Bilateral investment treaties are agreements between two countries that establish rules for cross-border investment by private companies. They aim to make it more attractive for companies to invest in another country and typically include measures to guarantee fair treatment and protect against asset seizure. They also allow companies to take complaints to an independent international body. The US has 40 active bilateral investment treaties and uses a standard model treaty for negotiations.
A bilateral investment treaty is an agreement between two countries on the rules governing cross-border investment by private companies. It does not directly involve governments that make foreign investments. A bilateral investment treaty is usually part of a broader package of trade agreements,
The concept of a bilateral investment treaty is that both countries agree to rules that make it more attractive for companies from one country to invest in another country. This investment can take various forms, such as buying a local company, merging with it, or participating in a jointly financed project. It does not include simply investing in a company by buying some of its shares.
The precise terms of a bilateral investment treaty can vary greatly. However, there are some measures that appear in most treaties. These include a guarantee that the country will treat foreign companies fairly and that the government will not seize a company’s assets, for example by nationalizing its resources.
One of the most important elements of a treaty is that it allows a company that feels it has been mistreated by a foreign government to take its complaint to an independent international body. The best known of these is the International Center for Settlement of Investment Disputes. Without this element in a treaty, a company would have to take legal action against a foreign government in that country’s courts. In addition to being an expensive proposition, there will often be a suspicion, justified or not, that you will not get a fair hearing. However, the standalone system doesn’t always work; Some countries, like Argentina, that have lost many cases have threatened to leave the system.
As of 2009, the United States had 40 active bilateral investment treaties in force, with another seven awaiting official confirmation by the governments of one or both countries. The United States has a standard model treaty that forms its initial basis for negotiating new treaties. Some of the specific measures it seeks include the right for companies to move money in and out of countries freely at market exchange rates, a blockade on countries that force foreign companies to appoint locals to positions of top management and a cap on countries that place performance restrictions on foreign companies.
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