The Enforcement
The introduction of the India-UAE Bilateral Investment Treaty (BIT) on August 31, 2024, saw the completion of the era of protection by default. The compliance environment of 2026, to an investor who was used to the 2013 BIPPA, necessitates a radical transformation in the structuring and documentation of investments.
1. The Salini Plus Test: What Constitutes a Guaranteed Investment
The 2013 BIPPA offered protection to virtually all assets of a UAE resident in India. In 2026, an asset will only be classified as a Covered Investment upon meeting the Three-Part Threshold Test:
- Investment of Capital: You have to demonstrate a physical transfer of funds to the host country.
- Anticipation of Profit: The investment should be in the form of a business and not a storage of funds.
- Risk to the assumption: The instrument of a purely guaranteed-return (debt-like) instrument with no market risk can not be covered by the treaty.
Why this is significant to GIFT City: By organising through a Category II AIF in GIFT City, it is already like the matter that the structure of the fund incorporates both a distinct capital commitment and market-based risk.
2. Substance Requirements: End of Post-Box Companies
The most hostile modification to the 2024 BIT (and explained in the Dec 12, 2025 IFSCA FAQ) is that of Substantial Business Activity (SBA).
To obtain the status of treaty protection, a UAE entity must prove:
- Physical Presence: An actual office which is in use (not merely a shared desk).
- Local Employment: Hiring the qualified professionals (Principal Officers) who are citizens of the home state.
- Core Income-Generating Activities (CIGA): Indicating that the investment decisions are located in the UAE/GIFT City never outsourced to a third country.
50GW for 2030, Strategy
3. Key Comparisons: BIT 2024 vs. 2026 Reality
| Feature | 2013 BIPPA (Legacy) | 2024 BIT (2026 Compliance) | Impact on UAE Investors |
|---|---|---|---|
| Local Remedies | No mandatory exhaustion period. | Mandatory 3-Year Exhaustion in domestic courts. | Requires early legal planning and better local documentation. |
| Portfolio Investment | Often excluded or ambiguous. | Explicitly Included (Shares, Bonds, Units). | Opens the door for GIFT City fund investors to claim BIT protection. |
| FET Clause | Broad “Fair & Equitable Treatment.” | Narrowed Protection (Denial of justice, due process). | Reduces “vague” claims; requires proof of specific regulatory abuse. |
| Third-Party Funding | Permitted / Unregulated. | Strictly Prohibited (Art. 16). | Investors must have their own “skin in the game” for legal disputes. |
What experts are saying?
Experts’ Comments Linked to Foreign Direct Investment, the UAE to IND
4. The 2026 “Clean Hands” Doctrine
The new BIT has a Legality Requirement as presented in Article 1.4. In case an investment is discovered to be corruptive, fraudulent, or round-tripping, all the protections of the treaty are nullified immediately.
To the UAE investors, it implies that Enhanced Due Diligence (EDD) on the source of funds is no longer voluntary. The strict AML/KYC system at GIFT City is a “Compliance Shield so to speak, with a recorded line of legality that safeguards the investor in case a conflict at any point arises before an international tribunal.
5. Deeds of Advice between UAE Family Offices
To make sure that your 2026 portfolio is still “BIT-Protected,” you are to audit three things:
- Dual Nationality Review: In case you have a second passport, make sure that your ordinary residence has been listed in the UAE to become a UAE national as per Art 1.9.
- Beneficial Ownership: Beware, no Country of the Border-Sharing (e.g., China/Pakistan) is a significant control, this provokes the Press Note 3 restrictions in India.
- The 3-Year Clock: When a conflict occurs, then you need to take action at once. The treaty compels you to exhaust local solutions in 3 years before proceeding to international arbitration. It is too late to wait until the year 2 to file.