What are bilateral investment treaties (BITs)?

BITs function as the legal basis of which states can mutually agree upon to recognize the protocols and parameters of bilateral investments. They are particularly useful when it comes to dealing with lesser developed countries, because double tax agreements and free trade agreements (more detailed and specific agreements) may not be in place.

Bilateral Investment Treaties are purported to encourage, promote and protect investment between two states. These treaties normally cover:

1. Scope and definition of investment;
2. Admission and establishment;
3. National treatment;
4. Most-favored-nation treatment;
5. Fair and equitable treatment;
6. Compensation in the event of expropriation or damage to the investment;
7. Guarantees of free transfer of funds; and
8. Dispute settlement mechanisms - both state-state and investor-state.