Multinational Enterprises and Investment Treaties

Over the past few decades, a few thousand international investment agreements have been concluded. One cornerstone of those treaties has been a straightforward model of foreign investment: an investor based in a home State that has made an investment located in the territory of a host State. Under that model, treaty protections operate reciprocally, protecting the investments of each treaty party's nationals made in the territory of another treaty party.The foreign investment model on which investment treaties have been based — and which, in turn, supports the reciprocal structure of the treaties — often does not capture current economic reality. Foreign investments by multinational enterprises today routinely involve multiple jurisdictions in which inputs are traded (as part of international production networks known as global or regional value chains) and through which capital is channeled (as transit investment).The reliance by multinational enterprises on international production networks and transit investment has challenged the reciprocal foundation of investment treaties. This article responds to that risk by developing strategies for policymakers and decision-makers to preserve the reciprocal foundation of investment treaties in a 21st century global economy