Structuring Foreign Investment to Ensure Treaty Protection -
Although it is common practice for businesses to structure their investments abroad through jurisdictions that maximize tax and other advantages—such as the Isle of Man or the British Virgin Islands—investors less frequently plan to ensure that their foreign investments are structured so as to obtain protections from sovereign interference, such as regulatory takings or taxation. Often businesses are unaware that there is a network of treaties that protect investors abroad against abusive sovereign conduct. Taking advantage of that network can require advance planning.
These treaties include investment treaties between two States (bilateral investment treaties, or BITs), investment treaties between several States, which are typically related to a specific subject matter such as energy investments, or a specific region (multi-lateral investment treaties, or MITs) and free trade agreements (FTAs). BITs, MITs and FTAs typically contain substantive protections that allow foreign investors to bring claims against host States in specialized fora. But to obtain those protections, thought must be given to the holding structure for foreign investments so as to take advantage of an applicable and effective treaty.
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