2 Foreign Investment: Economic and Legal Foundations

Subject(s):

Foreign Direct Investment — Definition of investment — Investment ‘in accordance with host state law’ — Specialized treaty frameworks — Treaties, interpretation — Treaty provisions

This chapter examines two foundational questions relating to foreign investment: why firms engage in foreign investment, and how inward foreign investment affects host states. It then examines the scope of the investment treaty regime’s coverage of different types of ‘investors’ and ‘investments’. The chapter makes a simple yet often overlooked point: whereas different types of foreign investment have different drivers and effects, investment treaties cover practically all forms of investment and all types of foreign investors. This has important implications when considering the effects of the investment treaty regime.