Bilateral Investment Treaties, or better known as BITs, are agreements between two countries that set rules for how investors from one country can invest in the other. They are designed to promote and protect foreign investments by creating a stable legal framework that gives investors the confidence when doing business abroad. That framework creates obligations for the host government to treat foreign investors with particular standards, as well as, grant foreign investors the right to bring claims against the host government directly in the case of violations of the treaty.
Oman routinely signs BITs with other countries as part of its strategy for foreign investment and has 30+ agreements with countries such as the UK, Germany, and Japan.
Here are some key investors rights commonly found in BITs:
The Right to “Fair and Equitable” Treatment
To avoid any arbitrary or discriminatory actions that could harm the investors or their investments, the host government must maintain full transparency and uphold a minimum standard of treatment, that is established in the treaty, to be given to the investors and their investments. This right extends beyond simple “fairness”, it obliges the host government to act transparently, consistently, and in good faith towards foreign investors.
Examples of cases brought forward include claims of unfair treatment, abuse of power or bad faith, fundamental changes in the law that contradict expectations, and inconsistent application of legal procedures and regulations that violate the right to fair treatment.
The Right to Compensation for Expropriation
It is important to note that the host government is entitled to expropriate the property of the investors; however, it must be for legitimate public use, non-discriminatory, done in accordance with due process, and followed by an adequate market value compensation paid without delay and freely transferable. The right covers both direct (where the property is physically transferred to the government or it’s entities) and indirect expropriation (where the property isn’t physically transferred but the goverement deprives the investors of the property’s full economic use and enjoyment). For example, implementing excessive regulations and stripping control from the investors.
The Right to Allow Free Transfer of Funds
Another common right under BITs is related to cross-border fund transfer, which allows investors to make transfers in and out of the host country with ease and without delays. This obligation prohibits any hinderance from the host government that might trap profits within the host country. It ensures liquidity and financial stability, which are crucial for international business, as well as reinforcing investor confidence by guaranteeing free flow of funds and smoother economic operations. The guarantee of free transfer typically covers the following types of flows; profits, interest, dividends, proceeds from sales or liquidations (total or partial), capital funds, and loan payments, etc.
This right also prevents the implementation of currency controls by guaranteeing market exchange rates at the time of the transfer. However, the government may also exercise its right to delay or halt transfers, while still acting good faith, in the events of bankruptcy, enforcement of creditor rights, criminal investigations, financial regulatory requirements, or compliance with court orders and judgments.
The Right to Resolve Disputes with the Government
One of the most powerful rights given to investors under BITs is the right of the investor to resolve disputes the investor has with the host state using a variety of dispute resolution venues such as domestic courts and international arbitration. The actual venues that the investor has access to and the process for resolving disputes depends on the actual text of the treaty, however, most treaties require a cooling-off period for negotiations before resorting to a formal dispute resolution mechanism. If no settlement is reached, the investors may then bring a claim before the domestic court, ad hoc arbitration, or the ICSID, which Oman is a member of, insuring independency from domestic courts.
Conlcusion
In summary, Bilateral Investment Treaties, or BITs, are a fundamental tool that protects foreign investors by ensuring fair treatment, compensation for expropriation, and free fund transfers, while allowing direct dispute resolution against host governments. They create a stable legal framework that balances investor rights with legal government actions, developing confidence and promoting cross-border investment.
The Oman-Iran BIT is the most recent BIT that Oman entered into and was singed in Muscat on May 2025.
