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Promotion of investment

I. Promotion of investments as purpose for the conclusion of bilateral investment treaties


Customary international law does not impose any obligation on States relating to the promotion of investments (either in a State’s territory, or investment by a State’s nationals in other States).1 In the absence of a treaty or an investment contract, a State is thus under no such obligation. The express aim of most BITs, as can be witnessed from their title, is to “protect and promote investments."

II. Impact of BITs in the promotion of foreign investment


Considering the many variables that need to be taken into account, it is difficult to evaluate whether BITs fulfil their objective of promoting foreign investment. Various econometric and other studies in the last decades have not clearly shown whether the entry into force of BITs is directly correlated with an increase of outward or inward foreign direct investment.2

III. Weak obligations relating to the promotion of investments in BITs


The preambles of BITs typically focus on the objective of promoting and protecting investment, sometimes highlighting that promotion and protection must be achieved in a manner consistent with other public policy objectives.3 Even though investment protection is one of the expressly stated aims of BITs, the majority of BITs do not include an obligation to promote investments.4 When they do, they typically contain a general and vague obligation to promote and encourage inward foreign direct investment (as a continuing duty),5 most of the times combined with the obligation to admit foreign investment subject to national laws or policies.6 Furthermore, BIT provisions imposing an obligation on a State to encourage its own nationals to invest in the territories of the State’s BIT partners are exceptional.7

IV. No arbitral case law relating to a State's failure to promote foreign investment


The promotion of foreign investment is unlikely to represent a sanctionable obligation: international arbitration is often only available to established investments only and does not cover disputes regarding the admission of investments.8 If the option to bring arbitration proceedings is available, investors are more likely to bring disputes claiming a breach of the specific obligation of admission, rather than the general obligation of promotion.9 Hence, there appear to be no investment arbitration awards condemning a State regarding the breach of the promotion obligation.10 It has been proposed that BITs should include legally-binding provisions regarding promotion and facilitation of investment.11

V. Reference to the promotion obligation in interpreting other obligations


Several tribunals have relied on the provisions on promotion of investments in providing a context for the interpretation of other investment protection provisions, notably the fair and equitable treatment provision.12 However, scholars and arbitral tribunals have highlighted the limits of this exercise, which may lead to giving preambles undue weight, or to favouring certain stated objectives to the detriment of others.13

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