The India–UAE Bilateral Investment Treaty (2024): Implications For Investment And Economic Diplomacy

Policy Update
Himanshi Singh

Background

A deep-rooted Comprehensive Strategic Partnership has replaced the old marine commercial link between India and the United Arab Emirates (UAE). With Prime Minister Narendra Modi’s historic visit in 2015—the first by an Indian premier in 34 years—diplomatic relations, which were initially established in 1972, gained fresh impetus. This visit changed the emphasis from a buyer-seller energy dynamic to a multifaceted combination of infrastructure, security, and high technology.

India continues to be the UAE’s second-largest trading partner, while the UAE is India’s third-largest trading partner and seventh-largest investor. In FY 2025–2026, bilateral trade hit a record of US$101.25 billion, up from about US$180 million in the 1970s. On February 13, 2024, the two countries signed the Bilateral Investment Treaty (BIT) to create a stable legal framework for these flows, which are driven by the 2022 Comprehensive Economic Partnership Agreement (CEPA). This treaty, which takes effect on August 31, 2024, replaces the 2013 Bilateral Investment Promotion and Protection Agreement (BIPPA) and indicates that India is prepared to re-engage with international capital through a well-considered “middle-ground” approach.

Functioning

The stringent 2016 India Model BIT is significantly different from the 2024 India-UAE BIT. In order to promote state sovereignty, India unilaterally terminated over 75 BITs after a string of unfavourable arbitral judgements in the mid-2010s. In order to meet the strategic needs of Gulf capital, the 2024 BIT with the UAE deliberately departs from that defensive posture.

Comparative Legal Architecture

The structural shifts in India’s investment regime are highlighted in the following comparison between the previous 2013 agreement, the 2016 Model, and the new 2024 BIT:

Table 1: Comparative Evolution of Investment Protection Standards

Feature	2013 India-UAE BIPPA	2016 India Model BIT	2024 India-UAE BIT
Investment Definition	Broad asset-based.	Enterprise-based; strict 4-prong Salini test.	Calibrated enterprise-based; omits “Duration” and “Economic Dev”.
Portfolio Investment	Protected under broad scope.	Explicitly excluded.	Explicitly included (shares, stocks, bonds).
Sovereign Wealth Funds	Covered generally.	Limited institutional coverage.	Covered explicitly under “Investor” control criteria.
Local Remedies	No mandatory requirement.	Mandatory 5-year pursuit in domestic courts.	Reduced to a mandatory 3-year window.
Treatment Standard	FET and MFN included.	FET & MFN excluded; limited to CIL.	Omitted; specific prohibitions against denial of justice.
Third-Party Funding	Silent.	Silent.	Explicitly Prohibited.

Source: Press Information Bureau (PIB) Release

Investor-State Dispute Settlement (ISDS) and Sovereignty

In order to avoid protracted litigation and provide investor access to independent arbitration, the treaty restructures the ISDS process. Reducing the mandated local remedies window from five years to three years is a crucial compromise. It also makes it clear that an investor has a three-year window to pursue these remedies, after which they have the unrestricted right to start international arbitration, regardless of any ongoing domestic appeals.

The BIT maintains stringent sovereignty carve-outs to counteract this. Tax and national security decisions are not subject to tribunal review or justiciability. Furthermore, if an investment is connected to money laundering, fraud, or corruption, no claim may be made.

Performance

High-level diplomatic and financial integration has increased in tandem with the BIT’s enforcement, with the two countries aiming for US$200 billion in commerce by 2032.

Table 2: Key Strategic and Commercial Outcomes (2024–2026)

Sector	Agreement / Outcome	Stakeholders Involved	Strategic Impact
Finance	GIFT City Physical Presence.	ADIA, FAB, Mashreq Bank.	Physical node for Gulf capital into Indian infrastructure.
Energy	10-year LNG Supply.	HPCL, ADNOC Gas.	Import of 0.5 MMTPA from 2028 for energy transition.
High-Tech	8 Exaflop Supercomputing.	C-DAC (India), G42 (UAE).	Accelerating sovereign AI and climate modelling.
Defence	Strategic Defence Partnership.	MoD (India), MoD (UAE).	Co-development and joint manufacturing of platforms.
Space	Launch Infrastructure MoU.	IN-SPACe, UAE Space Agency.	Satellite manufacturing and incubator centres.
Food Security	US$ 2 billion food parks.	Ministry of Investment (UAE), Gujarat Govt.	Improving farmer income and UAE food resilience.

Source: Press Information Bureau (PIB) Release

Significance and Impact

The 2024 BIT acts as the legal anchor for the extensive physical and digital corridor established by the CEPA.

Physical Connectivity: Dholera SIR

Gujarat’s Dholera Special Investment Region (SIR) has become the hub for business cooperation. Aircraft Maintenance, Repair, and Overhaul (MRO) facilities, a maritime port, and a greenfield international airport are all being developed by UAE entities under a historic Letter of Intent. By integrating Dholera with the Western Dedicated Freight Corridor, these developments establish it as a global logistics hub backed by semi-high-speed rail.

Digital Integration and Remittances

The UAE is the second-biggest supplier of remittances (19.2% of total inflows), with India being the world’s largest recipient. The 4.3 million Indian diaspora has access to real-time, affordable remittance channels thanks to the integration of India’s UPI with the UAE’s AANI and RuPay with the UAE’s JAYWAN. The strong economic ties between the two countries are strengthened by this digital bridge.

Challenges and Emerging Issues

Despite its historic position, there are still a number of legal and policy obstacles to overcome:

Access to Justice: MSMEs and smaller Indian investors may not be able to pursue costly international arbitration against the host state due to Article 16’s complete ban on third-party finance.
Narrowed Treatment Standards: The treaty restricts the spectrum of protections by leaving out Most-Favoured-Nation (MFN) and Fair and Equitable Treatment (FET) clauses. This might leave investors open to regulatory changes that fall short of the “denial of justice” standard.
FTA Utilisation: Due to high certification costs and inverted duty structures—where duties on raw materials are higher than those on finished goods—reports indicate that FTA utilisation rates for Indian exporters remain low (20–30%).

Way Forward

A coordinated policy response is necessary to optimise the 2024 BIT’s potential. The creation of specialised, expedited commercial courts in major investment hotspots like Gujarat and Maharashtra should be a top priority for the Ministry of Law and Justice. In order to settle issues within the treaty’s required three-year local litigation window, these courts must be specially prepared to handle disputes involving foreign investors and states. India can strengthen investor trust and save the national treasury by preventing disputes from rising to costly international tribunals through effective domestic resolution.

Financially speaking, the Department of Economic Affairs ought to implement regulations that incentivise foreign portfolio investors to convert short-term assets into long-term infrastructure debt. GIFT City can serve as a single clearinghouse to move UAE funds into high-value manufacturing and green energy projects by utilising the BIT’s enhanced protections for portfolio investments. With this strategy, the investment profile would change from erratic financial flows to steady, long-term capital that is necessary for India’s infrastructure objectives.

Additionally, the Ministry of Commerce and Industry should support the establishment of recognised testing and compliance laboratories inside significant MSME industrial clusters in order to close the competitiveness gap. These facilities would help manufacturers overcome the present 15% to 20% cost disadvantage they have in comparison to regional competitors by offering reasonably priced, internationally standard certification support. Increasing the use of trade agreements like the UAE CEPA requires lowering these compliance burdens.

Lastly, in critical industries that are the focus of Production Linked Incentive (PLI) programmes, the Ministry of Finance must methodically rationalise inverted duty arrangements. Input costs for domestic manufacturers will be reduced if import charges on main industrial raw materials, such as steel, aluminium, and chemicals, are lowered below the tariffs on completed goods. In order to fully realise the strategic goal of the BIT, such fiscal reforms will encourage UAE investors to go beyond portfolio holdings and build direct component-manufacturing activities within India.

References

American Review of International Arbitration. (2024, December 14). India–UAE bilateral investment treaty 2024: Breaking new ground or following old paths? https://aria.law.columbia.edu/india-uae-bilateral-investment-treaty-2024-breaking-new-ground-or-following-old-paths/

Department of Economic Affairs. (2024, February 13). Bilateral investment treaty between the Government of the Republic of India and the Government of the United Arab Emirates. Ministry of Finance, Government of India. https://dea.gov.in/sites/default/files/BIT%20MoU%20Engilsh.pdf

Dholera Insider. (2026, January 20). India-UAE defence tie boosts Dholera smart city investment. https://www.dholerainsider.com/dholera-sir-updates/india-uae-defence-ties-trade-200-billion-2032-uae-investment-dholera-smart-city

Embassy of India, Abu Dhabi. (2026, June). Bilateral economic & commercial relations report. https://www.indembassyuae.gov.in/page/bilateral-economic-and-commercial-relations/

Ministry of External Affairs. (2026, January 19). Joint statement: Visit of President of the UAE, His Highness Sheikh Mohamed bin Zayed Al Nahyan, to India. Government of India. https://www.mea.gov.in/bilateral-documents.htm?dtl/40601

Ministry of External Affairs. (2026, April). India-UAE bilateral relations brief. Government of India. https://www.mea.gov.in/Portal/ForeignRelation/India-UAE-2026.pdf

Middle East Briefing. (2026, January 21). UAE President’s India visit yields trade and investment push. https://www.middleeastbriefing.com/news/uae-presidents-india-visit-yields-trade-investment-push/

NITI Aayog. (2025, October). Trade watch report Q4 FY25. Government of India. https://niti.gov.in/sites/default/files/2025-10/Trade_Watch_Report_Q4_FY25_V4.pdf

NITI Aayog. (2026, February). Trade watch quarterly report (July–September 2025). Government of India. https://www.niti.gov.in/sites/default/files/2026-02/Trade-Watch-Quarterly-July-September-Q2-FY-2025-26.pdf

NITI Aayog. (2026, June). Trade watch quarterly Jan-March Q4 FY26. Government of India. https://niti.gov.in/sites/default/files/2026-06/Trade-Watch-Quarterly-Jan-March-Q4-FY26.pdf

Press Information Bureau. (2024, October 7). Bilateral investment treaty between India and the United Arab Emirates, giving continuity of investment protection to investors of both the countries, comes into effect. Ministry of Finance, Government of India. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2062692

Press Information Bureau. (2024, October 7). 12th meeting of the India-UAE High Level Joint Task Force on Investments. Ministry of Commerce & Industry, Government of India. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2062860

Press Information Bureau. (2025, January 1). Ministry of Finance year ender 2024: Department of Economic Affairs. Ministry of Finance, Government of India. https://www.pib.gov.in/PressReleaseDetail.aspx?PRID=2089236&reg=3&lang=1

Press Information Bureau. (2026, May 15). Prime Minister’s visit to the UAE. Government of India. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2261611&reg=3&lang=1

S&R Associates. (2024, November 5). The new India-UAE BIT: Changing the model BIT by BIT. https://www.snrlaw.in/the-new-india-uae-bit-changing-the-model-bit-by-bit/

Tuli, S. (2024, August 31). Dispute resolution and recovery mechanisms for Indian investors in the UAE. Legal Lands. https://legallands.com/dispute-resolution-and-recovery-mechanisms-for-indian-investors-in-the-uae/

UNCTAD. (2024). International investment agreements navigator: India – United Arab Emirates BIT (2024). Investment Policy Hub. https://investmentpolicy.unctad.org/international-investment-agreements/treaties/bilateral-investment-treaties/5119/india—united-arab-emirates-bit-2024-

About the Contributor

Himanshi Singh is a Research & Editorial Intern at the Impact and Policy Research Institute (IMPRI). She holds a postgraduate degree in Political Science and International Relations. Her research interests include foreign policy, strategic studies, public policy, national security, diplomacy, and global governance, with a particular focus on India’s external relations and evidence-based policy research.