BIPA talks put on hold
Source: The Hindu
SUJAY MEHDUDIA, 22.1.2013
Frozen till the review of model text is completed
The Union Government has ordered a freeze of all Bilateral Investment Protection Agreements (BIPA) negotiations till a review of the model text is carried out and completed. This comes after a spate of show-cause notices were received by the Government, served by foreign companies seeking to recover their investments under the BIPA.
The issue has figured in summit meetings with Russian President Vladimir Putin having raised the issue in his annual meeting with Prime Minister Manmohan Singh last month.
The spate of notices under BIPA began with the Vodafone case but the Supreme Court’s cancellation of the 2 G licences led to more companies following suit with firm backing from their respective Governments. This adverse experience with BIPA, with an estimated $5 billion hanging in balance, could dampen the Foreign Office’s enthusiasm for inking the pact with a large number of countries. (For further reading on Investor-State Dispute Cases, click here
Fearing the Government could be flooded with more notices in future, the Ministries of Finance and Commerce & Industry felt it was time India carried out a review of the BIPA model text, and, therefore, decided to put on hold all negotiations pertaining to BIPA till a thorough review is carried out.
“It has been decided to review the model text of BIPA in the light of arbitration notice[s] received under different BIPAs. Therefore, pending review of the model text, all BIPA negotiations have been kept on hold. The government will proceed to negotiate BIPA agreements expeditiously once the review is complete,” said a communication by the Department of Economic Affairs.
Vodafone was first off the block with a notice to the Government, stating that it was covered under BIPA as an investor defined under Article 1(d) of the treaty. Its Dutch subsidiary, Vodafone International Holdings BV, served the notice. This was soon followed by another round of notices issued in the aftermath of Supreme Court cancelling 122 telecom licences, including that of companies such as Russian telecom giant Sistema, Norwegian telecom company Telenor and UAE-based Etislat.
Till date, India has signed BIPAs with 82 countries. Out of which, 72 treaties have been enforced. The first BIPA was signed in 1994 with the U.K. Besides, India has signed 17 Free Trade Agreements, Comprehensive Economic Partnership Agreement (CEPA), Comprehensive Economic Co-operation Agreement (CECA) and Preferential Trade Agreements (PTAs).
Among the companies that have served notices under BIPA are: Devas Employees Mauritius [BIPA with Mauritius]; Sistema Joint Stock Financial Corporation [Russia]; Telenor Asia [Singapore]; Capital Global Limited and Kaif Investment Limited [both Mauritius based-investors in Loop Telecom Limited under BIPA with Mauritius]; Vodafone International [the Netherlands]; and, the Children’s Investment Fund Management [the U.K. and Cyprus].
Following outcry by foreign investors and a show-cause notice issued by Vodafone on the issue, the Government had, last year, constituted an inter-Ministerial Group (IMG) to look into the issue. The IMG had concluded that international taxation issues did not come under BIPA.
The IMG had also concluded that in the Vodafone case, the issue was not covered under the India and the Netherlands BIPA.
In fact, the feedback to the IMG from all the Ministries had indicated that taxation issues were not covered under BIPA.
Comes on the heels of show-cause notices served by firms looking to recover their investments
Spate of notices began with the Vodafone case but led to more companies following suit
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