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India-UAE Comprehensive Economic Partnership Agreement 2022

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Introduction

The India-UAE Comprehensive Economic Partnership Agreement ("CEPA") has been entered into with the intent to pursue a wide-ranging economic partnership as opposed to a less expansive Free Trade Agreement ("FTA"). Consequently, the India-UAE CEPA covers areas like services, investment, IPR, government procurement, disputes etc. and respective regulatory regimes as well.

The CEPA has also allowed national treatment to companies based in both countries for government procurement contracts. The CEPA specifically recognises the importance of government procurement in trade relations and has accordingly set an objective for effective, reciprocal, and gradual opening of their government procurement markets, in order to maximise, inter alia, competitive opportunities for the suppliers of the Parties.

As per the official press release issued on the India-UAE CEPA by the Ministry of Commerce and Industry, it is worth noting that the UAE is currently India's third-largest trading partner with bilateral trade in 2019-20 valued at US$ 59 billion. The UAE is also India's second largest export destination with exports valued at approximately US$ 29 billion for the year 2019-20. Furthermore, the UAE is also the eighth largest investor in India with an estimated investment of US$ 18 billion whereas Indian investments in the UAE are estimated at around US $ 85 billion. The CEPA is expected to increase the bilateral trade in goods to USD 100 billion within five years of the signing and increase trade in services to USD 15 billion.

This is the first time that India has opened government procurement to foreign companies through the FTA/CEPA route. Till date, India has been very sensitive about including government procurement within the ambit of any bilateral or multilateral agreement.

Highlights

Government procurement limited to retain India's domestic preference policies

The pecuniary threshold for government procurement has been kept at Rs 200 crores. This in line with the mandate under the General Financial Rules, 2017 prohibiting Global Tender Enquiry for tenders up to 200 crore rupees. The CEPA recognises that the commitments under government procurement should be sufficiently flexible to accommodate the specific circumstances and needs of each party.

Hence, the coverage of government procurement under the CEPA is limited to only 34 ministries under the Government of India. These do not include state governments, urban local bodies and panchayati raj institutions and any procurement under the Preference to Make in India Order 2017. Additionally, there are exemptions provided for procurement related to construction, healthcare, agriculture, etc.

There is also a clause protecting MSMEs by recognising the important contribution that MSMEs can make to economic growth and employment and the importance of facilitating the participation of MSMEs in government procurement. Hence, each party reserves the right to apply a preferential procurement policy for its MSMEs in accordance with its laws and regulations, as along as such measure(s), including the criteria for eligibility, are transparent.

Rules of Origin

The Rules of Origin ("RoO") for government procurement are aligned with that of the Rules of Origin of Goods chapter in the CEPA. The definition of originating products under the RoO includes goods which are wholly obtained or produced entirely in the party country. In case the product is not wholly or partly produced in the country then it has to satisfy stringent conditions which are as follows:
  • The good has a qualifying value content of not less than 40 per cent and

  • All the non-originating materials used for production have to undergo a change in tariff classification

Digital Trade

The CEPA recognises the economic growth and opportunity that digital trade provides and seek to foster an environment conducive to the advancement of digital trade. Broadly, the CEPA seeks to promote collaboration in the following fields:

  • Consumer Protection - Protecting consumers from fraudulent commercial practices when they engage in digital trade, encouraging cooperation between the respective consumer protection authorities and publishing information on the consumer protection, including remedies and legal compliance requirements.

  • Unsolicited Commercial Electronic Messages - Mandating consent to receive unsolicited messages, minimisation of unsolicited messages, recourse/remedies against provider of unsolicited messages.

  • Personal data protection - Adopting a legal framework that provides for the protection of the personal data of the users of digital trade based on international principles and guidelines.

  • Cross-border flow of information - Promoting electronic information flows across borders subject to their laws and regulatory frameworks.

  • Use of open data - Endeavour to ensure that open data is allowed to be reused, redistributed freely by the public, and identify ways in expansion of access to, and use of open data can be achieved.

  • Digital and electronic invoicing - Ensuring that implementation of cross-border measures related to digital and electronic invoicing in respective countries are based on international frameworks.

  • Digital & electronic payments - Promoting interoperability and the interlinking of digital electronic payment infrastructures.

  • Cyber security - Strengthen cooperation and build capabilities of competent authorities.

Our Take

The India-UAE CEPA offers immediate benefits such as simpler customs procedures; clear and transparent rules on trade; lower tariffs; enhanced market access; government procurement opportunities and greater information and guidance for SMEs. The Press Release of Ministry of Commerce and Industry states that it expects that the CEPA will create jobs, open new markets for India's startups, MSME's, traders and all sections of businesses, make businesses more competitive and boost India's economy. The success of the CEPA is also expected to open up opportunities in the other markets in the Middle East and Africa.

Since India has had imbalance and outcome related issues with other FTAs it remains to be seen whether the India-UAE CEPA will be able to successfully demonstrate trade balance between the two countries.

Links:

Comprehensive Economic Partnership Agreement (CEPA) between the Government of the Republic of India and the Government of the United Arab Emirates (UAE) - https://commerce.gov.in/international-trade/trade-agreements/comprehensive-economic-partnership-agreement-between-the-government-of-the-republic-of-india-and-the-government-of-the-united-arab-emirates-uae/

FAQs on the Comprehensive Economic Partnership Agreement (CEPA) between the Government of the Republic of India and the Government of the United Arab Emirates (UAE) - https://commerce.gov.in/wp-content/uploads/2022/05/FAQs-on-CEPA_For-Uploading-on-DoCs-website-05-May-2022.pdf

Practice Contacts

Ameet Datta - Partner (Practice Lead) | ameet@saikrishnaassociates.com

Suvarna Mandal - Partner | suvarna@saikrishnaassociates.com

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