India-Israel Bilateral Investment Agreement Takes Effect, Promoting Cross-Border Investments with New Rules

The Bilateral Investment Agreement (BIA) between India and Israel, which seeks to promote and protect cross-border investments while significantly tightening the rules governing investor-state dispute settlement, comes into effect from July 4, 2026. The treaty requires investors to first pursue domestic legal remedies before approaching international arbitration and preserves both governments' right to regulate in areas such as taxation, public policy and national security. Signed in New Delhi on September 8, 2025, the agreement replaces the earlier investment protection framework with a treaty aimed at creating a predictable and transparent investment environment for investors in both countries. The agreement defines an investment as one that complies with the host country's laws and possesses characteristics such as commitment of capital, expectation of profit and assumption of risk. It limits treaty protection to investments made in accordance with domestic laws and excludes portfolio investments and speculative assets from the definition. The BIA reaffirms the sovereign right of both countries to regulate investments in pursuit of legitimate policy objectives, including public health, environmental protection, taxation and national security. It also contains provisions preventing treaty shopping by denying treaty benefits to shell companies or investors that restructure solely to gain access to the agreement's dispute resolution mechanism.