bilateral investment treaty

bilateral investment treaty
bilateral investment treaty (BIT)
A treaty between two governments designed to promote and protect foreign private investment by minimizing the political risks associated with investing in a foreign country. These agreements establish the terms and conditions under which nationals and companies of one country invest in another country, including their rights and protections. Subject to certain exceptions and limitations, BITs provide protection against:
• Expropriation or nationalization of foreign assets.
• Currency restrictions.
• Discrimination between local and foreign investors.
One of the main protections accorded by a BIT is that it allows foreign investors to sue the host government for a breach of the treaty before the International Centre for Settlement of Investment Disputes instead of the local courts.
If a BIT is not available (either because one has not been negotiated between the relevant countries or has been negotiated but not yet ratified), the foreign investor may be able (depending on its negotiating strength) to negotiate some of the same protections and rights in a host government agreement, including a stabilization clause. A foreign investor with a qualifying project may also mitigate its risks by obtaining political risk insurance.
As of March 1, 2010, the US is a party to 40 BITs including with Argentina, Kazakhastan, Senegal and Ukraine. In 2009, the US undertook a review of its model BIT which was last updated in 2004. The purpose of this review was to ensure that the model BIT is consistent with the public interest and overall US economic agenda.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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