Bilateral collateral

Until recently, there was little legal protection from foreign investment risk.But the past few years have seen the rise of the bilateral investment treaty(BIT). Matthew Saunders shows how BITs can benefit the energy sector

The risks inherent in investing in developing markets are well appreciated,particularly by those within the energy sector for whom foreign direct investmentis often routine. However, the traditional routes taken to provide a measureof protection, such as the obtaining of export credit guarantee insurance, areoften of small value compared to the amount invested. Recent years have seena proliferation of a new form of protection, the bilateral investment treatyor ‘BIT’. If its role is properly