A Comparison of Bit and the Investment Chapter of Free Trade Agreement from Policy Perspective

Abstract

This paper presents the recent development of BITs and the part of FTAs related to investment. In respect of the slower increase in the number of BITs as well as more FTAs being concluded and that it is a common practice for the FTAs to have an investment chapter, it is possible to incorporate investment matters into FTAs. Based on some key elements of investment rules in several FTAs and BITs, it is clear that the investment chapter can be designed perfectly and is actually designed to have very similar or even identical contents to those in BITs. Since there is no legal or technical barrier to incorporate the contents of a BIT into an FTA, the discretion whether to have a separate BIT or to have the contents of a BIT included in the FTA simply belongs to the parties. Furthermore, because there is no legal difficulty incorporating the investment treaties into a chapter of an FTA, BIT's certainly can be replaced by an investment chapter in FTA. Thus, there would be no difference incorporating investment provisions in the FTA investment chapter or in a BIT. However, there may be some concerns that need to be addressed in the case of countries which might not be able to avoid facing the trend of a more comprehensive mode of negotiations to have both trade and investment matters being included in the same set of negotiations, where the use of leverage between trade and investment matters is basically unavoidable.

Keywords: BIT, FTA, international investment, policy choice, UNCTAD