Bilateral Investment Treaties and Related Agreements
The U.S. Bilateral Investment Treaty (BIT) program supports several key economic policy objectives from protection of investment interests overseas to promotion of market-oriented policies and exports.
The BIT program's basic aims are to:
- Protect investment abroad in those countries where investors' rights are not already protected through existing agreements (such as modern treaties of friendship, commerce and navigation, or FTAs);
- Encourage the adoption of market-oriented domestic policies that treat private investment in an open, transparent, and non-discriminatory way; and
- Support the development of international law standards consistent with these objectives.
U.S. Bilateral Investment Treaties provide investments with six basic benefits, which we often refer to as the "core" BIT principles:
- First, our BITs provide that investors and their "covered investments" (that is, investments of a national or company of a Party in the territory of the other Party) are entitled to be treated as favorably as the host Party treats its own investors and their investments or investors and investments from any third country. The BIT generally affords the better of national treatment (NT) or most favored nation (MFN) treatment for the full life cycle of investment, i.e., from its establishment or acquisition, through its management, operation and expansion, to its disposition.
- Second, BITs establish clear limits on the expropriation of investments and provide for payment of prompt, adequate and effective compensation when expropriation takes place.
- Third, BITs provide for the transferability of funds into and out of the host country without delay using a market rate of exchange. This covers all transfers related to a covered investment and creates a predictable environment guided by market forces.
- Fourth, the circumstances in which performance requirements can be imposed are limited. The performance requirement disciplines apply to specific circumstances that would require covered investments to adopt inefficient and trade distorting practices (e.g., local content requirements or export quotas) as a condition for establishment, acquisition, expansion, management, conduct, or operation.
- Fifth, BITs give investors from both Parties the right to submit an investment dispute with the treaty partner's government to international arbitration. There is no requirement to use that country's domestic courts.
- Sixth, BITs give covered investments the right to engage the top managerial personnel of their choice, regardless of nationality.
The United States negotiates BITs on the basis of a model. The Department of State and the Office of the United States Trade Representative (USTR), working with other U.S. government agencies, completed an update of the U.S. model bilateral investment treaty (BIT) in November 2004: the 2004 U.S. Model BIT.
The model contains provisions developed by the Administration to address the investment negotiating objectives of the Bipartisan Trade Promotion Authority Act of 2002, which incorporated many of the principles from existing U.S. BITs. The model is substantively similar to the investment chapters of the free trade agreements the United States has concluded since the 2002 Act. The State Department and USTR consulted their respective advisory committees and relevant congressional committees in the development of the new model. The United States last updated its model BIT in 1994.
Responsibility for BIT policy and negotiations is shared by the State Department and USTR. Points of contact are:
- Bilateral Investment Treaty Coordinators at the State Department, Bureau of Economic and Business Affairs, Office of Investment Affairs: 202-736-4906/202-736-4060); and
- USTR, the Office of Services, Investment, and Intellectual Property: 202-395-9679.
Investment Provisions in Free Trade Agreements:
USTR Site for Free Trade Agreements
BIT Documents:
- United States Bilateral Investment Treaties (Updated March 3, 2008)
- 2004 U.S. Model Bilateral Investment Treaty
- NAFTA Investment
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