The main advantage of bilateral investment treaties is that if the host state is alleged to breach the BIT, the investor does not need to ask the government to accept a claim. Although investors are not parties to BITs, they nevertheless give them the right to admit host states to international arbitration, and they should not exhaust any domestic remedies. The investors do not need to involve their government. The host State must not agree to arbitration as this process is mandatory as soon as the investor calls for it. There is also no risk that the dispute will become the only one on the list of bilateral disputes (including other commercial issues) between the investor and another state. If the argument is resolved in favor of the investor, the BIT requires the arbitral award to be enforceable in the host state’s courts. If the host state does not legislate for this or intervenes in the enforcement process, this will lead to different investor-state demands. Still, it will negatively affect the host state’s position in other states and their investors’ eyes.
BITs have such an effective dispute resolution mechanism that the initiation or mere threat of an arbitration process can persuade the host State to resolve the dispute without having to go to court. Most investor states have model BITs that they adhere to in varying degrees, depending on the host state’s negotiation strength (Ye, 2019). Although the obligations are expressed as mutual, in practice, both parties are a developed state and a developing state, the former representing the investor and the other one being the receiving state. No two BITs are identical, but they usually have relatively similar definitions of “investor” and “territory”, and fair and equal treatment provisions; national or most favored nation (MFN) regime for taxes, repatriation of investments, payments, income, profits, expropriation, settlement of disputes.
Moreover, the provisions are similar regarding the BIT duration and its further application to investments tree made before its termination. It should also be said about those investments that are protected through the conclusion of a BIT. BITs protect assets made by citizens of one state in the territory of the receiving state. Citizens are defined as individuals holding the citizenship of the investor’s condition, and legal entities are corporations, partnerships, firms, or associations created or established by its legislation.
Reference
Ye, F. (2019). The impact of bilateral investment treaties (BITs) on collective labor rights in developing countries. The Review of International Organizations, 1-23.