Israel-India Bilateral Investment Agreement Enters Into Force

On 4 July 2026, the Bilateral Investment Agreement concluded between Israel and India on 8 September 2025 entered into force, affording protections to Israeli investments in India and to Indian investments in Israel. This is the first agreement concluded by India under its new model for investment promotion and protection agreements with an OECD member State. For Israel, it is part of a concentrated effort of concluding investment protection agreements with Asian States: the Agreement with India joins similar agreements concluded in recent years with Viet Nam, the Philippines, South Korea, the United Arab Emirates, Japan, and Myanmar.

As of 2024, the stock of mutual investments between Israel and India stood at approximately USD 360 million – a rather modest amount relative to the size of the Indian economy. The Agreement between Israel and the world’s fourth-largest economy is expected to create a more conducive investment environment and to strengthen trade relations, as well as the strategic ties between the two States.

What rights and protections are afforded to investors?

The Agreement includes a broad range of protections intended to reduce investors’ exposure to non-commercial risks. These include:

• Protection against arbitrary treatment: the host State may not subject an investor or its investment to measures constituting denial of justice, fundamental breach of due process, or abusive and manifestly arbitrary treatment.
• Protection against expropriation: the host State may not take over an investment, or adopt measures having an effect equivalent to expropriation, without payment of adequate compensation.
• National treatment: once the investment has been made, the host State is required to accord to investors and their investment treatment no less favourable than that accorded, in like circumstances, to domestic investors and their investments.
• Full protection and security: the host State must accord to investments and investors of the other party full protection and security, which is limited to physical security and does not go beyond what is required by the applicable customary international law regarding the minimum standard of treatment of aliens.
• Free transfer of funds: profits, dividends, and proceeds from the sale or liquidation of the investment may be transferred outside the host State.
• The possibility of recourse to international arbitration in the event of a dispute.

What should investors pay particular attention to in the Agreement?

Notwithstanding the broad protections afforded to investors, the Agreement contains a number of important limitations:

• Exhaustion of local remedies: in the event of a dispute, before submitting a claim to international arbitration, the investor must, in principle, first pursue proceedings before the domestic courts of the host State.
• Decisions said to concern essential security interests are not subject to review: where a State asserts that a decision was taken on essential security grounds, such decision is non-justiciable.
• The Agreement does not apply to measures of a local government or of an enterprise owned or controlled by such a local government, but only to measures of the central government. Likewise, the Agreement does not apply to taxation measures.
• The Agreement expressly prohibits third-party funding of arbitration proceedings.

An additional layer of protection, but not a substitute for risk management

In conclusion, the Agreement between Israel and India is a positive development in the economic relations between the two States. That said, investors relying on the Agreement should be aware of its material limitations and should assess the level of protection it affords on a case-by-case basis. The Agreement may provide Israeli investments in India with an additional layer of protection, but it is no substitute for a prudent management of the contractual relationship with the host State.