1. Key Features

Under the TEPA, EFTA has committed to investing USD 100 billion in India over the span of 15 years. This substantial investment will be distributed across various sectors, including pharmaceuticals, machinery, and manufacturing. In return, India will lift most import tariffs on industrial products from EFTA countries. Other key features of the TEPA include market access for service providers and professionals in specific industries and improvements to intellectual property rights.

The TEPA's aim to foster increased trade and investment opportunities is especially relevant given the pre-existing upward trajectory in trade relations between India and EFTA. It is particularly relevant for prospective Swiss investors, with Switzerland currently already making up the vast majority of both import and export with India among the EFTA states.

2. Promotion of Foreign Direct Investment

Chapter 7 TEPA outlines the investment promotion and cooperation commitments made between the parties and Article 7.1 explicitly recognizes the significance of foreign direct investment ("FDI"). The chapter contains, inter alia:

• Shared Objectives: the parties aim to increase FDI from EFTA States into India by USD 100 billion over the next 15 years, along with the goal of generating 1 million jobs in India within the same timeframe.
• Investment Promotion: The EFTA States commit to promoting FDI from their investors into India, while India pledges to create a favorable climate for such investments, considering any security and public order concerns.
• Cooperation: Both parties agree to cooperate in various areas to facilitate investment and job creation, including identifying investment opportunities, removing obstacles, fostering an environment for increased investment flows, and promoting technology collaboration.

3. Standards of Protection under the TEPA

Unlike the more commonly-seen method of protecting foreign investment through overarching standards of treatment, the TEPA specifies specific standards of protection within each of its chapters.

This is the same approach taken under India's recent trade agreement with Australia and the UAE (i.e., the India-Australia Economic Cooperation and Trade Agreement ("ECTA") and the India-UAE Comprehensive Economic Partnership Agreement ("CEPA"), which both limit investment protection standards to specific chapters. For instance:

• National Treatment: The requirement to afford national treatment is provided for with respect to the trade in goods (Article 2.7), where the parties agreed to the non-application of internal rates of taxation on mutual imports in accordance with Article II of the WTO General Agreement on Tariffs and Trade 1994 ("GATT"). Moreover, national treatment is afforded with respect to intellectual property protection (Article 8.1).
• Most Favored Nation ("MFN") Treatment: MFN applies to the setting of customs duties on imports, to the supply of services (Article 6.3) and to the protection of intellectual property (Article 8.1).

In accordance with these standards, the parties commit to treating other parties' nationals (including Swiss companies) no less favorably than they treat their own nationals or nationals of any other state concerning specific matters, such as the protection of intellectual property rights (Article 8.1).

No Fair and Equitable Treatment ("FET") and no Expropriation clauses: Unlike most of the Bilateral and Multilateral Investment Treaties signed and ratified by Switzerland, the TEPA contains neither an express FET clause nor specific protection against expropriation without compensation.

4. Dispute Resolution Mechanisms under the TEPA

In line with India's recent approach towards free trade agreements, the TEPA does not contain an Investor-State Dispute Settlement ("ISDS") mechanism.

Therefore, foreign investors do not have direct recourse against host states to enforce the standards of protection set out in Chapters 2, 6 and 8.

Instead, alleged failure to adhere to the standards within the TEPA would be subject to resolution among the party states, as stipulated in the TEPA Dispute Settlement provisions contained in Chapter 12 and Annex 12A, which provides for dispute resolution through arbitration. The TEPA therefore does not specify an administering arbitral institution or arbitral rules but rather sets out an ad hoc arbitration procedure in its Annex 12A, similar to the ones contained in ECTA and CEPA.

Furthermore, a panel constituted under Chapter 12 will issue a "recommendation" (as opposed to an "award") directing a party to remove or modify an uncompliant measure. The objective of arbitration outlined in Chapter 12 is therefore not primarily focused on compensation, as is typically the case under Bilateral Investment Treaties ("BITs") and International Investment Agreements ("IIAs") more generally.

The more aspirational provisions in Chapter 7 regarding investment promotion and cooperation are carved out of the TEPA dispute settlement mechanism (see Article 7.6). However, if shared objectives are not met, India has the option to undertake temporary and proportionate remedial measures to rebalance concessions given to the EFTA States in the trade in goods. These measures are subject to consultation and review processes.

5. Previous Investment Protection Framework and Ongoing BIT Negotiations

For Swiss investors, the TEPA fills a potential gap in investment protection following India’s 2017 termination of its BIT with Switzerland.

The termination was a result of India's efforts to reshape its bilateral and multilateral investment regime, a decision sparked by numerous BIT claims and most notably the unfavorable ruling in the White Industries v. Republic of India. India terminated most of its BITs in the aftermath of this ruling and introduced a new Model BIT in 2015, based on which India also intends to renegotiate its BIT with Switzerland. The Model BIT contains an ISDS mechanism but with more limited protections than the previous BIT. Swiss-Indian negotiations on a new BIT are ongoing and it is not clear what level of protection any future BIT will entail or whether it will offer direct recourse for investors in the form of an ISDS mechanism.

In summary, the TEPA marks a significant milestone in trade relations between India and the EFTA states. With its focus on enhancing investment, promoting cooperation, and protecting intellectual property rights, the TEPA sets a framework for sustainable economic growth for both parties. The absence of a traditional ISDS mechanism may be regrettable but it underscores a shift in India's recent approach to free trade agreements, favoring dialogue and consultation between party states over adversarial proceedings. It remains to be seen what level of additional protection any potential Switzerland-India BIT will offer for investors and more importantly, whether it will include an ISDS mechanism.