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International investment protection refers to the protection of foreign investments from interference by the host country. It is vital for foreign investments to be stable and predictable, given their unique nature, duration, and risks involved. Investors who invest resources become vulnerable once the host State’s position has changed. That is why the nature, structure and purpose of foreign investment law are distinct from trade law. At the same time, it is crucial to protect the host nation. Foreign investment is indeed subject to domestic law and administrative control. Due to these reasons, foreign investment law differs from trade law in its nature, structure and purpose.  as well as its importance in protecting the host country. In reality, foreign investment is subject to domestic law and administrative control. The rights of states to regulate cannot be negated by the guarantees afforded to foreign investors. In certain niches of investment, the local people’s interests must be protected. Finding a balance between all of these potentially conflicting interests is the goal of international investment law.


A bilateral investment treaty (BIT) is one of the most important sources of legal protection for foreign investments in modern times. Developing states have also been negotiating an increasing number of BITs in recent years. By 2008, there were estimated to be 2600 BITs worldwide. Germany had 135 BITs negotiated, China had 121, and Switzerland had 114. BITs provide foreign investors from respective countries with guarantees under certain free trade agreements (‘FTAs’). Despite many similarities, BITs are by no means identical. In some cases, there are significant differences that must be taken into account when examining each BIT. Foreign investments are protected by international treaties. The foreignness of the investment is determined by the nationality of the investor and not by the origin of the invested capital. The treaties available to that investor depend on the investor’s nationality.


Investors can be individuals or corporations. Individuals’ nationalities are determined by the laws of the countries to which they claim citizenship, while corporations’ nationalities are typically determined by the place of their incorporation. The corporate veil is normally not pierced to reveal a company’s nationality, which makes nationality planning possible for investors who set up companies in countries with favourable treaties. Participation in a company is usually considered to be an investment by most investment treaties, giving shareholders independent standing. A foreign company may claim it has been adversely affected by state action and that such actions adversely affect the value and profitability of the company and even minority foreign shareholders are protected.


FAIRNESS AND EQUITY: FET is an international legal standard that functions independently of the legal system of the host country. Consequently, even though a foreign investor is not eligible for the most favoured nation clause, if he cannot establish that investors of other nationals have been better received, he may have been handled inequitably and unfairly. An investment tribunal can identify typical fact instances in which fairness and equity (FET) have been utilised. Consistency, transparency, stability, the protection of the investor’s legitimate expectations, compliance with contractual obligations, procedural propriety, and due process, a sense of obligation to act in good faith (bona fide), and freedom from coercion and harassment have all emerged as a result of these factual situations. These categories don’t even scratch the surface of the FET standard’s capabilities.


Just about all investment treaties make the same pledge, albeit the wording may vary. ‘Perpetual protection and security are mentioned in some treaties, while security and protection’ are mentioned in others. There are provisions requiring states to take steps to protect investments against negative consequences. When State entities invade, the obligation to provide physical security may apply. Its original purpose was to safeguard the investor against physical harm, such as an invasion of the premises where the investment was made. However, there is evidence that the notion of complete safety and security encompasses not only safety but also the employment of legal protection. Several treaties expressly cover protection and legal security.


In most bilateral investment treaties, the principle of national treatment is embodied. Foreign investors, as well as their investments, are to be treated as favourably as nationals of the host country it is possible and even necessary to improve the treatment of foreign investors if the international standards are higher than those for domestic investors. There are several investment treaties which include a provision concerning a right of access to a national market, especially those signed by the US and Canada, including provisions that grant business access to national markets.  Most of these clauses apply after a business is established. Despite the similarity of most national treatment clauses, their practical effects differ, depending on how broad the exemptions are.


There are rules on the relocation of funds in nearly all bilateral investment treaties, including the right of investors to make transfers, the types of payments that may be made, and the negotiation of exchange rates and foreign exchange rates. Many treaties cover both inward and outward transfers, but other treaties address only outward transfers. There is some variation among the treaties regarding the right to transfer funds. Any time generalized transfer rights are granted, such as ‘in the context of investment’, both directions of transfer are covered by international treaties that declare that rights are “subject to the laws of the host state” limit the investor’s ability to relocate. Because the rules of the host state may change in the future, such a restriction decreases the value of the investor’s right to transfer. The types of transfers that are permissible may be restricted.


International investment law is currently a very area of activity of international law, with a large number of arbitral decisions covering a wide variety of topics. Since the late 1990s, there has been a noticeable increase in inactivity, owing to the increasing number of investment treaties that allow direct access to global arbitration. In a variety of sectors, the practice of global investment tribunals contributes immensely to the improvement of international law. When there are so many investment tribunals, it is difficult to produce meaningful and uniform case law. The tribunals’ differing approaches make it difficult to predict the fate of suits. Some of these changes indicate a more conservative interpretation of substantive requirements, prompting discussion of a new infrastructure to safeguard overseas investments.

Author(s) Name: Shashwat Sinha (KIIT School of Law, Bhubaneshwar)