Two of the best-known investor wins against India, the indirect-transfer disputes of the last decade, were delivered not by Indian law but by investment treaties. When domestic tax measures caught those investors, an investment treaty gave each a right to international arbitration, and that right is what produced the result. Many investors took the wrong lesson from those cases. They concluded the treaty backstop is there if needed. For most investments structured today, it is materially less available than it was then. An investor relying on the old understanding is carrying a risk it has not priced. The fuller picture is not decline but redesign: India reset the terms of protection and is now rebuilding its treaty network on them. Both halves matter to how an investment should be structured today.
How the protection worked before
For three decades India built a wide network of bilateral investment treaties. They were investor-friendly in the way that generation of treaties generally was: a broad, asset-based definition of protected investment; substantive guarantees including fair and equitable treatment and protection against expropriation; and, critically, direct access for the investor to international arbitration against the state, without first exhausting India's domestic courts. An investor that held its India investment through a country with such a treaty had a credible, enforceable route to a neutral forum if the state treated it unfairly. That route is what the indirect-transfer cases used, and it worked: tribunals found against the retrospective measure, and the matters were ultimately resolved.
What changed
After a run of adverse awards in the mid-2010s, India reset its treaty programme — deliberately, and broadly. The change has three parts, and each narrows the protection an incoming investor can rely on.
First, the network shrank. India terminated around seventy-five of its older treaties across 2016 and 2017. For an investor whose home country was on that list, the treaty it might once have relied on is simply no longer in force for new investment.
Second, the replacement standard is far narrower. India's current model, adopted in the same period, recasts what counts as a protected investment, prioritises state-to-state over investor-state dispute settlement, and, decisively, requires an investor to exhaust India's domestic remedies for a period of years before it can go to international arbitration at all. The neutral forum is still there, but it sits behind a long domestic queue.
Third, and most important for anyone whose exposure is fiscal, taxation has been carved out. Under the current model and the new-generation treaties built on it, measures relating to taxation fall outside treaty protection — and the host state's own determination that a measure is a taxation matter is not reviewable by an arbitral tribunal. In plain terms: the precise kind of claim that delivered the famous indirect-transfer wins is the kind the new treaties are designed not to entertain. The backstop narrowed most exactly where earlier investors leaned on it hardest. This carve-out is not an Indian peculiarity. Modern treaty practice, including major-economy models, increasingly keeps tax outside investor arbitration, on the principle that tax disputes belong in tax forums under substance rules. That is the same principle, drawn from the OECD's base-erosion work, that drives India's anti-avoidance and substance standards.
What India is building back
The reset was not a retreat from investment protection. It was a change of template, and India is rebuilding a network on it. New-generation treaties are coming into force: the treaty with the United Arab Emirates took effect in 2024, and treaties with Brazil, Kyrgyzstan and Uzbekistan entered into force in 2025, with others signed and pending. The map that emptied in 2016 and 2017 is filling again, treaty by treaty, on the newer terms.
Two further shifts set the direction of travel. India has said it will refresh its model treaty to be more investor-friendly, and in early 2026 the Ministry of Finance confirmed the revised text is in preparation. At the same time, in its trade agreements India is routing investment disputes away from investor arbitration toward state-to-state resolution: its deals with the United Kingdom, the EFTA states and Oman exclude investor-state arbitration, and the trade agreement concluded with the European Union in January 2026 leaves investment protection to a separate instrument still to be negotiated. The shape of recourse is being redrawn, not simply removed.
The honest read for an incoming investor is therefore neither alarm nor complacency. Protection is narrower per treaty than the previous generation granted, but it is real, expanding in coverage, and trending modestly back toward the investor. What it is not is automatic, or the same from one home jurisdiction to the next. That is precisely why the response is to check the live position rather than to assume either the old breadth or a blanket absence.
What it means for an incoming investor
None of this makes India unprotected or unattractive. India rebalanced toward regulatory sovereignty in the same years that the most developed economies pulled back from old-style investor-state arbitration: the European Union invalidated and then terminated arbitration under its intra-EU treaties after the Achmea ruling; the United States removed full investor-state arbitration with Canada and dropped fair-and-equitable-treatment claims in the USMCA; and France, Germany and Poland withdrew from the Energy Charter Treaty. India's move is part of that international mainstream, not a singling-out of foreign capital, and it sits alongside a clear shift toward prospective, codified rules. It does change what an investor should do at entry, and the change is concrete.
- Check the live treaty position for your jurisdiction — do not assume it. Whether an in-force investment treaty exists between India and a given country, and what generation it belongs to, now varies widely. The answer for one investor's home country is not the answer for another's, and the network is still being rebuilt. Confirm the current position for the specific jurisdiction through which the investment will be held.
- Do not assume tax disputes are covered. The taxation carve-out means the fiscal exposure most investors worry about, whether a change in tax treatment, a reassessment or a retrospective measure, is largely outside current treaty protection. Plan as though the treaty will not answer a tax dispute, because under the new generation it generally will not.
- Mind the survival window on terminated treaties. Terminated treaties commonly protect investments made before termination for a defined period afterwards. An investment made while an old treaty was in force may still carry that older, broader protection for its survival window, a valuable and time-limited position worth identifying for any pre-existing holding.
- Allocate the risk the treaty no longer carries by contract. Where the treaty once absorbed change-in-law and tax risk, the purchase agreement and shareholder arrangements must now do more of that work: tax indemnities, change-in-law allocation, and clear pricing of the residual exposure.
- Treat treaty protection as one structuring input among several, with realistic expectations. The holding jurisdiction still matters, but for what current treaties actually deliver, which is substantive protection short of tax and behind a local-remedies requirement, not for the broad, direct-access protection of the previous era. Substance, sound structure and contractual allocation now carry more of the load than the treaty does.
Time-sensitive — check your vintage. The one item that will not wait is the survival window. A terminated treaty typically keeps protecting investments made before it ended for a set number of years afterwards. A holding that predates a termination may still carry the older, broader protection, including the route to arbitration the new template restricts, but only until that window closes. Identify any such position now, while the option is live, rather than discovering after the window has run that the protection lapsed.
The bottom line
The investment-treaty backstop in India has not disappeared; it has been redrawn and is being rebuilt — a smaller but growing network, a higher bar to arbitration, and a deliberate exclusion of tax. The investor exposed today is the one still relying on the protection that operated a decade ago. The investor in good shape is the one who confirms the live position for its own jurisdiction, assumes tax sits outside the treaty, allocates that risk by contract, and builds the structure to stand on substance rather than on a recourse that may no longer be there. Protection in India is now something you assemble, not something you assume.
Frequently asked questions
Does an investment treaty still protect a foreign investment in India?
Sometimes, and less than before. India terminated many older treaties in 2016–17 and replaced its model with a narrower one that requires years of domestic litigation before international arbitration. Whether protection exists at all depends on the specific country through which the investment is held, and what it covers is narrower than the previous generation. The live position must be checked per jurisdiction.
Is India stepping back from investment protection, or rebuilding it?
Rebuilding, on new terms. After terminating around seventy-five older treaties in 2016–17, India has brought new-generation treaties into force, with the UAE in 2024 and Brazil, Kyrgyzstan and Uzbekistan in 2025, and has said it will make its model treaty somewhat more investor-friendly. The protection each treaty grants is narrower than the previous generation, and in several trade agreements investor arbitration is replaced by state-to-state resolution. So coverage is expanding while the rights per treaty are tighter. The practical task is to read the specific live treaty, not the headline direction.
Are tax disputes covered by India's investment treaties?
Generally no, under the current generation. India's model and its new treaties carve taxation out of protection, and make the state's own decision that a measure is a tax matter non-reviewable by a tribunal. The retrospective-tax claims that succeeded a decade ago would face a treaty designed to exclude them. Tax risk should be managed by structure and contract, not assumed to fall under a treaty.
If a country's old treaty with India was terminated, is an existing investment still protected?
Possibly, for a time. Terminated treaties usually protect investments made before termination for a defined survival period afterwards. An investment made while the treaty was in force may retain that older, broader protection for the remainder of that window. The position is specific to the treaty and the dates, and is worth confirming for any holding that predates a termination.
If the treaty will not protect us, what will?
Structure and contract. A holding built on genuine substance, an exit and tax position designed at entry, and a purchase agreement that allocates change-in-law and tax risk through indemnities and pricing. These are within the investor's control, and they now carry the load the treaty once shared.
Sources and authorities
- India's Model Bilateral Investment Treaty (2016) — narrowed investment definition; taxation carve-out and non-justiciability of the state's taxation determination; ISDS subordinated to state-to-state; local-remedies exhaustion and notice requirements.
- Termination of approximately 75 older Indian BITs (2016–2017); UNCTAD Investment Policy Hub — India IIA navigator (for the live, jurisdiction-by-jurisdiction position and survival clauses).
- India–United Arab Emirates BIT (2024, in force 31 August 2024) — new-generation template: asset-based definition including portfolio investment; exclusion of fair and equitable treatment and most-favoured-nation; defined protections (denial of justice, due process, non-discrimination, protection from manifestly abusive or arbitrary treatment); three-year local-remedies exhaustion; taxation carve-out; New York Convention enforcement.
- Rebuilding phase: BITs with Brazil, Kyrgyzstan and Uzbekistan entered into force in 2025; Israel signed 2026. India's announced refresh of its Model BIT toward more investor-friendly terms (2025); Ministry of Finance confirmation that the revised model is in preparation (1 February 2026).
- Trade-agreement dispute design: India–EFTA TEPA (in force 2025), India–UK and India–Oman agreements (investor-state arbitration excluded; state-to-state resolution); India–EU trade agreement concluded January 2026 with investment protection deferred to a separate instrument.
- Comparative context: EU termination of intra-EU investor arbitration after Achmea (2018; 2020 agreement); USMCA removal of full investor-state arbitration with Canada and of fair-and-equitable-treatment claims (2020); withdrawals from the Energy Charter Treaty (2023).
- The indirect-transfer disputes (Vodafone; Cairn) — investment-treaty arbitrations under older-generation treaties; see the companion case study.
- Companion analyses: the indirect-transfer case study; the jurisdiction-choice piece; the structuring pillar; the synthesis hub; and the ATB Legal companion on investor-state arbitration.
General information for a senior audience, not legal or tax advice. The live treaty position, survival-clause windows and the precise reach of the taxation carve-out are jurisdiction- and fact-specific and must be verified by ATB before publication and before any investor relies on them.
This article is general information and not legal or tax advice. Laws and case-law develop; obtain advice on your specific circumstances before acting.