A bilateral investment treaty (BIT)
is an agreement establishing the terms and conditions for private investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
by nationals and companies of one state
A sovereign state, or simply, state, is a state with a defined territory on which it exercises internal and external sovereignty, a permanent population, a government, and the capacity to enter into relations with other sovereign states. It is also normally understood to be a state which is neither...
in another state. This type of investment is called foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
(FDI). BITs are established through trade pact
A trade pact is a wide ranging tax, tariff and trade pact that often includes investment guarantees. The most common trade pacts are of the preferential and free trade types are concluded in order to reduce tariffs, quotas and other trade restrictions on items traded between the signatories.-By...
s. A nineteenth-century forerunner of the BIT is the friendship, commerce, and navigation treaty (FCN).
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
Arbitration, a form of alternative dispute resolution , is a legal technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to one or more persons , by whose decision they agree to be bound...
, often under the auspices of the ICSID
ICSID may refer to:* International Centre for Settlement of Investment Disputes* International Council of Societies of Industrial Design...
(International Center for the Settlement of Investment Disputes), rather than suing the host State in its own courts.
The world's first BIT was signed on November 25, 1959 between Pakistan
Pakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan...
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
. There are currently more than 2500 BITs in force, involving most countries in the world. Influential capital exporting states usually negotiate BITs on the basis of their own "model" texts (such as the US model BIT).
Political movements and NGOs have spoken against the use of BITs, stating that they are mostly designed to protect the foreign investors and do not take into account obligations and standards to protect the environment, labour rights, social provisions or natural resources. Moreover when such clauses are agreed upon the formulation is legally very imprecise, enabling investors to take great liberties and making it difficult for host states to predict the limits of their rights and obligations.
BITs involving the U.S.
Not yet ratified
- : signed January 11, 1995, entered into force January 4, 1998
- : signed November 14, 1991, entered into force October 20, 1994
- : signed September 23, 1992, entered into force March 29, 1996
- : signed August 1, 1997, entered into force August 2, 2001
- : signed September 29, 1999, entered into force May 30, 2001
- : signed March 12, 1986, entered into force July 25, 1989
- : signed April 17, 1998, entered into force June 6, 2001
- : signed September 23, 1992, entered into force June 2, 1994
- : signed February 26, 1986, entered into force April 6, 1989
- (Kinshasa): signed August 3, 1984, entered into force July 28, 1989
- (Brazzaville): signed February 12, 1990, entered into force August 13, 1994
- : signed July 13, 1996, entered into force June 20, 2001
- : signed October 22, 1991, entered into force December 19, 1992
- : signed August 27, 1993, entered into force May 11, 1997
- : signed March 11, 1986, entered into force June 27, 1992
- : signed April 19, 1994, entered into force February 16, 1997
- : signed March 7, 1994, entered into force August 17, 1997
- : signed May 2, 1986, entered into force March 3, 1989
- : signed July 1, 1995, entered into force July 11, 2001
- : signed February 4, 1994, entered into force March 7, 1997
- : signed July 2, 1997, entered into force June 12, 2003
- : signed May 19, 1992, entered into force January 12, 1994
- : signed January 19, 1993, entered into force January 12, 1994
- : signed January 13, 1995, entered into force December 26, 1996
- : signed January 14, 1998, entered into force November 22, 2001
- : signed April 21, 1993, entered into force November 25, 1994
- : signed October 6, 1994, entered into force January 1, 1997
- : signed July 22, 1985, entered into force May 29, 1991
- : signed December 1, 1998, entered into force March 3, 2005
- : signed October 27, 1982, entered into force May 30, 1991. Amendment: signed June 1, 2000, entered into force May 14, 2001
- : signed March 21, 1990, entered into force August 6, 1994
- : signed May 28, 1992, entered into force January 15, 1994
- : signed December 6, 1983, entered into force October 25, 1990
- : signed October 22, 1991, entered into force December 19, 1992
- : signed September 20, 1991, entered into force May 1, 1993
- : signed September 26, 1994, entered into force December 26, 1996
- : signed May 15, 1990, entered into force February 7, 1993
- : signed December 3, 1985, entered into force May 18, 1990
- : signed March 4, 1994, entered into force November 16, 1996
- : signed November 4, 2005, entered into force November 1, 2006
Ratification is a principal's approval of an act of its agent where the agent lacked authority to legally bind the principal. The term applies to private contract law, international treaties, and constitutionals in federations such as the United States and Canada.- Private law :In contract law, the...
- : signed January 15, 1994, not yet ratified
- : signed March 10, 1999, not yet ratified
- : signed December 13, 1983, not yet ratified by Haiti or the U.S.
- : signed July 1, 1995, not yet ratified by the U.S.
- : signed June 17, 1992, not yet ratified by Russia
- : signed December 16, 1994, not yet ratified
- : 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
The United States is party to many free trade agreements worldwide.Beginning with the Theodore Roosevelt administration, the United States became a major player in international trade, especially with its neighboring territories in the Caribbean and Latin America...
- Agreement on Trade Related Investment Measures (WTO agreement)
- Trade and Investment Framework Agreement
A Trade and Investment Framework Agreement is a trade pact which establishes a framework for expanding trade and resolving outstanding disputes between countries....