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A bilateral investment treaty (BIT) is an
agreement Agreement may refer to: Agreements between people and organizations * Gentlemen's agreement, not enforceable by law * Trade agreement, between countries * Consensus, a decision-making process * Contract, enforceable in a court of law ** Meeting of ...
establishing the terms and conditions for private investment by nationals and companies of one
state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Department of State * ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, United States * '' Our ...
in another state. This type of investment is called foreign direct investment (FDI). BITs are established through trade pacts. A nineteenth-century forerunner of the BIT is the "friendship, commerce and navigation treaty" (FCN). This kind of treaty came in to prominence after World Wars when the developed countries wanted to guard their investments in developing countries against expropriation. Most BITs grant investments—made by an investor of one Contracting State in the territory of the other—a number of guarantees, which typically include
fair and equitable treatment An international investment agreement (IIA) is a type of treaty between countries that addresses issues relevant to cross-border investments, usually for the purpose of protection, promotion and liberalization of such investments. Most IIAs cover f ...
, protection from expropriation, free transfer of means and full protection and security. The distinctive feature of many BITs is that they allow for an alternative dispute resolution mechanism, whereby an investor whose rights under the BIT have been violated could have recourse to international
arbitration Arbitration is a form of alternative dispute resolution (ADR) that resolves disputes outside the judiciary courts. The dispute will be decided by one or more persons (the 'arbitrators', 'arbiters' or ' arbitral tribunal'), which renders the ...
, often under the auspices of the International Centre for Settlement of Investment Disputes (ICSID), rather than suing the host State in its own courts. This process is called investor-state dispute settlement (ISDS). The world's first BIT was signed on November 25, 1959 between
Pakistan Pakistan ( ur, ), officially the Islamic Republic of Pakistan ( ur, , label=none), is a country in South Asia. It is the world's List of countries and dependencies by population, fifth-most populous country, with a population of almost 24 ...
and
Germany Germany, officially the Federal Republic of Germany (FRG),, is a country in Central Europe. It is the most populous member state of the European Union. Germany lies between the Baltic and North Sea to the north and the Alps to the sou ...
. There are currently more than 2500 BITs in force, involving most countries in the world. and in recent years, the number of bilateral investment treaties and preferential trade agreements, in particular, has grown at a torrid pace; practically every country is a member of at least one. Influential capital exporting states usually negotiate BITs on the basis of their own "model" texts (such as the Indian or U.S. model BIT). Environmental provisions have also become increasingly common in international investment agreements, like BITs. As part of the effort to reform substantive standards of investment protection, states have sought to introduce the right to regulate into their new BITs.


Criticism

BITs give rights to investors, but give obligations only to States. Whilst preliminary objections by states are becoming more common in cases instituted under BITs, NGOs have spoken against the use of BITs - stating that they are essentially designed to protect foreign investors and do not take into account obligations and standards to protect the environment, labour rights, social provisions or
natural resource Natural resources are resources that are drawn from nature and used with few modifications. This includes the sources of valued characteristics such as commercial and industrial use, aesthetic value, scientific interest and cultural value. ...
s. Moreover, when such clauses are agreed upon, the formulation is legally very open-ended and often unpredictable. A counter-claim may be a way of rebalancing investment law, by allowing States to file claims against investors, as a means to sanction investor misconduct.{{Cite news , author=Arnaud de Nanteuil , title=Counterclaims in Investment Arbitration: Old Questions, New Answers? , url=https://brill.com/view/journals/lape/17/2/article-p374_6.xml , work=The Law & Practice of International Courts and Tribunals , date=17 August 2018 , access-date=23 November 2020


Notable people

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Franz J. Sedelmayer Franz J. Sedelmayer is a German security consultant and CEO of the US-based Multinational Asset Recovery Company (M.A.R.C). His attempts, through legal proceedings in various jurisdictions, to win compensation for assets expropriated by the Russian ...


See also

*
Agreement on Trade Related Investment Measures The Agreement on Trade-Related Investment Measures (TRIMs) are rules that are applicable to the domestic regulations a country applies to foreign investors, often as part of an industrial policy. The agreement, concluded in 1994, was negotiated u ...
(WTO agreement) * International Centre for Settlement of Investment Disputes * Investor-state dispute settlement * Trade and Investment Framework Agreement (TIFA)


Notes


External links


United Nations Conference on Trade and Development (UNCTAD) list
of all current BITs between states, with links to treaty texts.
Canadian Treaty Information

Discover the dark side of investment
Resources critiquing investment agreements for prioritising corporate profits above human rights and protection of the environment International trade law Foreign direct investment Commercial treaties