September 11, 2025 — Bilateral investment treaties are agreements between two states under which each state agrees to provide certain protections to investors of the other state who invest in its territory. The protections typically include guarantees against expropriation without compensation, fair and equitable treatment standards, free transfer of investment-related funds, most-favoured-nation treatment, and dispute resolution mechanisms that allow investors to bring claims directly against the host state in international arbitration. The bilateral investment treaty network has expanded substantially since the first such treaty between Germany and Pakistan in 1959; there are now approximately three thousand bilateral investment treaties in force globally, supplemented by a growing network of investment chapters within multilateral trade agreements.

For most of the network's history, BITs were the concern of two categories of actor: states, which negotiated and applied them, and large multinational corporations, which structured their cross-border investments to obtain treaty protection where useful. The historical individual investor or smaller entrepreneur did not generally consider BIT protection as a planning factor; the cost and complexity of structuring around BITs was not justified by the scale of their investments.

The post-2015 development of investor-state arbitration, combined with the increasing scale of individual cross-border entrepreneurial activity, has changed this. A growing population of cross-border entrepreneurs and high-net-worth individuals now consider BIT protection in their planning, including — in selected cases — in their citizenship and residence planning. This article reads the current state of the BIT network, identifies the categories of activity in which BIT protection has become a planning consideration, and describes the structuring options that practitioners now consider.

The architecture of bilateral investment treaties

The principal protections under bilateral investment treaties have stabilised across the network in roughly the following form.

The expropriation protection prohibits the host state from expropriating the investment without compensation. The protection extends to direct expropriation — the seizure of the investment — and to indirect expropriation — measures that have an effect equivalent to seizure without formal taking. The compensation must generally be prompt, adequate, and effective, with adequacy defined by reference to the fair market value of the investment at the date of expropriation.

The fair and equitable treatment standard requires the host state to treat the investment in a manner that satisfies certain qualitative criteria. The standard has been the subject of substantial interpretation in arbitral case law, with the principal elements including: protection of the investor's legitimate expectations, due process and procedural fairness, freedom from arbitrary or discriminatory measures, transparency in administrative action, and stability of the legal framework applicable to the investment.

The free transfer protection requires the host state to permit the free transfer of investment-related funds, including capital contributions, returns on the investment, repayment of loans, and proceeds of liquidation or sale. The protection limits the host state's ability to impose currency controls, transfer restrictions, or capital controls on covered investments.

The most-favoured-nation treatment requires the host state to provide treatment that is no less favourable than the treatment provided to investors of any other state. The provision has been used by investors to claim the benefit of provisions in other bilateral treaties to which the home state of the claimant is not a party.

The dispute resolution mechanism is the most distinctive feature of bilateral investment treaties. The mechanism allows the investor to bring claims directly against the host state in international arbitration, typically before the International Centre for Settlement of Investment Disputes or under the rules of the United Nations Commission on International Trade Law. The arbitration produces a binding award that is enforceable against the host state's assets globally, subject to certain limitations.

Why bilateral investment treaties have become individual-relevant

The historical premise that bilateral investment treaties were principally a corporate concern reflected the cost and complexity of accessing the protection. The cost of structuring an investment to qualify for BIT protection, monitoring the investment for compliance with the protective conditions, and — if necessary — bringing investor-state arbitration was generally too high to be justified by individual or smaller entrepreneurial investments.

Several developments have changed this calculation.

The first is the expansion of investor-state arbitration to a broader range of investment categories. The early arbitral case law focused on traditional foreign direct investment in physical assets and operating businesses. The post-2010 case law has extended to a wider range of categories, including financial investments, intellectual property holdings, real estate, and — in some cases — cryptocurrency and digital asset positions. The expansion has brought a wider range of cross-border individual activity within potential BIT protection.

The second is the increasing scale of individual cross-border entrepreneurship. The post-2010 growth of remote work, of international entrepreneurship, of cross-border technology businesses, and of individual investment activity has produced a population of high-net-worth individuals whose cross-border position is sufficiently substantial to justify BIT-related planning. The marginal investment that BIT planning requires is now justified by the scale of the underlying activity for a meaningful number of individuals.

The third is the increase in political and regulatory risk in several jurisdictions where individual entrepreneurs operate. The post-2015 period has produced episodes of regulatory action affecting foreign-held assets, of currency controls, of expropriation in certain emerging markets, and of broader political instability. The episodes have demonstrated that BIT protection is, in certain cases, the principal practical recourse for affected investors.

The fourth is the development of the citizenship-by-investment industry. Several jurisdictions — historically a handful of Caribbean states, more recently several European states — have offered programmes that allow qualifying individuals to acquire citizenship through investment. The programmes have been used by some investors specifically to access the BIT networks of the granting state. The use is controversial in some respects but has expanded the menu of citizenship options that high-net-worth individuals consider.

The categories of activity that benefit

The categories of cross-border individual activity in which BIT protection has become a meaningful planning consideration include the following.

The first is the establishment of operating businesses in jurisdictions with material political or regulatory risk. An entrepreneur establishing an operating business in a developing country with episodes of regulatory action against foreign-held assets has substantive interest in ensuring that their investment qualifies for BIT protection from one or more home jurisdictions. The protection provides a recourse mechanism in the event of subsequent regulatory action.

The second is the holding of significant real estate or other physical assets in jurisdictions with comparable risk profiles. Real estate held directly by a foreign individual may qualify for BIT protection under the relevant bilateral treaty, providing a layer of protection against subsequent regulatory action affecting the property.

The third is the holding of intellectual property, financial investments, or other intangible assets in jurisdictions with developing legal frameworks. The applicability of BIT protection to such holdings depends on the specific bilateral treaty and on the categories of investment recognised under the treaty's definition of investment.

The fourth is the structuring of cross-border financing arrangements where the investor seeks protection against host-state action affecting the financing. Loans, bonds, and similar financial instruments may qualify for BIT protection under some bilateral treaties.

The fifth is the holding of assets in jurisdictions where the bilateral investment treaty network provides specific protection that the investor's home jurisdiction's network does not. This category captures investors who have flexibility in selecting the home jurisdiction of their investment vehicle and who select that home jurisdiction in part for its BIT network.

The structuring considerations

The structuring considerations for BIT-aware planning have several distinct elements.

The first is the choice of the home state of the investment. BIT protection is available where the investor is a national or qualifying resident of a state that has a bilateral investment treaty with the host state. The selection of an investment vehicle in a state with strong treaty network coverage of the host state is therefore a planning consideration. The principal source-state networks for BIT planning include those of the United Kingdom, the Netherlands, Switzerland, Singapore, and — with significant variations — the United States.

The second is the qualifying conditions for the investment vehicle. Most bilateral investment treaties require that the investor have certain connections to the home state, typically including incorporation in that state and — in some treaties — substance in that state. The qualifying conditions vary across treaties; the investor must read the specific treaty applicable to the contemplated investment and ensure that the structure satisfies the conditions.

The third is the substance of the investment vehicle. Several arbitral decisions have addressed the situation in which an investment vehicle was established principally to access BIT protection without genuine substance in the home state. The decisions have generally been protective of the substance principle, with thin investment vehicles vulnerable to challenges that they do not qualify as covered investors. The substance question for BIT vehicles has therefore acquired a recognisable parallel to the substance question for tax planning vehicles.

The fourth is the timing of the structuring. BIT protection requires that the investment vehicle's qualifying status pre-date the relevant host state action. A vehicle established after the action that prompts the claim may be challenged as having been created in response to the dispute, in which case the protection may be denied. The timing consideration favours pre-positioning of investment vehicles before specific risks materialise.

The fifth is the consideration of citizenship and residence as planning variables. For investors with flexibility in their citizenship or residence position, the selection of a citizenship or residence that provides access to favourable BIT networks may be a meaningful planning consideration. The integration of citizenship and residence planning with BIT planning has become more visible in advisory practice over the past five years.

The recent arbitral developments

The arbitral case law on bilateral investment treaties has continued to develop through the post-2020 period. Several developments are worth identifying.

The first is the increasing strictness of the substance requirements for investment vehicles. The case law has, on aggregate, become more demanding on the question of whether a vehicle established in a treaty state has sufficient substance to qualify as a covered investor. The trend is consistent with the broader substance-focused trend in international tax law.

The second is the development of the legitimate expectations doctrine. The fair and equitable treatment standard has been interpreted to protect the investor's legitimate expectations at the time of the investment, with subsequent regulatory changes that materially alter the investment's economic position potentially constituting violations of the standard. The doctrine has been applied in cases involving abrupt tax law changes, sudden regulatory shifts, and other government actions that affect the investment's value.

The third is the increasing use of investor-state arbitration in cases involving cryptocurrency and digital asset investments. Several recent cases have addressed the question of whether cryptocurrency holdings or digital asset positions qualify as covered investments under the relevant bilateral treaties, with mixed results. The case law is still developing.

The fourth is the response of certain states to investor-state arbitration. Several states have, in recent years, terminated bilateral investment treaties or reformed them to limit the scope of arbitration. The European Union's actions on intra-EU bilateral investment treaties — the Achmea decision and subsequent developments — have produced significant changes in the European BIT landscape. The treaty terminations and reforms have to be tracked by practitioners working in the affected jurisdictions.

The intersection with citizenship-by-investment

The citizenship-by-investment industry has produced a population of individuals who have acquired second or alternative citizenships specifically to access certain advantages, including BIT network access in some cases. The principal jurisdictions offering citizenship-by-investment programmes have evolved over the past decade, with several Caribbean states maintaining long-running programmes and several European jurisdictions — Malta most prominently — having offered programmes that have been the subject of European Union scrutiny.

The use of citizenship-by-investment for BIT planning is controversial. The substance principle that has become central to BIT case law applies to the qualifying conditions of the investor, and a citizenship acquired solely for treaty access may be vulnerable to challenge in subsequent arbitration. The practical impact of substance challenges varies, however, and many investors with citizenship-by-investment have proceeded with BIT-aware planning notwithstanding the theoretical risk.

The European Union has, through 2024 and 2025, taken steps to constrain the citizenship-by-investment industry. The constraints have produced changes in the programmes available and have raised questions about the long-term viability of certain programmes. Practitioners working in this area must monitor the regulatory developments closely, as the position can shift materially over short periods.

The trajectory through the second half of the 2020s

The trajectory of bilateral investment treaty considerations in cross-border individual planning is one of increasing relevance and increasing complexity. The treaty network will continue to be in force, with selective additions and selective terminations producing a network that is broadly stable in coverage but with non-trivial changes at the margin. The arbitral case law will continue to develop, providing more granular guidance on the application of treaty protections to specific categories of investment.

The integration of BIT planning with broader cross-border planning will continue. The investor or entrepreneur with significant cross-border exposure will increasingly consider BIT protection alongside tax planning, residency planning, citizenship planning, and asset structuring. The advisory function on cross-border planning will increasingly include BIT analysis as a routine component for investments of sufficient scale.

The cumulative effect on cross-border investment is one of increased optionality combined with increased complexity. The investor who understands the treaty network has more tools available than at any prior point. The investor who does not is operating with a smaller toolkit than is now standard. The professional advisory infrastructure has developed to support the planning, and the leading firms now include BIT expertise as a standard component of their cross-border practice.

The bilateral investment treaty network was, for most of its history, an instrument of state policy and corporate strategy. Its emergence as an instrument of individual planning is a recent development. The trajectory suggests that the integration will deepen rather than reverse, with consequent effects on how cross-border individuals approach their long-term planning.