DATA SOVEREIGNTY VS INVESTOR RIGHTS ANALYSING DATA LOCALIZATION MEASURES AS INDIRECT EXPROPRIATION UNDER THE INDIAN MODEL BIT

AUTHOR – ANJALI HIRWANI, STUDENT AT GUJARAT NATIONAL LAW UNIVERSITY

BEST CITATION – ANJALI HIRWANI, DATA SOVEREIGNTY VS INVESTOR RIGHTS ANALYSING DATA LOCALIZATION MEASURES AS INDIRECT EXPROPRIATION UNDER THE INDIAN MODEL BIT, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (4) OF 2026, PG. 562-576, APIS – 3920 – 0001 & ISSN – 2583-2344.

Abstract

The collision between digital sovereignty and international investment law has emerged as one of the most consequential tensions in contemporary legal thought. Due to India’s evolving data localisation architecture, which is basically based on the Reserve Bank of India’s 2018 payment data directive and operationalised through the Digital Personal Data Protection Act 2023, foreign technology investors face significant compliance challenges. In the light of the white Industries and Vodafone arbitral disputes, India’s investment treaty strategy underwent a significant recalibration. This paper analyses whether these actions meet the legal threshold of indirect expropriation under the Indian Model BIT 2016. The study makes the case that, although India’s data localization policies are generally defendable as lawful general regulatory action within the police power tradition, certain structural aspects of these mandates create distinct shortcomings that could be tested in investor-state arbitration. It does this by drawing on international arbitral jurisprudence, doctrinal analysis of treaty text, and comparative regulatory assessment. Targeted legislative and treaty-drafting reforms are proposed to insulate India’s digital sovereignty project from arbitral challenge.

Keywords: Data Localization; Indirect Expropriation; Indian Model BIT 2016; Digital Personal Data Protection Act 2023; Investment Treaty Arbitration; Police Powers Doctrine; Investor-State Dispute Settlement; Regulatory Sovereignty