BILATERAL INVESTMENT TREATY Meaning and
Definition
-
A bilateral investment treaty (BIT) refers to a legally binding agreement between two countries that establishes the terms and conditions for promoting and protecting foreign investment between them. These treaties are primarily designed to enhance and encourage bilateral investment flows by providing mutual benefits and protections to both investing and host countries.
Typically negotiated by sovereign states, a bilateral investment treaty outlines the rights and obligations of investors from one country in the territory of the other. It offers certainty and assurances to foreign investors, ensuring fair treatment, protection against expropriation without compensation, the freedom to transfer funds, and access to international dispute resolution mechanisms.
The treaty often includes provisions for the resolution of investment disputes through international arbitration, allowing investors to seek compensation in case of any breach of the treaty by the host country. This dispute settlement mechanism ensures a neutral and fair process to resolve conflicts related to foreign investments.
Bilateral investment treaties play a significant role in promoting transparent investment climates, stable regulatory frameworks, and legal protections, which ultimately encourage foreign investors to engage in cross-border business activities. These agreements serve as a key instrument for attracting foreign direct investment, fostering economic growth, and creating employment opportunities.
