The aftershock from a messy tax-bill battle between India and a major U.K.-based phone carrier is making it unlikely that Stephen Harper will sign a foreign investor protection treaty during his visit to the South Asian country.
Canada's top diplomat in India announced this to Canadian journalists in a briefing Sunday following Prime Minister Harper's arrival in this country of 1.2 billion people for a six-day trade mission.
Stewart Beck, Canada's high commissioner to India, said New Delhi has placed on hold all negotiations on deals to grant foreign investors more legal protections after fights with companies such as British telecom giant Vodafone.
"I would say this is going to take more time," he said of Canada's efforts to secure a foreign investor protection deal with India.
Canadian officials are still holding out hope that they may reach a separate deal during the visit on resuming trade in nuclear material and technology, sources said.
However, India is rethinking how it proceeds with investor protection deals that grant foreign companies standing to sue for compensation if government measures hurt their investments.
This past April, Vodafone issued a notice warning India it intended to challenge tax legislation that allows authorities to reopen tax cases dating as far back as the 1960s and collect more revenue over past corporate deals.
It was the latest in a string of cases where foreign investors were threatening to use bilateral investment treaties to challenge Indian government measures.
"They had a judgment that went against them – the government – in the courts," Mr. Beck said. "So they're taking a look at all their agreements before they actually finalize any one of them in particular."
Mr. Harper is in India to rekindle a number of high-profile trade deals with this rapidly expanding economy that have either stalled or made slow progress.
He's also trying to promote more Canadian-Indian trade. Sectors that Mr. Beck says are considered ripe for Canada include agriculture, education and energy. Canada is already the largest supplier of lentils and pulses to India but could also offer the country supply-chain expertise. India will also require foreign oil and gas to maintain a economic growth rate of at least six per cent, he said.
Mr. Harper begins his trip with a visit to the iconic Taj Mahal in Agra, India.