Title
BILATERAL INVESTMENT AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE STATE OF ISRAEL
Preamble
Preamble
The Government of the Republic of India ("India") and the Government of the State of Israel ("Israel") (hereinafter referred to as the "Party" individually or the "Parties" collectively);
Desiring to promote bilateral cooperation between the Parties with respect to foreign investments;
Desiring to promote conducive conditions and to encourage a competitive environment for investments by investors of a Party in the territory of the other Party;
Recognizing that the promotion and the protection of investments of investors of one Party in the territory of the other Party will be conducive to the stimulation of mutually beneficial business activity, to the development of economic cooperation between them and to the promotion of sustainable development; and
Reaffirming the right of Parties to regulate investments in their territory in accordance with their law and policy objectives;
Have agreed as follows:
Body
Chapter I. Preliminary
Article 1. Definitions
For the purposes of this Agreement:
1.1 "confidential information" means business confidential information, e.g. confidential commercial, financial or technical information which could result in material loss or gain or prejudice a disputing party's competitive position, and information that is privileged or otherwise protected from disclosure under the law of a Party;
1.2 "Designated Representative" means:
(i) for India, Secretary/Additional Secretary/Joint Secretary, Department of Economic Affairs, Ministry of Finance, Government of India.
(ii) for Israel, the Ministry of Finance, Chief Economist Department, or its successor.
1.3 "enterprise" means:
(i) any entity constituted and organised under the law of a Party holding the necessary approvals in the relevant economic sector and carrying out substantial business activities in the territory of that Party; and
(ii) a branch of any such entity established in the territory of a Party in accordance with its law and carrying out substantial business activities there. (1)
1.4 "investment" means any of the following investments, owned or controlled, directly or indirectly, by an investor of one Party in the territory of the other Party (a) in accordance with the law of the Party in whose territory the investment is made including the necessary approvals in the relevant economic sector, and (b) that, has the characteristics of an investment such as the commitment of capital or other resources, the expectation of gain or profit, and the assumption of risk.
Such investment shall only include the following:
(A) an enterprise constituted, organised and operated in good faith, which can possess any of the following assets:
(a) shares, stocks and other forms of equity participation of the enterprise or in another enterprise;
(b) turnkey constructions, production or revenue sharing contracts or other similar contracts;
(c) bonds, debentures and other debt instruments of another enterprise;
(d) a loan to another enterprise;
(e) licenses, permits, authorisations or similar rights conferred in accordance with the law of a Party;
(f) long term rights conferred by law of a Party, or under contract, but excluding concessions, to search for, explore, extract or exploit natural resources in accordance with the law of a Party; (2)
(g) copyrights, know-how and intellectual property rights such as patents, trademarks, industrial designs and trade names, to the extent they are recognized under the law of a Party;
(h) moveable or immovable property and related rights; or
(i) any other interests of the enterprise which involve substantial economic activity and out of which the enterprise derives significant financial value;
(B) shares, stocks and other forms of equity participation in an enterprise;
(C) bonds, debentures and loans and other debt instruments issued by an enterprise. (3)
For greater clarity, investment does not include the following:
(i) debt securities issued by a government or government-owned or controlled enterprise, or loans to a government or government-owned or controlled enterprise;
(ii) any pre-operational expenditure relating to admission, establishment, acquisition or expansion of the enterprise incurred before the commencement of substantial business activities of the enterprise in the territory of the Party where the investment is made;
(iii) claims to money that arise solely from commercial contracts for the sale of goods or services by a national or enterprise in the territory of a Party to an enterprise in the territory of the other Party;
(iv) goodwill, brand value, market share or similar intangible rights;
(v) claims to money that arise solely from the extension of credit in connection with any commercial transaction;
(vi) an order or judgment sought or entered in any judicial, administrative or arbitral proceeding;
(vii) any other claims to money that do not involve the kind of interests or operations set out in the definition of investment in this Agreement.
1.5 "investor" means a natural person of a Party or juridical person of a Party, other than a branch or representative office, that has made an investment in the territory of the other Party;
For the purposes of this definition, a "juridical person" means:
(a) a legal entity that is constituted and organised under the law of that Party and that has substantial business activities (4) in the territory of that Party; or
(b) a legal entity that is constituted and organised under the laws of that Party and that is directly or indirectly owned or controlled by a natural person of that Party or by a legal entity mentioned under sub-clause (a) herein.
1.6 "local government" includes:
for India:
(i) An urban local body, municipal corporation or village level government; or
(ii) an enterprise owned or controlled by an urban local body, a municipal corporation or a village level government.
for Israel:
(i) municipalities, local councils and regional councils; or
(ii) an enterprise owned or controlled by a municipality, a local council or a regional council.
1.7 "measure" includes a law, regulation, rule, procedure, decision, administrative action, requirement or practice.
1.8 "natural person of a Party" means
(i) in case of India, a national or citizen or permanent resident (5) in accordance with the laws of India;
(ii) in case of Israel, a national or permanent resident (6) in accordance with the law of Israel.
A natural person of a Party who is a dual national shall be deemed to be exclusively a national of the country of her or his dominant and effective nationality, where she/he ordinarily or permanently resides.
1.9 "Pre-investment activity" means any activities undertaken by the investor or its enterprise prior to the admission and establishment of the investment in accordance with the law of the Party where the investment is made, including but not limited to acquiring of the necessary permits to operate in a sector, and in compliance with sectoral limitations on foreign equity.
1.10 "Sub-national government" means a State Government or a Union Territory administration in the case of India but does not include local governments;
1.11 "Territory" means:
(i) In respect of India: the territory of the Republic of India in accordance with the Constitution of India, including its territorial waters and the airspace above it and other maritime zones including the Exclusive Economic Zone and continental shelf over which the Republic of India has sovereignty, sovereign rights, or exclusive jurisdiction in accordance with its law and the 1982 United Nations Convention on the Law of the Sea and international law;
(ii) In respect of the State of Israel: the territory of Israel including the territorial sea as well as the continental shelf and the exclusive economic zone, over which Israel exercises sovereignty, sovereign rights or jurisdiction in accordance with international law and the laws of Israel.
1.12 "WTO Agreement" means the Marrakesh Agreement Establishing the World Trade Organization, done at Marrakesh on 15 April, 1994.
Article 2. Annexure, Provisos and Footnotes
For the purposes of this Agreement, the Annexures, Provisos and Footnotes in this Agreement constitute an integral part of this Agreement and are to be accorded the same effect as other provisions in this Agreement.
Article 3. Scope and General Provisions
3.1 This Agreement shall apply to measures adopted or maintained by a Party relating to investments of investors of the other Party in its territory, in existence as of the date of entry into force of this Agreement or established, acquired, or expanded thereafter, and which have been admitted by a Party in accordance with its law, regulations and policies.
3.2 For investments in existence as of the date of entry into force of this Agreement this Agreement shall not apply to claims arising out of an alleged breach or events which occurred, prior to the entry into force of this Agreement.
3.3 Notwithstanding anything in Article 3.2 to the contrary, this Agreement shall replace the India-Israel BIT 1996, in respect of investments made or acquired prior to the date of termination of India-Israel BIT 1996 which would have been otherwise protected as per Article 15(2) of India-Israel BIT 1996.For the avoidance of doubt the Parties hereby confirm that from the date of entry into force of this Agreement, the India-Israel BIT 1996 shall cease to be effective in respect of investments made or acquired before the date of termination of the India-Israel BIT 1996.
3.4 Subject to the provisions of Chapter Ill of this Agreement, nothing in this Agreement shall extend to any Pre-investment activity related to establishment, acquisition or expansion of any investment, or to any measure related to such Pre-investment activities, including terms and conditions under such measure which continue to apply to the management, conduct, operation, sale or other disposition of such investments after the permit has been acquired and the investment has been made.
3.5 This Agreement shall not apply to:
(i) any measure by a local government;
(ii) any law or measure regarding taxation, including measures taken to enforce taxation obligations.
For greater certainty, it is clarified that where the Party in which investment is made decides that conduct alleged to be a breach of its obligations under this Agreement is a subject matter of taxation, such decision of that Party, whether before or after the commencement of arbitral proceedings, shall be non-justiciable and it shall not be open to any arbitration tribunal to review such decision.
(iii) the issuance of compulsory licenses granted in relation to intellectual property rights, or to the revocation, limitation or creation of intellectual property rights, to the extent that such issuance, revocation, limitation or creation is consistent with the international obligations of the Parties under the WTO Agreement.
(iv) government procurement by a Party;
(v) subsidies or grants provided by a Party;
(vi) services supplied in the exercise of governmental authority by the relevant body or authority of a Party. For the purposes of this Agreement, a service supplied in the exercise of governmental authority means any service which is not supplied for a commercial purpose.
Article 4. Right of State to Regulate
The Parties reaffirm the right of each Party to regulate, including through adopting or maintaining measures, within its Territory in pursuit of legitimate public policy objectives. The mere fact that a Party regulates in a manner which negatively affects an investment or interferes with an investor's expectations, including its expectation of profits, is not a breach of an obligation under this Agreement.
Chapter II. Obligations of Parties
Article 5. Treatment of Investments
5.1 No Party shall subject investors with respect to their investments and investments made by investors of the other Party to measures which constitute:
(i) Denial of justice in any judicial or administrative proceedings; or
(ii) fundamental breach of due process; or
(iii) targeted discrimination on manifestly unjustified grounds, such as gender, race or religious belief; or
(iv) manifestly abusive or manifestly arbitrary treatment, such as coercion, duress and harassment. (7)
5.2 Each Party shall accord in its territory to investments of the other Party and to investors with respect to their investments full protection and security. For greater certainty, "full protection and security" only refers to a Party's obligations relating to physical security of investors and to investments made by the investors of the other Party which does not require a treatment in addition to or beyond that which is required by the applicable customary international law regarding the Minimum Standard of Treatment of aliens.
5.3 A determination that there has been a breach of another provision of this Agreement, or of a separate international agreement, does not establish that there has been a breach of this Article.
Article 6. National Treatment
6.1 Each Party shall not apply to an investor with respect to its investments, or to investments made by investors of the other Party, measures that accord less favourable treatment than that it accords, in like circumstances, (8) to its own investors with respect to their investments or to investments by such investors with respect to the management, conduct, operation, sale or other disposition of investments in its territory.
6.2 The treatment accorded by a Party under Article 6.1 means, with respect to a Sub-national government, treatment no less favourable than the treatment accorded, in like circumstances, by that Subnational government to investors with respect to their investments, and to investments of investors, of the Party of which it forms a part.
6.3 This Article shall not apply to rights on land and real estate.
Article 7. Expropriation
7.1 Neither Party may nationalize or expropriate an investment of an investor (hereinafter "expropriate") of the other Party either directly or through measures having an effect equivalent to expropriation, except for reasons of public purpose, (9) in accordance with the due process of law in a non-discriminatory manner and on payment of adequate compensation. Such compensation shall be adequate and be at least equivalent to the fair market value of the expropriated investment immediately on the day before the expropriation takes place ("date of expropriation"), and shall not reflect any change in value occurring because the intended expropriation had become known earlier. Valuation criteria shall include going concern value, asset value including declared tax value of tangible property, and other criteria, as appropriate, to determine fair market value.
7.2 Payment of compensation shall be made in a freely convertible currency and be realisable. Interest on payment of compensation, where applicable, shall be paid in simple interest at a commercially reasonable rate from the date of expropriation until the date of actual payment. On payment, compensation shall be freely transferable in accordance with Article 8 (Transfers).
7.3 The Parties confirm their shared understanding that:
(a) Expropriation may be direct or indirect:
(i) direct expropriation occurs when an investment is nationalised or otherwise directly expropriated through formal transfer of title or outright seizure; and
(ii) indirect expropriation occurs if a measure or series of measures of a Party has an effect equivalent to direct expropriation, in that it substantially or permanently deprives the investor of the fundamental attributes of property in its investment, including the right to use, enjoy and dispose of its investment, without formal transfer of title or outright seizure.
(b) The determination of whether a measure or a series of measures have an effect equivalent to expropriation requires a case-by-case, fact-based inquiry, that takes into consideration among other things:
(i) the economic impact of the measure or series of measures, although the sole fact that a measure or series of measures of a Party has an adverse effect on the economic value of an investment does not establish that an indirect expropriation has occurred;
(ii) the duration of the measure or series of measures of a Party;
(iii) the character of the measure or series of measures, notably their object, context and intent; and
(iv) whether a measure by a Party breaches the Party's prior binding written commitment to the investor whether by contract, licence or any other legal document.
7.4 For the avoidance of doubt, the Parties agree that an action taken by a Party in its commercial capacity shall not constitute expropriation or any other measure having similar effect.
7.5 Non-discriminatory regulatory measures by a Party that are designed and applied to protect legitimate public interest or public purpose objectives such as public health, safety and the environment shall not constitute expropriation under this Article, except in the rare circumstance when the impact of a measure or series of measures is so severe in light of its purpose that it appears manifestly excessive.
Article 8. Transfers
8.1 Subject to its law, each Party shall permit all funds of an investor of the other Party related to an investment in its territory to be freely transferred and on a non-discriminatory basis. Such funds may include:
(i) contributions to capital;
(ii) profits, dividends, capital gains and proceeds from the sale of all or any part of the investment or from the partial or complete liquidation of the investment;
(iii) interest, royalty payments, management fees, and technical assistance and other fees;
(iv) payments made under a contract, including a loan agreement;
(v) payments made pursuant to Article 7 [Expropriation], Article 9 [Compensation for losses] and under Chapter IV.
8.2 Unless otherwise agreed to between the Parties, currency transfer under Article 8.1 shall be permitted in the currency of the original investment or any other convertible currency. Such transfer shall be made at the prevailing market rate of exchange on the date of transfer.
8.3 Nothing in this Agreement shall prevent a Party from conditioning or preventing a transfer through a good faith application of its law, including actions relating to:
(i) bankruptcy, insolvency or the protection of the rights of the creditors;
(ii) compliance with judicial, arbitral or administrative decisions and awards;
(iii) compliance with labour obligations;
(iv) financial reporting or record keeping of transfers when necessary to assist law enforcement or financial regulatory authorities;
(v) issuing, trading or dealing in securities, futures, options, or derivatives;
(vi) compliance with the law on taxation;
(vii) criminal or penal offences and the recovery of the proceeds of crime;
(viii) social security, public retirement, or compulsory savings schemes, including provident funds, retirement gratuity programs and employees insurance programs;
(ix) severance entitlements of employees;
(x) requirement to register and satisfy other formalities imposed by the Central Bank and other relevant authorities of a Party; and
(xi) in the case of India, requirements to lock-in initial capital investments, as provided in India's Foreign Direct Investment (FOi) Policy, where applicable, provided that, any new measure which would require a lock-in period for investments will not apply to existing investments.
8.4 Notwithstanding anything in Article 8.1 and 8.2 to the contrary, the Parties may temporarily restrict transfers in the event of serious balance-of-payments difficulties or threat thereof, or in cases where, in exceptional circumstances, movements of capital cause or threaten to cause serious difficulties for macroeconomic management, in particular, monetary and exchange rate policies.
Article 9. Compensation for Losses
Each Party shall accord to investors of the other Party, and to investments by such investors, non-discriminatory treatment with respect to measures, including restitution, indemnification, compensation or other settlement, it adopts or maintains relating to losses suffered by investments in its territory owing to war or other armed conflict, civil strife, or state of national emergency.
Article 10. Subrogation
10.1 If a Party or its designated agency makes a payment to any of its investors under a guarantee or a contract of insurance it has entered into in respect of an investment in the territory of the other Party, the other Party shall recognize the validity of the subrogation in favour of such Party or agency thereof to any right or title held by the investor.
10.2 A Party or its designated agency thereof which is subrogated to the rights of an investor in accordance with paragraph 1 of this Article shall be entitled in all circumstances to the same rights as those of the investor in respect of the investment including the same payments due pursuant to those rights and claims.
10.3 If a Party or its designated agency has made a payment to its investor and has taken over rights and claims of the investor under this Article that investor shall not, unless authorised in writing by the Party or its designated agency to act on behalf of the Party or its designated agency making the payment, pursue those rights and claims against the other Party. In the exercise of subrogated rights or claims, a Party or its designated agency exercising such rights or claims shall disclose evidence of the subrogation or transfer of rights from the investor to the Party or its designated agency to the other Party.
Article 11. Transparency
11.1 Each Party shall, to the extent possible, ensure that its laws, regulations, procedures, and administrative rulings of general application in respect of any matter covered by this Agreement are promptly published or otherwise made available in such a manner as to enable interested persons and the other Party to become acquainted with them.
11.2 Each Party shall, as provided for in its laws and regulations:
(i) publish any such measure that it proposes to adopt; and
(ii) provide interested persons and the other Party a reasonable opportunity to comment on such proposed measures.