Bilateral investment treaty

A bilateral investment treaty (BIT) is an agreement establishing the terms and conditions for private investment by nationals and companies of one state 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).^[1]

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, often under the auspices of the ICSID (International Center for the Settlement of Investment Disputes), rather than suing the host State in its own courts.^[2]

The world's first BIT was signed on November 25, 1959, 1959 between Pakistan and Germany.^[3] There are currently more that 2500 BITs in force, involving most countries in the world.^[4] Influential capital exporting states^{[citation needed]} usually negotiate BITs on the basis of their own "model" texts (such as the US model BIT).^[5]

BITs involving the U.S.

United States TIFAs      The United States      BIT in force      BIT not ratified or in negotiations

Up to date as of 2009^[6]

In force

1.  Albania: signed January 11, 1995, entered into force January 4, 1998
2.  Argentina: signed November 14, 1991, entered into force October 20, 1994
3.  Armenia: signed September 23, 1992, entered into force March 29, 1996
4.  Azerbaijan: signed August 1, 1997, entered into force August 2, 2001
5.  Bahrain: signed September 29, 1999, entered into force May 30, 2001
6.  Bangladesh: signed March 12, 1986, entered into force July 25, 1989
7.  Bolivia: signed April 17, 1998, entered into force June 6, 2001
8.  Bulgaria: signed September 23, 1992, entered into force June 2, 1994
9.  Cameroon: signed February 26, 1986, entered into force April 6, 1989
10.  Democratic Republic of the Congo (Kinshasa): signed August 3, 1984, entered into force July 28, 1989
11.  Republic of the Congo (Brazzaville): signed February 12, 1990, entered into force August 13, 1994
12.  Croatia: signed July 13, 1996, entered into force June 20, 2001
13.  Czech Republic: signed October 22, 1991, entered into force December 19, 1992
14.  Ecuador: signed August 27, 1993, entered into force May 11, 1997
15.  Egypt: signed March 11, 1986, entered into force June 27, 1992
16.  Estonia: signed April 19, 1994, entered into force February 16, 1997
17.  Georgia: signed March 7, 1994, entered into force August 17, 1997
18.  Grenada: signed May 2, 1986, entered into force March 3, 1989
19.  Honduras: signed July 1, 1995, entered into force July 11, 2001
20.  Jamaica: signed February 4, 1994, entered into force March 7, 1997
21.  Jordan: signed July 2, 1997, entered into force June 12, 2003
22.  Kazakhstan: signed May 19, 1992, entered into force January 12, 1994
23.  Kyrgyzstan: signed January 19, 1993, entered into force January 12, 1994
24.  Latvia: signed January 13, 1995, entered into force December 26, 1996
25.  Lithuania: signed January 14, 1998, entered into force November 22, 2001
26.  Moldova: signed April 21, 1993, entered into force November 25, 1994
27.  Mongolia: signed October 6, 1994, entered into force January 1, 1997
28.  Morocco: signed July 22, 1985, entered into force May 29, 1991
29.  Mozambique: signed December 1, 1998, entered into force March 3, 2005
30.  Panama: signed October 27, 1982, entered into force May 30, 1991. Amendment: signed June 1, 2000, entered into force May 14, 2001
31.  Poland: signed March 21, 1990, entered into force August 6, 1994
32.  Romania: signed May 28, 1992, entered into force January 15, 1994
33.  Senegal: signed December 6, 1983, entered into force October 25, 1990
34.  Slovakia: signed October 22, 1991, entered into force December 19, 1992
35.  Sri Lanka: signed September 20, 1991, entered into force May 1, 1993
36.  Trinidad and Tobago: signed September 26, 1994, entered into force December 26, 1996
37.  Tunisia: signed May 15, 1990, entered into force February 7, 1993
38.  Turkey: signed December 3, 1985, entered into force May 18, 1990
39.  Ukraine: signed March 4, 1994, entered into force November 16, 1996
40.  Uruguay: signed November 4, 2005, entered into force November 1, 2006

Not yet ratified

1.  Belarus: signed January 15, 1994, not yet ratified
2.  El Salvador: signed March 10, 1999, not yet ratified
3.  Haiti: signed December 13, 1983, not yet ratified by Haiti or the U.S.
4.  Nicaragua: signed July 1, 1995, not yet ratified by the U.S.
5.  Russia: signed June 17, 1992, not yet ratified by Russia
6.  Uzbekistan: signed December 16, 1994, not yet ratified
7.  Pakistan: negotiations announced September 28, 2004, began February 7, 2005

Note: Many countries that do not have BITs with the U.S. are instead covered by free trade agreements.

U.S.-Panama BIT as an example

The Bilateral Investment Treaty (BIT) between the governments of the United States and Panama was signed on October 27, 1982.^[7] It was the second BIT ever to be signed by the U.S., with the Egypt treaty resolved only a month prior. The 1982 Treaty protects U.S. investment and assists Panama in its efforts to develop its economy by creating conditions more favorable for U.S. private investment and thereby strengthening the development of its private sector.

Here are some of the Treaty’s key areas:

TREATMENT OF INVESTMENTS.

The nations are to maintain favorable investment conditions for each other. Each country shall treat the other’s investments as if they were made by their own nationals or companies. Each country is allowed to have exceptions to this treaty which are listed in the Annex section. These exceptions may arise from laws or regulations which are enforced in either of the countries, and they must be disclosed before the BIT is signed. The investment of nationals and companies will receive fair and equitable treatment under protection and security of that country. The protection and treatment of the investments will fall under national and international law. Neither country will impose conditions of performance requirements which specify that goods or services must be purchased only in that country.

COMPENSATION FOR EXPROPRIATION.

It is said that no investment should be expropriated or nationalized by the government unless this is done for a public purpose, is not discriminatory, done under due process of law, and offers proper compensation, equivalent to the fair market value of that investment. In the event that a national or a company of one of the countries suffers a loss in its investment in the territory of the other country because of war or other type of armed conflict, it shall not be treated less favorably, with regard to restitution or other payments for such loss, than nationals or companies of such other country.

TRANSFERS.

This guarantees the rights of an investor to conduct all transfers related to the investment, in and out of the country without delay. Such rights include: returns, compensations, contract payments, management expenses, dispute payments, license royalties, proceeds from liquidation and sale, etc.

INVESTMENT DISPUTE SETTLEMENT.

This part of the treaty provides ways of settling investment disputes between a foreign investor and a government. The treaty suggests initial efforts to be through negotiation and consultation but if this fails then the dispute would be settled through procedures upon which the foreign investor and the government agreed.

Notes

1. ^ See W. Michael Reisman et al.,"International Law in Comparative Perspective" (2004), p. 460.
2. ^ See Jarrod Wong, "Umbrella Clauses In Bilateral Investment Treaties: Of Breaches of Contract, Treaty Violations, and the Divide Between Developing and Developed Countries In Foreign Investment Disputes", George Mason Law Review (14 Geo. Mason L. Rev. 135) (2007).
3. ^ "International Investment", by Americo Beviglia Zampetti and Pierre Sauve, in Research Handbook in International Economic Law (E. Elgar, 2007), p215; http://www.bilaterals.org/article-print.php3?id_article=717
4. ^ See Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law, Oxford, 2008, p. 2. Also see UNCTAD, World Investment Report (2006) XVII, 26.
5. ^ http://www.ustr.gov/trade-agreements/bilateral-investment-treaties (discusses model BITs). See also INTERNATIONAL INVESTMENT INSTRUMENTS: A COMPENDIUM VOLUME XIV, 01/03/05 (UNCTAD/DITE/4(Vol.XIV)), Part II, for the Canadian model BIT.
6. ^ http://tcc.export.gov/Trade_Agreements/Bilateral_Investment_Treaties/index.asp Trade Compliance Center
7. ^ "Treaty Between the U.S. and Panama Concerning Protection and Treatment of Investments of 1982"; See also "Protocol Amending Investment Treaty with Panama of 2000".

See also

• Agreement on Trade Related Investment Measures (WTO agreement)
• Trade and Investment Framework Agreement (TIFA)

External links

• The Trade Compliance Center in the U.S. Department of Commerce's International Trade Administration. Includes links to U.S. BIT texts.
• Canadian Treaty Information
• United Nations Conference on Trade and Development (UNCTAD) lists all BITs between all states (not just the U.S.), with links to treaty texts.