In April 2025, Bangladesh’s state-owned gas company Petrobangla cleared all of Chevron’s outstanding gas bills from previous years. Within days of this payment, Petrobangla formally urged Chevron to resume work on the stalled $65 million Jalalabad compressor project. Petrobangla Chairman told the press, ‘…we have already cleared all outstanding arrear payments of Chevron Bangladesh.’ Chevron Bangladesh welcomed the government’s action as its media and communications manager said that ‘…This outcome sends a positive signal to existing and potential investors.’
These steps represent a clear policy shift on the part of the government to honour contract obligations in the energy sector. By paying the arrears to Chevron forthwith and enabling the project restart, Bangladesh sends a concrete message of contractual dependability and responsiveness to investors. Chevron and others have already interpreted this practical step as a good signal of stability. However, to translate this passing signal into lasting confidence, Bangladesh must complement such gestures with robust legal frameworks and effective dispute-resolution mechanisms. In particular, the country’s experience with investor-state arbitration suggests two broad reforms: the adoption of a Model Bilateral Investment Treaty (BIT) with a clear template for future agreements, and the strengthening of domestic institutions to interface with investors.
Bangladesh’s investor–state arbitration record
Bangladesh’s investment-treaty policy is still dominated by first-generation BITs concluded during the 1980s and 1990s, which contain sweeping protections like Fair and Equitable Treatment (FET), Most Favoured Nation (MFN), expropriation, and traditional Investor–State Dispute Settlement (ISDS) provisions hammered out in a different policy context. These ‘vintage’ treaties tend to lack modern carve-outs for legitimate public-interest regulation, investor ‘legitimate expectations’ limitations, or tax and health-directed measures, leaving interpretative lacunae that tribunals may fill, to the host states’ disadvantage at times. In consequence, investors have been able to invoke treaty protection and ISDS against changes in regulation or contract, producing costly arbitrations and constraining policy space.
Bangladesh has faced several notable disputes under its Production Sharing Contracts (PSCs) and BITs, all in the energy sector. In Chevron Corporation and Texaco Petroleum Company v People’s Republic of Bangladesh (ICSID Case No ARB/06/10), Chevron sought to recover roughly $240 million, claiming that Petrobangla had wrongfully deducted a 4% ‘tariff’ from its gas sales. In May 2010, an ICSID tribunal unanimously rejected Chevron’s claim on the merits. However, even though Bangladesh prevailed substantively, the arbitration was costly; the tribunal awarded Chevron a large share of its legal fees and ordered Bangladesh to bear most of its jurisdictional-phase costs. In other words, Bangladesh ‘won’ the case, but incurred substantial expenses due to procedural tactics. As the tribunal noted, the equal division of costs was attributed to Bangladesh’s ‘dilatory’ actions earlier in the proceedings.
Another landmark dispute is Saipem S.P.A v People’s Republic of Bangladesh (ICSID Case No ARB/05/07). Saipem had obtained an ICC arbitration award against Petrobangla under a gas pipeline contract, but Bangladesh’s courts annulled that award on procedural grounds. The claimant then went to ICSID under the Italy-Bangladesh BIT, alleging that Bangladesh’s judicial interference violated its treaty obligations. The ICSID tribunal agreed that Bangladesh had breached the BIT (notably under the FET standard) by flagrantly violating the New York Convention on arbitration. In short, Saipem established that domestic annulment of an arbitration award could itself violate international obligations to investors.
In Chevron’s 2010 case, although Bangladesh won the main issues, it still had to share the costs. Overall, Bangladesh’s track record in BIT arbitration is not one of crushing defeats, but it is far from free of pain. Every arbitration has consumed government resources, and in the case of Saipem, it has resulted in an adverse finding of treaty breach. The Chevron award also underscores that vague treaties or contract terms and procedural wrangling can lead even successful states to bear heavy litigation burdens.[1]
This history shows why the recent payment to Chevron matters. The Chevron and Saipem experiences illustrate the stakes: honouring agreements and clarifying treaty terms can prevent costly legal battles. As Bangladesh’s former lead counsel, Dr Kamal Hossain noted in 2010, if a state has ‘just cause’, it can obtain ‘justice’ in international arbitration – but only if its legal arguments are clear and well-founded. Similarly, a stand-alone Model BIT, drafted with precision and foresight, would leave less room for dispute and help ensure that this promising sign of compliance (clearing dues) translates into durable trust.
International responses: model BITs and policy space
The last decade has seen many countries rethink their BIT regimes in light of arbitration outcomes. For example, India’s first modern Model BIT (released in 2016) overhauled India’s treaty practice. Notably, the 2016 Model BIT removed a broad FET clause, replacing it with protection against only certain violations of ‘customary international law’. It omitted any MFN provision and explicitly excludes orders or judgments as protected assets (a reaction to White Industries Australia Ltd v Republic of India). Crucially, Article 15 of India’s Model BIT requires foreign investors to exhaust local remedies for at least five years before initiating international arbitration. This five-year rule underscores that international arbitration is a remedy of last resort. The Indian Model BIT also carves out policy measures. For instance, it excludes taxes and regulatory changes aimed at public health or the environment from investors’ claims. In short, India’s template limits investor protections and preserves space for legitimate domestic regulation, a direct response to early disputes in which tribunals had adopted broad FET and MFN interpretations.
Nigeria also developed a new Model BIT in 2016 as part of its reform process. However, it has not officially adopted a single, unified ‘Model BIT’. The government announced that the model would incorporate innovative features to protect national interests, while retaining an ISDS mechanism. Nigeria’s approach, like India’s, stresses that any new BIT should balance investor rights with states’ policy goals.
Perhaps the most striking example is South Africa. After a 2010 court ruling (Foresti v Republic of South Africa) challenged its Black Economic Empowerment laws, South Africa reviewed its BITs. By late 2015, it terminated all of its BITs with European countries and enacted the Protection of Investment Act 2015. The Act eliminates investor-state arbitration: disputes must be resolved in South African courts or via state-to-state procedures. The Act explicitly reaffirms the state’s public interest in ‘right to regulate’. In effect, South Africa decided that domestic courts and laws should govern foreign investment, except where its constitution requires greater protection.
These global trends (India, Nigeria, South Africa) are instructive for Bangladesh. Like India, Bangladesh is revising its BITs (with African partners, for example) or negotiating new ones. On 8 September 2025, India and Israel concluded a BIT negotiated in a manner consistent with India’s and Israel’s respective Model BITs, illustrating how a Model-BIT-informed template can help States conclude coherent agreements quickly while preserving regulatory space.
A published Model BIT would provide a clear template: Bangladesh could choose a balanced approach, for example, by limiting MFN provisions and FET standards, as India did, and explicitly reserving the right to regulate in areas such as health, the environment, and taxation. Such a model treaty – publicly available – would set investor expectations regarding permissible protections and policy space. If Bangladesh commits to using it as the basis for all new and updated BITs, it would signal predictability and seriousness about ‘rule-based’ investment partnerships.
Towards a model BIT and stronger institutions
Building on the Chevron episode, Bangladesh should take two priority steps. First, modernise its BIT framework. Many of Bangladesh’s BITs date from 1980–90 with traditional ISDS provisions. The government could replace ad hoc bargaining with a comprehensive Model BIT. The model could mirror successful features from others: for example, require investors to try local courts for (say) five years before arbitration; remove or limit MFN clauses to prevent ‘importing’ unexpected protections; and clarify that non-discriminatory regulatory measures for public welfare (taxes, health, environment, security) are outside ISDS scope. Bangladesh’s Model BIT should be written in clear, self-explanatory language to minimise ambiguities. By publicly committing to that model for future treaties and revising old ones accordingly, Bangladesh would reduce legal uncertainty for investors and itself.
Second, strengthen domestic investment facilitation and dispute-prevention. The One Stop Service Act (2018) and the Bangladesh Investment Development Authority (BIDA) are already the steps toward easing investment. These institutions should be empowered to handle legal questions and disputes proactively. For instance, BIDA could establish a dedicated legal cell to advise on treaty interpretation and investment disputes, and to coordinate with ministries on contractual issues. Practical dispute-avoidance measures, such as fast-track mechanisms for investors to lodge grievances with regulators, should be institutionalised. The idea is to give investors a clear process for resolving problems early, without resorting immediately to international arbitration. This creates the predictability and transparency that investors seek.
Conclusion
Clearing Chevron’s dues and greenlighting the Jalalabad project are welcome moves that demonstrate Bangladesh’s responsiveness to foreign partners. However, lasting investor confidence will come from structural legal guarantees, rather than one-off acts of goodwill. By adopting a forward-looking Model BIT and reinforcing its investment institutions, Bangladesh can turn this positive moment into enduring trust. In practical terms, that means negotiating all future treaties on its own terms – as India and others do – and ensuring that its laws and agencies resolve disputes predictably. With such reforms, Bangladesh will signal that it is serious about a stable, rule-based investment regime. That ‘certainty’, above all, will attract and reassure the capital-intensive investors the country needs.
[1] In contrast to these outcomes, Scimitar Exploration Ltd v People’s Republic of Bangladesh (ICSID Case No ARB/92/2) saw the tribunal dismiss the investor’s claims. Scimitar claimed expropriation and FET violations; no award was rendered.
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