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11 - Re-crafting Bilateral Investment Treaties in a Development Framework: A Comparative Regional Perspective

Published online by Cambridge University Press:  05 March 2012

Biplove Choudhary
Affiliation:
Asia Pacific Trade and Investment Initiative
Parashar Kulkarni
Affiliation:
Formerly Research Officer
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Summary

Overview

Definition

UNCTAD (2000) defines Bilateral Investment Treaties (BITs) as agreements between two countries for the reciprocal encouragement, promotion and protection of investments in each others territories by companies based in either country. BITs constitute to date the most important instrument for the international protection of foreign investment.

While the specific elements of the treaties and the manner of their application differs across countries, typically the coverage of BITs extends to scope and definition of investment, its admission and establishment, national treatment, most favoured nation treatment, fair and equitable treatment, compensation in the event of expropriation, war and civil unrest or other damage to the investment, guarantees of free transfers of funds and recuperation of capital gains, and dispute settlement mechanisms both statestate and investor-state.

Objectives

The proponents of BITs have sought to justify them in terms of the overall benefits in attracting Foreign Direct Investment (FDI). Cross border investments are seen as an important source of bridging the savings-investment gap and boosting economic growth in developing countries. They are thought to be important mechanisms for effecting technology transfer, employment generation and relaxing constraints on Balance of Payments. Profit remittances on account of foreign equity are related to the performance of investment projects unlike the inflexible repayment obligations of foreign debt. These supposed benefits from FDI have generated an intense competition amongst developing countries.

Type
Chapter
Information
Capital Without Borders
Challenges to Development
, pp. 209 - 238
Publisher: Anthem Press
Print publication year: 2010

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