Overview: India has approved a new Bilateral Investment Promotion and Protection Agreement (BIPA) with Saudi Arabia, introducing a two-year local-remedy period before eligible investors can pursue international investment arbitration, subject to the treaty’s conditions. The agreement is expected to strengthen the framework for bilateral investment while businesses continue to assess FDI structuring and FEMA compliance.
India-Saudi BIPA Approved
The Government has approved a new Bilateral Investment Promotion and Protection Agreement (BIPA) with Saudi Arabia. The agreement provides for a two-year period for exhausting local legal remedies before an eligible investor can initiate international arbitration under the Investor-State Dispute Settlement (ISDS) mechanism, states a Financial Express report. The process will be subject to the agreement’s eligibility criteria and procedural requirements.
The agreement is part of India’s evolving bilateral investment treaty framework. It includes provisions relating to the treatment of investments, non-discriminatory treatment, protection against expropriation and free transfer of investment-related funds, according to the report. The framework provides greater legal certainty for qualifying investors from both countries. It also allows governments to introduce and enforce regulations in the public interest.
The agreement follows the successful conclusion of India-Saudi investment treaty negotiations, announced by the Ministry of Finance in September. The two countries have been working to deepen investment cooperation across energy, infrastructure, technology, manufacturing and other sectors.
What Does the Two-Year Local-Remedy Period Mean?
A key feature of the India-Saudi BIPA is the two-year local-remedy period. In practical terms, an eligible investor must first pursue available remedies before the relevant domestic courts or authorities for the specified two-year period before seeking international investment arbitration under the treaty.
The provision should not be read as an automatic right to arbitration after two years. The investor must also meet the agreement’s eligibility criteria and comply with its procedural requirements.
The two-year period also represents a change from the longer local-remedy periods seen in India’s earlier investment treaty framework. India has already adopted a three-year period in its investment agreement with the UAE, which entered into force on 31st August, 2024, and its agreement with Israel, in force since July 4, 2026. The Department of Economic Affairs lists both agreements in its bilateral investment treaty records.
What the BIPA Could Mean for Businesses
The BIPA provides an additional layer of treaty-based protection alongside domestic laws and regulations for Indian businesses receiving investment from Saudi Arabia and Saudi investors looking at opportunities in India.
Businesses considering or implementing cross-border investments should continue to assess:
- the applicable FDI route and sectoral conditions;
- ownership and shareholding structures;
- valuation and pricing requirements;
- FEMA reporting and documentation;
- investment and shareholder agreements; and
- applicable company, tax and sector-specific regulations.
The BIPA does not replace these domestic compliance requirements. Treaty protection operates alongside the rules governing how foreign investment is received, reported, held and transferred in India.
Businesses planning to receive Saudi investment should address FDI structuring and FEMA compliance from the outset and review these requirements whenever there are changes in ownership, capital or repatriation.
What Indian Businesses Should Keep in Mind
The new agreement may be relevant to companies that are already receiving Saudi investment as well as businesses considering future Saudi participation.
Before accepting or restructuring foreign investment, businesses should review the proposed ownership structure, applicable FDI restrictions, valuation requirements, reporting obligations and contractual arrangements. Keeping corporate and FEMA records in order also helps businesses demonstrate compliance when needed.
The treaty itself should not be treated as a substitute for transaction-level legal or regulatory review. Its protections depend on the applicable treaty conditions.
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Setindiabiz supports Indian businesses and foreign investors with FDI structuring, company incorporation, FEMA compliance, regulatory documentation and post-investment compliance. Support can include investment-route assessment, entity structuring, shareholding documentation, applicable approvals and FEMA reporting.
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FAQs
What is the India-Saudi BIPA?
The India-Saudi Bilateral Investment Promotion and Protection Agreement (BIPA) is an investment treaty intended to provide specified protections to qualifying investors and investments from India and Saudi Arabia.
What is the two-year local-remedy period under the India-Saudi BIPA?
The agreement provides for a two-year period during which an eligible investor must pursue available domestic legal remedies before becoming eligible to initiate international investment arbitration under the treaty, subject to its other conditions and procedures.
Does completing two years automatically allow an investor to start international arbitration?
No. Completing the two-year period by itself does not guarantee access to arbitration. The investor and investment must satisfy the treaty’s eligibility requirements and applicable procedural conditions.
Does the India-Saudi BIPA remove FDI and FEMA compliance requirements?
No. The BIPA operates alongside India’s domestic regulatory framework. Saudi investors and Indian businesses must continue to comply with applicable FDI policy, FEMA rules, valuation requirements, sectoral conditions, company law, tax provisions and reporting obligations.
The India-Saudi BIPA strengthens the treaty framework governing investments between the two countries, with a two-year local-remedy period before eligible investors can pursue international arbitration, subject to the agreement’s conditions. For businesses, however, the treaty is only one part of the cross-border investment framework.
Companies and investors should continue to assess FDI eligibility, ownership structures, FEMA requirements, valuation, reporting and transaction documentation when planning or receiving investment between India and Saudi Arabia.
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Setindiabiz Editorial Team is a multidisciplinary collective of Chartered Accountants, Company Secretaries, and Advocates offering authoritative insights on India’s regulatory and business landscape. With decades of experience in compliance, taxation, and advisory, they empower entrepreneurs and enterprises to make informed decisions.
