What bilateral investment treaties protect foreign ownership rights?

Bilateral Investment Treaties (BITs) are international agreements between two countries that protect the rights of foreign investors. For foreign investors in industrial land and infrastructure projects in India, these treaties provide legal safeguards against unfair treatment, expropriation, and discriminatory regulation. They also establish mechanisms for dispute resolution outside the host country’s court system. Below are five key aspects of how BITs protect foreign ownership rights:

1. Protection Against Expropriation Without Compensation

• BITs prohibit host countries (like India) from nationalizing or expropriating foreign-owned assets, including land or developed industrial facilities,  without:
  
  • Public purpose
    
  • Due process
    
  • Fair market compensation
    
• If expropriation occurs, the investor is entitled to prompt, adequate, and effective compensation based on the asset’s fair value.

2. Fair and Equitable Treatment (FET)

• BITs guarantee non-discriminatory, predictable, and transparent treatment of foreign investors.
  
• Host countries must not create arbitrary regulatory burdens or deny justice through biased enforcement.
  
• Investors can claim a breach of FET if there is:
  
  • Sudden cancellation of development approvals
    
  • Unjust denial of repatriation rights
    
  • Retroactive regulatory changes targeting foreign ownership

3. National and Most-Favored-Nation (MFN) Treatment

• Foreign investors must be treated no less favorably than domestic investors or investors from any third country.
  
• This clause prohibits discrimination in:
  
  • Licensing procedures
    
  • Taxation
    
  • Land allocation
    
  • Dispute resolution mechanisms
    
• Ensures a level playing field for foreign companies involved in industrial land development or leasing.

4. Free Transfer and Repatriation of Capital

• Most BITs guarantee the unrestricted transfer of profits, dividends, sale proceeds, and other capital returns.
  
• Transfers must be allowed in freely convertible currencies and without undue delay.
  
• These rights reinforce India’s obligations under the Foreign Exchange Management Act (FEMA) when repatriating returns from land investments.

5. International Arbitration for Dispute Resolution

• BITs allow foreign investors to bypass domestic courts in case of disputes and seek resolution through:
  
  • ICSID (International Centre for Settlement of Investment Disputes)
    
  • UNCITRAL (United Nations Commission on International Trade Law)
    
  • PCA (Permanent Court of Arbitration)
    

This clause provides a neutral, enforceable, and rules-based mechanism if investor rights are violated.