involves three or more countries. The origin of modern bilateral agreements, particularly Bilateral Investment Treaties (BITs), can be traced to the eve of the 1960s, when European countries began negotiating treaties exclusively focused on foreign investment. These agreements were created to establish a basic legal framework for investments and to promote foreign investment in developing countries, solving the problem of legal uncertainty under customary international law.
The mechanism of a bilateral agreement is tailored to the mutual needs of the two parties and enters into force after signature and ratification under international law. In the context of trade, a Bilateral Trade Agreement (BTA) or Free Trade Agreement (FTA) works by reducing or eliminating trade barriers like tariffs and quotas on a substantial portion of bilateral trade. Key provisions often include Rules of Origin, which determine if goods qualify for preferential treatment, and mechanisms to address non-tariff barriers. A deeper form of this is a Comprehensive Economic Partnership Agreement (CEPA), which covers trade in goods, services, investment, and intellectual property rights, such as the India-UAE CEPA.
Bilateral agreements connect to broader concepts like the World Trade Organization (WTO), which often references these deals to facilitate international trade negotiations. India's approach to these agreements has changed significantly; following adverse arbitral awards in the mid-2010s, India terminated around 75 BITs in 2016 and 2017 and adopted a more restrictive 2016 Model BIT. Recently, India has been revising the 2016 Model BIT to be "more investor-friendly" and has advanced new agreements, though it continues to exclude Investor-State Dispute Settlement (ISDS) in many new trade pacts, channeling disputes through State-to-State mechanisms instead. For instance, the India-UAE BIT signed in 2024 is an outlier that retains ISDS but introduces a three-year expiration period for the mandatory exhaustion of local remedies.