Customary international law in respect of the treatment and taking of foreign investment before the era of the bilateral investment treaty customarily was contentious.

Capital-exporting States generally maintained that host States were bound under international law to treat foreign investment at least in accordance with the “minimum standard of international law”; and where the host State expropriated foreign property, it could lawfully do so only for a public purpose, without discrimination against foreign interests, and upon payment of prompt, adequate and effective compensation. Capital-importing States maintained that, in matters of the treatment and taking of foreign property, host States were not bound under international law at all; that the minimum standard did not exist; and that States were bound to accord the foreign investor only national treatment, only what their domestic law provided or was revised to provide. The foreign investor whose property was taken was entitled to no more than the taking State's law afforded.

The gulf between the positions of the capital-exporting States and those of the capital-importing States reached its extremity with the adoption by the United Nations General Assembly in 1974 of the Charter of Economic Rights and Duties of States.