Role of Domestic Courts in the Settlement of Investor-State Disputes by A. Saravanan & S. R. Subramanian

Author:A. Saravanan & S. R. Subramanian
Language: eng
Format: epub
ISBN: 9789811570100
Publisher: Springer Singapore

4.3.1 BIT as an Instrument to Attract Foreign Investment

The main objective of concluding BITs is to promote and protect the investment and investors on a reciprocal basis. It also provides confidence among the investors to attract more foreign investment. It is significant to note that the relationship between BIT and FDI inflows is highly contested. Some scholars agree that ‘signing investment treaties increases FDI’,26 while some others argue that investment treaties increase only a few types of FDI. However, in a notable work, Neumayer and Spess sought to prove that BIT increases the FDI inflows into the developing country.27 Another group of scholars take a negative approach towards the effect of BITs on FDI inflows.28

The same debate continues in India as well. While some argue that FDI inflows are not dependent on BITs, some other scholars are affirmative on this aspect. Two notable works deserve mention here, the first study by Rashmi Banga,29 examined this relationship in 15 Asian developing countries including India from 1980 to 2000. The study found that BIT signed in these countries with developed countries had significant impact on FDI inflows. However, the study found out that BITs signed with developing countries did not have much impact on FDI inflows. Interestingly, India had signed only 14 BITs till 2000, out of which, 9 BITs were entered with developed nations, and they all had significant impact on FDI inflows in India. Another significant work (Bhasin and Manocha) analysed this relationship during 2001–2012 and found that BITs signed during the said period have contributed to increase in FDI inflows.30 From the above discussion, we cannot come to any conclusion that BITs alone determine the FDI inflows into India. However, it is submitted that BITs could be one of the important tools to encourage investors to invest in India.31

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