The Bilateral Investment Treaties (BITs) are international agreements between countries to facilitate the direct investment of companies from a country, usually economically developed, in another developing country. These agreements originated in the 1960s[1] and aimed to protect the legal security of investors of one country in the foreign country receiving the investment. The BITs can be between two countries or between countries of the same economic region (intraregional agreements).[2]

At present there are more than 3000 BITs of which African countries are party to more than 900, signed mostly with non-African countries. The BITs are characterized by a series of common elements that serve to guarantee both the promoting of development and the rights and interests of investors. The first principle of the BITs is National treatment – that means treating foreign companies and locals equally. Thus, the country receiving the investment must commit to facilitating the investment of foreign companies. These foreign companies should not be hampered by administrative or bureaucratic procedures and should be treated in the same way as national companies. The governments of the countries receiving the investment must guarantee the application of the law and respect what is expressed in the investment treaty; they cannot act arbitrarily regarding foreign companies. [3]

Secondly, the countries receiving the investments must act in coherence with WTO rules. This entails applying the principle of most-favoured-nation (MFN), i.e. treating other nations equally. This clause requires a country receiving direct private investment from a foreign country to give the investors the same conditions and warranties as those granted to third countries that have more favourable conditions.[4]

There is a third element common to all BITs called “fair and equitable treatment”. It is a very vague requirement and is often a source of conflict between investors and the state hosting the investment. It has become a feared clause for such states because most investor-state disputes are based on this clause. It is a clause given to subjectivity and allows anyone who intends to apply it to interpret it according to their interests. Fair and equitable treatment requires a predictable context that does not detract from the reasonable expectations of investors. Likewise, it requires an absence of unpredictability on the part of the states when applying the law as well as of discrimination that involves unfair treatment that limits the promotion of foreign investment[5].

The fourth main element that distinguishes BITs is that they allow foreign companies financial facilities for the free transfer of funds from one country to another. This includes operating with foreign currencies, making direct investments in a foreign country and collecting profits from it, paying foreign currency to employees or making investment management payments at home. Once again, this element reveals the hypocrisy of an economic system that privileges Transnational Companies over people. Once again, we find legal subterfuges in which cooperation and development aid front sophisticated investment treaties that are at the expense of developing countries and their peoples. [6]

In a time of globalization, Bilateral Investment Treaties (BITs) were created with the intention of promoting investment in less economically advanced countries and as a fight against poverty. In addition, the BITs served investment companies as a guarantee against the instability of the poorest countries in the face of unforeseen situations that could jeopardize the investments made. However, after 50 years of BITs it is not possible to conclude that such agreements have facilitated direct investment in developing countries. On the contrary, these treaties have gradually become weapons against the countries that receive the investment when their governments do not act in accordance with the interests of the investment companies.

Finally, the BITs have become a trap for the countries that receive investment because transnational companies are able to attack foreign governments directly. The companies are entitled to request financial compensation for the damage caused and for the loss of profit that the company has failed to receive. These actions are articulated inside of the BITs through the so-called Investor-States Dispute Settlements (ISDS).[7] These treaties have become unpopular and are rejected by most developing countries. Even in developed regions like the European Union there was a call recently to member states to end the BITs among them[8]. For this reason, I wonder how it is possible that the European Union excluded them among its member states while enabling its member states to continue to promote them with other countries including those in Africa.

Africa continues to need direct foreign investment to achieve the Sustainable Development Goals (SDGs) to eradicate poverty and improve the continent’s economic development. However, trade and investment must always be at the service of people. In no case may the interests of the transnational companies prevail over the welfare of the peoples. Thus, I consider that the BITs as they are currently designed are a threat both for the development of countries of Africa as well as achieve compliance of SDGs.

José Luis Gutiérrez Aranda

Trade Policy Officer

[1] Bilateral Investment Treaties: History, Policy and Interpretation

[2] Investment Policies and Bilateral Investment Treaties in Africa


[4] What is the most-favoured-nation clause?

[5] The figure of fair and equitable treatment in public international law

[6] Bilateral investment treaties and a WTO investment framework


[8] European Commission