Through their foreign direct investments, German businesses open up new markets across the world. At the same time, foreign companies invest in Germany. Both developments strengthen the German economy, secure employment, and promote prosperity in Germany. This makes it even more important to provide comprehensive protection for these investments. International Investment Agreements (IIAs) and investment guarantees are important instruments for protecting foreign direct investments.
Investment Guarantees: Vital Instrument for German Industry
The instrument of investment guarantees is indispensable for German exporters. It secures the global presence of German industry. When investing in emerging economies and developing countries in particular, investors are exposed to political risks that they could not take without investment guarantees.
IIAs for Effective Protection of Foreign Direct Investment
Comprehensive protection from political risks to foreign direct investment is of great importance to business. International Investment Agreements (IIAs) and investment chapters in free trade agreements (FTAs) offer such protection.
Investment Agreements are Crucial to German Business Success Abroad
Investments always involve economic risk. Foreign investments are also exposed to political risks and International Investment Agreements (IIAs) offer protection against these political risks. The number of investor-state dispute settlement (ISDS) cases is increasing worldwide, with a majority of complaints originating from industrialized countries. About one-third of all cases is ruled in favor of the investor. Most cases are brought in economic sectors with strong state intervention. Small and medium-sized companies also make use of ISDS.
Reform of Investment Protection in Emerging Economies
Emerging economies are pressing for reforms in investment promotion and protection. Existing agreements are being terminated and renegotiated, new standards drafted. The objective is frequently to secure the state’s right to regulate.
Growing Protectionism in Foreign Direct Investment
Since 2000, the United Nations Conference on Trade and Development (UNCTAD) has identified a trend towards greater protectionism against foreign direct investment. Reversing this trend is of great importance, not only for German industry.
International Investment Agreements between EU Member-States
More than half of all the ISDS cases ever brought by German investors have been directed against other EU member-states. The European Commission has demand-ed that the EU member-states terminate their international investment agreements with other EU states. Nevertheless, investor protection must be upheld.