Protection Standards in Bilateral Investment Treaties and Their Contribution in Attracting Foreign Direct Investment

Abstract

Since the mid-1980s, most countries, especially the developing, have become more open to foreign direct investment (FDI) aiming to benefit from its fiscal development contributions, as countries with a high level of investment systematically achieve higher levels of development. Accordingly, bilateral investment treaties (BITs) guarantee certain standards of treatment. However, there are various concerns related to the effectiveness of BITs at large and of their investment protection standards especially to promote inflows of FDI, as there are opinions indicating that many multinational enterprises do not appear to take BITs into account when determining their investment plan abroad. This paper purports at first to examine the most important investment protection standards provided by BITs, in order to connect these standards with the main host country determinants for attracting FDI. In addition, it explores the possible impact of BITs on FDI inflows, since they are the key instrument in the strategies of most countries to attract foreign investors. The present paper in order to assess the importance of BITs examines several studies that explore the impact of BITs on FDI inflows, concluding that higher number of BITs raise the FDI.