Updated December 5, 2016
U.S. International Investment Agreements (IIAs)
Background
investment chapters, and often viewed as more
comprehensive and higher-standard than those of other
The United States, a major source of, and destination for,
countries. U.S. IIAs cover about one-fifth of U.S. FDI stock
foreign direct investment (FDI), is party to binding
abroad (Department of Commerce). Historically, U.S. IIAs
international investment agreements (IIAs) with over 50
have focused on developing economies, aiming to protect
countries. These treaty agreements reduce FDI restrictions,
U.S. companies investing in countries with weak legal
ensure nondiscriminatory treatment of investors and
regimes, and/or insufficient protection for private property.
investment, and aim to balance other policy interests (such
More recent U.S. investment agreements and negotiations
as safeguarding a host government’s right to regulate in the
involve larger U.S. trading partners.
public interest). While some World Trade Organization
(WTO) agreements address investment issues in a limited
Figure 1. U.S. International Investment Agreements
manner, IIAs, in the form of bilateral investment treaties
(BITs) and investment chapters in free trade agreements
(FTAs), are the primary tools for promoting investment and
protecting investors. The over 2,600 IIAs in force globally,
form a complex, overlapping network of investment rules.
Role of Congress. BITs require Senate approval and FTAs
require approval by both Houses to enter into force in the
United States. Congress sets U.S. investment negotiating
objectives, most recently in the 2015 Trade Promotion
Authority (TPA) (P.L. 114-26), which reaffirmed principal
U.S. negotiating objectives to reduce or eliminate foreign
investment barriers and to ensure that foreign investors do
not receive “greater substantive rights” for investment

protections than U.S. investors in the United States. The
Source: USTR and the Department of State information.
Department of State and U.S. Trade Representative (USTR)

co-lead U.S. investment negotiations using a “Model BIT”
Issues for Congress
template, revised in 2012 (Box 1).
Box 1. Basic Provisions of U.S. IIAs
Status of U.S. investment negotiations. In February 2016,
the United States and 11 other countries signed the Trans-
Market access for investments.
Pacific Partnership (TPP), a proposed Asia-Pacific regional
Nondiscriminatory treatment of foreign investors and
FTA. Congress must pass implementing legislation for the
investments compared to domestic investors (national
agreement to take effect in the United States. TPP’s
treatment) and those of a third country (most-favored-nation
investment provisions reflect compromise among the
treatment).
negotiating parties, as well as efforts to target concerns of
Minimum standard of treatment (MST) in accordance with
customary international law, including fair and equitable
some stakeholders. The TPP text carries over core investor
treatment and full protection and security.
protections common in prior U.S. IIAs and contains some
Prompt, adequate, and effective compensation for direct or
new features, such as:
indirect expropriation, with safeguards allowing for
 clarification of MST and certain other provisions;
nondiscriminatory regulation in the public interest.

Timely transfer of funds into and out of the host country
greater affirmation of governments’ right to regulate;
without delay using a market rate of exchange.
 expanded provisions on ISDS proceedings (e.g., rules
Limits on performance requirements that, for example,
for dismissing frivolous suits, third-party submissions,
condition investment approval on using local content.
and arbitral qualifications, and code of conduct); and
Investor-State Dispute Settlement (ISDS) for binding

international arbitration of private investor claims against host
exemption of tobacco control measures from ISDS.
country governments for violation of investment obligations,
President-elect Trump has announced his intent to withdraw
along with transparency requirements of ISDS proceedings.
from TPP once in office, making its future uncertain.
Exceptions such as for national security and prudential
Nonetheless, investment issues in trade agreements will
interests.
likely continue to draw congressional attention. They
include issues such as balancing investor protections with

other interests, including governments’ right to regulate for
U.S. IIAs. The United States has in force BITs with 40
environmental, health, and other objectives. Prospects also
countries and 14 FTAs with 20 countries (Fig. 1), most with
are unclear for the Transatlantic Trade and Investment
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U.S. International Investment Agreements (IIAs)
Partnership (T-TIP), a potential U.S.-EU FTA that has been
more assertively for its creation, which was endorsed in
under negotiation since 2013. If negotiations continue under
TPA-2015. Contradictions between arbitral awards
the next Administration, the agreement’s approach to ISDS
resulting from the use of ad-hoc dispute panels have raised
would likely be a key issue for Congress.
concerns about the coherence of global investment
TPP and T-TIP currently represent around three-quarters of
protections. Yet, appeals processes prolong disputes and
the stock of U.S. FDI abroad, but do not include major
investor uncertainty. During the T-TIP negotiations, the EU
emerging economies, such as China, India, and Brazil. BIT
proposed a new “Investment Court System,” which would
discussions, however, have been underway with China and
include, among other things, an appellate mechanism. To
India. While such potential BITs present opportunities for
date, the U.S. government and U.S. industry have favored
enhanced commercial relations, debate exists over whether
ISDS over the EU proposal, while some civil society groups
high standard investment commitments can be achieved.
assert that the EU proposal fails to resolve their concerns
These existing U.S. BIT negotiations, if continued, as well
about ISDS.
as potential new BIT negotiations with other countries,
could be of oversight interest in the 115th Congress.
Figure 2. Global FDI Stock and ISDS Cases, 1987-2015
Debate over ISDS. ISDS was designed to depoliticize
disputes by allowing investors to bring claims against
foreign governments in a neutral forum (Box 2). While
ISDS is a core component of U.S. IIAs, it was a contentious
issue in the TPP and T-TIP negotiations. The ISDS debate
has intensified with the growth of both global investment
and ISDS cases (Fig. 2). U.S. investors account for around
one-fifth of investment claims. To date, no cases have been
decided against the United States.
Box 2. Mechanisms for ISDS
The most widely used fora for ISDS are the International Centre
for Settlement of Investment Disputes (ICSID), a World Bank
Group affiliated organization, and the United Nations
Commission on International Trade Law (UNCITRAL). They
provide the procedural rules for arbitrating international
investment disputes, typically by a unique tribunal consisting of:

one arbitrator appointed by the investor; one by the State; and
Source: U.N. Conference on Trade and Development (UNCTAD).
one by agreement of both parties.
Investment rules architecture. Congress may consider the
Members of Congress could revisit issues raised in the
U.S. approach to IIAs in the global context. Proposed
ISDS debate. Supporters argue that ISDS is a reciprocal
mega-regional agreements such as TPP and T-TIP, if
right protecting U.S. investors overseas, ISDS gives foreign
pursued, could form the basis for potential multilateral
investors in the United States no additional substantive
rights relative to U.S. law as investment obligations mirror
investment rules. New IIAs may also be an opportunity to
U.S. law, and no ISDS case has ever been decided against
consider revisions to ISDS, such as developing an appellate
the United States. Critics, in contrast, assert that investors
body mechanism. Pursuing bilateral FTAs and BITs might
should not have additional procedural rights to challenge
reinforce the current trajectory of overlapping investment
governments through a venue outside of the country’s
rules, yet may allow opportunity for rules more tailored to
courts, the scope of covered protections is too broad, and
the specific investment relationship. BIT negotiations with
that ISDS presents transparency and fairness concerns.
economies such as China and India could expand U.S.
market access and investor protections, but would need to
Other aspects of ISDS elicit debate as well. Critics argue
overcome unique challenges faced in these markets such as
companies’ use of ISDS, or the mere threat of it, can lead to
state-driven strategic investment strategies and strong
a “regulatory chill.” They also highlight the use of ISDS to
presence of state-owned enterprises in investment activity.
resolve claims, for example, centering on environmental
Open policy questions include the effectiveness of the
and labor regulations. Supporters counter that U.S. IIAs
provide basic due process protections modeled after U.S.
current global network of IIA, the role of FTAs and BITs in
law, and do not prevent governments from adopting or
shaping the investment rules architecture, and if more
maintaining nondiscriminatory laws or regulations that
comprehensive multilateral rules should be pursued, such as
protect the public interest. They also note that ISDS awards
through the WTO. See CRS Report R43052, U.S.
are restricted to monetary penalties or restitution and cannot
International Investment Agreements: Issues for Congress.
force governments to change its laws or regulations.
Martin A. Weiss, Specialist in International Trade and
Currently, ISDS decisions cannot be appealed. (In trade
Finance
disputes, by contrast, participants can appeal a decision to a
Shayerah Ilias Akhtar, Specialist in International Trade
permanent WTO appellate body.) Members of Congress
and Finance
could consider the pros and cons of an appellate mechanism
IF10052
for investment disputes, as well as whether to advocate
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U.S. International Investment Agreements (IIAs)


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https://crsreports.congress.gov | IF10052 · VERSION 11 · UPDATED

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