Implication of International law on Foreign Investment Process: A Reference of Nepal

Abstract

Foreign investment is the movement of capital flow from one country to another country. A company and natural person can be the part of management of company or corporation in another country. Traditionally foreign investment was mere the subject matter of contract which has been changed with the presence of international law. Many issues of foreign investment are addressed by multilateral treaty provisions. There are financial investment; foreign direct investment (horizontal investment, vertical investment, conglomerate investment, greenfield investment, brownfield investment), portfolio investment, official flows, commercial loans, and technological investment etc. There are classical approach, dependency approach and middle path approach of foreign investment. Classical economic theory argues that foreign investment is beneficial for host country whereas dependency theory is reverse to classical theory and middle path theory analyses both positive and negative aspect of foreign investment. Joint venture, management contract, turnkey operation, and licensing agreement are basic method of foreign investment in Nepal. There are bilateral, regional and multilateral instruments supporting for foreign investment. Bilateral instruments include Bilateral Investment Protection Treaties and Bilateral Double Taxation Avoidance Treaties whereas regional instruments are developed by African Union, European Union etc. Multilateral instruments are developed by International Monetary Fund (IMF), World Bank Group, World Trade Organization etc. Constitution of Nepal (2015 AD) has purported liberal and open economic policy to accelerate economic growth. Foreign Investment and Technology Transfer Act, 2075 (2019 AD) and Foreign Exchange (Regulation) Act, 2019 BS (1962 AD) are principal legislation for foreign investment in Nepal. There are various principles of foreign investment which are most favored nation treatment, national treatment, preferential treatment, full protection and security, fair and equitable treatment, protection against nationalization or expropriation and protection from threat agreements etc.