India and the European Union have incorporated a structured mediation framework into their proposed free trade agreement (FTA), aiming to resolve disputes through a faster and mutually acceptable process. The agreement, whose conclusion was announced on January 27, is expected to be signed after legal review and could come into force next year.
As per the draft text, an annexure on “model mediation procedures” outlines how disagreements related to trade measures can be handled.
It states, “A Party (India or EU) may at any time request to enter into a mediation procedure with respect to any measure by a Party alleged to adversely affect trade between the Parties.” The request must clearly specify the issue, detailing the measure in question and the perceived or potential impact on bilateral trade.
However, mediation is not automatic. The provision makes it clear that the process can only begin if both sides agree. In case the two parties fail to decide on a mediator within the stipulated timeframe, the request will lapse, as “the request for mediation ‘shall be regarded as rejected’.”
The procedure is also location-flexible. According to the text, “The mediation procedure shall take place in the territory of the party to which the request was addressed, or by mutual agreement in any other location or by any other means.” Once a mediator is appointed, both sides are expected to work toward a resolution within a limited window.
“The two sides shall endeavour to reach a mutually agreed solution within 60 days after the appointment of the mediator,” the document states. It also allows room for temporary arrangements, noting that interim solutions may be explored during discussions.
Apart from mediation, the agreement contains a dedicated section on dispute settlement. This mechanism is intended to ensure clarity and efficiency in handling disagreements over how the pact is interpreted or applied.
“The objective of this Chapter is to provide an effective and efficient mechanism for the avoidance or prompt settlement of any dispute arising between the Parties… with a view to reaching, where possible, a mutually agreed solution,” the text explains.
The agreement further provides flexibility in dispute resolution methods. It notes that “Parties may at any time agree to undertake an alternative method of dispute resolution, such as good offices, conciliation or mediation,” reinforcing the focus on cooperation rather than confrontation.
In a separate development, a draft reviewed on Friday indicated that India and the EU will extend Most Favoured Nation (MFN) treatment to each other for five years from the date the agreement takes effect. This move is expected to ensure non-discriminatory trade terms between the two sides during that period.
The broader FTA, described as a major economic milestone, spans 20 chapters, including provisions on digital trade. These include commitments to encourage paperless transactions and enhance cooperation on regulatory and technical matters.
The deal, negotiated over nearly two decades, is expected to significantly deepen economic ties. It will open up a combined market of roughly 2 billion people, linking India -- the world’s fourth-largest economy -- with the EU, the second-largest economic bloc. Together, they account for about 25 per cent of global GDP and nearly one-third of global trade.
Once finalised after legal scrutiny, the agreement’s text may still undergo revisions, with the final version to be confirmed at the time of signing.
(With inputs from agencies)
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