India’s long-standing negotiations to sign new bilateral investment treaties (BITs) and free trade agreements (FTAs) with its prominent economic partners are bearing fruit. It has signed BITs with the United Arab Emirates (2024), Israel (2025), and Uzbekistan (2024), and FTAs with New Zealand (April 2026), the United Kingdom (July 2025), European Free Trade Association ( March 2024), and Oman (signed December 2025). While much of the conversation has understandably focused on the potential economic benefits of these agreements and the mechanism for resolving investor-state disputes under international law (or the omission thereof), an important facet is frequently missing: their impact on commercial arbitration within India.

The opportunity beyond market access

India’s expanding network of BITs and FTAs presents an opportunity that goes beyond attracting foreign capital and opening export markets. Properly designed, these agreements can help India strengthen something every international business needs: a dispute-resolution system that is predictable, enforceable and trusted.

India already has the basic statutory architecture. The Arbitration and Conciliation Act, 1996, covers domestic arbitration, international commercial arbitration and the enforcement of foreign arbitral awards. The question now is how India’s treaty policy can reinforce that architecture. The answers vary.

In the first instance, India’s recent FTAs have generally omitted an investor-state dispute settlement (ISDS). However, given that a sizeable share of investment in India is made through contracts between foreign investors and Indian state agencies, future FTAs could better explain the rationale for this policy. For example, when the European Union-Australia FTA was negotiated, the contracting parties clarified that “the agreement does not cover the protection of investments, which is not necessary given the level of trust in the respective legal systems of both parties”.

Taking a cue from this approach, India’s future FTAs should include provisions or preambular text that similarly clarify that the absence of an ISDS is justified by the availability of commercial arbitration remedies in India. Such provisions, alongside recent legislative reforms to strengthen India’s arbitration framework and the pro-arbitration approach of Indian courts, could help provide a middle ground between the state’s reservations about an ISDS and the desire of foreign investors to avoid litigating in Indian courts.

The second instance is where India’s BITs, which do provide for an ISDS, explicitly distinguish between the scope of treaty-based arbitration and commercial arbitration pursuant to a contract. For example, the India-Uzbekistan BIT excludes “disputes arising solely from an alleged breach of a contract” between the state and a foreign investor from the scope of an ISDS.

Such treaties also make access to ISDS conditional on foreign investors exhausting local remedies. They require foreign investors to submit their claims to the relevant domestic courts or administrative bodies of the host State for a specified period. The wording appears to exclude commercial arbitration tribunals seated in India. There does not appear to be a cogent policy reason for this exclusion. Accordingly, future BITs could clarify that foreign investors may also satisfy the exhaustion-of-local-remedies requirement by submitting the substance of their investment dispute to commercial arbitration in India.

Finally, India’s recent BITs indicate that the Government of India does not favour third-party funding in an ISDS. Since ISDS claims implicate sovereign decisions and can have a chilling effect on States’ regulatory policymaking, this approach is understandable. However, these considerations do not apply to commercial arbitration in India.

Given these distinctions, India’s future BITs and FTAs should clarify that their prohibition of third-party funding in an ISDS does not, by itself, signal the impermissibility of such funding in commercial arbitration in India. This would, in turn, create room for Indian regulators to develop a coherent and comprehensive policy on third-party funding for the domestic commercial arbitration ecosystem, consistent with global best practices. Such a nuanced approach is also necessary for India to realise its ambition of becoming a global arbitration hub.

What investors look for

Ultimately, investors deciding where to invest their capital do not assess tax rates or market access alone. They also ask what happens when a relationship breaks down. A country that can answer this question convincingly has a significant economic advantage.

India’s recent BITs and FTAs already demonstrate an evolution towards more sophisticated dispute-resolution mechanisms that balance investment protection with the country’s needs. The opportunity now is to connect that treaty practice with the goal of bolstering commercial arbitration in India.

The goal should be straightforward: agreements that strive to prevent disputes, arbitration proceedings that resolve such disputes efficiently and responsibly, and courts that enforce arbitral awards predictably. From this perspective, India does not need to make every treaty an arbitration treaty. Yet, through subtle adjustments, it can make commercial arbitration an integral part of the infrastructure supporting the country’s trade and investment relationships.

If India gets that balance right, its growing treaty network can do more than open markets. It can help establish India itself as a jurisdiction in which international businesses are willing to make commitments, with the confidence that, when those commitments falter, any resulting dispute will be resolved credibly and efficiently.

Arun Chawla is the Director General of the Indian Council of Arbitration