Foreign Investment In AI Data Centres In India: Balancing Investor Protection, Digital Sovereignty And Environmental Regulatory Autonomy
Pragya Sharma & Prachi Tripathi
ABSTRACT
The expansion of artificial intelligence is creating a new class of digital infrastructure in India: high-density data centres designed to provide largescale computing, storage, networking and cooling capacity. These facilities attract foreign capital and can support digital services, employment, cloud computing and national AI ambitions, but they also raise difficult questions concerning investor protection, control over data and environmental resource allocation. This paper examines the interaction between India's foreign investment regime, digital-data governance and environmental regulation through the lens of international investment law. It argues that the central challenge is not whether India should protect investors or regulate data centres, but how it can preserve regulatory space while maintaining predictability and non-discrimination. The paper evaluates fair and equitable treatment, legitimate expectations, expropriation and national treatment alongside India's data-governance and environmental powers. It also compares regulatory approaches in the European Union, China, Singapore, the UAE and Brazil. The paper proposes a coordinated framework based on transparent approval criteria, technology-neutral sustainability standards, risk-based data governance, regulatory-impact assessment and carefully drafted investment treaties. Such an approach can attract long-term investment without converting legitimate digital and environmental regulation into an avoidable source of investment disputes.
Keywords: Artificial Intelligence; AI Data Centres; Foreign Investment; Digital Sovereignty; Environmental Regulatory Autonomy; International Investment Law.
