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Questions and Answers

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

  • To discriminate between investors based on nationality
  • To establish a level playing field between all foreign investors (correct)
  • To promote harmony among nations on a global scale
  • To provide favorable treatment to investors from developed countries

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

  • MFN treatment is applied in practice
  • MFN treatment is not applied in practice (correct)
  • Investors from third states are favored
  • National Treatment is applied

    • What is the comparison in the MFN clause?

  • Between investors from the same country
  • Between investors from two different countries (correct)
  • Between investors from developed and developing countries
  • Between domestic and foreign investors

    • What is the purpose of MFN clauses in IIAs?

    <p>To ensure states treat each other in a manner that is at least as good as they treat third parties</p> Signup and view all the answers

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

    <p>To level the field of competition among investors from different states</p> Signup and view all the answers

    What is the result of MFN commitments in treaties?

    <p>Parties treat all other states with whom they have made commitments the same as each other</p> Signup and view all the answers

    What is the relationship between MFN and National Treatment?

    <p>MFN is similar to National Treatment</p> Signup and view all the answers

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

    <p>To ensure states treat each other in a manner that is at least as good as they treat third parties</p> Signup and view all the answers

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

    <p>They can benefit from the stronger bargaining power of third countries</p> Signup and view all the answers

    What is the main goal of MFN treatment?

    <p>To establish a level playing field between all foreign investors</p> Signup and view all the answers

    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.

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