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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Clear out junk files and repair common Windows errorsFree Scan →A bilateral investment treaty (BIT) is an agreement between two countries that sets rules for how each country treats certain investments made by investors from the other. It can give covered investors legal protections and, in some cases, a route to bring a treaty claim against a host government—but the treaty’s wording determines who and what it covers and whether a particular claim can proceed.
What a BIT covers
A BIT is one type of international investment agreement. Investment rules can also appear in broader trade agreements. The label alone does not establish a particular investor’s rights: the treaty’s definitions and operative provisions do. Depending on the text, an investor may be a person or a company, and a covered investment may include specified types of assets. Some agreements address investments only after they are established; others also set rules for admission or establishment.
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Protections run between the two governments and investors and investments from the other country, subject to the agreement’s scope. A treaty does not necessarily protect every foreign investor, every asset, or every stage of an investment.
What protections may a BIT provide
Common treaty provisions address nondiscrimination, treatment of investors, and limits on certain government actions. Their names can sound familiar across treaties, but their legal meaning depends on the particular wording, exceptions, and interpretation.
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- National treatment concerns whether covered foreign investors or investments receive treatment comparable to domestic ones in specified circumstances.
- Most-favoured-nation treatment concerns treatment compared with investors or investments from other countries, within the treaty’s defined scope.
- Fair and equitable treatment (FET) is a standard found in many treaties, but not a single, universally settled checklist. Older clauses often leave it unspecified; newer designs may tie it to the customary international law minimum standard, set out a closed list of elements, or omit it.
- Full protection and security and provisions against unreasonable or discriminatory impairment may address particular forms of treatment or interference.
- Expropriation protections may restrict when a government can take or expropriate a covered investment and set conditions for compensation.
In a 2023 analysis of 2,670 investment treaties concluded between 1959 and 2023 by 99 jurisdictions participating in its work programme, the OECD found that almost 95% referred to FET. That figure describes that sample, not every treaty worldwide or the content of the standard in any one agreement. UNCTAD described FET in 1999 as “a yardstick by which relations between foreign direct investors and Governments of capital-importing countries may be assessed”; that is an analytical description, not binding treaty language.
Expropriation is governed by the specific text
One U.S. government-published treaty text, for example, permits expropriation for a public purpose if it is nondiscriminatory, follows due process, and is accompanied by prompt, adequate, and effective compensation. It measures compensation by reference to the investment’s fair market value immediately before the expropriatory action. This is an example of treaty drafting, not a formula that applies to every BIT.
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Can an investor bring a claim against a government?
Some BITs provide for investor-state dispute settlement (ISDS), allowing an eligible investor to bring certain treaty claims against a host state before an arbitral tribunal. A company may be eligible, but only if it meets the applicable treaty’s definition of investor and satisfies the other requirements. A treaty claim is not simply any disagreement between a business and a government.
Two questions must be kept separate:
- What does the treaty require? Its substantive protections define the obligations that may apply to covered investments.
- Can a tribunal hear this claim? The treaty’s consent and procedural provisions determine whether the investor, investment, dispute, and requested forum fall within the tribunal’s authority.
Eligibility, time limits, waiting periods, available forums, and other procedural conditions vary by treaty. Ratifying the ICSID Convention alone does not make a state agree to arbitrate every investment dispute. Its preamble states that “no Contracting State shall by the mere fact of its ratification, acceptance or approval of this Convention and without its consent be deemed to be under any obligation to submit any particular dispute to conciliation or arbitration”. Consent for a particular dispute must therefore be found in the relevant legal instruments.
Arbitration is not always public
Whether proceedings are transparent depends on the applicable treaty, rules, and other instruments. UNCITRAL amended its Arbitration Rules in 2013 to incorporate Rules on Transparency in Treaty-based Investor-State Arbitration; the 2014 Mauritius Convention promotes applying those transparency obligations to existing investment treaties. Those instruments do not make every treaty arbitration public.
Does a BIT stop a government from changing its laws?
No. A BIT is not a general ban on regulation or a guarantee against commercial loss. Governments retain authority to regulate, while treaty obligations may constrain how they treat covered investors and investments or set conditions for expropriation. Whether a measure breaches a treaty depends on its text, applicable exceptions, and the facts. The example expropriation clause above illustrates that a treaty can permit a public-purpose taking when specified conditions are met.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to check whether a treaty applies to an investment
For a real investment or dispute, identify the investor’s home state, the host state, and the investment, then examine the treaty that may apply to those facts. Check its current status and the relevant text rather than relying on a summary of BIT protections.
- Confirm the parties and status. Verify that the two states concluded the agreement and whether it is in force for the relevant period. Check for amendments, termination provisions, and any survival clause affecting investments made before termination.
- Read the definitions. Check whether the investor’s nationality or place of incorporation qualifies and whether the asset meets the definition of covered investment.
- Check when protection begins. Determine whether the treaty covers admission or establishment, or only investments already made, and review any exclusions or exceptions.
- Compare the operative protections. Read the exact FET, national-treatment, most-favoured-nation, security, impairment, and expropriation provisions. Note any links to customary international law, closed lists, compensation terms, or limitations.
- Read the dispute clause closely. Identify the state’s consent, eligible claimants and claims, available forums, time limits, waiting periods, and any local-remedy requirements or transparency rules.
When comparing two treaties, use the same checklist for each: definitions; admission versus post-establishment coverage; FET wording; nondiscrimination scope and exceptions; direct and indirect expropriation and compensation; general or security exceptions and right-to-regulate language; dispute consent and procedure; and entry into force, amendment, termination, and survival. The relevant terms must be checked in the two treaty texts; a general BIT description cannot resolve the comparison.
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