Global Law Experts Top Search Results to
Help Tackle Law in Foreign Investment

Foreign investment is the flow of capital from an individual or company in one country to an entity in another country. This movement of capital is made with the objective of acquiring assets, establishing business operations, or generating a financial return in the host country. It is a key element of the global economy, allowing capital to move from jurisdictions where it is abundant to those where it can be used to fund economic development, new technologies, and business growth.

The two main types of foreign investment are distinguished by the investor’s intent and level of control. The first is Foreign Direct Investment (FDI), which involves an investor acquiring a substantial interest in a foreign business with the goal of having a long-term role and influence in its management. The second is Foreign Portfolio Investment (FPI), which is the more passive purchase of foreign financial assets, such as stocks and bonds, made for financial return rather than for control of the enterprise.

The primary difference between Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) lies in the degree of influence and control an investor has. FDI is an active, long-term investment where the investor takes a significant stake in a foreign company with the intent to control or influence its operations. In contrast, FPI is a passive, often shorter-term investment in securities like stocks and bonds, where the investor has no intention of exercising day-to-day control over the company.

Foreign investment is a powerful engine for a nation’s economic growth. It provides vital foreign capital that fuels the development of new industries and infrastructure, which in turn leads to job creation. Beyond just money, it often brings an infusion of advanced technology and modern management expertise into the host country. This combination of capital and knowledge helps to enhance the competitiveness of local industries and stimulate the overall economy.

Bilateral Investment Treaties (BITs) are agreements between two countries that establish the legal terms and conditions for private investment by the nationals and companies of one country in the other. They protect foreign investors by setting legally binding standards of treatment that the host state must adhere to. These protections typically include guarantees of fair and equitable treatment, protection from unlawful expropriation without compensation, and the right to freely transfer funds. Crucially, most BITs also grant investors access to an independent international arbitration forum to resolve disputes with the host state.