Bilateral investment treaty

Bilateral investment treaties (or, BITs) are [[wex:international conventions|international agreements]] establishing the terms and conditions for private [[wex:foreign direct investment|investment]] by nationals and companies of one state in another state. 

The first generation of these treaties were Friendship, Commerce and Navigation Treaties (FCNs), which required the host state to treat foreign investments on the same level as investments from any other state, including in some instances treatment that was as favorable as the host nation treated its own investments. FCNs also established the terms of trade and shipping between the parties, and the rights of foreigners to conduct business and own property in the host state. 

The second generation of these treaties are Bilateral Investment Treaties (BITs), which set forth actionable standards of conduct that applied to governments in their treatment of investors from other states, including: 

  • fair and equitable treatment (often meaning [[wex:National treatment|national treatment]] or [[wex:Most favored nation|most favored nation]] 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 [[wex:International arbitration]], often under the auspices of the [[wex:ICSID]] (International Center for the Settlement of Investment Disputes), rather than suing the host State in its own courts. 

It is estimated that there are more than 2,500 BITs active in the world today.  See UNCTAD, WORLD INVESTMENT REPORT 2007 (2007) xvii, available here.

See, e.g.:

  • United Nations Conference on Trade and Development (UNCTAD) maintains a database of all BITs between all states, with links to treaty texts.
  • [[wex:International trade law]]
  • [[wex:International economic law]]