Only when relations with a host government take a turn for the worst do investors show much interest in the humble BIT. The treaties can provide a legal lifeline when a host country decides that a foreign investment project would be better managed by the president’s nephew or that a firm’s cash reserves should be subjected to a 100% tax.

By permitting foreign investors to sue a host state before an international arbitration tribunal – and seek cash damages for certain forms of loss – these obscure international treaties can pack a powerful punch.

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So powerful, in fact, that there has been a backlash from some governments, who protest that the treaties can curb even ‘legitimate’ regulation of foreign business actors. In other words, government measures such as stricter pollution controls or more stringent land-use restrictions may generate investor demands for compensation.

Indeed, as investors, lawyers and government officials gathered in Frankfurt last December to mark the 50th anniversary of the first BIT – a treaty between Germany and Pakistan – local government officials were fretting about a massive arbitration claim recently filed against Germany.

No longer are BIT lawsuits filed exclusively by Western investors who run afoul of the local constabulary in the poorest and most benighted of countries. Even highly developed economies are finding that their policies towards foreign investors may come under the legal microscope thanks to the far-reaching terms of bilateral investment treaties.

Currently, a panel of international arbitrators is being asked to determine whether local politicians in Hamburg improperly reneged on a deal with the Swedish utility company Vattenfall. The Federal Republic of Germany could be forced to write a massive compensatory cheque to Vattenfall if arbitrators rule that German politicians broke binding treaty commitments.

In recent months, the Vattenfall claim has been a political wake-up call for western Europe.

Governments are belatedly engaging in the type of due diligence that developing countries have been undertaking for some years now – trying to figure out exactly what promises have been made to foreign investors in these treaties.

Indeed, some governments, such as South Africa and Argentina, have put de-facto moratoriums on negotiating further such pacts.

Other countries, such as Ecuador, Venezuela and the Czech Republic, have even begun to tear up some of their bilateral treaties, insisting that local law or, in the Czech case, EU law, provides adequate safeguards for foreign investors.

Even the Obama administration in the US is reviewing the Bush administration’s policy on BITs in an effort to determine whether these treaties strike the proper balance between investor protection and state sovereignty.

Taken together, these high-profile investor lawsuits and the greater scrutiny brought to bear by defensive governments seems likely to ensure bilateral investment treaties no longer age gracefully in the shadows.

Luke Eric Peterson is editor of InvestmentArbitration Reporter.com, an online news service tracking and analysing crossborder investment lawsuits.