Bits

Running head: Bilateral Investment Treaties

Bilateral Investment Treaties: The Positive and Negative Effects of Bilateral Investment Treaties in Less Developed Countries
Marcelo Carlos Humberto Fernandez Flores
University of Arkansas

April-2010

The Positive and Negative Effects of Bilateral Investment Treaties in Less Developed Countries

Introduction
Among human activities,commerce has always been one of the most important activities, which is a source of trade between different interests, determined by the product, service, or good required to fulfill and accomplish a determined activity. When people trade and do business, principles that shape this relations are juridical security, security that is provided by the principle of good faith and by legal protectionsenounced in independent, sovereign, and autonomous countries. Not only an individual can trade or do business, there are many relations for this type of activity such as individual-individual, individual-collectivity, collectivity-collectivity, person-company, person- public sector, company-public sector, company-company, public sector-public sector. Yet, these relationships can be performed in thedomestic or international field and for both; security is the primordial factor to assure private and public interests. In the international scope providing security is a more challenging task due to countries trade policies, barriers, restrictions, independence, sovereignty, and autonomy. The tendency for policies to protect international relations, have been evolving lately in terms of enforcingand protecting investment of different industries. The mechanism for protecting international investment is a new technique created in 1959 called Bilateral Investment treaty.
The objective for this paper is to comprehend the evolution and effects of bilateral investment treaties in developing or less developed countries, when the companies from industrialized countries look to diversify theirmarket.

THEORETICAL ANALYSIS
History
Bilateral Investment Treaties are formed in the mid 1950s as a way of expanding commerce and markets in which the intent of developed countries was to protect the investment of their private capital (private companies from developed countries). These treaties are formed and created instead of the decadent Hull Rule.
Both customary international law andits practice were under attack by developing country hosts by the 1950s. The nationalization of British oil assets by Iran in 1951, the expropriation of Liamco's concessions in Libya in 1955, and the nationalization of the Suez Canal by Egypt a year later served notice of a new militancy on the part of investment hosts. The nationalization of sugar interests by Cuba in the 1960s further undercutassumptions about the security of international investments. Mean-while, collective resistance to the Hull Rule in the United Nations was on the rise (Kerner, 2009). In 1962, the UN General Assembly adopted the "Resolution on Permanent Sovereignty over Natural Resources" that provided for merely "appropriate" compensation in the event of expropriation. Several more UN resolutions followed in the1970s, along with a string of under compensated expropriations around the world. Bilateral treaties made their debut in the late 1950s, just as consensus on customary rules began to erode (Elkins, 2006).
Since the adoption of the first BIT in 1959, a rapid grow of BIT has been occurring,t he most significant increase took position during the 1990s, when their number rise five times (UNCTAD, 1999).Latin American countries have not started signing BITs until the late 1980s. Changes in the development strategies of the countries in the region have since led to a rapid growth of BITs, and according to the United Nations they reach a total of 300 treaties, 93 per cent of which were signed during the 1990s. Together with the 82 BITs signed by the Caribbean countries which, however, had...