THE IMPORTANT ROLE OF
THE BITs IN THE NEW INVESTMENT SCENARIO

Essay #1

Gisah TAVARES

30/04/2009

Due to globalization tendency and the increasing relation between international markets, States have the necessity of establishing economic relations in order to develop its economy by stimulating investments in its territory. The most important instrument utilized as a mechanism not only to ensure the protection but also to promote these foreign direct investments, are the Bilateral Investment Treaties, common known as BITs.
The first Bilateral Investment Treaty (BIT) was signed in 1959 between Germany and Pakistan in order to promote investments in Germany that has lost a large part of its investments after the Second World War and searched a way to rebuild its economy by promoting foreign direct investments. The use of the BITs as a new method of establishing investment accords between countries has been followed by Switzerland that signed its first BIT in 1961 and France, in 1962. A not really significant number of BITs was concluded from the 1960’s until the1980’s.
However, the spectacular increase of the BITs only happened in the 90’s, when the states realized that the necessity of development by emergency markets has grown. In order to develop its economy, the developing countries sought the safest instrument not only to protect, but also to promote the foreign direct investments, so the BITs. As an example, during the pass decade, the number of BITs quintuple, rising from 385 at the end of the 1980’s to 1.857 at the end of the 1990’s[1]. In 2006 some 2.400 – 2.600 bilateral investment treaties were in effect, most between developed and developing countries but a substantial number between developing countries inter se[2].
The rise of the Bilateral Investment Treaties in the pass decade is explained by the need of an effective protection of these foreign investments by investor state. The regular