Simple English definitions for legal terms
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A bilateral investment treaty (BIT) is an agreement between two countries that establishes the rules for private investment by individuals and companies from one country in the other country. The treaty sets standards for how the host country must treat foreign investors, including fair and equal treatment, protection from expropriation, and the ability to transfer funds. BITs often include a dispute resolution mechanism that allows investors to seek arbitration if their rights are violated. There are over 2,500 BITs in effect around the world today.
A Bilateral Investment Treaty (BIT) is an international agreement between two countries that establishes the terms and conditions for private investment by nationals and companies of one country to another country. The purpose of these treaties is to protect foreign investors and their investments in the host country by setting forth actionable standards of conduct that apply to governments in their treatment of investors from other nations.
The first generation of these treaties were Friendship, Commerce and Navigation Treaties (FCNs), which required the host state to treat foreign investments on the same level as investments from any other nation. The second generation of these treaties are Bilateral Investment Treaties (BITs), which set forth actionable standards of conduct that applied to governments in their treatment of investors from other nations, including fair and equitable treatment, protection from expropriation, and free transfer of means and full protection and security.
One distinctive feature of many BITs is that they allow for an alternative dispute resolution mechanism, whereby an investor whose rights under the BIT have been violated could have recourse to international arbitration, often under the auspices of the International Center for the Settlement of Investment Disputes (ICSID), rather than suing the host State in its own courts.
There are more than 2,500 BITs active in the world today. For example, the United States has BITs with countries such as China, India, and Brazil. These treaties help to promote foreign investment and economic growth by providing investors with greater legal certainty and protection.
Overall, BITs are important tools for promoting international investment and economic growth by providing investors with greater legal certainty and protection.