The Model Bilateral Investment Treaty (BIT) 2015 is a concept and a template document approved by the Government of India in December 2015 to serve as the basis for negotiating future international investment agreements. Its creation was prompted by a multi-year review process following the 2011 finding against India in the White Industries case, which was the first known investor-state arbitration ruling against the country. The Model BIT was designed to solve the problem of India's exposure to unmeritorious investment claims under its previous, broader 2003 Model BIT by balancing investor protection with the state's sovereign right to regulate.
The Model BIT works by significantly narrowing the scope of protections and investor access to international arbitration. Article 1.4 defines "investment" using a hybrid enterprise and asset-based approach, requiring an enterprise to be constituted and operated in good faith and possess characteristics like commitment of capital, certain duration, and significance for the host state's development. This definition is more restrictive than the broader asset-based definition in India's older treaties. The Model BIT omits the standard Fair and Equitable Treatment (FET) provision, replacing it with a narrower standard in Article 3.1 that protects against denial of justice, fundamental breach of due process, targeted discrimination, and manifestly abusive treatment. Furthermore, it excludes the Most-Favored-Nation (MFN) clause, preventing foreign investors from claiming more favorable terms from India's other BITs. A key mechanism is the mandatory exhaustion of local remedies, requiring investors to pursue domestic judicial or administrative remedies for a minimum of five years before commencing investor-state arbitration under Chapter IV. The Model BIT connects to India's older 1993 and 2003 Model BITs, which it was intended to replace. Since its adoption, India has notified at least 47 countries of its intention to terminate existing BITs and has signed new agreements with countries like the UAE and Brazil based on this framework. The core framework remains the same, but the government is currently evaluating the Model BIT to make it more investor-friendly, while still safeguarding its regulatory space.