investment

10 Questions

What is the primary purpose of the MFN standard in a BIT?

To establish a level playing field between all foreign investors

What is the result of not granting interests and favorable treatment to third states?

MFN treatment is not applied in practice

What is the comparison in the MFN clause?

Between investors from two different countries

What is the purpose of MFN clauses in IIAs?

To ensure states treat each other in a manner that is at least as good as they treat third parties

What is one of the ancillary purposes of the MFN clause?

To level the field of competition among investors from different states

What is the result of MFN commitments in treaties?

Parties treat all other states with whom they have made commitments the same as each other

What is the relationship between MFN and National Treatment?

MFN is similar to National Treatment

What is the purpose of MFN clauses in trade treaties like the WTO?

To ensure states treat each other in a manner that is at least as good as they treat third parties

What is the benefit of MFN clauses for smaller developing countries?

They can benefit from the stronger bargaining power of third countries

What is the main goal of MFN treatment?

To establish a level playing field between all foreign investors

Study Notes

Foreign Direct Investment (FDI)

FDI is a key element in international economic integration, creating stable and long-lasting links between economies.
It involves a stake in a company or project by a foreign entity, with a minimum 10% ownership stake to establish controlling interest.
FDI can be made through various means, including opening a subsidiary, acquiring a controlling interest, or starting a new company in a foreign country.

Characteristics of FDI

FDI goes beyond mere capital investment, including provision of management, technology, and equipment.
It establishes effective control of the foreign business or at least substantial influence over its decision-making.

Political Risk

Political risk includes political violence, expropriation, government repudiation of contracts, and other forms of unrest.
MIGA (Multilateral Investment Guarantee Agency) only supports investments that are developmentally sound and meet high social and environmental standards.

International Centre for Settlement of Investment Disputes (ICSID)

ICSID is a member of the World Bank Group, established in 1966 to promote international investment.
It is an independent, depoliticized, and effective dispute-settlement institution, providing confidence in the dispute resolution process.

World Trade Organization (WTO)

The Agreement on Trade-Related Investment Measures (TRIMS) is the only WTO agreement that deals directly with foreign investment.
TRIMS prohibits restrictions on foreign investors that are inconsistent with central commitments of the GATT 1994.

Investment Control

The Investment Control model recognizes restrictions and controls on the admission of FDI stipulated by the laws and regulations of the host country.
This approach subjects the investment to local laws and regulations, with no special treatment.

Liberalized Standard

This approach offers selective liberalization by way of an agreed "opt-in" on the part of the host state, resulting in a "positive list" of industries in which rights of entry and establishment may be enjoyed.

National Treatment and Most Favoured Nation (MFN)

National Treatment ensures that foreign investors and their investments are accorded treatment no less favourable than that accorded to the host state's own investors.
The MFN standard ensures that investments or investors of contracting parties to a BIT receive the best treatment that each of them has granted to the investments or investors of any other third country.