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 the state of the other. This type of investment is called Foreign direct investment (FDI). BITs are established through trade pacts.

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 Resolution of Investment Disputes), rather than suing the host State in its own courts. [ See Jarrod Wong, [http://www.law.gmu.edu/gmulawreview/issues/14-1/documents/WONG-FinalFormatted.pdf "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).]

There are currently more that 2500 BITs in force, involving most countries in the world. [ See Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law, Oxford, 2008, p. 2. Also see UNCTAD, World Investment Report (2006) XVII, 26.] Influential capital exporting states usually negotiate BITs on the basis of their own "model" texts (such as the US model BIT).

BITs involving the U.S.

Up to date as of November 1 2006

In force
#ALB: signed January 11 1995, entered into force January 4 1998
#ARG: signed November 14 1991, entered into force October 20, 1994
#ARM: signed September 23 1992, entered into force March 29 1996
#AZE: signed August 1 1997, entered into force August 2 2001
#BHR: signed September 29 1999, entered into force May 30 2001
#BAN: signed March 12 1986, entered into force July 25 1989
#BOL: signed April 17 1998, entered into force June 6 2001
#BUL: signed September 23 1992, entered into force June 2 1994
#CMR: signed February 26 1986, entered into force April 6 1989
#COD (Kinshasa): signed August 3 1984, entered into force July 28 1989
#CGO (Brazzaville): signed February 12 1990, entered into force August 13 1994
#CRO: signed July 13 1996, entered into force June 20 2001
#CZE: signed October 22 1991, entered into force December 19 1992
#ECU: signed August 27 1993, entered into force May 11 1997
#EGY: signed March 11 1986, entered into force June 27 1992
#EST: signed April 19 1994, entered into force February 16 1997
#GEO: signed March 7 1994, entered into force August 17 1997
#GRD: signed May 2 1986, entered into force March 3 1989
#HON: signed July 1 1995, entered into force July 11 2001
#JAM: signed February 4 1994, entered into force March 7 1997
#JOR: signed July 2 1997, entered into force June 12 2003
#KAZ: signed May 19 1992, entered into force January 12 1994
#KGZ: signed January 19 1993, entered into force January 12 1994
#LAT: signed January 13 1995, entered into force December 26 1996
#LTU: signed January 14 1998, entered into force November 22 2001
#MDA: signed April 21 1993, entered into force November 25 1994
#MGL: signed October 6 1994, entered into force January 1 1997
#MAR: signed July 22 1985, entered into force May 29 1991
#MOZ: signed December 1 1998, entered into force March 3 2005
#PAN: signed October 27 1982, entered into force May 30 1991. Amendment: signed June 1 2000, entered into force May 14 2001
#POL: signed March 21 1990, entered into force August 6 1994
#ROM: signed May 28 1992, entered into force January 15 1994
#SEN: signed December 6 1983, entered into force October 25 1990
#SVK: signed October 22 1991, entered into force December 19 1992
#SRI: signed September 20 1991, entered into force May 1 1993
#TRI: signed September 26 1994, entered into force December 26 1996
#TUN: signed May 15 1990, entered into force February 7 1993
#TUR: signed December 3 1985, entered into force May 18 1990
#UKR: signed March 4 1994, entered into force November 16 1996
#URY: signed November 4 2005, entered into force November 1, 2006

Not yet ratified
#BLR: signed January 15 1994, not yet ratified
#ESA: signed March 10 1999, not yet ratified
#HAI: signed December 13 1983, not yet ratified by Haiti or the U.S.
#NIC: signed July 1 1995, not yet ratified by the U.S.
#RUS: signed June 17 1992, not yet ratified by Russia
#UZB: signed December 16 1994, not yet ratified
#PAK: 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. [ [http://www.unctad.org/sections/dite/iia/docs/bits/us_panama_1982.pdf "Treaty Between the U.S. and Panama Concerning Protection and Treatment of Investments of 1982"] ; See also [http://www.unctad.org/sections/dite/iia/docs/bits/us_panama_2000.pdf "Protocol Amending Investment Treaty with Panama of 2000"] .] 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 ivestor 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

External links

* [http://tcc.export.gov/Trade_Agreements/Bilateral_Investment_Treaties/index.asp The Trade Compliance Center] in the U.S. Department of Commerce's International Trade Administration. Includes links to U.S. BIT texts.
* [http://www.treaty-accord.gc.ca/ Canadian Treaty Information]
* [http://www.unctadxi.org/templates/DocSearch____779.aspx United Nations Conference on Trade and Development (UNCTAD)] lists all BITs between all states (not just the U.S.), with links to treaty texts.
*


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