India-Israel Investment Pact Comes Into Force: Will The New BIA Boost Cross-Border Investments?

The India-Israel investment relationship advances to the next phase. Signed between the Government of the Republic of India and the Government of the State of Israel on September 8, 2025, in New Delhi, the Bilateral Investment Agreement (BIA) enters into force on 4 July 2026, further enhancing bilateral economic relations with greater certainty for investors, the Finance Ministry stated. The agreement would promote the flow of fresh investment from one country to another and generate a stable, transparent and enabling investment climate, the ministry added.

What Does The India And Israel BIA Mean?

The Bilateral Investment Agreement supersedes the earlier investment treaty regime between India and Israel and lays down updated rules for the protection of investments in accordance with India’s revised investment treaty model.

“The BIA is a landmark step towards strengthening bilateral economic relations and ensuring a secure and predictable investment climate,” the Finance Ministry said in a statement.

“The BIA is robust in protection of Investment and Investor with respect to their investments while being flexible enough to retain sovereign policy space in line with legitimate public policy objectives, reflecting the modern principles and evolving jurisprudence of international investment law,” the ministry added.

The government hopes that the pact will encourage cross-border investment and strengthen the economic relationship between India and Israel in the long run.

What’s In It For Investors?

This new treaty is designed to increase investor confidence through legal protection but to leave governments free to make policy choices in the public interest.

Its main features include:

• Protection from unlawful expropriation of investments
• More transparency in investment-related decisions
• Easier transfer of investment money
• Provisions for compensation of eligible losses
• A structured way of resolving disputes

The agreement aims to strike a balance between protecting foreign investors and preserving each country’s sovereign right to regulate areas such as taxation, public health, environmental protection and national security.

New Rules On Investor Disputes

The dispute resolution process is one of the major changes under the BIA.

Instead, the treaty requires that investors who pursue international arbitration must first exhaust legal remedies available in the host country’s judicial or administrative system.

International arbitration cannot begin until the domestic proceedings have concluded or five years have elapsed, whichever is earlier.

The treaty also tightens the eligibility criteria for arbitrators, requires greater disclosure to ensure impartiality, and prohibits third-party funding of investor-state arbitration to discourage speculative claims.

It also excludes the protection of treaties in the case of fraud, corruption, money laundering or other unlawful activities.

Governments Leave Options Open On Policy

Unlike many older investment treaties, the India-Israel BIA explicitly protects the right of both governments to impose regulations in areas including taxation, public welfare and national security.

The accord also includes a broad tax carve-out that limits investors’ ability to challenge tax measures through international arbitration except in certain expropriation-related cases.

It also includes measures to prevent treaty shopping by denying treaty benefits to shell companies or to investors who restructure their businesses solely to obtain them.

Trade And Investment Relations Set To Deepen

The government estimates bilateral investment between India and Israel to be around $800 million. Policymakers said the new agreement would help sustain higher investment flows in the years ahead.

The pact was signed in New Delhi in September 2025 between Union Finance Minister Nirmala Sitharaman and Israeli counterpart Bezalel Smotrich.

Speaking at the signing ceremony, Sitharaman had said that industries of both countries should strengthen business partnerships to harness emerging investment opportunities. Despite security challenges, Smotrich said the two countries have continued to enjoy strong economic growth and reiterated cooperation in areas such as fintech, infrastructure, financial regulation and digital payments.

India-Israel Economic Relations Enter A New Phase

The new BIA replaces the earlier bilateral investment, which came into effect in 1996 after India and Israel established full diplomatic relations.

The agreement will remain in force for 10 years initially and will continue thereafter unless terminated by either country on one year’s written notice. The agreement’s sunset clause also ensures that the treaty protects existing investments for another 10 years even after termination.

The India-Israel Bilateral Investment Agreement will offer a more predictable environment for businesses wishing to invest across both markets, supporting the next phase of economic cooperation with stronger legal safeguards, clearer dispute resolution rules and greater policy certainty.

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