Converging Trends in Investment Treaty Practice

Traditionally, the vested interests of states concluding bilateral investment treaties (BITs) fell into two categories: on the side of capital-exporting states, an interest in adopting strong protections for foreign investors; on the side of capital-importing states, an interest in attracting foreign investment but also in attempting to preserve host country sovereignty and authority to promote the public interest. Over the past decade or so, however, the line between capital-exporting and capital-importing state increasingly has blurred, and the calculus for states negotiating BITs has become less certain. The experience of the US as a respondent to claims brought to arbitration by Canadian investors under Chapter 11 of NAFTA significantly affected the development of a new generation of US BITs that better balance the interests of host states against those of foreign investors. Similarly, as emerging market economies become significant exporters of capital, these countries are concluding BITs and resorting to investor-state arbitration, driven at least in part by the needs of their own foreign investors. This article examines this convergence in BIT practice. It suggests that these converging trends, a function of states operating behind what Rawls referred to as a “veil of ignorance,” are having and should continue to have a moderating influence on the content of BITs.