In this article, Bileteral Investment Treaties (BITs) and Most Favored Nation and National Treatment Clauses will be discussed.


Bilateral Investment Treaties, or BITs, are international agreements between two countries that are designed to promote and protect foreign investments. These agreements provide a framework for investment protection, including provisions for dispute resolution, and promote the free flow of capital between countries.

One of the key principles of BITs is the concept of “national treatment” or “most-favored nation treatment.” This means that foreign investors are entitled to the same treatment as domestic investors, as well as investors from any other country that has signed a BIT with the host country.

The goal of national treatment is to create a level playing field for foreign investors and to ensure that they are not discriminated against in favor of domestic investors. This is important because foreign investors often face unique challenges when investing in a foreign country, such as unfamiliar legal systems, cultural differences, and language barriers.

BITs also typically include provisions for dispute resolution between investors and host countries. These provisions may allow investors to bring claims directly against the host government in an international arbitration forum, rather than having to rely on domestic courts.

In addition to promoting investment protection and providing a mechanism for dispute resolution, BITs can also help to stimulate economic growth by promoting the free flow of capital between countries. By providing greater certainty and predictability for investors, BITs can help to attract foreign investment, which in turn can create jobs and stimulate economic development.

Bilateral Investment Treaties have been around for several decades, and they have been signed by hundreds of countries around the world. However, they have also been subject to criticism and controversy, particularly in recent years.

One of the main criticisms of BITs is that they can be used by multinational corporations to undermine the sovereignty of host countries. Critics argue that BITs can give investors too much power, allowing them to challenge and even overturn legitimate public policy decisions made by host governments.

For example, if a host country were to introduce new environmental regulations that could impact the profitability of a foreign investment, the foreign investor may be able to bring a claim against the host country under the terms of a BIT. This could result in the host country being forced to pay substantial compensation to the foreign investor, or even being forced to change its environmental regulations.

Critics also argue that BITs can create a race to the bottom, as countries compete with each other to offer the most favorable investment terms to attract foreign investment. This can result in a race to the bottom in terms of labor standards, environmental regulations, and other important policy areas.

Despite these criticisms, BITs continue to be an important tool for promoting and protecting foreign investment. In recent years, there has been a trend towards renegotiating and modernizing existing BITs to address some of the concerns that have been raised.

For example, many new BITs include provisions to promote sustainable development, such as provisions requiring investors to comply with environmental and labor standards, and provisions allowing host countries to regulate in the public interest. These provisions are designed to balance the interests of investors with the interests of host countries and to ensure that BITs promote sustainable economic growth.

Another trend in recent years has been the use of regional agreements to promote investment protection. For example, the European Union has negotiated investment agreements with several countries, including Canada, Japan, and Singapore. These agreements include provisions for investment protection, dispute resolution, and other important features of BITs.

Overall, Bilateral Investment Treaties are an important tool for promoting and protecting foreign investment. While they have been subject to criticism and controversy, they continue to play an important role in promoting economic growth and development around the world. As the world becomes increasingly interconnected and globalized, the importance of BITs is likely to continue to grow.


As mentioned above, the most favored nation (MFN) clause and the national treatment principle are two key provisions found in BITs. These clauses are designed to ensure fair treatment of foreign investors and to promote a level playing field for trade between countries.

The most favored nation clause is a provision that requires a country to extend the same treatment to investors from other countries as it does to investors from its most favored trading partners. In other words, if a country extends favorable treatment to investors from one country, it must also extend that same treatment to investors from all other countries with which it has signed an MFN clause.

The MFN clause is intended to prevent discrimination against foreign investors and to promote equal treatment for investors from different countries. It is based on the principle of reciprocity, where countries agree to treat each other’s investors fairly in exchange for similar treatment.

The MFN clause can be found in a wide range of international agreements, including trade agreements, investment treaties, and especially, in BIT’s. The clause is designed to promote openness and transparency in international investments and to prevent countries from engaging in protectionist behavior.

For example, imagine that Jordan has signed an bileteral investment treaty with Türkiye that includes an MFN clause. Türkiye has also signed an investment treaty with Azerbaijan, but that treaty does not include an MFN clause. If Türkiye were to offer a special tax exemption to investors from Azerbaijan, it would be required to extend that same exemption to investors from Jordan under the MFN clause.

The national treatment principle, on the other hand, requires a country to treat foreign investors in the same way as it treats its own domestic investors. This means that once a foreign investor has made an investment in a country, that investor should receive the same treatment as a domestic investor in terms of legal protection, tax treatment, and other factors.


The national treatment principle is designed to promote fairness and equal treatment for foreign investors. It is based on the idea that foreign investors should not be put at a disadvantage simply because they are not domestic investors. You can get more information from our article about the principle of fair and equal treatment.

For example, if a country provides a tax exemption for its domestic investors, it must also provide that same exemption to foreign investors under the national treatment principle. This ensures that foreign investors are not at a disadvantage when investing in the country.

Both the MFN clause and the national treatment principle are important tools for promoting fair and open international trade and investment. By ensuring that foreign investors are treated fairly and equally, these clauses help to create a level playing field for trade and investment between countries.


However, there are some criticisms of these clauses. Some argue that the MFN clause can create a “race to the bottom” in terms of regulation, as countries compete to offer the most favorable treatment to investors. Others argue that the national treatment principle can be difficult to enforce in practice, as countries may be tempted to favor their own domestic investors over foreign investors.

Despite these criticisms, the MFN clause and the national treatment principle remain important provisions in many international agreements. By promoting fair and equal treatment for foreign investors, these clauses help to foster economic growth and development around the world.


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Stj. Av. Ömer Faruk KILIÇ 

Av. Muhittin KURNAZ

Sosyal Medyada Bizi Takip edin





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