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 India rejects EU Demand for International Trade Pact Wednesday 27th July 2011 | Sebastian David Lees Casting off pressure from the EU, It was announced today that India is unlikely to accept a standard protection clause in it's trade agreement with the EU bloc. The clause allows overseas investors to take legal action against a country through an international dispute settlement agency.
The EU demanded the inclusion of this clause (known internationally as an 'investor to state dispute settlement mechanism') in the proposed trade and investment agreement which was initially drafted back in 2007. The inclusion of such a clause has caused controversy internationally and if agreed upon, would allow European businesses that are investing in the Indian subcontinent to take legal action against the Indian government for damamges over policies such as the banning of toxic or dangerous chemicals, or national health policies such as the banning of cigarette or other tobacco related products.
This clause would also be applicable to pharmaceutical companies if the Indian government decided to introduce policy control measures to reduce the price of essential medicines. While current international law requires foreign investors to sue governments in domestic courts for any claims (or alternatively at the World Trade Organisation dispute panel), such agreements allow foreign investors to seek further legal action at international arbitration bodies such as the United Nations Commission on International Trade Law.
The rejection of India to accept the inclusion of the clause remains a contentious issue internationally, but only time will tell if it shakes foreign investor confidence in the nation, or if the lure of one of the world's fastest growing economies is too strong - no matter what the risk.
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