{"id":121779,"date":"2026-08-31T11:19:21","date_gmt":"2026-08-31T05:49:21","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=121779"},"modified":"2026-08-31T11:19:21","modified_gmt":"2026-08-31T05:49:21","slug":"qualified-mfn-investment-treaty","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/qualified-mfn-investment-treaty\/","title":{"rendered":"Qualified MFN in Bilateral Investment Treaties &#8211; India&#8217;s Proposed Reforms"},"content":{"rendered":"<h2 style=\"text-align: justify;\"><strong>Qualified MFN Latest News<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India is considering a Qualified Most Favoured Nation provision while remodelling its Bilateral Investment Treaty framework.\u00a0<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Bilateral Investment Treaties<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A Bilateral Investment Treaty (BIT) is an agreement between two countries that establishes rules for protecting investments made by investors of one country in the territory of the other.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">BITs generally address issues such as:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Protection against discriminatory treatment<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Expropriation of investments<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Fair and equitable treatment<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Transfer of funds<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Investor-State Dispute Settlement (ISDS)<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India adopted a new <\/span><b><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/indias-model-bilateral-investment-treaty\/\" target=\"_blank\">Model BIT<\/a> in 2015<\/b><span style=\"font-weight: 400;\">, partly in response to concerns arising from earlier investment disputes.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The 2015 model adopted a more cautious approach towards investor protections, including not providing an open-ended MFN clause or a full Fair and Equitable Treatment (FET) standard.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>About the MFN Principle<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The <strong><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/suspension-of-mfn-clause-in-india-switzerland-tax-treaty\/\" target=\"_blank\">Most Favoured Nation (MFN) principle<\/a><\/strong> generally requires a country to provide investors from one treaty partner treatment no less favourable than that provided to investors from another country.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">For example, if Country A gives investors from Country B more favourable treatment under a later treaty, an MFN provision could potentially allow investors from Country C to seek similar treatment if their treaty with Country A contains an applicable MFN clause.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India moved away from an <\/span><b>open-ended MFN provision<\/b><span style=\"font-weight: 400;\"> in its 2015 Model BIT because of concerns that investors could use provisions from treaties with third countries to make broader claims than those expressly negotiated in their own treaty.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Qualified MFN<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A <\/span><b>Qualified MFN<\/b><span style=\"font-weight: 400;\"> provision would retain the principle of non-discrimination but place specific limitations on its application.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Instead of allowing investors to automatically claim the most favourable provision available in any third-country treaty, the provision could include safeguards specifying:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Which treaty provisions can be imported?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Whether the provision can apply retrospectively?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Whether settled disputes can be reopened?<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">What categories of treatment are covered?<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This approach attempts to balance investor protection with the regulatory autonomy of the State.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>News Summary<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The Union Government is considering a broader restructuring of its BIT framework. The proposed reforms include <\/span><b>Qualified MFN treatment<\/b><span style=\"font-weight: 400;\"> rather than restoring the open-ended MFN rule that was removed about a decade ago.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The objective is to address concerns of major trading partners such as the <\/span><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/european-union-eu\/\" target=\"_blank\"><b>European Union<\/b><\/a><span style=\"font-weight: 400;\">, while avoiding the risks associated with allowing investors to import favourable provisions from unrelated third-country treaties.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The approach could also provide negotiating leverage for Indian companies seeking similar treatment in major overseas markets such as the <\/span><b>US <\/b><span style=\"font-weight: 400;\">and<\/span><b> EU<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Changes to ISDS<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposed framework would reduce the domestic<\/span><b> ISDS window from five years to one year<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Under such a system, investors would generally be expected to pursue domestic legal remedies for one year before moving towards international arbitration.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposal is intended to expedite dispute resolution, but experts have cautioned that shorter timelines would increase the importance of strengthening India\u2019s domestic dispute-resolution institutions.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Longer Post-Treaty Protection<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The draft proposal also seeks to double the period of investor protection after expiry of a BIT from five years to 10 years.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This could provide greater certainty to investments made under a treaty even after the treaty itself has expired.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Wider Definition of Investment<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Another proposed change is to expand the definition of \u201cinvestment\u201d to include portfolio investments and other financial assets.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This could potentially bring certain shares and minority or portfolio holdings within the scope of treaty protection, depending on the final wording of the agreement.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposal also seeks to ban third-party funding of investment-related litigation.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>India\u2019s FDI Context<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposed reforms come against a backdrop of declining net FDI inflows into India.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">According to the report, average annual net FDI was close to US$40 billion during FY20-FY22, but fell to approximately US$7.65 billion in FY26, based on preliminary data.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">At the same time, Indian companies have expanded their investments overseas. This combination has increased the policy focus on making India\u2019s investment regime more predictable and competitive.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Strategic Balance<\/strong><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposed reforms attempt to balance two objectives: making India more attractive to foreign investors while preserving the policy flexibility sought under the 2015 Model BIT.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The EU itself has moved towards an Investment Court System model while retaining non-discrimination protections.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India is also negotiating around a dozen BITs, making the design of its revised framework particularly important.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><strong>Conclusion<\/strong><\/h2>\n<ul>\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India&#8217;s proposed BIT reforms represent an attempt to create a more predictable investment environment without returning to unrestricted treaty protections.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A Qualified MFN clause could provide investors with greater protection while limiting the possibility of importing unrelated provisions from third-country treaties.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400; text-align: justify;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The success of the proposed framework will depend on the precise safeguards adopted, the strength of domestic dispute-resolution institutions and India&#8217;s ability to balance investor confidence with regulatory autonomy.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b> <strong><a href=\"https:\/\/www.financialexpress.com\/business\/news\/large-investment-treaties-may-include-qualified-mfn-rule\/4328386\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>India is considering Qualified MFN treatment in its revamped Bilateral Investment Treaty framework to balance investor protection with policy flexibility.<\/p>\n","protected":false},"author":21,"featured_media":121786,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[60,9885,22,59],"class_list":["post-121779","post","type-post","status-publish","format-standard","has-post-thumbnail","category-upsc-mains-current-affairs","tag-mains-articles","tag-qualified-mfn","tag-upsc-current-affairs","tag-upsc-mains-current-affairs","no-featured-image-padding"],"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/121779","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/21"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=121779"}],"version-history":[{"count":3,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/121779\/revisions"}],"predecessor-version":[{"id":121796,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/121779\/revisions\/121796"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/121786"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=121779"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=121779"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=121779"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}