ISLAMABAD, Sep 7, 2026: Pakistan has begun a fresh examination of its bilateral investment treaty framework, putting the strategy adopted in 2021 to a test over whether it has achieved the intended balance between protecting the state from costly investment disputes and maintaining confidence among foreign investors.
The Federal Cabinet has constituted a Committee on Bilateral Investment Treaties to review Pakistan's existing BIT framework and prepare a draft BIT policy. The committee is headed by the Minister for Commerce and includes senior officials from Economic Affairs, Foreign Affairs, Commerce, Law and Justice, the Special Investment Facilitation Council, the Attorney General's Office and the Board of Investment. The committee's constitution and mandate were disclosed following the Cabinet decision.
Testing the 2021 strategy
The committee's mandate goes beyond drafting another treaty template. It will examine the experience of Pakistan's BIT terminations, determine whether the Pakistan BIT Strategy 2021 and Model BIT framework remain relevant, review the circumstances surrounding the Pakistan-Sweden termination notice and formulate guidelines for future termination decisions. It is also to prepare a draft BIT policy covering investment protection, Most Favoured Nation treatment, Fair and Equitable Treatment standards and dispute-resolution mechanisms.
The review comes against the background of a policy shift that began several years ago. The Board of Investment says Pakistan has been revisiting its Model BIT, while its official list of bilateral investment agreements identifies Sweden among Pakistan's treaty partners.
In 2021, the government announced that the Cabinet had approved a new Model Bilateral Investment Treaty template, intended to provide a more contemporary framework for Pakistan's future investment agreements.
The current review therefore raises a broader question: whether the restructuring begun in 2021 has produced the treaty framework Pakistan now needs, or whether further changes are required.
Sweden exposes the dilemma
The most immediate test came with the Pakistan-Sweden BIT. Pakistan, through its Mission in Stockholm, issued a notice of termination of the 1981 treaty pursuant to the approved Pakistan BIT Strategy 2021.
The agreement between Pakistan and Sweden was signed on March 12, 1981, and entered into force on June 14, 1981. Under Article 11, the termination notice required one year to take effect, making September 28, 2026 the effective termination date. The treaty text is available in the United Nations Treaty Series, while the details of Pakistan's termination decision were presented to the Cabinet by the Board of Investment.
The federal government has formed a committee to investigate the termination notice issued for Pakistan’s Bilateral Investment Treaty (BIT) with Sweden. The move follows concerns that the decision could hurt foreign investment in Pakistan.
— Bloom Pakistan (@bloom_pakistan) August 29, 2026
The Board of Investment (BOI) raised… pic.twitter.com/rt02vp2zX0
Pakistan subsequently decided to revoke the termination notice before it took effect and begin negotiations to modernise the existing agreement. The decision followed a review of the possible implications for investor confidence, bilateral economic relations and Pakistan's wider interests in Europe.
The Sweden episode illustrates the competing considerations facing the new BIT review. On one side is the objective of reducing exposure to treaty provisions that Pakistan considers excessively broad. On the other is the need to maintain predictable investment relations with countries whose companies operate in Pakistan or may consider investing there.
The Cabinet's decision to withdraw the termination notice does not by itself amount to abandonment of the 2021 strategy. Rather, it raises the question of whether selective termination is sufficient, or whether Pakistan needs a more systematic approach combining treaty reform, renegotiation and stronger institutional assessment before any future termination.
Why the treaty framework matters
The concerns over Pakistan's older BITs are rooted in the legal exposure associated with investment treaties. The Board of Investment has identified broad protections in earlier-generation agreements as a policy concern, including provisions relating to MFN treatment, FET and investor-state dispute settlement. The current Cabinet committee has consequently been instructed to consider these provisions when preparing the new policy.
The international record provides context. UNCTAD's Pakistan investment-policy profile records 53 bilateral investment treaties across different statuses and 13 known treaty-based investor-state dispute settlement cases involving Pakistan.
Those figures do not establish that BITs themselves caused Pakistan's investment disputes, nor do they demonstrate that terminating treaties necessarily improves the investment climate. They do, however, show why the legal design of Pakistan's investment agreements has become an important policy issue.
One of the most consequential cases was the Tethyan Copper Company arbitration, in which an ICSID tribunal found Pakistan liable for breaches of investment-protection obligations and awarded damages and costs running into billions of dollars. The case is relevant to the discussion of arbitration exposure, although the existence of the arbitration should not be presented as evidence that the BIT alone caused the underlying dispute.
Pakistan is still pursuing investment agreements
The government's current actions also show that Pakistan has not moved away from investment treaties altogether. Pakistan and Canada have continued negotiations on a Foreign Investment Protection and Promotion Agreement/BIT.
An official government statement said the talks were aimed at establishing a high-quality investment regime, with investor protection, transparent dispute-prevention mechanisms and regulatory coherence identified as part of Pakistan's broader economic-reform agenda.
Pakistan is also seeking to modernise its investment treaty with Australia. The government described the negotiations as an effort to develop a modern, balanced and forward-looking framework that would promote investment while protecting legitimate interests.
The evidence therefore points to reform rather than simple withdrawal. Pakistan continues to see a role for investment treaties, but is seeking to determine what protections they should provide and how they should interact with domestic investment policy.
Treaty reform cannot solve the wider investment problem
That distinction is important because Pakistan's investment challenge extends well beyond the wording of its BITs. The Pakistan Institute of Development Economics' assessment of the country's FDI environment identifies broader constraints affecting Pakistan's attractiveness to investors, including policy uncertainty, low investment, weak productivity and institutional and regulatory problems.
The IMF's 2026 Pakistan country report similarly points to the need for deeper structural reforms to improve governance and the business environment.
This means that even a substantially improved BIT framework would address only one part of Pakistan's investment problem. Investors also assess regulatory predictability, taxation, energy costs, infrastructure, access to finance, market conditions, institutional capacity and the broader consistency of government policy.
The committee's review will determine whether Pakistan retains the core principles of the 2021 strategy, modifies them or develops a new approach to its treaty network. Its significance will ultimately depend not on the number of BITs terminated, but on whether future agreements can provide credible protection for investors while preserving sufficient policy space for the state.
