India & Israel Investment Pact Eases Local Remedies Timeline

India has reduced the exhaustion period for local remedies available to Israeli investors to three years from the previous five years in the Bilateral Investment Agreement (BIA) signed on Monday between the two countries.

India has included a similar provision in its investment agreement with the UAE that came into force last year. The Bilateral Investment Agreement (BIA) between India and Israel aims to give comfort to investors in both jurisdictions and includes portfolio investments, which is a divergence from the past in such treaties.

Local remedies exhaustion means that jurisdictionally, investors must first try to resolve their disputes by the legal systems of the host country before they can avail themselves of international arbitration. Typically, India has a five-year period for that.

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Israel is the inaugural member of the OECD (Organisation for Economic Co-operation and Development) with which India has formalized this agreement.

The agreement encompasses clauses designed to protect investments from expropriation, promote transparency, and facilitate seamless transfers and compensation for losses, as stated by the finance ministry. Simultaneously, it meticulously balances the protection of investors with the regulatory rights of the state, ensuring adequate policy space for sovereign governance.

"The agreement is expected to boost investments and provide greater certainty and protection for investors, facilitating the growth of trade and mutual investments by ensuring a minimum standard of treatment and an independent dispute resolution mechanism through arbitration," it said.