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 o ...

establishing the terms and conditions for private

investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing i ...

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 S ...

in another state. This type of investment is called

foreign direct investment A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct co ...

(FDI). BITs are established through

trade pact A trade agreement (also known as trade pact) is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees. It exists when two or more countries agree on terms that help them trade with each other. The most common tr ...

s. 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, 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 The International Centre for Settlement of Investment Disputes (ICSID) is an international arbitration institution established in 1966 for legal dispute resolution and conciliation between international investors and States. ICSID is part of ...

(ICSID), rather than suing the host State in its own courts. This process is called

investor-state dispute settlement Investor-state dispute settlement (ISDS) or investment court system (ICS) is a system through which countries can be sued by foreign investors for certain state actions affecting foreign direct investment (FDI). This system most often takes the ...

(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, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...

. There are currently more than 2500 BITs in force, involving most

countries A country is a distinct part of the world, such as a state (polity), state, nation, or other polity, political entity. It may be a sovereign state or make up one part of a larger state. For example, the country of Japan is an independent, so ...

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,

NGO A non-governmental organization (NGO) or non-governmental organisation (see spelling differences) is an organization that generally is formed independent from government. They are typically nonprofit entities, and many of them are active in h ...

s 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 Labor rights or workers' rights are both legal rights and human rights relating to labor relations between workers and employers. These rights are codified in national and international labor and employment law. In general, these rights influen ...

, 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. O ...

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

* Franz J. Sedelmayer

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

Criticism

Notable people

See also

Notes

External links