Trade Law

[By Manav Chakraborty and Manya Singh] The authors are students of Jindal Global Law school The computation of proper customs is a matter of vital importance for both Government and importers alike as it forms the backbone of revenue collection and compliance in cross-border trade. In a recent decision, titled Coal India Limited Vs. Commissioner Of Customs (Port) (Coal India) the Supreme Court of India confronted a contentious and commercially significant issue in this field: whether “product service fees” paid to a third party which is separate from the price paid to the foreign exporter should be included in the assessable value of imported goods under Rule 9(1)(a) and (e) of the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. (Valuation Rules) While the judgment establishes an important precedent with far-reaching consequences for transactions involving complex import arrangements, it also raises several interpretive and doctrinal issues that need to be resolved. In particular, the ruling raises questions about the scope of “condition of sale”, the distinction between pre- and post-import services, and the extent to which form can be disregarded in favour of commercial substance. This article critically analyses the decision, examining its reasoning, statutory context, and potential consequences for future customs valuation disputes. Factual Matrix and Supreme Court’s Ruling The case arose out of a contract for the supply of spare parts for P&H Shovels entered into between Central Coalfields Ltd. (a subsidiary of Coal India Ltd., the appellant) and Harnischfeger Corporation, USA (the foreign supplier). The contract was routed through the latter’s Indian distributor, M/s Voltas Ltd., which was to be paid 8% of the Free On-Board (FOB) value of the contract in Indian rupees towards “engineering and technical service fees.” This payment was not deducted from the FOB value and was made directly to Voltas. Following provisional assessments, the Assistant Commissioner of Customs included the 8% fee paid to Voltas in the assessable value of the goods under Rule 9(1)(a) and (e) of the Valuation Rules, read with Section 14(1) of the Customs Act, 1962. The short levy of duty was quantified at Rs. 64,47,244 and the appellant was directed to furnish this amount within 15 days. The Court first began by scrutinizing the pertinent contractual documents and its clauses specifically focusing on Clause 5 of the Purchase Order. It observed that the 8% payment to Voltas Ltd. was not a collateral arrangement but an integral term of the sale contract and the obligation to pay this amount was inextricably linked to the act of importation. The Court therefore held that the foreign supplier’s quotation made it clear that the payment to Voltas Ltd. was to be made in addition to the FOB price, and not deducted from it, reinforcing the viewpoint reached by different authorities before that this payment was a condition of sale and not a separate post-importation service. The Court’s main reasoning as to why the 8% payment obligation under the Purchase order was rightfully included in the assessable value of the imported goods under Rule 9(1)(a) and Rule 9(1)(e) of the Valuation Rules read with Section 14(1)(a) of the Customs Act, 1962 lied in the nature of the services rendered by Voltas Ltd. While the appellant characterized these services as post-importation maintenance and technical assistance, the Court essentially found them to be fundamentally tied to the import transaction activities to ensure smooth execution of the sale and importation of goods and hence includable in the assessable value. In addressing the appellant’s reliance on the Note to Rule 4 of the Valuation Rules and previous Supreme Court decisions such as Commissioner of Customs (Ports), Kolkata Vs. J.K. Corpn. Ltd (J.K Corporation) and Commissioner of Customs Vs. Ferodo India (P) Ltd. the Court drew a clear distinction between the cases on the basis of their factual matrix. In J.K Corporation, the Court held that payments for post-importation activities (such as technical know-how or license fees for plant operation after import) were not a precondition for the sale of goods and hence would not come within the purview of assessable value of the imported goods so as to enable the authorities to levy customs duty in view of the Note to Rule 4. In contrast, the services in the present case were pre-importation or contemporaneous with importation and thus includible in the assessable value under Rule 9(1)(e). Substance Over Form: Doctrinal Application and Limitations One of the central takeaways from the judgement rendered by the Court is the reaffirmation of the principle of “substance over form” adopted by judicial bodies in the context of customs valuation. Despite the contractual clause classifying the services rendered by Voltas Ltd. as engineering and technical service, the Court based on a granular and detailed reading of the clause and all the other surrounding documents, termed these “product service” charges as nothing but commission being paid to Voltas Limited for procurement of spare parts and making the sale as effective as possible. This principle has long held a foundational role in the jurisprudence of indirect taxation, with courts repeatedly cautioning that mere contractual form or nomenclature cannot immunize a transaction from scrutiny when the economic substance suggests otherwise. In CCE v. Acer India Ltd., the Supreme Court underscored that the artificial division of prices into dutiable and non-dutiable components, without justification, is impermissible. The Court emphasized that the true character of consideration must be evaluated in substance and not in structure. While the Court’s reliance on this principle in Coal India Ltd. is consistent with its past jurisprudence, its broad classification of the services provided by Voltas as having a direct nexus to the value of imported goods—and hence dutiable—raises concerns. If interpreted expansively, this reasoning could enable customs authorities to include a wide range of third-party services within the assessable value, even where such services are tangential to the transaction. The Court’s conclusion that Voltas’ services were merely facilitative of the sale was primarily grounded in Clause 5 of the Purchase Order, which outlined Voltas’ role in

[By Krishna Ravishankar ] The author is a student of National Law University, Jodhpur.   INTRODUCTION With the wheels of the 13th Ministerial Conference (hereinafter, “MC”) bus gearing up speed to be held at Abu Dhabi, MC-12 still remains an important talking point in the realm of international trade. The most significant face of the Geneva Ministerial Conference is the adoption of the 2022 Ministerial Decision on the TRIPS Agreement (hereinafter, “MD”) which provides clarifications to the existing patent waiver provisions in order to make vaccines and associated technologies more accessible to the developing world in the face of the COVID-19 pandemic. [1]While however laudatory the policy intent of the MD might be, there still remains the question of the legal enforceability of the same. This article tries to discuss this recurrent issue in a succinct manner. MINISTERIAL DECISIONS AS SOFT LAW INSTRUMENTS The “Covered Agreement” Argument As Peter Van De Bosche highlights, the role of the Dispute Settlement Understanding (hereinafter, “DSU”) is “prompt settlement of disputes between WTO members concerning their respective rights and obligations under WTO law.”[2] This observation is further enshrined under Article 3.2 which makes the functioning of the DSU strictly applicable only to WTO Covered Agreements.[3] Article 1.1 provides the contours of a “covered agreement” as those expressly provided for in Appendix 1 of the DSU as reiterated in Panel Report of Brazil- Desiccated Coconuts.[4]The Appellate Body in the report of Guatemala- Cement 1 while interpreting Article 7.2 and Article 23.1 further states that a legal recourse for a member state shall lie under the DSU only when it arises from an alleged violation of a provision of an “explicitly mentioned covered agreement.”[5] Thus, as a result, ministerial decisions not being explicitly mentioned in Appendix 1 which doesn’t allow member states to bring alleged violations of the same within the DSU Adjudication Mechanism lack legal enforceability. [6] The Marrakesh Agreement Perspectives Considered the highest decision-making body of the WTO, the WTO Ministerial Conference under Article IV:1 has the authority to adopt decisions in furtherance of any of the mentioned multilateral trade agreements provided for in the Appendixes of the Marrakesh Agreement.[7] This decision making authority must be read with Article IX which qualifies the subject matter on which an MC can adopt such decisions with regard to covered agreements. Decisions regarding official interpretations under Article IX:2 and waivers and concessions in exceptional circumstances under Article IX:3 along with amendments to WTO Covered Agreements under Article X are the subject matters of most MDs.[8] However, decisions normally taken Article IX as recognised by the Appellate Body in EC-Chicken Cuts merely constitute official interpretations under Article IX:2 and thereby no claim for specific legal enforcement can be made because MDs don’t generally generate specific rights or obligations on Member States. [9] Mainly considered by scholars as decisions showcasing the political will of the Ministerial Conference, they have been considered to lack the legally binding nature a covered agreement has making them non-binding soft law instruments. [10] PROBLEMS WITH THE “SOFT LAW” APPROACH A major problem that has arisen with this blanket “covered agreement” and “soft-law” approach with MDs is that many ministerial decisions enacted necessarily didn’t take the colour of merely official interpretations under Article IX:2. Some of the most consequential MDs pertained to important waivers and concessions under Article IX:3 and Article IX:4 be it the Doha Ministerial Decision of 2001, the Nairobi Export Decision of 2017 as well the current TRIPS Ministerial Decision of 2022. [11]Many Ministerial Decisions which have been taken, have a hue of waivers and concessions that create specific rights and obligations under WTO Covered Agreements, making us want to re-look the approach EC-Chicken Cuts has taken. Sometimes, MDs merely dealing with interpretations or clarifications under Article IX:2 also require legal enforceability when there are specific rights and obligations created by them.  [12] Part V of the Agreement of Subsidies and Countervailing Measures which is the Dispute Settlement Part was itself incorporated through a ministerial decision. Questions, when arisen regarding its enforceability, required The Panel to step in US-Lead and Bismuth-II to clear the ambiguity.[13] It held while differentiating between a Ministerial Declaration and a Ministerial Decision that a Ministerial Declaration merely recognises the need to take certain actions hence it cannot be mandatorily enforced. [14]A ministerial decision, on the other hand, specifies a scheme on how these actions are to be given effect. These gaps that the soft-law approach has taken only open more pandora boxes than it closes. THE VIENNA CONVENTION ON LAW OF THE TREATIES: A POSSIBLE ANTIDOTE While the principle of stare decisis is not followed largely in WTO law with previous panel and appellate body reports merely having a persuasive value, tracing the jurisprudence was important to understand the sense of the grey area one is traversing. Before discussing a possible solution to how these gaps can be addressed, it is important to look at how the Vienna Convention (hereinafter, “VCLT”) has been used by Panels and the Appellate Body.[15]Article 31(3)(a) and Article 31(3)(b) which lay down the parameters for a subsequent agreement and subsequent practices supplementing that agreement have been used as an important source of interpretation of WTO law under the “customary principles of international law” of Article 3.2 of the DSU. [16] When read with Article 2 of the VCLT which defines a treaty, these two provisions act as instruments part of the same transaction thereby mandating equal legal enforcement.[17] A very important interpretation of the “subsequent agreement” arises from the Appellate Body’s decision in Japan-Taxes on Alcoholic Beverages wherein the Appellate Body held that if a subsequent agreement dealt with an interpretation or clarification of a covered agreement provision, then it must be given the same level of legal enforcement as a covered agreement itself.[18]Though it didn’t specify ministerial decisions to fall within this description of a subsequent agreement, it did surely provide some room for introspection. The next important finding comes in the Appellate Body Report in US- Clove Cigarettes wherein

[By Sanket Das & Shrey Srivastav] The authors are students at National Law University Odisha. Introduction Successful investment facilitation strategies are built on a solid foundation of transparency and information. By transparency, it is meant that the investors should have knowledge about the pertinent laws which influence their investment decisions. [1] Further, investors should also be apprised of the administrative procedures of the nation they are going to invest in. [2] The survey found transparency and information to be “very significant” in their role as an investor. The vast majority of respondents ranked “very significant” the publication of relevant laws and regulations influencing foreign direct investment, such as those provided on an Institute for Portfolio Alternatives (IPA) website[3]. The people who took the survey analysed that investment application timelines and expenses must be made public[4]. According to information on investment facilitation measures at the country level, the majority of the 86 countries included in the Investment Facilitation Draft have implemented measures relating to the disclosure (publication of laws and regulations), accessibility of measures , the lack of fees for information access, and specifics on authorisation processes & payments[5]. Transparency as a component under Investment Facilitation Draft Transparency and information are fundamental to easing the process of making investments. In order to make an informed investment decision, investors need access to knowledge about administrative procedures, laws and other issues that could affect their enterprise. Transparency of investment incentives Members must be transparent about the laws, regulations, policies, and processes that control investment incentives. Information on all investment incentives must be published regularly (preferably in English) and made publicly available without prejudice. Investment incentives facilitate Investments in a nation and induces to increased stability and reduced  possibility of rent-seeking. Small and medium-sized enterprises (SMEs) who may have fewer resources for internationalisation and fewer resources to find information will find this material particularly useful. Incentives inventories are being published online by many economies to attract investment. Providing incentives for people to work toward Sustainable Development Goals (SDGs) can be quite helpful. Dispute between International Investment Agreement (IIA) & Investment Facilitation for Development Agreement (IFD) Each dispute settlement mechanism used to implement an IFD Agreement and an IIA is distinctive. Given the likelihood of an IFD Agreement being a multilateral or plurilateral agreement under WTO, the disputes under these agreements shall be subject to the exclusive and compulsory jurisdiction of WTO as mentioned under the Dispute Settlement Understanding[6]. The consensus among nations on a certain issue may be indicated by how frequently it appears in IIAs. However, Investor-State Arbitration (ISA) is permitted in many IIAs. It is now the most common route to an Investor-State Dispute Settlement (ISDS). About one thousand ISA lawsuits have been filed with the International Centre for Settlement of Investment Disputes (ICSID) so far. Given the similarities between an IFD Agreement and an IIA, a state regulatory measure on investment facilitation might fall under both purviews. Thus, parties alleging different treaties could file the same matter to ISA dispute settlement, WTO dispute settlement, or both. As things stand, a number of possibilities exist[7]. Dispute scenarios For instance, a relief claim is filed with ISA under the IIA and the IFD Agreement. In this hypothetical, we explore if and how an ISA tribunal may handle a challenge brought before the WTO. The well-known instance which best demonstrates this is of Philip Morris Asia vs. Australia.[8] Tobacco Plain Packaging Act was passed in Australia in 2011 to reduce tobacco use for public health reasons. Several lawsuits were filed against Australia after the Act was passed. The investor argued that Australia should uphold its commitments under the Australia-Hong Kong BIT Model and  the Paris Convention for the Protection of Industrial Property, the Agreement on TRIPS, and the Agreement on Technical Barriers to Trade (TBT). WTO accords include both TRIPS and the TBT pact. Australia first argued that to import obligations owed by Australia to other states under other treaties the BIT’s umbrella clause could not be used and then argued that the BIT’s dispute settlement provision cannot assert “roving jurisdiction” that would allow a BIT tribunal to start making a broad series of determinations that could conflict with the determinations of the agreed dispute settlement bodies under the nominated multilateral treaty. This is especially true when those organisations have sole authority. Transparency, simplifying & expediting of administration procedures There should be a push to streamline and speed up the application and approval processes for investment projects at all levels of government. Members should also think about instituting silent consent administrative processes to make investments easier. Where the competent authority fails to act within the time period needed under its laws and regulations, authorization is automatically granted to investors under the idea of “silent consent”, unless investors have been advised otherwise.[9] Investments with little risk can be approved with minimal scrutiny, while those with higher risk require more time and attention from the administration. Section II: Transparency of Investment Measures of Investment Facilitation Draft 2022. Publication and availability of measures and information In order to make investors, interested parties, and other members become familiar with any relevant general application measures linked to matters falling within its scope, each member is required to disclose or make it readily accessible. The member state is obligated to publish any international agreements to which it is a party.[10] However, this provision can be waived in the case of an emergency situation. Once a member publishes the text of a law or regulations, there should be a reasonable amount of time before investors to comply.[11] The member shall make every effort to announce in advance the aim and objective of a new legislation or regulation or amendments that are relevant with the legal framework for adopting measures.[12] The Member shall maintain electronically accessible information for investors.[13] Information relevant to investing in its domain includes the laws and regulations pertaining to FDI[14], details regarding which sectors are open, limited, or prohibited, and any other such data[15]. The information on how to start a company and get it registered, as well as how to

[By Vanshika Chansoria and Raj Aryan] Vanshika is a student at the National Law Institute University, Bhopal, and Raj is a student at the Lloyd Law College, Greater Noida. Introduction International trade is the movement of commodities, goods, services, and intellectual property across the national borders of one’s own country. Trade has been taking place across borders since the time when there was no form of formal body regulating such trade. During the earlier 16th and 17th century the first kind of structured trade started in Europe which came to be known as “mercantilism”. Mercantilism is based on the idea to maximize the exports of the country by imposing restrictions on imports. The export of goods and services accounted for 19.74% and import accounted for 23.64 % of Gross Domestic Product (GDP) of India during the pre-COVID- 19 era. The advent of COVID- 19 brought disruption in the global import-export market and curtailed free trade between countries. According to the World Trade Statistical Review 2019, India is one of the developing economies in Asia whose role in international trade has been increasing in the global value chain. But the impact of COVID-19 on trade in India is estimated to be 348 million dollars and India falls under the category of 15 most-affected economies of the world as per the United Nations Report. Since International trade has curtailed, its great time to encourage domestic products and producers and boost domestic production, by implementing the theory of protectionism. Protectionism  The theory of Protectionism aims to increase exports and decrease imports by imposing various kinds of trade barriers so that the domestic industries can get a fair chance to fight with international products and services. India was a protectionist country until the 1990s. But in the late 20th century India opened its market for international trade as a part of the Liberalisation, Privatisation, and Globalisation (LPG) model. COVID-19 has spread in all major countries of the world resulting in the reduction of trade all across the world. This knowingly or unknowingly has led the countries to use their own products due to reduction of trade. The point to be considered here is if developing countries like India are ready to face such challenges of Covid-19 and use domestic products. The theory of protectionism can be enforced in various ways: Impose heavy taxes on imports from other countries. A restriction on commodities to be imported. Provide subsidies to domestic producers. Make rules and regulation which can make it difficult for foreign producers to obtain license. Decrease the cost of domestic products in foreign markets by exchanging rate controls. Come up with Anti-dumping policies. The current decision of the Indian Government to boycott Chinese goods and stopping trade practices with China encourage them to adopt the theory of protectionism. Adding to the same, further, the Indian Government has banned 59 Chinese mobile applications and later banned 118 Chinese Apps, including PUB-G, on the surge of National Security, Sovereignty, and Integrity of India. As a result of this step taken by the government, various substitute apps came up front, and people were encouraged to use the same along with domestic products with the aim of becoming self-reliant, i.e. Atma Nirbhar. In the gaming sector, Bollywood actor Akshay Kumar has announced the launch of the FAU-G game, keeping in view the vision of Atma Nirbhar, in which 20% of the generated revenue will be donated to BharatKeVeer Trust. Atmanirbhar Bharat In order to overcome the problem of lack of local production, Prime Minister, Shri Narendra Modi in his speech on 11 May, 2020 announced the idea of Atma Nirbhar Bharat.  The vision envisages the production of goods and raises India’s capacity. It is not just to ‘Make in India’ but for the world. There are 5 essential features of the Atma Nirbhar Policy which include – economy, structure, technology-driven system, vibrant demography, and demand. Prime Minister’s vision of Atmanirbhar Bharat is to make India a self-sufficient country. This does not direct India to be in isolation or anti-global. India has a great opportunity to emerge as a manufacturing hub and has the capacity of producing ready and consumable goods on a large scale. India provides a large market size for the whole world. The objective behind this vision is to make India competitive with the rest of the world. Even during the peak of COVID – 19, India has attracted $38 billion of foreign direct investment. The vision expands to not produce goods only for the domestic market only but for the global market as well. The New Education Policy (NEP) which was launched this year will enlarge the scope of the education sector in facilitating greater exposure for Indian students and will establish India as a global education hub. It will make the youth capable enough to make India the global leader in science, technology, and other sectors; shaping the vision of Atmanirbhar Bharat. The theory, vision, and steps taken to achieve the Atmanirbhar Bharat are promoting the theory of Protectionism. CHANGES AND RELAXATIONS MADE BY THE GOVERNMENT OF INDIA AFTER THE ADVENT OF COVID – 19: A recent report which has been released by the World Trade Organization (WTO) said that international trade in 2020 will drop sharply with a rate of 32%. The government of India in order to mitigate the loss accrued by the economy affecting trade has come with new programs in order to facilitate international trade. Firstly, the government has launched an Incentive program of Rs 10,000 crore for stimulating the local Active Pharmaceutical Ingredients (API) production. In the near future, the imports and exports of API could also be considered for ramping up manufacturing for domestic use and exports. Secondly, in order to recover the economic impact on the economy of the country and boost the MSME sector, the government has come up with some new economic packages to transfer income to the poorer segments in the economy along with complementary liquidity enhancing measures of the monetary authority. Thirdly,

[By Ashuthosh V] The author is a student at the Institute of Law, Nirma University. Introduction The Dispute Settlement Body (‘DSB’) is a forum that resolves disputes between the World Trade Organization (‘WTO’) members. Such disputes must be a subject matter under any WTO agreement arising out of the Final Act of the Uruguay Round. The Dispute Settlement Understanding (‘DSU’), a WTO agreement, lays down a specific set of rules and procedures that govern the functioning of the current Dispute Settlement System (‘DSS’). It ensures that obligations are enforced against the signatories when they fail to comply with such obligations. It is considered one of the most successful international dispute resolution systems. The Appellate Body (‘AB’) is a part of the DSS that reviews an appeal against the proceedings conducted by a panel established by the DSB. The AB reviews only legal questions surrounding trade conflicts between the Member States. The AB consists of seven members and requires a minimum quorum of three members to hear an appeal. On December 11, 2019, the terms of two of the last three members expired and the United States (US) has been blocking the appointment of new members to the AB. With only one judge left, the AB cannot adjudicate upon any appeal pending in the WTO. This has led the WTO-DSS to a grinding halt and created an AB crisis within the WTO framework. The author in this article shall analyze arbitration under Article 25 of DSU as a potential alternative to AB proceedings till the crisis remains. The author shall also explain how the ad-hoc arbitration mechanism under the WTO framework is not a permanent option to the WTO Members. The Appellate Body Crisis The US has criticized the AB for undermining US sovereignty by engaging in judicial activism. Further, the AB was claimed to have other issues such as long delays, reversing factual findings of the panel report, and creating new obligations in an existing dispute that has not been approved by the Members. The AB ignores existing rules and adds new rules which undermine WTO as a forum for negotiation. It is perceived by other WTO members such as India, Canada, Australia, China, and European Union, that the AB passes decisions that amount to judicial overreach, thus, rendering trade remedies less effective at addressing several issues such as unfair dumping, the imposition of tariffs, unfair subsidies, and restriction of trade. The current status of the AB is that there is one judge left and the US is using its veto power to block the appointment or reappointment of new members to the AB. Until such vacancies are filled, ongoing trade disputes and future disputes would be left pending, as a result of which, countries would have to rely on an alternative mechanism outside the WTO framework to adjudicate the matter between them and seek a remedy. According to the DSU rules, the DSB cannot adopt a panel report before its appeal is resolved. Since the AB is not able to hear any appeal due to non-fulfillment of the quorum, any WTO member could use this loophole to block the enforcement of a panel report by appealing against such findings under DSU rules. It is imperative to understand that the AB is not able to hear any appeal but the WTO rules do not restrict any member from filing such an appeal before the AB. Therefore, the ability of WTO to enforce binding decisions on parties has been temporarily paralyzed subject to the appointment of members. Arbitration Mechanism under Article 25 of DSU: An Analysis Arbitrating trade disputes within the WTO framework was widely considered by several member states. Article 25 of DSU provides for an option to settle the dispute through arbitration. This clause could be invoked even at the stage of appeal against a panel report. The effect under Article 25 is that the award passed by the arbitrator is binding and enforceable against the disputed parties similar to the Panel and AB decisions that are adopted by DSB and further implemented. The parties mutually agree to the process, and there is no influence or involvement of any outside party unless permitted by the disputing parties. The US will be prevented from blocking the functioning of the Arbitration panel because it is not allowed to interfere with its proceedings involving other Members. The Arbitration panel would apply both substantial and procedural rules of WTO agreements to resolve a dispute, thereby enforcing obligations under multilateral agreements between the Member States. To ensure that Article 25 is effective to be considered as an alternative to the AB, member states must mutually agree on drafting a plurilateral general arbitration agreement that shall lay down the procedures of arbitration, the scope of subject-matter of arbitration, and ensure that the rulings are binding on the parties. On April 2, 2020, the European Union along with 15 other WTO Members entered into a Multi-Party Interim Arbitration Agreement (MPIA). The objective of the agreement was to strengthen arbitration under Article 25 to replace the AB for WTO members till it is inoperative. The agreement proposed reviewing panel decisions through arbitration with the mutual consent of the parties under Article 25.2 of DSU. It also provided for certain agreed procedures to facilitate arbitration under Article 25. The objective of the agreement is to enable Arbitration as an alternative within the WTO framework to resolve existing trade disputes until the AB is inoperative. Therefore, once the minimum quorum of the AB is established, i.e, three members are present, the AB would be able to hear appeals against the panel findings. In 2001, the US and European Union in the United States- Section 110(5) of the US Copyright Act agreed to apply Article 25 to use arbitration to determine the level of benefits impaired to the European Union. Arbitration was used as the parties could not agree on the level of benefits within a reasonable period to implement the panel report. Thus, Article 25 can be used

[By Arush Mittal] The author is a student at Hidayatullah National Law University, Raipur. Introduction India inked the Investment Cooperation and Facilitation Treaty with Brazil on 25th January, 2020. This treaty is a Bilateral Investment Treaty (‘BIT’) between the two countries. The signing of this treaty gathered a lot of deliberation as it contains a unique clause that uses the concept of ‘dispute prevention’ instead of the commonly known ‘dispute resolution’. This is India’s 4th and Brazil’s 10th bilateral investment treaty since these countries procured the Model BIT. Through this article, I have tried to analyze the features of this BIT and what it holds for India. Tracing the History of Indian BIT Model India signed its first-ever BIT with the United Kingdom in 1994 that laid emphasis on foreign investment; this treaty served as a base for India to ink several other BITs. This led India to sign more than 80 BITs and ratify over 70 treaties from the period of 1994 to 2011. India was ecstatic with the signing of the BITs until the upheaval due to the White Industries case. The ICC Tribunal had awarded USD 4.08 million to the White Industries as compensation since it was found that India had violated its obligation to provide ‘effective means’ of asserting claims to the investor; this provision was entailed in the Most-Favoured Nation (‘MFN’) clause of the India-Australia BIT. After this catastrophe, India underwent a sea-change towards the investment treaties. India scrapped BITs with 53 countries and signed only one BIT from the period of 2011-2015, with UAE. The inception of a new Model BIT was brought forward by the government of India in 2016 that became effective from 2017. Features of the Treaty in Brief The India-Brazil BIT is symbolic for a variety of reasons. The treaty neglects the widely known ‘investor-state’ dispute settlement (‘ISDS’) and promotes ‘state-to-state’ dispute settlement (‘SSDS’) with the primary focus on dispute prevention. It is also a south-south agreement between two large and growing countries as the nations have committed to cooperate in the field of cybersecurity, oil and natural gas, health and traditional medicine, science and technology, etc. Unlike other investment agreements, this treaty confers that no compensation can be awarded by a tribunal. However, it gets its encouragement from the WTO dispute settlement mechanism where it allows the tribunal to interpret the BIT. This treaty sets aside arbitration and yields for the settlement of disputes in an ‘amicable manner’ that would mainly involve mediation. A principal feature of this treaty is that the foreign investor cannot file a claim against the country where investment takes place, instead, the state to which the investor belongs, files the claim. Investor-State Dispute Settlement Vs. State-State Dispute Settlement The ISDS has been subjected to extensive criticism in the contemporary times. Some of the main reasons include the unpredictable nature of the interpretation of the standards by which the conflicting awards are protected; and the restriction placed by the system on the States’ regulatory freedom. Countries such as South Africa, India, and Brazil have rethought their long-followed approach recently and have led to various policy innovations. For example, Brazil follows a model of “Cooperation and Facilitation Investment Agreements” that does not mention the ISDS model in any sense. Neither the Australia-Japan Economic Partnership Agreement nor the Australia-United States Free Trade Agreement (has adopted the SSDS) allows the ISDS model. The SSDS is an alternative for the ISDS. The way States provide diplomatic protection, in a similar manner, the SSDS model protects the private investor. If an investor believes that a host state has committed a breach of the investment obligations, it can ask its home state to file a case of his/her behalf. The States also have the power to prevent controversial claims; this helps to assuage the fear of developing countries towards expensive lawsuits, as the home states would have considerations other than mere gains of its corporation. The Southern African Development Community amended its Finance and Investment Protocol to include the SSDS instead of the ISDS; and the Australia-China FTA added the filter of SSDS. In the India-Brazil BIT, Brazil justifies its proposal for the SSDS on the ground that it intends to avoid disputes. According to Brazil, the ISDS model involves excessive litigation that puts a constraint on the sovereignty of a state and has a negative impact on the developing states. It also believes that ISDS has the potential of terminating the relationship between the state and the foreign investor; which could easily be prevented if the States resort to mediation. Indian model BIT shows a traditional approach in this regard as it follows the ISDS model (in a restrictive manner). The provision of the Indian model BIT bars the investors from litigating the disputes in ISDS, as the issues decided by the Indian courts cannot be subject to arbitration and the investors must exhaust all local remedies to access arbitration. A Dispute Prevention Mechanism The India-Brazil BIT varies from the Indian BIT model. The India-Brazil BIT model retains features from the models of both the countries, attaining more inspiration from the BIT model of Brazil as it leads to the settlement of investment disputes by using a distinctive approach. This approach focuses on ‘prevention’ of the disputes, rather than settlement. Article 13 of the BIT between India and Brazil establishes the creation of a joint committee that comprises officials from both the countries, and this committee supervises the execution of the treaty, resolving the disputes in an ‘amicable manner’. Article 14 of the BIT talks about the creation of an ombudsman in Brazil and India that would follow the recommendations of the joint committee and therefore address the differences in the dispute. Article 18 establishes the dispute prevention mechanism. If a case arises where the joint committee is impotent to prevent the dispute, the matter is then referred to as the state-to-state dispute settlement procedure. Article 19 is responsible for the state-to-state dispute settlement. Article 19.2 clearly says that