Do Bilateral Investment Treaties Promote Foreign Direct Investment? Preliminary Reflections on a New Methodology

The future of the international investment regime is rapidly evolving and many different kinds of investment treaties are now being negotiated. In particular, the EU, which is emerging as a new actor on the scene of international Foreign Direct Investment (FDI) policy will need to know what kind of FDI-related provisions it should favour. We argue that much can be learned from the substance of existing Bilateral Investment Treaties (BITs) as differences in legal provisions of BITs are crucial regarding the application of BITs in praxi. Therefore, this paper presents a new methodology to measure the effect of the essential legal provisions of BITs. Starting from a review of 40 empirical studies, the (heterogeneous) empirical results of the effects of BITs on FDI are summarized. In the conceptual part of this paper, the most important legal substantive criteria as well as the key technical features of BITs are identified together with their variants. These are the components of new BITSEL index.