India-Britain Trade Negotiations Include Controversial Investment Clause

Britain and India are finalizing a trade deal which includes the Investor-State Dispute Settlement (ISDS) mechanism, allowing companies to sue governments over policy changes that harm investments. This provision, controversial for its potential to impede climate efforts, has been excluded from prior UK agreements post-Brexit.

Britain and India are closing in on a comprehensive trade agreement that features the controversial Investor-State Dispute Settlement (ISDS) mechanism. This provision permits companies to initiate legal action against either government if they believe policy changes could unfairly impact their investments or profits, sources familiar with the talks informed Reuters.

The inclusion of ISDS is contentious. Critics argue it hinders environmental policies, as it allows fossil fuel producers to protect their assets against climate-related regulations. This mechanism is absent from recent UK bilateral trade agreements but is part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to which Britain is a signatory. Meanwhile, India has moved to curtail ISDS use in its treaties.

Despite past resistance, the provision has been pushed by Britain to reassure its businesses about fair treatment in India's legal system. Trade talks have been ongoing since January 2022, with key issues like tariffs on whisky, autos, and pharmaceuticals remaining. India's Commerce Minister's recent discussions signal a possible imminent agreement.

(With inputs from agencies.)