PROTECTING YOUR FOREIGN INVESTMENT
Foreign investment can pay off substantially if successful, however it is often exposed to serious political risk. One of the primary ways to limit that risk is to structure (or restructure) the investment to ensure it is covered by the protections offered by bilateral or multilateral investments treaties.
We set out below a brief guide to the investment treaty framework and consider practical steps that can be taken by investors to ensure they maintain protection of their foreign investments, even where there is a transfer of assets.
What is an investment treaty and how can a foreign investment be protected?
Investment treaties are agreements between two or more foreign states which establish reciprocal undertakings between the signatories to protect and promote investments made by investors from one signatory state into another. They are favourable to host states because they encourage foreign investment and bring capital into the country. They are also favourable to investors by offering legal protection against adverse actions of the host state, including, for example, guarantees of fair and equitable treatment, full protection and security and fair compensation in cases of expropriation.
The violation of rights offered under an investment treaty is directly enforceable against the host state through international arbitration, including before the International Centre for the Settlement of Investment Disputes (ICSID), or under the arbitration rules of the United Nations Commission on International Trade Law. There are currently nearly 3000 agreements in force, including both bilateral investment treaties (BITs) and multilateral investment treaties (MITs).
Oct-Dec 2021 issue
Gibson, Dunn & Crutcher LLP