Trade and Investment between the EU and India: A promising horizon with a closer look at negotiation roadblocks.

By Thijs De Cuyper, University of Leuven and Gautam Mohanty, Kozminski University and Jindal Global Law School


Introduction – The sixth round of the European Union (EU)-India investment protection agreement (IPA) was set to resume on 10-13 October 2023 in Brussels. However, plans have changed due to India prioritizing its Free Trade Agreement (FTA) with the United Kingdom, which is expected to be signed later in October. Nonetheless, the fact that EU-India negotiations are ongoing at this point in time is in stark contrast to the collapse of negotiations in 2013 which could be summed up as a clash between the dynamics of core interests of both powerhouses. Briefly stated, the IPA is being developed within the ambit of a wider EU-India FTA. As per the “EU textual proposal to India” dated 31. October 2022, the proposed agreement stipulates certain investment protection standards and the resolution of disputes between foreign investors and states under international law.[1] While recent progress provides much hope for a successful India-EU IPA, there are still some hurdles that need to be negotiated. Against the backdrop of the upcoming elections in 2024 in India and the EU, the IPA assumes specific importance for both in the context of exerting one’s strategic sovereignty, especially amid the Russia-Ukraine conflict and the COVID-19 pandemic.


Outline – In the following paragraphs, this blog post discusses the European and Indian perspectives on the IPA. What will become clear is that further progress in the negotiations require the EU and India to overcome the main challenge of finding common ground on two sets of provisions. These are (i) the trade and sustainable development provisions in the FTA on the one hand, and (ii) the provisions related to the settlement of disputes in the investment protection chapter on the other hand.


The EU’s perspective – From the perspective of the EU, the IPA aspires to achieve stability by ensuring India’s adherence to international law, thereby ultimately promoting foreign investor confidence. The negotiations between India and the European Union have to be approached from the perspective that, at least for the EU, the agreement would be much more than an economic partnership. Besides the economic benefits of increasing trade and investment with a growing India, the EU also sees the agreement as a chance to bolster its relationship with a democratic country with whom it shares more values than other regional rivals such as China.


EU investment treaties and external action values – To understand this particular approach from the EU, one has to recall the changes that have occurred in the wake of the Lisbon Treaty of 2009. The latter stipulated that investment treaty-making be placed under the banner of the Common Commercial Policy, and so became part of a broader and active value-oriented external policy of the EU.[2] Union policymakers have increasingly amplified the importance of developing a comprehensive international investment policy. The latter relates to the need to develop an investment policy that goes beyond a narrow view on solely pre- and post-establishment issues of FDI. In one of its communications on the future of an EU investment policy, the European Commission mentioned that such a policy should have the effect of enabling and protecting all the operations that accompany foreign investments.[3] Indeed, the Commission has stressed that it must pursue a policy that “benefits society as a whole and promotes European and universal standards and values alongside core economic interests, putting a greater emphasis on sustainable development, human rights, tax evasion, consumer protection, and responsible and fair trade”.[4] Furthermore, the European Parliament has stated unequivocally that it will not ratify future investment agreements that fail to address non-economic objectives.[5]


This multifunctional EU approach towards international investment treaties can be observed in the EU-Canada Comprehensive Economic and Trade Agreement (CETA) and the EU-Mexica FTA. More importantly, this approach is visible in 0the draft of the EU-India FTA. However, India does not necessarily embrace such an approach. In particular, the provisions on trade and sustainable development prove to be a cause for concern. India has never concluded an FTA including such provisions in the past and is wary of the legal consequences of such provisions. South Korea already had a dispute on the basis of similar provisions in the EU-Korea FTA.[6] India is skeptical that the FTA will be used to impose European sustainability requirements that do not correspond to its own economic reality. The EU negotiators should be clear about how legally binding they want the trade and sustainability commitments to be.


India’s perspective – Similarly, from the perspective of India, the IPA aims to de-escalate the protectionist approach by way of removing judicial interference by domestic courts of India in foreign investments. This aims to be in tandem with the “Make in India”, “Skill in India” and “Digital India” initiatives to attract foreign investment to India. The significance of the EU-India relationship is duly highlighted in the “EU strategy for cooperation in the Indo-Pacific[7], which mentions India as a strategic partner, inter alia, in the fields of regulatory cooperation, human rights, trade and investment. Historically, the investment protection regime in India has been problematic, primarily owing to India’s nationalistic and inward-looking approach vis-à-vis investor-state dispute settlement mechanisms (ISDS). Notably, India has, in recent times, unilaterally terminated several Bilateral Investment Treaties (BITs) that were previously agreed with EU member states. In 2017, India unilaterally terminated its BITs with 22 EU countries[8] courtesy of recalibrating its investment protection regime to its 2015 Model BIT which postulates a more protective approach towards future arbitration claims. For instance, the definition of investor and investment is narrowed down and certain provisions such as Most Favoured Nation (MFN) have been dropped and disputes pertaining to taxation have been excluded.[9]

Notwithstanding the above, for example, the cases filed by foreign investors such as Vodafone, Cairn Energy, Nissan and White Industries under their respective concerned BITs are enough indicators for the EU to seek the protection of its investors by way of an IPA. Hence, it remains to be seen what India’s approach to the IPA negotiations will be. For now, although the EU has a text proposal available for public scrutiny[10], India has not disclosed any textual proposals for the IPA.

Nevertheless, it appears that certain points of contention between both are the justiciability of taxation measures, the push by the EU for a two-tier multilateral investment court, the ambit of the most favoured nation (MFN) and fair and equitable treatment (FET) provisions.[11] The proposed IPA between India and the European Union (EU) holds significant geopolitical and economic implications from India’s perspective. Geopolitically, India views this agreement as a platform to bolster its strategic partnership with the EU, a critical regional player. This alignment can amplify India’s standing in international affairs, helping it navigate complex global dynamics. Further, India’s interest lies in securing and diversifying supply chains, opening up new export markets and ensuring an infusion of new capital and technology into the country. To that extent, India’s interest also lies in undercutting its dependence on China amidst increased public scrutiny, especially post-covid. Interestingly, it is not yet clear whether the IPA will contain any carve-outs for national security measures, such as investment screening mechanisms.

The Indian stance on the proposed two-tier investment court, while yet to be explicitly articulated, remains a subject of contemplation, particularly due to India’s conspicuous absence from active participation in the ongoing ISDS reform process (on the ISDS reform process see here). This reticence stems from India’s historical proclivity towards the resolution of investment disputes through arbitration rather than a multilateral appellate mechanism. A meticulous examination of India’s reservations unfurls several intricate layers rooted fundamentally in the preservation of its sovereign prerogatives and the safeguarding of its autonomous decision-making within the sphere of investment dispute resolution. India, historically and contemporaneously, has maintained a steadfast commitment to retaining sovereignty and autonomy over matters of investment arbitration, keen on preventing any extraneous influences encroaching upon issues of national consequence. Although the 2015 Model BIT indicates a more inward approach by India, nonetheless, the Model BIT and the BITs subsequently finalized indicate an interesting duality in India’s approach to BITs. On one hand, a perusal of the Model BIT highlights India’s cautious approach to foreign investment and the disputes arising therefrom wherein the incorporated provisions aim at safeguarding India’s sovereignty and public policy interests while on the other hand, it also exhibits India’s continued reliance on investment arbitration as a dispute resolution forum. Notably, the recent BIT concluded between India and Brazil provides for state-state arbitration rather than investor-state arbitration.


Conclusion – The proposed deadline to come to a final agreement is set to be the end of 2024. On the European side, the results of the negotiations will have to be accepted by all of the Member States, as well as by the EU Parliament. The situation with the CETA shows that member state approval can take time. A further question is whether the EU parliament will be able to tone down its appeal to ideals when the ratification vote on the EU-India FTA takes place. The fact that common ground has been reached on the substance of the FTA may not be a compelling reason for EU Parliamentarians in the end. Rather, it might be whether or not EU Parliamentarians find closer political ties with India more important than certain issues on which Prime Minister Modi and his Bharatiya Janata Party (BJP) have a different perspective, such as the Ukrainian conflict.[12] While a standstill like the one that exists with the EU-China agreement (see here) is certainly something to avoid, the EU-India agreement may be more politically viable because the EU does not have the same economic security or non-reciprocity concerns with India that it does with China.

The proposed India-EU IPA is a strategic instrument that aims to recalibrate the narrative surrounding India’s investment climate. As India enters this crucial phase of negotiation, it faces the challenge of balancing the pursuit of foreign investment with the preservation of its distinctive approach to investment dispute resolution. In this evolving landscape, the choices India makes will have enduring implications, shaping the contours of its economic and geopolitical relationships. The India-EU Investment Protection Agreement represents a nexus of law, policy, and geopolitics, and as the negotiations progress, it will be an intriguing subject of study and analysis in the fields of international law and diplomacy.


[1] EU Textual Proposal on Investment Protection, available at:

[2] M. Bungenberg (2010) Going Global? The EU Common Commercial Policy After Lisbon in C. Herrmann, J. Terhechte (eds.), European Yearbook of International Economic Law, Berlin, Springer, p. 128.

[3] European Commission, ‘Towards a comprehensive European international investment policy’, 7 July 2010, COM(2010) 343 final, 8.

[4] European Commission, ‘Towards a more responsible trade and investment policy’, 14 October 2015, COM(2015) 497 final, 12.

[5] J.R. Basedow (2020) The European Union’s New International Investment Policy and the United Nation’s Sustainable Development Goals: Integration as a Motor of Substantive Policy Change? in C. Beverelli, J. Kurtz, D. Raess (eds.), International Trade, Investment, and the Sustainable Development Goals, Cambridge, Cambridge University Press, p. 69-70.


[7] European Commission, Questions and Answers: EU Strategy for Cooperation in the Indo-Pacific, available at:

[8] Nicholas Peacock & Nihal Joseph, Mixed messages to investors as India quietly terminates bilateral investment treaties with 58 countries, available at:,as%20early%20as%20April%202017, last accessed on 20.10.2023.

[9] Nicholas Peacock & Nihal Joseph, Mixed messages to investors as India quietly terminates bilateral investment treaties with 58 countries, available at:,as%20early%20as%20April%202017, last accessed on 20.10.2023.

[10] EU Textual Proposal on Investment Protection, available at:

[11] Prabhash Ranjan, India-EU free trade agreement: Why we need to change our approach to negotiations, available at:

[12] Ashley J. Tellis, “What is in our interest”: India  and the Ukraine War, 25 April 2022,



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