International Protection of Direct Foreign Investments in the Third World

Abstract

PRIVATE investors invest to make profits and not for reasons of benevolence. Thus, if they make profits they expect, albeit not unnaturally, to keep them, subject to payment of appropriate taxes to the local authorities; if they acquire property, they expect to be entitled to keep it. The feeling of insecurity in these respects is, perhaps, the major deterrent to the flow of direct foreign investment in less-developed countries (LDC). Because of the need to ensure a steady flow of investment to LDCs and to improve the investment climate in LDCs, measures have been and are being taken to promote and protect direct foreign investment in LDCs. We are not concerned here about public investment which is normally undertaken pursuant to a treaty between the lender (which may be a government agency or an international financial institution such as the World Bank) and a borrower in the State, which more often than not is a public enterprise, with the government serving as a guarantor. No State would assert that it was entitled by the exercise of power of eminens dominium (eminent domain) to terminate the right of an investing State or of the World Bank to recover the loan or investment it had