Foreign investments

Guarantees of investors' rights provided by international investment agreements

• Full protection and security for investments

BITs provide that the Host State will be liable to compensate should official authorities cause any damage by its illegal acts or illegally omission to act by virtue of full protection and security for investments clause.

• Fair and equitable treatment

The Host State shall be obliged to refrain from taking any unreasonable or discriminatory measures that might cause damage for management and use of capital, its content, transition, transformation or liquidation.

• the most favoured nation (MFN) treatment

The Host State shall provide as the most effective protection for investments, as it is able to provide to the investment from any third state.

• National treatment

The Host State shall be obliged to treat foreign investors and their investments no less favourable than that which the Host State accords to its own nationals.

• Right to repatriate investments and returns

Investors are guaranteed the right to freely transfer the investment and returns abroad. But the Host State may limit this right subject to provisional effect in the accordance with specific provisions of the BIT.

• Protection against expropriation of foreign investor's property

Expropriation is the most dangerous threat to foreign investments. The existing customary international law permits any state on its territory to take or nationalize alien property. It is now well accepted that it is lawful for a state to take alien property which commonly accompanied by the compensation, but such taking may become unlawful if it is discriminatory or lack of a public purpose. The above mentioned conditions are contained in the most bilateral investment agreements.

• Compensation for taking of property

The issue of compensation for nationalization of foreign investment has not found any suitable solution in international law yet. It is generally accepted that a lawful nationalization is accompanied by compensation, though the non-payment of compensation does not affect the legality of the takings. The most controversial issue regarding compensation is the amount that the state should pay. The large number of capital exporting states is at the position of "prompt, adequate and effective compensation" in case of nationalization of foreign investors' property, i.e. compensation should cover the real market value of taking property. Developing countries collectively worked out another approach to this problem. From their point of view, in case of nationalization of its property a foreign investor has a right to receive the "appropriate compensation". In accordance with this concept, the Host State has a right to calculate the appropriate compensation which should be based on different coefficients, influencing the amount of compensation, including, for example, returns, period of time of deriving of profit, etc. In many developing countries investors should apply to local courts for compensation awards.

• Subrogation

A great number of BITs provides that the state which compensates to investor his/her losses on the basis of guarantee against non-commercial (political) risks related to its investments on the territory of other state, are entitled to make claims to latter state by the right of subrogation. These rights may be executed in the accordance with the legislation of the latter state. The Convention on Multilateral Investment Guarantee Agency (MIGA) dated 1985 is applied for its the states-members. Over 160 states, including Russia, joined the Convention. The main purpose of the MIGA is to insure private investors and creditors against political (non-commercial) risks in Host States.

• Settlement of disputes

Disputes between Host States and foreign investors should be settled in the independent international arbitration, whose decisions bear legally binding force for the parties. The vast majority of such disputes are adjudicated in accordance with the Regulations of International Center for the Settlement of Investment Disputes (ICSID) or United Nations Commission on International Trade Law (UNCITRAL).