Rudolf Dolzer

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This Article addresses the duties that a host state to a foreign investment undertakes when binding itself to an investment treaty. As with every international agreement, an investment treaty reduces the scope of sovereignty for all parties to the treaty. In particular, an investment treaty will limit the sovereign right of a state to subject foreign investors to its domestic administrative legal system. All the main clauses typically included in an investment treaty operate in various ways to define and narrow the types of domestic administrative regulation to which foreign investors must subject themselves. This is a response to investors’ concern for the predictability and stability of the legal framework governing their investments. Foreign investors’ expectations of administrative stability and the host state’s expectations of the sovereignty to control its administrative law are brought into a balance by an investment treaty that essentially favors the interests of foreign investors when compared to the general rules of international law applicable in the absence of a treaty.