What Are International Investment Agreements?
An international investment agreement (IIA) is a treaty involving two or more countries designed to protect and establish rules for cross-the-boarder investments. In other words, it helps protect investors in one country who own assets held in another country. Countries that agree to an IIA make a commitment to apply the standards outlined in the agreement to foreign investments held inside their own borders.
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Purpose
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Countries agree to IIA treaties for two primary purposes. One is to promote foreign investment in their own country. Promises to protect and treat foreign investments fairly can encourage foreign investment. Likewise, a country may agree to an IIA treaty to ensure its citizens' investments are treated fairly by partner countries when they invest abroad.
Bilateral Investment Treaties
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A bilateral investment treaty is an IIA established between two countries. Both countries agree to treat investment from the other country with the same rules and protections. In other words, it is a reciprocal arrangement. In addition to investment protection, these treaties are also used to promote public policy by establishing bilateral rules designed to protect the environment and promote public health and safety.
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Preferential Trade and Investment
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Preferential trade and investment agreements are designed to promote and encourage trade between countries. The North American Free Trade Agreement (NAFTA) is an example of a preferential trade agreement. This type of agreement is designed to reduce or erase trade tariffs between countries and protect intellectual property rights for companies in both countries.
International Tax Agreements
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Multinational corporations are companies that have investments and operations in more than one country. As a result, they may be subject to tax rules in both their home country and in the countries in which they operate. International tax agreements seek to establish bilateral rules of taxation for multinational corporations. Most often, these agreements eliminate double taxation for these types of corporations.
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