Landmark UK-India FTA Bans Forced AI Source Code Transfer
Landmark UK-India deal safeguards AI and software source code, boosting innovation and reshaping digital trade policy.
July 25, 2025

In a landmark move for the global technology landscape, the recently signed UK-India Free Trade Agreement (FTA) has introduced pioneering provisions to prohibit the mandatory transfer of software source code and algorithms. This development, a first for any Indian trade agreement, marks a significant policy shift and is poised to have profound implications for the burgeoning artificial intelligence (AI) and software sectors in both nations.[1][2] The agreement is designed to bolster intellectual property (IP) protection for technology exporters, particularly Indian IT firms and startups that are increasingly building their growth models around proprietary code and AI.[3][1] This move not only provides a major boost for these companies but also aims to strengthen the trust of UK buyers in the security and reliability of Indian technology services.[3][2] The deal, which covers 26 sectors from tariffs to technology, is India's most ambitious trade agreement to date and is expected to significantly enhance bilateral trade, which reached $20.5 billion in 2024.[4][5]
The core of this new provision within the FTA's digital trade chapter is the commitment to prevent the forced disclosure of source code as a condition for market access.[1][6] Historically, some countries have used such requirements as a means of forced technology transfer, a practice that businesses argue is extortionate and compromises commercially valuable trade secrets.[7] Tech companies, both large and small, invest significant resources in developing the source code that underpins their software and AI products, making its protection paramount.[8][9] The fear has been that disclosing this proprietary information could make it easier for competitors to copy valuable intellectual property, thereby eroding a company's competitive advantage.[8] By prohibiting this practice, the UK-India FTA aligns India's trade policies more closely with those of other developed economies and provides UK businesses with greater confidence to expand their operations in the Indian market.[2][10] This is a notable departure from India's previous stance in trade negotiations, where it had avoided such clauses to maintain regulatory flexibility.[1]
For India's rapidly growing technology sector, the implications of this source code protection are substantial. As Indian IT and IT-enabled services (ITeS) companies shift from service-based models to IP-led growth, particularly in the development of AI models, enterprise software, and Software as a Service (SaaS) platforms, the safeguarding of their core intellectual property becomes critical.[1] The agreement provides a significant boost for these exporters by assuring them that their foundational technology is secure when operating in the UK market. This assurance is expected to encourage further innovation and investment in research and development within India. The deal is also seen as a strategic enabler for companies with a strong presence in both countries, helping to streamline trade flows and reduce operational friction. Industry leaders have welcomed the agreement, highlighting its potential to improve market access and boost bilateral trade by an estimated $34 billion annually.[11] The move is anticipated to particularly benefit the manufacturing sector and small and medium-sized enterprises (SMEs).[11]
While the protection of source code is a significant win for the technology industry, the debate around such provisions is complex. Proponents argue that it is essential for fostering innovation and encouraging international trade by reassuring developers that their IP will be protected.[12][13] However, critics raise concerns about the potential impact on regulatory oversight and consumer protection. Access to source code can be crucial for regulators to verify that software, especially complex AI systems, functions as intended and to mitigate potential risks such as bias or security vulnerabilities.[8][12] Prohibiting access can enhance the "black box" nature of AI, limiting the ability of states to conduct ex-ante evaluations.[8] The UK-India FTA does include limited exceptions, allowing for source code disclosure to a regulatory or judicial body for a specific investigation or proceeding, but this is subject to protections against unauthorized disclosure.[8][14] This approach seeks to strike a balance between protecting commercial interests and ensuring public safety and accountability.
In conclusion, the inclusion of source code protection in the UK-India Free Trade Agreement represents a pivotal moment in digital trade policy. It provides a significant security blanket for Indian and UK technology companies, fostering an environment of trust and encouraging deeper collaboration and investment in the AI and software industries.[3][1][10] This forward-looking provision not only addresses a key concern of the technology sector but also sets a potential precedent for India's future trade negotiations with other developed nations.[1] The agreement also outlines a framework for cooperation on emerging technologies like AI, quantum computing, and blockchain, emphasizing ethical use and algorithmic transparency.[1] While navigating the complexities of regulatory access versus intellectual property protection will remain an ongoing challenge, this agreement marks a decisive step toward creating a more secure and predictable environment for the future of digital trade between the UK and India.