Investment protection agreement between Israel and India enters into force

The current agreement replaces the previous 1996 India-Israel BIT, which was terminated in 2017 as part of India’s major overhaul of its entire network of investment treaties after a series of lost international arbitrations.

India has since developed a new model BIT that is more weighted in favor of state regulatory rights. Israel became the first OECD country to enter into an agreement on this new Indian model.

Under the agreement, investors of each party receive treatment no less favorable than investors in the host country (national treatment) and no less favorable than investors in any third country. The exception is rights to land and real estate.

Direct or indirect expropriation is permitted only for public purposes, subject to due process of law, on a non-discriminatory basis and subject to prompt and adequate compensation.

The free transfer of capital, profits, dividends, royalties and proceeds from the sale or liquidation of investments is guaranteed – while both parties retain the right to impose temporary restrictions in crisis situations (balance of payments problems, exceptional macroeconomic circumstances), within the framework of their domestic legislation.

The mechanism of international arbitration is provided, but with significant restrictions: the investor must first apply to the national courts or administrative authorities of the host country and only after exhausting domestic remedies (a period reduced to three years, versus five years in the earlier Indian model) can proceed to international arbitration, except in certain cases where domestic remedies are objectively unavailable.

the clause not only protects the investor, but also imposes obligations on him – compliance with the domestic legislation of the host country, including tax regulation, anti-corruption standards and information disclosure requirements; an express prohibition on offering undue benefits to public officials.