chapter  2
21 Pages

BIT by BIT: The Growth of Bilateral Investment Treaties and Their Impact on Foreign Investment in Developing Countries

ByJeswald W. Salacuse

This chapter examines the Bilateral Investment Treaty (BIT) phenomenon, the process by which it has come about, the substantive rules it has created, and the effect it has had on foreign investment transactions. Many bilateral treaties, with various exceptions and qualifications, provide that the host country shall treat investments from its treaty partners in the same way it treats investments by host country nationals and companies. Many BITs combine both national treatment and most-favored-nation treatment so that the foreign investor may take advantage of whichever standard of treatment is more favorable. For both the investor and the host country, the BIT provisions on monetary transfers are among the most important in the treaty. While the world has developed a relatively elaborate legal structure for trade in the form of the General Agreement on Tariffs and Trade, it has yet to create a similar structure for international investment.