International investment has grown steadily over time. FDI flows are greater than ever and affect almost all countries and all sectors of the economy. Despite the existence of tensions and new approaches to this, the recent history of FDI is one of success. Significantly, this success has taken place irrespective of the existence of some structural limitations, for example the lack of an overwhelming international legal framework on FDI or the absence of a single and commonly accepted notion of FDI.

The understanding of the current situation of FDI requires these structural factors to be analysed in the context of the changes in many countries in relation to international trade and free flows of FDI. The need to balance the liberalisation of flows of capital and investment and the exchange of goods and services with the recognition of the power of the state to implement legitimate policies presupposes a significant shift in the approach to FDI. The traditional basic reference to protection of FDI once the investment has been implemented, which is very closely linked to the existence of a previous IIA that fixes the legal framework for this protection, is changing rapidly and in different directions and ways. Thus, changes in the wording of these IIAs by way of the inclusion of non-precluded measures clauses coexist with a trend in some countries towards focusing on the pre-investment phase in which the state is sovereign and there are usually no specific FDI treaty obligations. One of the consequences of this move is that the foundations on which FDI has stood so far over the last few decades have been altered, or at least refocused.

The ‘Monterrey consensus’, reached at the International Conference on Financing for Development at Monterrey in 2003, refers to FDI as ‘vital complements to national and international development efforts’. FDI is said to contribute ‘toward financing sustained economic growth over the long term. It is especially important for its potential to transfer knowledge and technology, create jobs, boost overall productivity, enhance competitiveness and entrepreneurship, and ultimately eradicate poverty through economic growth and development.’

In order to achieve these goals, a ‘transparent, stable and predictable investment climate’, both domestic and international, must be ensured.