Performance requirements in investment treaty law

Abstract

Host states permit foreign investors to access their economies generally because they believe that foreign investment can contribute to their economic development and prosperity. Foreign investments are therefore expected to increase employment, bring new technology and enterprise into the economy, and develop trade linkages, particular for exports, which will generate foreign exchange and improve the balance of payment. However, some countries are sceptical about the benefits that foreign investment may bring to the host states in these and other ways. To ensure the host states interests can be satisfied by foreign investment, the states usually impose certain requirements on foreign investors as conditions of starting the investment or, also likely, as conditions of continuing the investment. These requirements are known as performance requirements and are described by the UNCTAD: “performance requirements are stipulations, imposed on investors, requiring them to meet certain specified goals with respect to their operations on the host country”.