What Do We Know About the Effect of Investment Protection and Grant Agreements on Foreign Direct Investment?

Investment protection and grant agreements are agreements made by international law between two states. They aim to promote foreign direct investment (FDI) by improving legal certainty for foreign investors. They protect companies in the signatory states from expropriation, state arbitrariness and discrimination and enable law enforcement outside the legal system of the target country. They thus limit countries' scope for action. Do such agreements actually lead to additional direct investment? This article presents the results of a meta-study that summarises the existing empirical evidence on this topic. Contrary to some claims, the literature on this topic reveals largely positive effects. On average, an investment protection agreement leads to growth of around 25% in foreign direct investment.