I.  INTRODUCTION

1. The India-Israel Bilateral Investment Agreement (“Treaty”), which entered into force in July 2026, marks a significant development in international investment treaty practice. In particular, as the first bilateral investment treaty (“BIT”) that India has concluded with an OECD Member since it adopted its 2015 Model BIT, the Treaty offers valuable insight into India’s modern treaty policy and priorities.  More broadly, the Treaty reflects continuing efforts by States to recalibrate investor-State dispute settlement (“ISDS”) to address a perceived imbalance between investor protection and regulatory autonomy.

2. Consistent with India’s 2015 Model BIT, the Treaty underscores India’s emphasis on preserving regulatory flexibility and discretion for the host State. This is achieved through a combination of jurisdictional hurdles limiting the circumstances in which claims can be pursued, narrowed substantive protections, and carve-outs and exceptions.  Although some of these features diverge from Israel’s recent treaty practice, Israel’s preferences are evident in numerous areas, including the framing of the essential security exception and the narrowing of certain jurisdictional provisions as compared to India’s 2015 Model BIT. 

3. Overall, the Treaty aligns with a number of more recent trends in investment treaty practice and ISDS reform. While certain provisions are more novel—notably the prohibition on third-party funded claims—others appear to codify principles that have become more established in treaty practice and arbitral jurisprudence.  The Treaty also seeks to address longstanding concerns by certain States and civil society regarding fairness and efficiency in ISDS by providing, among other elements, an enhanced code of conduct for arbitrators, expedited dismissal procedures for frivolous claims, and transparency provisions.

II. ACCESS TO ARBITRATION FOR INVESTORS

4. Access to ISDS under the Treaty is subject to defined jurisdictional and procedural constraints.

5. First, Article 15 of the Treaty prohibits the use of third-party funding by investors. This step goes further than most modern BITs addressing third-party funding, which typically impose disclosure requirements and allow tribunals to order security for costs.  Similar language appears in the 2024 India-UAE BIT¹ but is frequently absent from other Israeli BITs.²  Third-party funding is increasingly used in investment arbitration, including in approximately 16% of ICSID cases registered between 2022 and 2025.³  This prohibition will inevitably limit access to ISDS for a large group of investors with potential claims under the Treaty, including those whose assets may have been expropriated and cannot pursue a claim without third-party funding.

6. Second, Article 1 adopts more restrictive definitions of both “investment” and “investor.” Its closed asset-based definition of investment excludes certain commercial, financial, and judicial claims, including arbitral awards.  The latter exclusion is particularly noteworthy: it is increasingly common for investment claims to arise out of an investor’s inability to enforce an arbitral award in the host State, and India itself has faced such claims in the past.⁴

7. The definition of “investor” is also restrictive, requiring a “genuine link to the economy” through “substantial business activities” and applying a dominant-and-effective nationality test to dual nationals. This approach mirrors the trend in recent BITs and model BITs⁵ to limit so-called “treaty shopping” and confine treaty protection to investments and investors with a substantive economic link to the relevant State.

8. Third, the scope of protection of the Treaty is notably circumscribed in various ways. Article 3 carves out numerous areas from the scope of the Treaty, including pre-investment activities, local government measures, taxation measures, government procurement, subsidies, compulsory intellectual property licenses, and services supplied in the exercise of governmental authority.  Considering that India has historically faced large claims relating to these areas—in particular retroactive taxation measures⁶—the Treaty’s provisions appear to directly reflect India’s past experience with ISDS. 

9. Fourth, Article 16 of the Treaty retains India’s common requirement that investors exhaust local remedies before commencing arbitration, although the required period has been reduced from five years under the 2015 India Model BIT to three years. The requirement for the exhaustion of local remedies has emerged as a major point of contention in India’s ongoing BIT negotiations, including with the United Kingdom.⁷  Although the length of the exhaustion period in this Treaty is shorter than in India’s model, it remains a hurdle for prospective claimants that is not found in many investment treaties, which generally require only a short consultation or cooling-off period (if any).

III. PRESERVING REGULATORY SPACE AND CONSTRAINING TRIBUNALS’ DECISION-MAKING

10. The Treaty’s substantive protections are drafted in a prescriptive manner that affords the host State considerable regulatory space and appears to restrict a tribunal’s scope for interpretation and analysis.

11. First, the standards of protection for investors are restrictive. Rather than incorporating traditional protections such as fair and equitable treatment (“FET”) and most-favored-nation (“MFN”) treatment, Article 5.1 adopts a closed list of conduct that would violate the BIT, which resembles the European Union’s approach of including closed lists in its recent investment treaties.⁸  This list includes denial of justice, fundamental breach of due process, targeted and unjustified discrimination, and “manifestly abusive or manifestly arbitrary treatment, such as coercion, duress and harassment.”  While some tribunals have held that a breach of the FET standard requires some of these elements to be proved, this remains contentious in the jurisprudence, and Article 5.1 appears to lay down a marker for a potentially more stringent approach.

12. Further, Article 5.2 offers investors full protection and security (“FPS”) but expressly limits that protection to the minimum standard of treatment under customary international law. The national treatment provision at Article 6 additionally requires tribunals to consider factors such as “legitimate regulatory objectives” when assessing whether investors have been treated differently in “like circumstances,” which may leave greater scope for host States to attempt to justify impugned measures.  This approach is consistent with the stricter approaches found in the USMCA⁹ and CPTPP¹⁰ and may make national treatment claims more difficult to establish.

13. Finally, the Treaty also attempts to preserve regulatory space for States through its expropriation provisions set out in Article 7. Although certain aspects merely codify principles that are already well-established in investment treaty and arbitral practice, including the police powers doctrine and the distinction between sovereign and commercial conduct, Article 7 is drafted in a manner that is more deferential to the host State.  In particular, the Treaty provides in a footnote that, where India expropriates land, questions relating to public purpose and compensation are to be determined under India’s domestic land-acquisition legislation, restricting the scope for a tribunal to review such measures.¹¹  The Treaty also excludes land from the scope of its national treatment obligation under Article 6, reflecting a clear area of priority for the host State.

14. Second, the Treaty constrains a tribunal’s ability to rule on, or interpret, certain issues that are likely to be central to certain ISDS claims. Article 24.2 requires tribunals to follow interpretations of domestic law adopted by domestic courts, while Article 13.5 sets out that tribunals shall not have jurisdiction to review decisions by the host State’s judicial authorities.  Although tribunals in investment arbitrations generally do not second guess national courts’ application of domestic law, limiting themselves to the question of whether the courts’ conduct as a whole violated international law, these provisions may constrain a tribunal’s ability to assess the overall conduct of national courts.  Combined with the Treaty’s exclusion of judgments and arbitral awards as “investments,” these provisions appear to make it more difficult for an investor to bring a claim relating to internationally wrongful judicial conduct.

15. Article 25 of the Treaty also gives the Contracting Parties considerable influence over the interpretation of the Treaty in the context of an investment claim, providing that joint interpretations adopted by the Contracting Parties are binding on tribunals. Although similar mechanisms appear in a number of investment treaties,¹² their use during ongoing proceedings has been controversial.¹³  The Treaty may therefore negatively impact investors’ access to justice: if the Contracting Parties agree on a joint interpretation during ongoing proceedings, this may risk giving binding interpretative authority over the scope of substantive protections to the very State defending a given claim rather than to the arbitral tribunal constituted to decide the claim.¹⁴

16. Finally, the Treaty provides at Article 33 that nothing shall prevent a Contracting Party from applying measures that “it considers necessary … for the protection of its own essential security interests.” The inclusion of this potentially far-reaching exception reflects the treaty practice of both Contracting Parties¹⁵ and may also respond to earlier ISDS cases in which India unsuccessfully raised essential security defenses, such as CC/Devas v. India¹⁶ and Deutsche Telekom v. India.¹⁷  Although some tribunals have accepted that such security exceptions are indeed self-judging,¹⁸ they have nevertheless sought to ensure that the host State remains subject to an obligation of good faith or a “causal nexus” between the measure and the essential security interest.  However, Article 33 of the Treaty and its accompanying Annex expressly state that a tribunal may not review a Contracting Party’s determination of its own essential security interests.  As a result, this provision may restrict the scope of future claims.

IV. ADDRESSING CONTEMPORARY CONCERNS REGARDING FAIRNESS AND EFFICIENCY IN ISDS

17. The Treaty incorporates several features that are consistent with broader efforts to address legitimacy and efficiency concerns regarding ISDS.

18. First, in its Preamble, the Treaty recognizes that sustainable development and the right to regulate are key objectives alongside investment promotion. This addition is likely to inform tribunals’ interpretation of the substantive protections within the Treaty and appears intended to lay down a marker for a balanced approach to reconciling investor rights with legitimate public policy measures.  

19. Second, Article 12 imposes a limited set of investor obligations, including compliance with domestic law, anti-corruption requirements, and disclosure obligations. This provision appears to be an attempt to codify the broader trend by treaty-making States and tribunals in recent years towards imposing responsibilities on investors and denying protection to those that violate national and international public policy.  However, Article 12 appears narrower than some other investor responsibility provisions found in recent BITs, which impose environmental, labor, human rights, corporate social responsibility, and sustainability-related obligations on investors.¹⁹ 

20. Third, the Treaty also introduces procedural reforms aimed at improving the integrity, efficiency, and transparency of ISDS proceedings. Article 20 devotes detailed attention to arbitrator independence and conflicts of interest, identifying specific circumstances that may give rise to doubts regarding an arbitrator’s impartiality and contemplating the adoption of a standalone code of conduct.  It is notable that, while the Treaty imposes disclosure requirements and provides potential avenues for challenging an arbitrator, it does not explicitly prohibit so-called “double-hatting.”

21. Articles 22 and 23 further incorporate mechanisms designed to improve procedural efficiency and transparency, including provisions for the expedited dismissal of meritless claims and enhanced transparency requirements, reflecting recent UNCITRAL-led reform initiatives.²⁰ In this regard, the Contracting Parties appear to be directly addressing common criticisms of ISDS; rather than denouncing the system altogether, their aim appears to be reform from within through their treaty-making.

V. CONCLUSION

22. The India-Israel BIT reflects an ambition to recalibrate the protections granted to investors and their access to investment treaty arbitration. It imposes jurisdictional, substantive, and procedural constraints by limiting access to arbitration, narrowing the scope of treaty protection, limiting tribunals’ discretion, and preserving regulatory space for States.  At the same time, the Treaty both codifies certain contemporary developments and implements reform initiatives designed to enhance the legitimacy, efficiency, and transparency of ISDS.

23. Given India’s denunciation of dozens of treaties in 2015–2017, the Treaty is particularly noteworthy. Rather than retreating from ISDS altogether, as several other frequent respondent States have done, India is re-entering the system on conditions that it deems acceptable from a sovereignty perspective.  This may also reflect India’s evolving position in the global investment landscape.  As Indian companies increasingly invest overseas, particularly in sectors such as technology, infrastructure, and digital services, protecting outbound investment has become an increasingly important policy objective alongside the more historic goal of attracting foreign investment.

The authors are grateful to Chen Wang for her help in writing this post. 

Footnotes:

1. India-UAE BIT (2024), at Article 16.
2. One notable recent exception is the Israel-Vietnam Free Trade Agreement (“FTA”) (2023), which imposes disclosure obligations at Article 9.27.
3. Toby McIntosh, New Information Disclosed on Level of Third-Party Funding of Investor Disputes, Eye on Global Transparency, dated 1 May 2025, available at https://eyeonglobaltransparency.net/2025/05/01/new-information-disclosed-on-level-of-third-party-funding-of-investor-disputes/.
4. The most famous example is White Industries Australia Limited v. The Republic of India (UNCITRAL), which arose out of an investor’s longstanding inability to enforce a 2002 ICC award against the award debtor in India.  This narrowed definition also appears consistent with Israel’s recent treaty practice: See, e.g., Israel-Philippines BIT (2022), at Section B, Articles 1.2–1.5, and Israel-Vietnam FTA (2023), at Article 9.2, Article 9.16 and Annex 9C.
5. See, e.g., Dutch Model BIT (2019), at Article 6.
6. See, e.g., Vodafone International Holdings BV v. Republic of India, PCA Case No. 2016-35 and Cairn Energy PLC v. Republic of India, PCA Case No. 2016-07, along with other high-value cases settled by India.
7. Amiti Sen, India-UK investment pact falters over dispute redress mechanism, BusinessLine dated 16 July 2026, available at https://www.pressreader.com/india/businessline-delhi-9wvw/20260716/282222312518769.
8. Comprehensive Economic and Trade Agreement (CETA, 2016), at Article 8.10; EU-Singapore Investment Protection Agreement (2018), at Article 2.4(2); EU-Vietnam Investment Protection Agreement (2019), at Article 2.5(2).  See also Modernized Energy Charter Treaty (2024), at Article 10(1).
9. United States-Mexico-Canada Agreement (USMCA), at Article 14.4(4) and Article 14.5(4).
10. Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), at footnote 14; CPTPP Drafters’ Note on Interpretation of “In Like Circumstances” Under Article 9.4 (National Treatment) and Article 9.5 (Most-Favoured-Nation Treatment).
11. Treaty, at footnote 9 (Article 7).
12. North American Free Trade Agreement (NAFTA, 1994), at Article 1131(2) (specifically relating to the Free Trade Commission); ASEAN-Australia-New Zealand Free Trade Agreement (2009), at Chapter 11, Article 27; CETA, at Article 8.31(3).
13. See, e.g., Pope & Talbot Inc. v. The Government of Canada, UNCITRAL, Award, dated 13 May 2002, at paras. 11–16 (where the tribunal held that the adoption of the interpretative declaration during pending arbitration proceedings was improper and questioned how it could be reconciled with “the rule of international law that no one shall be a judge in his own cause”).
14. Chester Brown, Chapter 15: States as Participants in International Arbitration, in Stefan M. Kröll, Andrea Kay Bjorklund, et al. (eds), Cambridge Compendium of International Commercial and Investment Arbitration, at pp. 424–438.
15. See, e.g., Israel-Japan BIT (2017), at Article 15(2); Israel-UAE BIT (2020), at Article 14(4); Israel-Korea FTA (2021), at Article 21.2; India Model BIT (2015), at Article 33; India-Belarus BIT (2018), at Article 33; and India-UAE BIT (2024), at Article 34.
16. CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited, and Telcom Devas Mauritius Limited v. Republic of India (I), PCA Case No. 2013-09, Award on Jurisdiction and Merit, dated 25 July 2016.
17. Deutsche Telekom AG v. Republic of India, PCA Case No. 2014-10, Award, dated 27 May 2020.
18. See, e.g., Angel Samuel Seda et al. v. Republic of Colombia, ICSID Case No. ARB/19/6, Award, dated 27 June 2024.
19. Morocco-Nigeria BIT (2016), at Article 14; South African Development Community (SADC) Model BIT (2012), at Articles 10–18; Pan-African Investment Code (2016), at Articles 19–24; Makane Moïse Mbengue and Stefanie Schacherer, The “Africanization” of International Investment Law: The Pan-African Investment Code and the Reform of the International Investment Regime (2017) 18(3) Journal of World Investment & Trade 414.
20. UNCITRAL Supplementary Provisions on the Conduct of Proceedings to Resolve International Investment Disputes, provisions IV and IX (3), adopted by UNCITRAL in its 59 annual sessions.