A bilateral investment treaty (BIT) is an agreement between two states designed to encourage and protect investments made by nationals or companies from one country in the other. They provide legal assurances to investors, fostering a stable environment for cross-border investments. Many countries around the world have domestic laws that provide protection to foreign investors, for example, Oman has the Foreign Capital Investment Law, however, BITs make the duty to provide this protection a legal obligation under public international law and offer investors the ability to resort to international arbitration to enforce their rights under the BIT without the need to have a contract between the state and the investor that provides for arbitration.
While the exact provisions can vary, most BITs share several common elements, including the duty to offer foreign investors treatment that is not less favourable than the treatment offered to national investors or investors from other states (national treatment and most-favoured-nation treatment), offer investors fair and equitable treatment, protect their investments against expropriation, and give investors the right to use several dispute resolution mechanisms.
National Treatment and Most-Favoured-Nation Treatment
A key provision in BITs is that the state has a duty to treat foreign investors and their investments at a standard that is not less favourable than the treatment it offers its own national investors or the investors of any other state. This concept has a wide scope and can relate to matters such as legal protections and access to markets in a manner that prevents discriminatory practices that target foreign businesses, including the payment of taxes. The objective of this clause is to create a level playing field and promote fair competition.
Protection Against Expropriation
Expropriation relates to the confiscation by the government of the private property of others. BITs typically include provisions to protect investors from unlawful expropriation of their investment by the government and set conditions for permitting expropriation if it is done for a public purpose, is non-discriminatory, and adheres to due process. Additionally, any expropriation must be followed by prompt, adequate, and effective compensation. In addition to this being translated in article 24 of the Foreign Capital Investment Law, Oman has a comprehensive framework for this in the Law on the Expropriation for Public Benefit.
Dispute Settlement Mechanism
The most critical feature of a BIT is the dispute settlement mechanism that allows an investor to enforce their rights against the host country if the country fails to meet its obligations under the treaty. A standard BIT would allow the investor to make a claim at their choice of venue, including making a claim through an arbitration process before the International Centre for Settlement of Investment Disputes (ICSID).
Conclusion
BITs provide a powerful mechanism for protecting and enforcing the rights of foreign investors. Oman traditionally used to sign these treaties frequently with other states, but the number of new treaties has been declining with the most recent one being Oman-Hungary BIT which was ratified in 2022.
