Indian
Model Text of BIPA
AGREEMENT
BETWEEN
THE
GOVERNMENT OF THE REPUBLIC OF
INDIA
AND
THE
GOVERNMENT OF THE REPUBLIC OF
FOR
THE
PROMOTION AND PROTECTION
OF
INVESTMENTS
The
Government of the
Republic
of
India
and the Government of the Republic of
(hereinafter referred to as the "Contracting
Parties");
Desiring to create conditions favourable for
fostering greater investment by investors of one State in
the territory of the other State;
Recognizing that the encouragement and reciprocal
protection under International agreement of such investment
will be conducive to the stimulation of individual business
initiative and will increase prosperity in both States;
Have
agreed as follows:
ARTICLE
1
Definitions
For
the purposes of this Agreement:
(a)
“Companies” means:
(i)
in respect of
India
:
corporations, firms and associations incorporated or
constituted or established under the law in force in any
part of
India
;
(ii)
in respect of
(b)
“investment” means every kind of asset
established or acquired
including changes in the form of such investment, in
accordance with the national laws of the Contracting Party
in whose territory the investment is made and in particular,
though not exclusively, includes:
(i)
movable and immovable property as well as other
rights such as mortgages, liens or pledges;
(ii)
shares in and
stock and debentures
of a company and any other similar forms of participation in
a company;
(iii)
rights to money or to any performance under contract
having a financial value;
(iv)
intellectual property rights,
in accordance with the relevant laws of the
respective Contracting Party;
(v)
business concessions conferred by law or
under contract, including concessions to search for
and extract oil and other minerals;
(c)
“investors” means any national or company of a
Contracting Party;
(d)
“ nationals” means:
(i)
In respect of
India
: persons deriving their status as Indian
nationals from the law in force in
India
;
(ii)
In respect of
(e)
“returns” means the monetary amounts yielded by
an investment such as profit, interest, capital gains,
dividends, royalties and fees;
(f)
"territory" means:
(a)
in respect
of India : the
territory of the
Republic of India
including its
territorial waters and
the airspace above
it and other maritime zones including the Exclusive
Economic Zone
and continental shelf over
which the Republic
of India has sovereignty,
sovereign rights or
exclusive jurisdiction in accordance with
its laws in force,
the l982 United Nations Convention on the Law of the
Sea and International Law.
(b)
in respect of
ARTICLE
2
Scope
of the Agreement
This
Agreement shall
apply to all
investments made by investors
of either
Contracting Party in the territory of the other
Contracting Party, accepted as
such in accordance with its laws and regulations, whether
made before or
after the
coming into force
of this
Agreement.
ARTICLE
3
Promotion
and Protection of Investment
(1)
Each Contracting
Party shall encourage and
create favourable conditions
for investors of the other
Contracting Party
to make investments in its
territory, and admit
such investments
in accordance with its
laws and
policy.
(2)
Investments and returns of investors of each
Contracting Party shall at all times be accorded fair and
equitable treatment
in the
territory of
the other
Contracting Party.
ARTICLE
4
National
Treatment and Most-Favoured-Nation
Treatment
(l)
Each
Contracting Party
shall accord
to investments
of investors
of the
other Contracting
Party, treatment
which shall not be less favourable
than that accorded
either to
investments of
its own or
investments of investors of any third State.
(2)
In addition,
each Contracting Party
shall accord to
investors of
the other
Contracting Party,
including in
respect of returns on
their investments,
treatment which
shall not be less favourable than
that accorded to investors of any third State.
(3)
The provisions of paragraphs (l) and (2) above shall
not be
construed so
as to oblige
one Contracting
Party to extend to
the investors of the other the benefit of any
treatment, preference
or privilege
resulting from:
(a) any
existing or
future customs unions
or similar international
agreement to
which it is or
may become a party, or
(b) any
matter pertaining wholly or mainly
to taxation.
ARTICLE
5
Expropriation
(1)
Investments
of investors
of either
Contracting Party shall not be nationalised,
expropriated or subjected
to measures
having effect equivalent
to nationalisation
or expropriation (hereinafter referred to
as " expropriation")
in the
territory of
the other Contracting
Party except for a public purpose in accordance
with law
on a non-discriminatory
basis and
against fair
and
equitable
compensation.
Such compensation
shall amount
to the genuine
value of
the investment
expropriated
immediately
before the
expropriation or
before the
impending expropriation
became public knowledge,
whichever is the earlier,
shall include interest
at a
fair and equitable rate until the date of payment,
shall be
made without
unreasonable delay,
be effectively
realizable
and be
freely transferable.
(2)
The investor affected shall have right, under
the law of
the Contracting
Party making
the expropriation,
to review,
by a
judicial or
other independent
authority of that Party, of his or its
case and of the
valuation of
his or
its investment
in accordance with the principles set out in this
paragraph. The
Contracting Party making the expropriation shall make every
endeavour to ensure that such review is carried out
promptly.
(3)
Where a Contracting Party expropriates the assets of
a company which is incorporated or constituted under
the law in
force in any part of
its own territory, and in which
investors of
the other Contracting Party
own shares, it shall
ensure that the provisions of paragraph (1) of this
Article are applied to the extent
necessary to ensure
fair and equitable compensation in respect
of their investment
to such
investors
of the
other Contracting Party who are owners of those
shares.
ARTICLE
6
Compensation
for Losses
Investors
of one
Contracting Party
whose investments
in the
territory of the other
Contracting Party suffer losses owing to war or other
armed conflict, a state of
national emergency
or civil disturbances in
the territory of
the latter Contracting Party shall
be accorded by
the latter Contracting Party treatment, as regards
restitution, indemnification,
compensation or
other settlement, no
less favourable than that which the latter Contracting
Party accords to its own investors or to investors
of any
third State.
Resulting payments
shall be freely transferable.
ARTICLE
7
Repatriation
of Investment and Returns
(l)
Each Contracting Party shall permit all funds of an
investor of the other Contracting Party related to an
investment in its territory
to be freely transferred,
without unreasonable delay and on a
non-discriminatory basis. Such funds
may include:
(a)
Capital and additional capital amounts
used to maintain and increase investments;
(b)
Net operating profits including dividends and
interest in proportion to their share-holdings;
(c)
Repayments of
any loan including
interest thereon, relating to the investment;
(d)
Payment of
royalties
and services
fees relating to the investment;
(e)
Proceeds from sales of their shares;
(f)
Proceeds received by investors in case
of sale or partial sale or liquidation;
(g)
The earnings of citizens/nationals of one Contracting
Party who work in connection with investment in the
territory of the other Contracting Party.
(2)
Nothing in
paragraph (l) of
this Article
shall affect the
transfer of
any compensation
under Article 6 of this Agreement.
(3)
Unless otherwise agreed to between the parties,
currency transfer under
paragraph (1) of
this Article shall
be permitted in the currency of
the original Investment or any other convertible
currency. Such
transfer shall be made at the prevailing market rate of
exchange on the date of transfer.
ARTICLE
8
Subrogation
Where one
Contracting Party or
its designated
agency has
guaranteed
any
indemnity
against non-commercial
risks in respect of an investment by
any of its investors
in the
territory
of the
other Contracting
Party and has made payment to such investors in
respect of
their claims
under this Agreement,
the other Contracting Party agrees that the first
Contracting Party or
its designated
agency is
entitled by virtue of subrogation
to exercise the rights and
assert the claims of those investors. The subrogated
rights or claims shall not exceed the original rights or
claim of such investors.
ARTICLE
9
Settlement
of Disputes Between an Investor and a
Contracting
Party
(1)
Any dispute
between an
investor of
one Contracting
Party and
the other Contracting
Party in
relation to
an investment
of the former under
this Agreement shall,
as far as possible, be settled amicably through negotiations
between the parties to the dispute.
(2)
Any such dispute
which has not been amicably settled within a period
of six months may, if both Parties agree, be submitted:
(a)
for resolution, in accordance with the law of the
Contracting Party which has admitted the investment to that
Contracting Party’s competent judicial, arbitral or
administrative bodies; or
(b)
to International conciliation under the Conciliation
Rules of the United Nations Commission on International
Trade Law.
(3)
Should the Parties fail to agree on a dispute
settlement procedure provided under paragraph (2) of this
Article or where a dispute is referred to conciliation but
conciliation proceedings are terminated other than by
signing of a settlement agreement, the dispute may be
referred to Arbitration. The Arbitration procedure shall be
as follows:
(a)
If the Contracting Party of the Investor and the
other Contracting Party are both parties to the convention
on the Settlement of
Investment Disputes between States and nationals of other
States, 1965 and the investor consents in writing to submit
the dispute to the International Centre for the Settlement
of Investment Disputes such a dispute shall be referred to
the Centre; or
(b)
If both parties to the dispute so agree, under the
Additional Facility for the Administration of Conciliation,
Arbitration and Fact-Finding proceedings; or
(c) to
an ad hoc arbitral tribunal by either party to the dispute
in accordance with the Arbitration Rules of the United
Nations Commission on International Trade Law, 1976, subject
to the following modifications:
(i) The appointing authority under Article 7 of the
Rules shall be the President, the Vice-President or the next
senior Judge of the International Court of Justice, who is
not a national of either Contracting Party. The third
arbitrator shall not be a national of either Contracting
party.
(ii) The parties shall appoint their respective
arbitrators within two months.
(iii) The arbitral award shall be made in accordance
with the provisions of this Agreement and shall be binding
for the parties in dispute.
(iv) The
arbitral tribunal shall state the basis of its decision and
give reasons upon the request of either party.
ARTICLE
10
Disputes
Between the Contracting Parties
(1)
Disputes between
the Contracting
Parties concerning
the interpretation
or application of
this Agreement should,
as far as possible, be settled through negotiation.
(2)
If a dispute between the Contracting Parties cannot
thus be
settled within six months from the
time the dispute
arose, it
shall upon the request of
either Contracting Party be submitted to an arbitral
tribunal.
(3)
Such
an arbitral
tribunal shall
be constituted for
each individual case in
the following
way. Within two months of the receipt of the request for
arbitration, each
Contracting Party shall
appoint one
member of the
tribunal. Those
two members shall
then select a national of a third State who on
approval by the two Contracting
Parties shall
be appointed Chairman of
the tribunal. The
Chairman shall be appointed within two months from
the date
of appointment of the other
two members.
(4)
If within
the periods
specified
in paragraph (3)
of this Article the necessary
appointments have not
been made, either Contracting Party may, in
the absence of any
other agreement, invite the President
of the International
Court of Justice to make any necessary
appointments. If
the President is a national of
either Contracting
Party or
if he is
otherwise prevented
from discharging the said
function, the Vice
President shall be
invited to make the necessary appointments.
If the Vice President
is a national of either
Contracting Party or if he too is prevented from
discharging the said function,
the Member
of the
International Court
of Justice
next in seniority who is not a national of either
Contracting Party shall be invited to make the necessary
appointments.
(5)
The arbitral
tribunal shall
reach its
decision by a majority of votes.
Such decisions shall be binding on
both Contracting
Parties. Each
Contracting Party shall
bear the
cost of
its own member
of the
tribunal and
of its
representation in
the arbitral
proceedings; the
cost of the Chairman and the remaining costs shall
be borne
in equal parts by the Contracting
Parties. The
tribunal may, however,
in its
decision direct that
a higher proportion of costs shall be
borne by one of
the two
Contracting Parties, and
this award
shall be binding
on both
Contracting Parties.
The tribunal shall determine its own procedures.
ARTICLE
11
Entry
and Sojourn of Personnel
A Contracting
Party shall, subject to its
laws applicable
from time
to time relating to the entry
and sojourn of non-citizens,
permit natural persons of
the other Contracting
Party and
personnel employed
by companies of
the other Contracting Party to
enter and
remain in its
territory for the purpose of engaging
in activities connected with investments.
ARTICLE 12
Applicable
Laws
(1)
Except as
otherwise
provided in
this Agreement, all investment shall be governed by
the laws in force in the
territory of the Contracting Party in which such investments
are made.
(2)
Notwithstanding paragraph (1) of this Article nothing
in this Agreement precludes the host Contracting Party from
taking action for the protection of its essential security
interests or in circumstances of extreme emergency in
accordance with its laws normally and reasonably applied on
a non discriminatory basis.
ARTICLE
l3
Application
of other Rules
If the
provisions of law of
either Contracting
Party or obligations
under international law existing at present or
established hereafter between the Contracting Parties
in addition
to the
present Agreement
contain rules, whether
general or specific, entitling investments by
investors of
the other
Contracting Party
to a
treatment more
favourable than is provided for
by the
present Agreement, such
rules shall to the extent
that they are more
favourable prevail
over the
present Agreement.
ARTICLE
l4
Entry
into Force
This Agreement
shall be subject to ratification
and shall enter
into force on the date of
exchange of
Instruments of Ratification.
ARTICLE
l5
Duration
and Termination
(1)
This agreement
shall remain in force for
a period of ten
years and thereafter it shall be deemed to have been
automatically
extended
unless either
Contracting Party
gives to the other Contracting Party a written notice
of its
intention
to terminate
the Agreement. The
Agreement shall stand terminated one year from the date on
receipt of such written notice.
(2)
Notwithstanding termination of this Agreement
pursuant to
paragraph (1) of this Article, the Agreement
shall continue to
be effective for a further
period of
fifteen years from the date of its termination in
respect of
investments made
or acquired
before the
date of
termination of this Agreement.
In witness whereof the undersigned, duly authorized
thereto by their respective Governments, have signed this
Agreement.
Done at………………..on this…………….day
of………….200…
in two
originals each in the Hindi and
English languages,
both the texts
being equally authoritative.
In case of any divergence, the English text shall
prevail.
For
the Government of the
For the Government of the
Republic
of
India
Republic of ……………..
Indian
Direct Investment in JVs/WOS Abroad
(updated on
30th March 2007)
1.
Overseas
investment policy
Liberalisation
of the policy on Indian investment overseas was first
undertaken in 1992 on the recommendations of the Kalyan
Banerjee Committee. Further
liberalisation, and streamlining of procedures, was
undertaken in 1995 when revised guidelines were notified.
Since then the policy has been consistently
liberalised from time to time.
RBI was designated as the nodal agency for
administering the policy, which had earlier been entrusted
to the Ministry of Commerce.
The basic rationale for opening up the regime of
Indian investments overseas has been the need to provide
Indian industry access to new markets and technologies with
a view to increasing their competitiveness globally and help
the country’s export efforts.
2.
Routes
for overseas investment
The liberalised policy provides for the following
routes :
(i)
Automatic
Route :
Indian corporates/Registered partnership firms have
been allowed to invest in entities abroad upto 200% of their
net worth in a year, without prior approval of Reserve Bank
or Government of India. The investment can be funded out of
balances held in Exchange
Earners Foreign Currency Account (EEFC) of the Indian
company or 100%
ADR/GDR proceeds
or by drawing foreign exchanges from an authorized
dealer in
India
up to 100% of the net worth of the Indian company. Such
investments would be reported post facto to the Reserve
Bank.
(ii)
ADR/GDR
Automatic Route : In
terms of this scheme , Indian companies can freely utilise
up to 100% of ADR/GDR proceeds for overseas investments
without any
limit under the automatic route subject to post facto report
to the Reserve Bank
(Refer RBI Notification No. FEMA.40/2002-RB
dated March 2, 2001 in partial modification of
notification No. FEMA 19/2000-RB dated 3rd May
2000 on RBI website www.rbi.org.in).
(iii)
ADR/GDR
automatic stock/ swap route : Under this route Indian
companies can automatically swap their fresh issue of ADRs/
GDRs for overseas acquisitions in the same core activity
subject to post facto report to RBI. (Refer RBI Notification
No. FEMA 19/2000-RB dated 3rd May 2000 as amended
by Notification No. FEMA 40/2001-RB dated March 2, 2001).
(iv)
Normal
Route : Proposals
not covered under the above automatic routes are considered
by the Special Committee on Overseas investments headed by
the Deputy Governor, RBI with member representatives from
Ministries of Finance, Commerce, External Affairs and the
Reserve Bank. RBI is the secretariat for this Committee.
The application for direct investment in joint
venture/ wholly owned subsidiary outside India or by way of
exchange of shares of a foreign company, shall be made in
form ODI or in form ODB respectively, to RBI, Exchange
Control Department., Central Office, Mumbai – 400 001.
3.
Streamlining of the overseas investment policy
The
policy for Indian direct investment abroad
has been substantially liberalized over the past
three years. During the fiscal year 2003-04, the policy has
been further streamlined as follows :
(i)
Corporates - Listed Indian companies are
permitted to invest abroad in companies, (a) listed on a
recognized stock exchange and (b) which has the shareholding
of at least 10% in an Indian company listed on a recognized
stock exchange in India (as on 1st January of the
year of the investment). Such investments shall not exceed
25% of the Indian company’s net worth, as on the date of
latest audited balance sheet.
(ii)
Individuals - Resident individuals are
permitted to
invest in overseas companies indicated as (i) above without
any monetary limit.
(iii)
Indian corporates/Registered partnership firms
are allowed to investment
in entities abroad up to 200% of their net worth and the
existing monetary ceiling of US$ 100 million (US$ 10 million
for partnership firms ) removed.
(iv)
Indian corporates/Registered partnership firms
are allowed to undertake agricultural activities either
directly or through an overseas branch.
(v)
The stipulation of minimum net worth of Rs.15
crores for Indian companies engaged in financial sector
activities in
India
removed for investment abroad in the financial sector.
In
the year 2005-06, the policy has been further liberalised
under
Automatic Route
as under:
(1)
Guarantees -
The scope of guarantee has been enlarged under the
Automatic Route
. Indian entities may offer any forms of guarantee –
corporate or personal/ primary or collateral/ guarantee
by
the promoter company/ guarantee by group company, sister
concern or associate company in
India
, provided that:
(a)
All “financial commitments” including all forms of
guarantees are within the overall prescribed ceiling for
overseas investment of the Indian party i.e currently within
200% of the net worth of the investing company;
(b)
No guarantee is ‘open ended’ i.e the amount of
the guarantee should be specified upfront, and
(c)
As in the case of corporate guarantees, all
guarantees are required to be reported to RBI, in Form ODR.
(2)
Disinvestment
- In order
to enable companies to have operational flexibility
according to their commercial judgment, the Automatic route
of disinvestment has been further liberalized. Indian
companies are permitted to disinvest without prior approval
of the RBI in the following categories:
a) in cases where the JV/WOS is listed in the
overseas stock exchange.
b)
in cases where the Indian promoter company is listed on a
stock exchange in
India
and has a net worth of less than Rs. 100 crore.
c)
where the Indian promoter is an unlisted company and the
investment in overseas venture does not exceed US$ 10
million.
(3)
Proprietorship
concerns – With a view to enabling recognized star
exporters with a proven track record and a consistently high
export performance to reap the benefits of globalization and
liberalization, proprietary/ unregistered partnership firms
are allowed to set up a JV/WOS outside
India
with prior approval of RBI.
4.
Overseas
investment approvals/ actual outflows/ inflows from
JVs/WOSs
(i)
Overseas investment approvals
The
overseas investment approvals have been steadily increasing
since 1996 both in terms of number of approvals and value.
Indian investments abroad has gone upto 1395 number
of approval of (US$ 2855 million) in the financial year
2005-2006 as compared to 290 approvals (US$ 557 million) in
the financial year 1996-97, an increase of 380% in terms of
number of approvals and 513% in terms of value of
investments approved.
In
the current year 2006-07 (April-October 06), 870 approvals
were granted to Indian companies for overseas investments
worth US$ 6034.87 million as compared to 822
approvals worth US$ 1190.74 million
in the corresponding period of last year.
Trends
of approvals and outflows of investment abroad during the
last ten years is at Annexure
1.
(ii)
Actual Outflows
Actual outflows rose from US$ 318.64 million
in 1999-2000 to US$ 4461 million in the year 2005-06,
a jump of 1400%.
In
the current year 2006-07 (April – October 06), actual
outflows stood at US$ 3319.65 million as compared to US$
2109 million in the corresponding period of last year.
The trend of outflows
during the last seven years is shown in the statement at
Annexure-2.
(iii)
Inflows
from JVs/WOSs
Foreign
exchange inflows from Indian overseas investments in joint
ventures and wholly owned subsidiaries have been steadily
rising. While inflows rose from US$ 49 million in 1999-2000
to US$ 51 million in 2000-01, there was more than seven fold
increase when the
inflows aggregated US$ 366.86 million in year 2005-06.
The
inflows during the current year 2006-07 (April-October 06)
by way of repatriation of dividend etc. from overseas JV/WOS
was US$ 116.50 million and non equity exports was Rs.1120.35
crores.
A
statement showing trend of inflows and non-equity exports
during the last seven years is at Annexure
3.
5.
Classificatation of Indian outgoing investments
(i)
Sectorwise:
During the
period from April 1999 to October 2006, the largest amount
of approvals for overseas investment was in the
manufacturing sector at US$11093 mn followed by financial
and non-financial services sector (including software
development) at US$ 7099.23 mn, Trading sector at US$ 390.81
million and Other activities at US$ 985.59 million
respectively.
A
Sector-wise break up of approvals for overseas investments
is at Annexure
4.
(ii)
Regionwise,
In the
current year 2006-07 (April-October 06), European Common
Market Region (US$ 2470.98 mn)
accounted for major share of India’s overseas
investment followed by Economic & Social Commission for
Asia Pacific Region (US$ 848.63 mn), Organisation Commune
African El Malagache Region (US$ 780.47 mn) and North
American region (US$ 729 mn).
A
Statement showing regional break-up of overseas investments
approved is at Annexure
5.
(ii)
Country-wise
: During the
period from April 1996 to October 2006,
Russia
was the largest recipient of approvals for Indian direct
investment at US$ 2830.58
million, followed by
USA
at US$ 2768.29 million,
Mauritius
at US$ 2150.72 million, and U.K at US$ 2149.62 million.
During
the year 2005-06,
Brazil
was the largest recipient of approvals of Indian direct
investment at US$ 420.12 mn followed by
Mauritius
at US$ 332.66 million,
Netherlands
at US$ 284.62 million and
USA
at US$ 270.25 million.
A
country-wise classification of approvals of overseas
investments during the last 10 years is at Annexure
6
Annexure
1
YEAR-WISE
APPROVALS AND OUTFLOWS OF
OVERSEAS INVESTMENTS
(Amount
in USD million)
|
Financial
Year
|
No.
of approvals
|
Equity
|
Loan
|
Guaran-
tee
|
Total
|
Annual
Cap
|
Actual
outflows
|
|
1
|
2
|
3
|
4
|
5
|
6
|
7
|
8
|
|
1996-97
|
290
|
363.73
|
37.76
|
155.12
|
556.61
|
500
|
204.99
|
|
1997-98
|
228
|
482.01
|
8.34
|
135.52
|
625.87
|
750
|
120.77
|
|
1998-99
|
275
|
144.98
|
18.48
|
86.21
|
249.67
|
750
|
142.83
|
|
1999-00
|
395
|
1298.93
|
50.44
|
407.64
|
1757.01
|
750
|
318.64
|
|
2000-01
|
