Bilateral Investment Treaty Arbitration

Bilateral Investment Treaty Arbitration

Bilateral Investment Treaty (BIT) Arbitration refers to a mechanism for resolving disputes between foreign investors and host states under the framework established by bilateral investment treaties. These treaties are agreements between two countries designed to promote and protect investments made by investors from one country in the other country.

BITs typically include provisions that guarantee fair and equitable treatment, protection against expropriation without compensation, and the right to transfer funds freely. When disputes arise—such as allegations of unlawful expropriation, failure to provide protection, or discrimination against foreign investors—the investor can invoke arbitration under the terms of the BIT.

One of the key features of BIT Arbitration is that it provides a neutral forum for resolving disputes, often using established arbitration institutions like the International Centre for Settlement of Investment Disputes (ICSID) or the United Nations Commission on International Trade Law (UNCITRAL).

For example, if a U.S. investor believes that a South American country has unfairly denied the investor a permit necessary for their business operations, the investor can initiate BIT Arbitration against that country under the relevant treaty provisions. The arbitration panel will then review the claims and make a binding decision, which can include monetary compensation or other remedies.

This process is significant as it helps to give investors confidence in investing abroad by providing a legal recourse that is independent of local courts, which may be perceived as biased.