Economic and Legal Protection of FDI
The preceding section has shown that most countries perceive FDI as predominantly beneficial. Obviously, the companies that engage in FDI prefer this form of transaction to other forms like trade or licensing. If FDI is beneficial to both parties of the transaction, why would FDI need any protection at all? The following section will explain the inherent risk to FDI as the consequence of a time inconsistency problem (section 3.1). MNEs, international organisations and policymakers have implemented economic and legal measures to protect FDI. The former will be introduced in section 3.2. and the latter in section 3.3.
KeywordsHost Country Legal Protection Arbitral Tribunal Investment Treaty Time Inconsistency
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