Starting with the trade liberalisation and opening up of the economies world over accordingly, each country has been trying to attract foreign capital through liberalised investment policies. In this connection, foreign investors started to seek investment destinations which provide most protective, hospitable and profitable climate for their investments. Consequently, many countries have entered into Bilateral Investment Promotion and Protection Agreements (BIPPAs) which not only encourage capital flows into their own countries but also provide safe business environment for their own investors abroad. The multilateral trading system is basically an attempt by governments to make the business environment stable and predictable.
In accordance with the purpose of BIPPAs, each contracting party should encourage and create favourable conditions for investors of the other contracting party to make investments in its territory, and admit such investments in accordance with its laws and policy. Investments of investors of each contracting party should at all times be subject to fair and equitable treatment and enjoy full protection and security in the territory of the other contracting party.
Since the main purpose of BIPPAs is to increase capital flow between the contracting parties and determine the conditions that shall be applicable to foreign investors in the legal system of hosting country, it is also a good opportunity for developed countries to give access to developing or less developed countries regarding new technological and industrial developments. Therefore, in addition to provide new market opportunities to foreign direct investors with these agreements; technology and know-how flow can also be accomplished between countries as well as capital flow.
The objectives of BIPPAs mainly are:
- Promoting foreign direct investments among contracting states
- Considering the reciprocity principle, protecting foreign direct investors against national legal system of the territory
- Provide equal and fair treatment to foreign direct investors complying with the most favoured nation and national treatment principle
- Establish confidence that profits and other incomes foreign investors gained from the invested country can be transferred without any delay
- Stabile, secure and equal level of investment for investors as well as predictability
- Open, fair and undistorted competition
Functions of Investment Agreements
1. National Treatment Principle: According to that principle imported and locally-produced goods should be treated equally — at least after the foreign goods have entered the market. The same should apply to foreign and domestic services, and to foreign and local trademarks, copyrights and patents. National treatment only applies once a product, service or item of intellectual property has entered the market. Therefore, it is important to mention that charging customs duty on an import is not a violation of national treatment even if locally-produced products are not charged an equivalent tax.
2. Most Favoured Nation Principle: Under the terms of BIPPAs, countries cannot discriminate between their trading partners. If one country is given better trade terms by another, then all other states must get the same terms. Most favoured nation status is a method of preventing discriminatory treatment among members of an international trading organization as well. Most favoured nation status provides trade equality among partners by ensuring that an importing country will not discriminate against another country’s goods in favour of those from a third. Once the importing country grants any type of concession to the third-party country, this concession must be given to all other countries.
3.Investments of investors of either contracting party cannot be nationalised, expropriated or subjected to measures having effect equivalent to nationalisation or expropriation in the territory of the other contracting party except for a public purpose related to the internal requirements for regulating economic activity on a non-discriminatory basis and against fair and equitable compensation.
In that case, compensation should be the amount to the genuine value of the investment expropriated immediately before the expropriation or before the impending expropriation became public knowledge, whichever is the earlier, will include interest at a fair and equitable rate until the date of payment, should be made without unreasonable delay, be effectively realizable and be freely transferable. In case of an expropriation government should pay the market value of the land which belongs to the foreign direct investor without any delay.
4. Investors of one contracting party whose investments in the territory of the other contracting party suffer losses owing to war or other armed conflict, a state of national emergency or civil disturbances in the territory of the latter contracting party shall be accorded by the latter contracting party treatment, as regards restitution, indemnification, compensation or other settlement, no less favourable than that which the latter contracting party accords to its own investors or to investors of any third States. Resulting payments can be freely transferable.
5. With the BIPPAs, the opportunity is given to foreign direct investors that when a dispute arises between the government and foreign direct investor, international arbitration shall be applicable which prevents arbitrary approaches of national courts against foreign direct investors.
Agreements of Turkey
Turkey currently has BIPPA’s with over 74 countries in the world from Europe, USA, Africa and Asia. Some of those agreements are signed with Afghanistan, Albania, Argentina, Australia, Austria, Azerbaijan, Bangladesh, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, China, Croatia, Cuba, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hungary, India, Indonesia, Iran, Israel, Italy, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Moldova, Mongolia, Morocco, Netherlands, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Syria, Tajikistan, Thailand, United Arab Emirates, Yemen, United Kingdom, United States of America, Tunisia, Turkmenistan, Ukraine, Uzbekistan.
The first BIPA was signed with Germany in 1962. By year of 2012, Turkey officially signed BIPA with 84 different countries and 75 of those agreements are currently in force including all countries in the EU excluding Ireland and the Republic of Southern Cyprus and all member countries of OECD excluding Ireland, Canada, Norway, Mexico and New Zealand.