At the event, Justice BV Nagarathna of the Supreme Court emphasized the urgent need for an interministerial forum to handle investment arbitration disputes. She proposed that instead of individual ministries independently addressing such cases, a collaborative forum should be established to ensure a unified, strategic approach right from the outset.
“When the dispute arises, ministries from this interministerial forum will take it up as a joint venture, rather than each ministry looking at it independently. Building consensus at the very initial stage is critical to developing an effective strategy,” she said.
She also highlighted the importance of capacity building, stressing that India's dependence on foreign law firms for high-stakes arbitration increases costs and places a significant burden on the exchequer. By fostering domestic legal expertise, she argued, India can better defend itself and shape global arbitration practices.
A Call for a Standard Operating Procedure (SOP) in Investment Arbitration
Finance Minister Nirmala Sitharaman, addressing the event, echoed the need for structured mechanisms in handling arbitration cases arising from Bilateral Investment Treaties (BITs). She emphasized the importance of early intervention, suggesting that India lacks a Standard Operating Procedure (SOP) for international arbitration cases.
“The SOP should be firmed up in such a manner that senior officials from relevant government departments are alerted at the earliest. A quick response team should be in place to assess the arbitration’s implications and prepare adequate responses,” she noted.
Her remarks underscored the necessity of balancing investor protection with a nation’s regulatory authority, ensuring that arbitration mechanisms do not unfairly hinder public interest policies.
Reforming India’s Approach to BIT Disputes
Justice Nagarathna provided a detailed overview of India's evolving Bilateral Investment Treaty (BIT) framework. She noted that India's first BIT with the UK in 1994 marked the beginning of numerous treaties—88 in total—which assured fair treatment and neutral dispute resolution mechanisms. However, India has since revised its approach, particularly after high-profile cases like the 2011 White Industries arbitration, where India lost due to judicial delays.
“The ruling in White Industries did not fully appreciate the Indian legal system, which caters to a population of over 1.4 billion people,” she pointed out.
She highlighted India’s 2016 Model BIT, which introduced stricter provisions to safeguard national interests. Additionally, India terminated 77 older treaties, but preserved arbitration rights through "sunset clauses", allowing disputes to be resolved under prior agreements for a specific period.
India also took proactive steps by issuing Joint Interpretative Statements with countries like Bangladesh, Colombia, and Mauritius to prevent tribunals from making broad and unintended interpretations of treaty provisions.
Global Challenges in Investment Arbitration
Justice Nagarathna underscored the growing concerns over foreign investor claims challenging government policies made in the public interest. Citing international cases such as Philip Morris v. Australia (where the company challenged Australia’s tobacco regulations) and Vattenfall v. Germany (disputing Germany’s nuclear energy phase-out), she noted that such claims question the legitimacy of the Investor-State Dispute Settlement (ISDS) system.
“Disputes brought by foreign investors challenging policy decisions of the government taken in public interest is a matter of serious concern. Addressing this legitimacy deficit is at the core of discussions on reforming the ISDS system,” she emphasized.
She also referenced the CDC v. Republic of Seychelles case, where Seychelles—a small country with a population of just 80,000—lost an arbitration case due to financial constraints in defending itself against corporate claimants. This, she argued, highlighted the urgent need for developing nations to strengthen domestic arbitration expertise.
Justice Indu Malhotra’s Role in India’s Arbitration Growth
Justice Nagarathna credited former Supreme Court judge Justice Indu Malhotra for playing a pivotal role in shaping India's arbitration framework. She noted that the NLU Delhi course aligns with her vision of equipping government officials and legal professionals with specialized knowledge in international arbitration.
She further emphasized the importance of ensuring that Indian investors receive fair and adequate protection under investment agreements, particularly as India continues to evolve as both a capital-importing and capital-exporting nation.
Bridging the Expertise Gap: A Call to Judiciary
One of the key takeaways from the event was the need for judicial capacity-building in investment arbitration. Justice Nagarathna urged the Chief Justices of High Courts to nominate judges to undertake this specialized course to enhance their ability to adjudicate investment treaty disputes effectively.
“Capacity-building initiatives like this will not only instill confidence in legal professionals handling this branch of law but also enable better strategies for future dispute resolution processes, ultimately protecting India’s financial interests,” she remarked.
The Road Ahead: Strengthening India’s Arbitration Ecosystem
The launch of this Post Graduate Certificate Diploma Course at NLU Delhi represents a transformational shift in India's arbitration landscape. With a structured SOP, an interministerial coordination forum, and a focus on domestic legal training, India is positioning itself to handle international arbitration cases more proactively and efficiently.
As the country continues to refine its investment treaty framework, initiatives like this will play a critical role in reducing dependency on foreign law firms, cutting arbitration costs, and ensuring India’s sovereign interests are safeguarded in global dispute resolution forums.
keywords: investment arbitration, bilateral investment treaty, international dispute resolution, india arbitration reform, nlu delhi arbitration course, investor-state dispute settlement, nirmala sitharaman
