Bilateral Investment Treaties in the United States
- 1 Bilateral Investment Treaties in the United States
- 1.1 Introduction
- 1.2 Bilateral Investment Treaties resources
- 1.3 Bilateral Investment Treaties and Related Agreements
- 1.4 The U.S. Bilateral Investment Treaty Program
- 1.5 Bilateral Investment Treaties Model
- 1.6 Investment Chapters of Free Trade Agreements
- 1.7 NAFTA Investment
- 1.8 More Information
A treaty is a formal agreement between two or more countries or international organizations that is intended to be legally binding and is governed by international law (Restatement Third (Fourth) of Foreign Relations Law § 301). Other terms used to describe a treaty are act, accord, agreement, convention, covenant, etc. When a treaty is made between two countries, it is called bilateral, and when more than two countries are involved, it is called multilateral. This research entry will focus on bilateral treaties where the United States is a party.
In the United States, treaties are the law of the land and have the force of statutes (U.S. Constitution Art. VI, cl. 2). United States Treaties are initiated, drafted, and negotiated to agreement by the executive branch, but require approval by two-thirds of the Senate (U.S. Constitution Art. II, § 2). Once a treaty is approved by the Senate, the President has discretion whether to ratify it (Restatement Third (Third) of Foreign Relations Law § 303 cmt. d, 1987). However, if the President does ratify a treaty, he must give effect to the conditions imposed by the Senate on its consent (Restatement Third (Third) of Foreign Relations Law § 314, cmt. b.).
A treaty enters into force for the United States when the President, with the advice and consent of the Senate, ratifies it or otherwise gives official notification of assent to it, provided the agreement is also in force internationally (Restatement Third (Third) of Foreign Relations Law § 312, cmt. j.).
From January 1, 1950, United States treaties, by law, must be published first in pamphlets known as Treaties and Other International Acts Series (TIAS) and later in bound volumes known as United States Treaties and Other International Agreements (UST) ( U.S.C. 112a(a) (2000)). TIAS and UST are five and ten years behind schedule, respectively. Finally, treaties must also be registered with the Secretary General of the United Nations (8 UN Charter, Art. 102).
For more information about United States bilateral treaties, click here.
Bilateral Investment Treaties resources
One of the main resources is the unctad bilateral investment treaties online (searchable database).
In the case of Free trade/sectoral agreements with investment protections:
- asia-pacific trade and investment agreements database
- asean-australia-new zealand free trade agreement
- asean comprehensive investment agreement
- energy charter treaty (ect)
- japan-mexico fta
- north american free trade agreement (nafta)
- mcgill preferential trade agreements database
- organization of american states (oas) bilateral investment treatys
- organization of american states (oas) ftas
In the case of Model bilateral investment treaties:
- canada 2004 model bilateral investment treaty
- colombia 2007 model bilateral investment treaty
- france 2006 model bilateral investment treaty
- german 2008 model bilateral investment treaty
- india 2003 model bilateral investment treaty
- iisd model international agreement on investment for sustainable development
- united states 2012 model bilateral investment treaty.
Bilateral Investment Treaties and Related Agreements
The U.S. Bilateral Investment Treaty (BIT) program provides several key economic benefits, from protection of investment interests overseas, to promotion of market-oriented policies and exports.
The U.S. Bilateral Investment Treaty Program
The BIT program’s basic aims are to:
- Protect investment abroad;
- Encourage the adoption of market-oriented domestic policies that treat private investment in an open, transparent, and non-discriminatory way; and
- Support the development of international law standards consistent with these objectives.
U.S. Bilateral Investment Treaties provide investments with six basic benefits, which we refer to as the “core” BIT principles.
National Treatment and Most-Favored-Nation Treatment
The U.S. Bilateral Investment Treaties provide that investors and their “covered investments” (that is, investments of a national or company of a Party in the territory of the other Party) are entitled to be treated as favorably as the host Party treats its own investors and their investments or investors and investments from any third country. The Bilateral Investment Treaty generally affords the better of national treatment (NT) or most favored nation (MFN) treatment for the full life cycle of investment, i.e., from its establishment or acquisition, through its management, operation and expansion, to its disposition.
Expropriation and Compensation
Bilateral Investment Treaties establish clear limits on the expropriation of investments and provide for payment of prompt, adequate and effective compensation when expropriation takes place.
Bilateral Investment Treaties provide for the transferability of funds into and out of the host country without delay using a market rate of exchange. This obligation covers all transfers related to a covered investment and creates a predictable environment guided by market forces.
The circumstances in which performance requirements can be imposed are limited. The performance requirement disciplines apply to specific circumstances that would require covered investments to adopt inefficient and trade distorting practices (e.g., local content requirements or export quotas) as a condition for establishment, acquisition, expansion, management, conduct, or operation.
Bilateral Investment Treaties give investors from both Parties the right to submit an investment dispute with the treaty partner’s government to international arbitration. There is no requirement to use that country’s domestic courts.
Senior Management and Boards of Directors
Bilateral Investment Treaties give covered investments the right to engage the top managerial personnel of their choice, regardless of nationality.
Bilateral Investment Treaties Model
In April 20, 2012, the U.S. Department of State and the Office of the United States Trade Representative announced the conclusion of the Administration’s review of the United States’ model bilateral investment treaty (BIT) and the release of the revised 2012 model BIT.
Since February 2009, when the Administration initiated a review of the United States’ (2004) model BIT to ensure that it was consistent with the public interest and the Administration’s overall economic agenda, the Administration has sought and received extensive input from Congress, companies, business associations, labor groups, environmental and other non-governmental organizations, and academics. While revisions to the model BIT do not require Congressional action, negotiated BITs require advice and consent of two thirds of the Senate.
International investment is a significant driver of America’s economic growth, job creation, and exports. The 2012 U.S. model BIT text will help achieve several important goals of the Obama Administration ensuring that U.S. companies benefit from a level playing field in foreign markets, providing effective mechanisms for enforcing the international obligations of our economic partners, and creating stronger labor and environmental protections.
The 2012 model BIT also supports our strategic international commitment to a robust economic agenda. It will play a critical role in ensuring that American firms can rely on strong legal protections when competing for the 95 percent of the world’s consumers who live outside the United States, as well as in promoting good governance, the rule of law, and transparency around the world.
Like the predecessor 2004 model BIT, the 2012 model BIT continues to provide strong investor protections and preserve the government’s ability to regulate in the public interest. The Administration made several important changes to the BIT text so as to enhance transparency and public participation; sharpen the disciplines that address preferential treatment to state-owned enterprises, including the distortions created by certain indigenous innovation policies; and strengthen protections relating to labor and the environment.
A BIT is an international agreement that provides binding legal rules regarding one country’s treatment of investors from another country. The United States negotiates BITs on the basis of a high-standard “model” text that provides investors with improved market access; protection from discriminatory, expropriatory, or otherwise harmful government treatment; and a mechanism to pursue binding international arbitration for breaches of the treaty. High-standard BITs, such as those based on the U.S. model, improve investment climates, promote market-based economic reform, and strengthen the rule of law. The United States has more than 40 BITs in force with countries around the world, and the investment chapters of U.S. free trade agreements (FTAs) contain substantially similar rules and protections. USTR and the Department of State co-lead the U.S. BIT program.
Investment Chapters of Free Trade Agreements
For a list of U.S. free trade agreements that include investment chapters, see here.
U.S. investment in Canada and Mexico is covered by Chapter 11 of the North American Free Trade Agreement (NAFTA), which contains provisions similar to the obligations in U.S. Bilateral Investment Treaties (BITs). Like the BITs, Chapter 11 contains provisions designed to protect cross-border investors and facilitate the settlement of investment disputes. Learn more about NAFTA investments here.
Responsibility for Bilateral Investment Treaties policy and negotiations is shared by the State Department and USTR.