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Bilateral Investment Treaties (BITs) are treaties signed by two countries for the recipro­cal protection of their investment in each other’s territory. The first BIT was signed in 1959 between Germany and Pakistan, according to UNCTAD, and by the end of 2019, more than 3,000 such BITs had been signed. Another critical function of BITs is to promote foreign investment—developing countries and least developed countries (LDCs) that have signed BITs are seen as favorable des­tinations for foreign investment as they guarantee protection to foreign investors, not just under domestic law, but also under international law.However, the global evidence on BITs leading to greater for­eign investment inflows remains inconclusive. Some studies show a positive correlation between the two, while some show negative or no co-relation. The spread of BITs has also resulted in an increase in the number of investor-State dispute settlement (ISDS) claims being brought by foreign inves­tors against the host State. Again, according to UNCTAD, the total number of known ISDS cases till the end of 31 July 2019 stands at 983.

Against this backdrop, this short piece looks at BITs signed by Nepal. According to UNCTAD’s World Investment Report 2019, foreign direct investment (FDI) inflows to Nepal increased from $71 million in 2013 to $161 million in 2018—an increase of over 100 percent in just five years. This is even more remarkable given that in 2014 FDI inflows to Nepal had dipped to $ 30 million.

Nepal has signed six bilateral investment treaties (BITs) with the following countries: India, Mauritius, Germany, Finland, the United Kingdom (UK) and France. Out of them, only four are in force. Nepal’s BITs with India and Mauritius have not come into force. In fact, a writ petition was filed in the Supreme Court of Nepal challenging the BIT that Nepal has signed with India. However, the court quashed this writ because India has already declared its intent not to ratify the BIT.

The BITs signed by Nepal can be described as those belonging to the first generation investment treaties i.e. a template of BITs that were championed by inves­tor-friendly Western European countries. In other words, the BITs signed by Nepal, thus far, contain broad and vague invest­ment treaty provisions provid­ing expansive rights to foreign investors with scant regard to the host state’s right to regulate. These BITs also provide for an ISDS, which allows a foreign inves­tor to bring claims against the host State before international arbitration tribunals.

A good example of a Nepali BIT containing broad and vague substantive provisions is the Nepal-UK BIT. Article 1 of this BIT defines ‘investment’ by relying on an asset-based definition of investment, where investment means every kind of asset. Like­wise, Article 2 of the same BIT contains a broad and vague fair and equitable treatment (FET) provision and a full protection and security provision without providing the normative content of these standards. The BIT also covers both direct and indirect expropriation but does not define or provide any guidance as to how to determine that sovereign regu­latory measures may amount to indirect expropriation.

One of the most important aspects of Nepali BITs is that they contain the ISDS provision. For instance, Article 10(2) of the Nepal-Germany BIT provides that any dispute between a for­eign investor and a host State that is not settled amicably with­in three months of a written notification made by the foreign investor, shall be submitted for ICSID arbitration. The BIT further provides that both the contract­ing States have given their con­sent to BIT arbitration under the aegis of ICSID.

The rising FDI levels to Nepal have resulted in greater integra­tion with the global economy, thus enhancing the chances of ISDS claims being brought by Nepal. Indeed, Nepal has already had its first brush with ISDS in a case known as Axiata and Ncell v Nepal. This case has been brought under the Nepal-UK BIT. The dispute arose due to the imposition of capital gains tax by the Nepali government on Axiata’s acquisition of a com­pany called Reynolds Holding limited from TeliaSonera in 2016, levied on Axiata’s subsidiary Ncell. While the foreign inves­tor has nominated an arbitrator, the Nepali government is yet to appoint an arbitrator. The out­come of this case might affect the trajectory and contours of future Nepali BITs.

As an LDC, Nepal needs FDI to boost its economic growth. BITs can play a role in this regard. BITs can signal to foreign investors that their investment in Nepal shall be protected, not just as per domestic law but also under inter­national law. This would boost investor confidence. However, it is critical for Nepal to ensure that its BITs are not too investor friendly and contain provisions that would allow Nepal to defend its bona fide sovereign regulatory measures adopted in good faith. The future Nepali BITs should strike a balance between protect­ing foreign investor’s money and safeguarding Nepal’s sovereign right to regulate.

It is equally important for Nepal to invest in capacity build­ing to better understand the implications and ramifications of investment treaties and BITs. Such capacity building efforts need to be undertaken at all lev­els—executive, judiciary, legisla­ture, civil society, and academia. A better and deeper understand­ing of BITs and ISDS shall enable Nepali policymakers to internal­ize BITs and ISDS. Such inter­nalization of BITs and ISDS shall allow them to evaluate domestic laws and policies in terms of their compatibility with Nepal’s BITs 

The author is a senior assis­tant professor at South Asian University’s faculty of legal studies. Views are personal

There were unmistakable signs during US President Don­ald Trump’s recent India visit that the two countries are keen on closer collaboration to contain China’s rise in the region. Speaking in New Delhi, Trump said he was “revi­talizing” the QUAD initiative with the help of Indian Prime Minister Narendra Modi. The QUAD—composed of Australia, Japan, India, and the US—is a platform, just like the Indo-Pa­cific Strategy, aimed at countering the Chinese BRI. Trump said among the goals of QUAD revival is “ensuring a free and open Indo-Pacific.”He reaffirmed the American commitment to fighting radical Islamic terrorism. As if the message was lost on the Indian audience he wanted to woo, he added that the US is also working with Pakistan to confront terrorists who operate “on its soil.” This was also music to the ears of Modi and members of the Hindu nationalist government he leads. Although the gargantuan trade deals Trump likes to trumpet did not materialize during his India sojourn, he could nonetheless boast of selling to India around $3 billion worth of American military hardware. His larger-than-life reception in Ahmedabad will also place him in good stead with the Indian-Americans in the year of the presidential election.

For Nepal, there was a clear message that the Americans are intent on consolidating their ties with India via the Indo-Pacific Strategy to give China a run for its money in South Asia. The American President and the US security establishment are one on this. In the days ahead, expect more pointed US references to Chinese interference in Tibetan affairs in Nepal, more swipes at China’s debt-trap diplomacy, and more Kathmandu visits of top American military officials to cement bilateral security ties. But with the government of its choice in Kathmandu, China won’t hold back either.

Whether the MCC compact is good for Nepal, the Amer­icans will not be pleased at the way PM Oli has appeared helpless in ensuring its smooth passage through the parlia­ment. They were ready to give the communist prime minister benefit of doubt, partly because they had zero trust in the ex-Maoists, including Prachanda. But what if Oli can’t secure their interests? The Indians have been unhappy with him since the blockade days. It makes perfect sense for the Indians and the Americans to join hands to secure their increasingly converging interests in Nepal.

The security establishments in both India and the US are obsessed with China. Minimizing the Middle Kingdom’s footprints in South Asia is their end goal. Towards that end, no tactic, however dirty, will be off limits. As PM Oli slowly loses his grip on power, they espy an opportunity. They will have seen how top Nepali leaders can easily be enticed to compromise on national interests, via amending the national charter if need be. When the three big outside powers here start playing dirty, it’s anyone’s guess what will happen to the country that has barely been able to achieve a semblance of stability after long.

We recently celebrated the Valentine’s Day, or the so-called love day. Many of us expressed love through every available means. We could have done that on other days also—there were 364 at our disposal. Maybe we didn’t realize then.

That particular day, Feb­ruary 14, gave us an occa­sion, a reason, a reminder, to express love. It’s easy to overlook, but it brought our minds to that particular day. We were reminded to think: ‘Today is a special day’.

Habitually, we are either living in the past or in the future. Past means memo­ries and future means pro­jections based on those memories. Memories are often good or bad, causing us to either cling to or loathe them. And projections too can be good or bad, causing us to either fancy or fear what would come next. In all this, our present moment slips away. Always.

Most of the festivals and ‘days’ around the world bring people’s minds to that day. These days enable people to live in the moment. They lift people’s minds out of mem­ories and projections, and drop them to the ‘here and now’. Without realizing, peo­ple enjoy the ‘here and now’.

Lost in memories and pro­jections, we lose our pre­cious moments. By habit, we cannot enjoy ourselves. We cannot accept ourselves in the moment as we keep remembering the good or nasty things of the past. We are too busy coveting or fear­ing what comes tomorrow or the next year. Slaves to past and future, we have lost our freedom to live ‘here and now’.

What happens if we were in a situation to love? Imag­ine your possible love is next to you. Or a friend, a kid, or your pet, it doesn’t matter. You cannot accept them when you are ruminat­ing the past and worrying about the future. You had a pleasant love affair in the past, or a horrible one. As a slave of habit, you start judging—‘this girl is worse than my ex’ or ‘this guy is no match to my prince’ or ‘this is great, but it will also pass and leave me in pain’. And whoops! Love vanishes. Mind oscillates between the past and future. Your moment of love is lost.

When you live in the pres­ent moment and accept things and people as they are, two things happen: you become peaceful and you better connect with people. It will clear your love-jam. You are then able to love.

 The government attitude to one of the three pillars of the economy, the private sector, has been disappointing. There are efforts to limit the role of the private sector even though there is a need for effec­tive partnership between public and private sectors to achieve our larger economic goals. Even government estimates show that the private sector’s contribution is crucial to the timely achievement of the Sustainable Development Goals (SDGs).

Full liberalization of the econ­omy and enhancement of the capacity of the private sector have failed due to policy inconsisten­cies of the past three decades. The expectation that a stable gov­ernment would result in policy clarity and a consistent approach in dealing with the private sector has not been met. Riding on a capitalistic horse to reach the des­tination of ‘sound communism’ is questionable. The Nepal Commu­nist Party (NCP)-led government clearly doesn’t consider the pri­vate sector a formal partner for economic development.

A Swedish Finance Minister was once asked by Joseph E. Sti­glitz, a Nobel Prize winner econo­mist, why his country’s economy was doing so well. The answer: “Because we have high taxes.” What he meant, as Stiglitz inter­prets, is that Swedes know that in a prosperous country there is a high level of public expendi­ture on infrastructure, education, technology and social protection, and that the government needs revenues to sustainably finance these expenditures.

Many of these public expen­ditures complement private expenditures. Advances in gov­ernment-financed technology can help support private investment. Investors rely ever more on edu­cated labor force and good infra­structure. Central to rapid growth is an increase in knowledge, and the government has to support the underlying basic research. But no such effort is seen in Nepal although the tax rate here is much higher compared to other coun­tries in the region. A huge amount of revenue collected goes in recur­rent expenditure and there is a dearth of quality investment in education let alone in research and development.

I cite this example as it comes from an economist who recom­mends increasing the size of the public sector with higher taxes. But even such scholars agree on the basic premise that the mon­ey collected by the government should be spent to advance key aspects of the economy. Finance Minister Yubaraj Khatiwada, con­sidered a champion of the wel­fare economic model, issued a White Paper at the start of his tenure to show the pathetic state of the economy back then, and promised that he would attempt course-correction. Many trust­ed him, including this scribe. But two years down the line, the economy has not found its way and the private sector has lost its confidence.

Forty years ago, when China began its transition to a market economy, no one could have imagined that the impoverished county would have a GDP com­parable to that of the US in under half a century. The Communist Party of China (CPC) didn’t just sit by idly deregulating the market. It also devised well-crafted policies to incentivize the private sec­tor to grow and compete against their counterparts from other developed countries.

In the context of Nepal, the NCP government should be mindful that the referees them­selves do not end up playing the economic game. Nor should the game’s rule surprise the players. A formal private sector always looks for policy reforms to gen­erate growth and job opportu­nities. It is the government’s job to facilitate a public-private dia­logue and draft policies to boost private sector enthusiasm in nation-building