Protection of Foreign Investment in India and International Rule of Law: Rise or Decline?

KFG Working Paper Series, No. 10, Berlin Potsdam Research Group “The International Rule of Law – Rise or Decline?”

32 Pages Posted: 16 Mar 2018

Date Written: June 2017

Abstract

This paper narrates the changes in the Indian policy towards foreign investment and analyses them in the backdrop of overall changes in the field of international law and particularly within the framework of the international rule of law. The policy changes that have taken place in India can be categorised into three periods. The first period commences after independence from colonial rule. This period is intriguing. At the international level, India insisted on national treatment for foreign investment and supported the New International Economic Order. Domestically, however, nationalisation was not pursued, and even when pursued, was not applied to foreign investors. This period continued until the 1990s when India faced serious economic problems and this coincided with the high point of the Washington consensus, often seen as the rise of the international rule of law. During this time, national treatment was abandoned and innumerable investment treaties granting liberal protection were entered into. This process ended abruptly after India lost the first investment case. This turn of events comments the third period, where efforts were made towards balancing between investor protection and conserving regulatory freedom. Although this period may appear to be a decline of the international rule of law, a nuanced approach shows that it is rather a rise. India has not withdrawn from the system of investor protection, as has been done by some other States. This period is characterised by extensive and detailed treaties to replace the prior sketchy treaty provisions. This is a move towards a more rule based investment protection.

Suggested Citation

Rajput, Aniruddha, Protection of Foreign Investment in India and International Rule of Law: Rise or Decline? (June 2017). KFG Working Paper Series, No. 10, Berlin Potsdam Research Group “The International Rule of Law – Rise or Decline?”, Available at SSRN: https://ssrn.com/abstract=3135261 or http://dx.doi.org/10.2139/ssrn.3135261

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