India, Israel bring Bilateral Investment Agreement into operation

The India-Israel Bilateral Investment Agreement (BIA), which will ensure a secure and predictable investment climate between the two countries, came into force from Saturday, the finance ministry said.

The pact, which will provide protection to the two-way investments, is expected to contribute to increased cross-border investment activity, it said.

The two countries inked the treaty on September 8 last year.

“The BIA between the Government of the Republic of India and the Government of the State of Israel… enters into force with effect from today, 04 July 2026,” the ministry said.

Under the pact, India has cut down the local remedies exhaustion period for Israeli investors to three years.

Local remedies exhaustion means that investors must first try to resolve their disputes using the legal system of the host country before they can take the matter to international arbitration. Normally, India keeps a five-year period for this.

The India-Israel BIA also includes portfolio investments in a deviation from such treaties in the past. Israel is the first OECD (Organisation for Economic Co-operation and Development) member with which India has inked this agreement.

The agreement is expected to pave the way for increased bilateral investments between the two countries. During April 2000 and March 2026, India received USD 371.35 million foreign direct investment (FDI) from Israel.

The implementation of the pact is important as both countries are also negotiating a free trade pact. The negotiations for the trade pact are going slow due to the West Asia crisis.

India is also negotiating bilateral investment treaties with other countries, including Saudi Arabia, Qatar, Oman, Switzerland, Russia, Australia and the European Union.

These investment treaties help in protecting and promoting investments in each other’s countries.

The government has earlier announced revamping the current model of BITs to make it more investor-friendly and attract foreign players.

Commenting on the pact, think tank GTRI said the 2015 model text treaty has excluded portfolio investments, while the Israel agreement covers shares, stocks and other equity holdings, as well as qualifying bonds, loans and other corporate debt.

“This could widen India’s exposure to investor-state disputes beyond traditional foreign direct investment to certain financial investments,” GTRI Founder Ajay Srivastava said.

He said the Israel pact allows investors to seek international arbitration after pursuing domestic legal remedies for three years, compared with five years under India’s 2015 Model BIT (bilateral investment treaty) and several later treaties.

Srivastava added that the two agreements with the UAE and Israel suggest that India is giving investors faster access to international arbitration.

“The agreement provides national treatment to all sectors except land and real estate,” he said, adding that the exclusion of land and real estate allows both governments to maintain separate rules for foreign investors in those sectors.

National treatment requires each country to treat the other’s investors no less favourably than domestic investors in like circumstances.

Both BIA and BITs are binding agreements between two countries that protect investments and investors from each country in the other.