There was a massive proliferation of bilateral investment treaties in the 1990s. A World Bank study stated that in 1994 there were over 700 such treaties. By the end of the millennium, the figure had moved towards 2,600 treaties. It has now exceeded that mark, reaching around 3,000. Investment chapters are also included in free trade agreements. There are now mega-treaties like the Trans Pacific Partnership (TPP) and the projected Transatlantic Trade and Investment Partnership (TTIP) between the European Union and the US, which contain chapters on investment. Obviously, states which participate in the making of these treaties consider them to be necessary for a variety of reasons, the most important being the belief that they promote the flow of foreign investment. The question whether they do in fact promote foreign investment flows has been subjected to considerable doubt in recent literature Yet, the treaties continue to be made, though there is a decline in their numbers in recent times. The forms they take also have begun to vary significantly so that the debate about whether they can contribute to customary international law has become moribund.
In that context, the avowal that there was a ‘BITs revolution’ and that this revolution had contributed to the creation of customary international law has even less merit now than before. Other reasons are advanced for their making. One is their signalling function. The making of such treaties is an indication that a state previously committed to certain ideological stances inimical to foreign investment has changed its policy and is now prepared to accept standards of protection of investment and international arbitration to settle investment disputes. The activity of China and Vietnam, communist states wedded to a concept of public ownership of property, is illustrative of this signalling function. The former East European states, liberated from communist ideology, also signed many such treaties. But, such treaty activity is also explicable on the basis of the need of these countries to enhance their competitive positions. The assumption is that developing countries, competing with each other to attract investment, make investment treaties in order to ensure that they recognise the same standards of protection as other developing states similarly placed. This may provide explanations as to why there are newcomers, like India, on the scene.