A BIT about Walmart

After the Centre had announced its intention to allow 51 per cent FDI in multibrand retail, Walmart said it would open stores in India in the next two years. However, without a bilateral investment treaty (BIT) between India and the US, Walmart's investments in India are likely to be governed solely by domestic laws. If India and the US enter into a BIT, Walmart, reportedly being probed for violating forex laws in India, will have the protection of the treaty in its interactions with every organ of the Indian state, whether it is the executive, the legislature or the judiciary.

With the re-election of Barack Obama, bilateral engagement between India and the US is expected to deepen. The signing of an investment treaty between the two countries would be a critical part of this. Negotiations for an India-US BIT have been ongoing since 2008-2009. Of late, there has been renewed interest in signing the treaty at the earliest. On October 26, the US State Department released a document titled "The United States and India: A Vital Partnership in a Changing World". Referring to the negotiations for a BIT, it says: "We are aiming for a high-quality agreement that expands on recent reforms to provide still greater openness to investment; strong rules to protect investors and guarantee transparency; and effective means for resolving disputes should they arise." But the revived interest in a BIT raises several preliminary questions that must be answered before any fruitful agreement can be arrived at.

It may appear overcautious to suggest that an investment treaty between India and the US needs to be viewed in the context of a single investor. But there are certain factors that seem to favour caution. First, government authorities are reportedly investigating claims that Walmart poured money into the multibrand retail sector, in spite of the ban on FDI in the sector so far. It allegedly invested $100 million in a domestic unit owned by Bharti Enterprises, its wholesale joint-venture partner. According to reports, Walmart is investigating these allegations. It has also been reported that the retail chain faces charges of tax evasion and money laundering in Mexico. Given this background, it is highly unlikely that any Walmart investment in India will be entirely free of regulatory troubles. If and when such regulatory concerns arise, the protection of a BIT could make a huge difference to Walmart.

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