By Stuart Bruce and Juliette Huard-Bourgois, King & Wood Mallesons’ London Office
Large-scale investments made in foreign jurisdictions face many risks, particularly when the investments are in countries with high levels of political and regulatory risk or developing judicial systems, as is often a concern for international investors entering certain African states. In such\ circumstances, investors are particularly concerned about the legal protections that are available to them during the life of their investments. Bilateral and multilateral investment treaties (“BITs”, “MITs”) have become the principle vehicle to overcome these challenges and mitigate the risks of government intervention.
BITs are international law instruments – treaties – agreed between two states. MITs are treaties agreed between more than two states. The purpose of BITs and MITs is to create a stable legal environment that fosters foreign direct investment. This is achieved by the “host state” (i.e. the state in which the investment is made) agreeing to provide certain guarantees and standards of protection to the investments of private foreign investors (i.e. those with the nationality of, or incorporation in, the “home state”). The investor is also provided with the opportunity to enforce its rights under the investment treaty against the host state through independent international investment arbitration. This is the major innovation of investment treaties, as traditionally it was only states that had standing to bring claims against one another.
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