Legal Protection to Foreign Investors

13 Pages Posted: 19 Dec 2012

See all articles by Juan Carlos Hatchondo

Juan Carlos Hatchondo

Indiana University Bloomington

Leonardo Martinez

International Monetary Fund (IMF) - IMF Institute

Date Written: January 1, 2011

Abstract

Foreign investment is typically considered an important source of growth for developing countries. This article describes the legal protection granted to foreign investors and its enforcement mechanisms. Governments have signed international investment agreements intended to protect foreign investors from the risk of expropriation and have increasingly chosen to issue sovereign debt in international financial centers, which expose defaulting governments to litigations in foreign national courts. In most cases, governments have complied with unfavorable rulings of international arbitration courts, and many recent sovereign default episodes were followed by relatively friendly debt restructuring agreements. But there have been cases in which expropriated investors or holders of sovereign debt in default have not been compensated, which suggests that the actual legal protection granted to foreign investors is limited.

Suggested Citation

Hatchondo, Juan Carlos and Martinez, Leonardo, Legal Protection to Foreign Investors (January 1, 2011). FRB Richmond Economic Quarterly, vol. 97, no. 2, Second Quarter 2011, pp. 175-187, Available at SSRN: https://ssrn.com/abstract=2190602

Juan Carlos Hatchondo (Contact Author)

Indiana University Bloomington ( email )

Dept of Biology
100 South Indiana Ave.
Bloomington, IN 47405
United States

Leonardo Martinez

International Monetary Fund (IMF) - IMF Institute ( email )

700 19 th Street NW
Washington, DC 20431
United States

HOME PAGE: http://works.bepress.com/leonardo_martinez/

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