KATHMANDU, -
The signing of the Bilateral Investment Protection and Promotion Agreement (BIPPA) in New Delhi on Friday has addressed one of India’s major concerns on protecting its investment in Nepal.
The deal will also support Nepal’s cause as it seeks more investment from the southern neighbour.
BIPPA seeks to promote and protect investments from either country in the territory of the other country with a view to increasing bilateral investment. The agreement requires each country to encourage and create favourable conditions for investors of the other country to make investments in its territory and to admit investments in accordance with its laws. Nepal will now have to treat Indian companies at par with the national ones. Article 6 of BIPPA has provisions for compensation to investors if their investments suffer losses owing to war, armed conflict and state of emergency. “Such investors shall be accorded treatment by the host country, no less than the treatment accorded to its own investors or investors of any third state. Any payment made under this Article shall be freely transferable,” states the agreement.
However, Nepali officials had reservations on the liabilities and other compensatory claims that Nepal will have to incur once BIPPA was signed. However, those in favour at the PM’s Office say the compensation clause will be applicable only when the government announces the damages. “The disturbances caused by trade unions do not come under BIPPA,” said a PMO official. But there was hardly any discussion in the country prior to signing the deal.
Now, except for public interest, nationalisation or expropriation of investments cannot take place. Article 5 of the agreement says that investments of either contracting party will not be expropriated, nationalised or subjected to measures having effect equivalent to nationalisation or expropriation in the territory of the other contracting party except in public interests.
The agreement also provides an elaborate dispute resolution mechanism to help settle disputes between investor and the host government as well as between the two governments. The mechanism includes resources to negotiations, conciliation and international arbitration. If the dispute goes to arbitration, there will be an arbitration tribunal consisting of three arbitrators, one each from two countries and the chairman who will be a national of a third state that has diplomatic relations with both the governments. The agreement that will remain in force for a period of 10 years will not be applicable to any dispute related to investment that has already arisen before this agreement was signed or on the claims that have already been settled.
Even though the reservations over BIPA persist, the signing of the deal is expected to have positive effects on the investors’ confidence. With the government announcing 2012-13 as investment year, the signing of BIPPA will give a boost to Bhattarai’s initiative to attract substantial foreign investment.
New Delhi has been pushing for BIPPA to protect its investment for over a decade now. India first came up with the proposal when Maoist cadres attacked the Indian multinational company, Colgate Palmolive, in Nepal during the insurgency in 1998.
Indian officials are of the view that Nepal has signed similar treaties with third countries and that singling out India was unfair. Nepal has signed BIPPA with France, Germany, Britain, Mauritius, Qatar and Finland, countries that do not have significant investments in Nepal.
