International Investment Agreements Protection: Why It Matters and How It Works
International investment agreements (IIAs) are agreements between countries that aim to promote and protect foreign investment flows. These agreements can take the form of bilateral investment treaties (BITs) or regional trade agreements (RTAs) that include investment provisions. IIAs usually provide investors with protection against discriminatory and arbitrary treatment, expropriation, and other forms of unfair treatment by the host country.
The rationale behind the establishment of IIAs is to stimulate foreign investment by providing investors with a legal framework that ensures stability, predictability, and consistency in the host country`s investment regime. IIAs also aim to ensure that investors can access certain protections and remedies if the host country breaches its commitments under the investment agreement.
One of the most significant protections offered by IIAs is investor-state dispute settlement (ISDS). ISDS allows investors to bring claims against the host country directly before international arbitration tribunals if they believe the host country has violated the IIA. The ISDS mechanism is designed to ensure that investors can obtain fair and impartial treatment in disputes with host states, especially in countries where the domestic judicial system may not be sufficiently independent or reliable.
However, ISDS has been subject to criticism in recent years, mainly because of concerns regarding transparency, consistency, and legitimacy. Critics argue that ISDS allows corporations to challenge legitimate public policy decisions made by democratic governments, leading to a «regulatory chill» that limits governments` ability to regulate in the public interest.
Despite these criticisms, IIAs remain an essential feature of the global economic landscape. As of 2020, there are over 2,600 IIAs worldwide, with BITs accounting for the majority of these agreements. IIAs have played a vital role in promoting cross-border investment and improving the investment climate in many countries. They have also helped to reduce transaction costs and increase legal certainty for investors.
In conclusion, IIAs are an essential tool for promoting and protecting cross-border investment. While ISDS may be subject to criticism, it is just one of many protections offered by IIAs. As the global economy continues to evolve, it is likely that the role of IIAs in promoting foreign investment will become even more critical in the years ahead.