Bilateral Investment Treaties and Its Impacts on Host Countries: The Case of India

Abstract

In recent years, scholars and researchers have raised questions about whether bilateral investment treaties provide the anticipated benefits and whether the costs imposed on host countries may outweigh those benefits. Evidence has shown that BITs pose challenges and a negative impact, including economic, political, sovereignty, and social impacts, for host countries. This includes suing host countries through ISDS, limiting their freedom to introduce new regulations, and preventing them from protecting labour rights, public health, and environmental protection. This study examines the dual nature of BITs by addressing the research problem: what are BITs, and how may they create potential drawbacks for host countries? This article applies a normative legal research method to analyse legal principles and regulations related to international investment law, including BITs, international legal instruments, arbitral decisions, and academic journals. Through doctrinal analysis, this study examines how the law is written and how it operates in practice, assessing whether existing legal principles strike an appropriate balance between investor protection and the regulatory agency of host countries. Under an analysis of the functions of BITs, the aim, and the structure, combined with a case study of India, this paper examines how treaties are primarily intended to create investment and advancement. It is found that BITs often undermine the host country's policy space, political and economic stability, and social welfare. To show these dynamics, this article includes a detailed case study on India’s experience with the Vodafone and Cairn tax disputes, representing how BITs can affect even large economies to significant financial and sovereignty risks.