Reassessing Risk and Protection Under the 2024 UAE-India Investment Treaty

The UAE-India 2024 Investment Treaty establishes a stricter, compliance-driven regime that narrows protections while demanding clear investment eligibility, lawful structuring, and substantial business presence. Investors must prioritize documentation, regulatory compliance, and early dispute-planning to secure protection under the treaty.

The UAE-India Bilateral Investment Treaty (2024 BIT) has reshaped the investment protection landscape between the two countries. In effect since August 31, 2024, the treaty is the sole operative instrument governing investor rights, dispute resolution pathways, and state obligations for new and future cross-border investments between the UAE and India.

For businesses already invested or planning to invest, this new framework requires a careful reassessment of compliance strategies, investment structuring, and risk-mitigation mechanisms.

Below is a practical advisory on what investors should review and incorporate into their decision-making.

1. The 2024 BIT now fully governs UAE-India investment relations

As of August 31, 2024, the 2014 BIT has ceased to operate. Except for ongoing disputes previously initiated, all future protections and claims must arise under the 2024 BIT.

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The treaty will remain in force until August 31, 2034, with a 10-year sunset protection for investments made before any termination date. This ensures policy stability for long-term projects – provided investors comply with the treaty’s qualifying and procedural requirements.

Investor takeaway: Review existing investments to confirm they meet the treaty’s eligibility criteria and ensure that future investments are structured to fall squarely within the treaty’s protective scope.

2. Clarified criteria for what qualifies as a protected investment

Article 1.4 introduces a three-part threshold test. An investment must:

• Involve a commitment of capital or resources
• Be made with an expectation of gain or profit
• Involve the assumption of risk

In addition, the treaty provides a detailed list of covered and excluded assets.

Key inclusions

• The 2024 BIT signals a shift by expressly including portfolio investments – for example, shares, stocks, bonds, debentures, and other debt instruments issued by enterprises of the other contracting state. This is significant because India’s previous model – the India Model BIT – explicitly excluded portfolio investments from the definition of “investment”. For financial investors this means that passive or non-controlling investments (which historically might not have qualified for treaty protection) now may be eligible under the 2024 BIT, provided they satisfy the qualifying criteria.
• A broad range of tangible and intangible assets, provided they are compliant with host-state laws. This means that physical assets (property, infrastructure, equipment) and non-physical assets (contractual rights, intellectual property, shares) can qualify – but only if they are legally established under the host state’s regulatory regime, and follow the capital-commitment, profit-expectation, and risk assumptions criteria. This requirement reinforces the importance of legal compliance and proper structuring by investors.

Key exclusions

• Concession contracts for non-renewable energy, signaling heightened sensitivity around extractives.
• Assets arising from pre-investment activities or measures tied to market entry (Article 2.2).

Investor takeaway: Ensure investment structures clearly demonstrate risk, capital commitment, and profit expectation. Clean documentation will be important in any future dispute or treaty-based claim.

3. Eligibility of investors: More rigorous, highly fact-dependent

The 2024 BIT introduces more precise requirements for those who qualify as an investor.

Natural persons

• Dual nationals are considered nationals of their country of ordinary residence.
• This provision matters primarily for UAE citizens, given India’s no-dual-citizenship rule.

Juridical persons

Entities must demonstrate substantial business activity in the home state. Supporting factors include:

• Physical presence and duration
• Location of central administration
• Number of employees
• Tax residence and payments
• Revenue generation

Trusts and state-owned or state-controlled entities are eligible, subject to these requirements.

Investor takeaway: Entities using holding companies, SPVs, or trust structures must document and substantiate “substantial business activity” to avoid allegations of treaty shopping.

4. Broad carve-outs and situations where protection will not apply

The treaty creates robust regulatory space for both India and the UAE. Investors must anticipate scenarios where treaty protection is unavailable.

Key disqualifying situations

Protection may be denied where:

• The investor violates host-state laws or administrative guidelines.
• The investment involves fraud, corruption, money laundering, or round-tripping.
• The investor is owned or controlled by nationals of a non-party state or, critically, by a person from a country sharing a land border with India who holds a beneficial interest.
• The structure appears designed for treaty shopping.
• The host state adopts non-discriminatory measures tied to public morals, health, environmental protection, monetary policy, or essential security.

Investor takeaway: Conduct compliance reviews and beneficial ownership audits. Indian regulations relating to border-sharing countries are particularly stringent and require thorough documentation.

5. Understanding the scope and limits of investor protections

The 2024 BIT retains core protections familiar to investors, but with tightly defined parameters:

• Fair and equitable treatment (FET) limited to protections against (i) denial of justice, (ii) due process breaches, (iii) targeted discrimination, or (iv) manifestly abusive treatment. (Crucially, the term “fair and equitable treatment” is not used in the broad sense that many older treaties apply. Several commentaries note that the 2024 BIT omits a free-standing FET clause and instead specifies a closed list of situations.)
• Full protection and security restricted to physical security. It does not obligate host states to guarantee commercial or legal security (for example, guaranteeing a particular profit level, or immunity from regulatory changes).
• National treatment, but subject to policy exceptions. Investors from the other party can expect parity with domestic investors only when they are in “like circumstances”. Regulatory distinctions made for bona fide policy reasons may be valid even if the treatment is less favorable.
• Protection from unlawful expropriation, with detailed carve-outs for public purpose measures. The treaty excludes certain measures from being treated as expropriation, such as non-discriminatory regulatory measures designed and applied to protect legitimate public interests (environment, health, etc.).
• Free transfer of funds and facilitation of entry and stay of investment-related personnel. Currency repatriation and movement of key personnel remain protected; however, investors should check if there are specific conditions or exceptions (for example, macro-economic measures) that apply.

Importantly, the treaty does not include a Most-Favored-Nation (MFN) clause, eliminating opportunities to import more favorable treatment from other treaties.

Investor takeaway: Protections exist but are no longer broad or open-ended. Investors should incorporate regulatory impact assessments into long-term planning, especially in policy-sensitive sectors.

6. Investor obligations: Compliance is now a treaty requirement

The BIT places binding obligations on investors, including:

• Compliance with host-state laws and regulations
• Prohibition on bribery or undue payments to public officials
• Adherence to tax laws in both jurisdictions
• Disclosure of investment-related information as required

Corporate Social Responsibility (CSR) obligations are encouraged, though not mandatory.

Investor takeaway: Non-compliance can invalidate treaty protection. Internal compliance programs should be updated to reflect the BIT’s explicit obligations.

7. Dispute resolution: Stricter timelines and mandatory local remedies

The BIT significantly tightens access to arbitration. Investors must:

1. Initiate local remedies within one year of becoming aware of the measure.
2. Pursue these remedies for three years, or until exhaustion, whichever is earlier.
3. Serve a notice of dispute.
4. Engage in at least six months of amicable settlement efforts.
5. Issue a notice of intent to arbitrate 90 days before commencing arbitration.
6. Waive all local remedies before commencing arbitration.
7. File arbitration within 12 months after local proceedings conclude, and within five years of discovering the breach.

Additional restrictions include:

• No third-party funding
• No parallel or multiple claims
• Transparent proceedings
• No punitive, moral, incidental, or consequential damages

Investor takeaway: Investors must plan dispute strategies early. Delayed action can forfeit the right to arbitration. Contractual risk-allocation clauses should reflect these procedural timelines.

8. Enforcement complexities remain

Although the BIT aligns with the New York Convention, India has not designated the UAE as a reciprocating territory for enforcement. As a result:

• An award issued in the UAE may face enforcement hurdles in India unless supported by a bilateral notification or domestic legal development.

Investor takeaway: When drafting contracts, consider seat of arbitration, enforcement prospects, and the need for supplementary contractual protections.

Conclusion: A stricter but more predictable framework

The UAE-India 2024 BIT introduces a more codified, compliance-driven framework for investment protection. While core safeguards remain, they are tightly conditioned, and investors must now demonstrate:

• Lawful and well-documented investment structures.
• Genuine economic presence in the home state.
• Full adherence to tax, regulatory, and anti-corruption laws.
• Timely action if disputes arise.

For both new and existing investors, the treaty shows the importance of rigorous compliance, careful structuring, and proactive risk management.

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