Non-Discrimination and Standard of Protection in Foreign Investment: A Critical Legal Analysis

Abstract

Investing in India by non-residents requires conformity with India’s foreign exchange regulations, specifically, the regulations governing Foreign Direct Investment. Most aspects of foreign currency transactions with India are governed by FEMA and the delegated legislations. An investor choosing between investing in two diverse countries will, among other factors, look to the non-discrimination and standard of protection; they can expect from the host state. The Central Government is working on a new law to safeguard foreign investment. The purpose of the proposed law is two-fold. On the one hand it offers the legal protection to foreign investors from abrupt policy changes and on the other hand, to provide speedier dispute resolution. Overall, the expectation is that the new law will help in attracting more foreign capital to boost the stuttering economic growth. The primary objective of this paper is to focus in on the issues and challenges these factors pose for the implementation of the law and its expectations.  The paper also aims to identify the current scenario of the non-discrimination and the standard of protection in Foreign Investment. It seems to be evident that non-discrimination in foreign investment is a desirable goal of public policy. Nevertheless defining and implementing non-discrimination proves to be a difficult task, especially more difficult than ensuring non-discrimination with respect to trade in goods. The paper also brings the standard of protection in foreign investment into the light. It also aims to focus on the standard of protection taken by the domestic laws to protect the foreign investment, usually which fails, as domestic law and remedies can be changed on the discretion of the state. It can be conferred that domestic laws can never substitute the remedies provided by the International law. Thus, it can never provide the kind of security to foreign investment that International law does.