Brics are rethinking costs of bilateral investment treaties

March 12, 2014. Letters to Editor  From Mr Kavaljit Singh.

Sir, Robert Zoellick’s assertion that China can advance internal reforms through proposed bilateral investment treaties (BITs) with the US and the EU is unconvincing (“International treaties can once again help China advance”, Comment, March 11). BITs are not meant to tackle corruption and fight favouritism in China, as perceived by Mr Zoellick. Such policy objectives can be best advanced through domestic political reforms. BITs are intended to promote, encourage and protect investments by nationals of one of the contracting states in the territory of the other contracting state.

The growing two-way investment flows between China and the US without any BIT demonstrate that such treaties are neither necessary nor sufficient for attracting investments. Further, BITs include investor-state arbitration which gives foreign investors the right to sue the host country without having to go to national court systems. However, BITs do not impose any obligations on the part of foreign investors or the home country. Why should the balance of obligations fall only on the host country?

Of late, Brics countries are rethinking about the costs and benefits of BITs. South Africa has unilaterally terminated many of its existing BITs and proposed a new bill that provides no recourse to international arbitration. India is currently reviewing its existing BITs and has put all ongoing negotiations on hold till the review process is complete.

Kavaljit Singh, Director, Madhyam, New Delhi, India