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Finance minister P Chidambaram recently approved the creation of a permanent group of secretaries to renegotiate India’s 82 bilateral investment protection agreements (BIPAs). This opportunity should be used not only to update and tighten India’s BIPAs but also to rethink India’s stance on the ICSID convention. Signing onto ICSID, as has been done by Pakistan and China, will go a long way in protecting the investments of Indian multinationals in other countries and steer foreign investment to India’s lagging infrastructure and utility sectors.
The “Convention on the Settlement of Investment Disputes between States and Nationals of other States,” commonly known as the ICSID Convention, is a multilateral treaty entered into force in October 1966. The treaty aims at encouraging investment in emerging economies and mitigating political and country-specific risks to foreign investments by providing a dispute resolution institution called ICSID—the International Centre for Settlement of Investment Disputes. Located in Washington DC, the centre facilitates arbitration and conciliation proceedings, and allows countries and foreign investors to resolve their disputes under the auspices of independent arbitrators and mediators. These arbitrators and mediators are expert professors, judges and lawyers in the field of international investment law, and thus can be relied upon for quick, neutral and just resolution of investor-state disputes.
The carrot for investors is that under Article 54 of the convention, all ICSID contracting member states, whether or not they are parties to a given dispute, are required to recognise and enforce ICSID arbitral awards as if they were a final judgment of a court in that state. And since the Convention was adopted under the aegis of the World Bank, the relationship between ICSID and World Bank weighs heavily in voluntary enforcement of these awards by member states—particularly for countries that continue to need support from the World Bank group. ICSID convention also provides for mechanisms to annul an award rendered by its tribunal—a procedure absent in forums where India’s current investor-state disputes are resolved. Under Article 52 of the convention, these proceedings go before an ad hoc committee which considers various grounds of annulment such as improper constitution of tribunal, manifest excess of tribunal’s powers, corruption on the part of a tribunal member, serious departure from a fundamental rule of procedure, and failure to state the reasons on which the award is based. Thus, on one hand foreign investors are assured of an independent non-state expert to arbitrate over their