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Legal protection

By entering into new bilateral IPTs with developing and emerging countries, the German government creates sound basic conditions for German direct investments abroad. The treaties guarantee comprehensive legal protection on the basis of international law for investments and make it easier for investors - and particularly for small and medium-sized enterprises - to develop foreign markets.

The most important elements of such treaties are:

  • definitions of the terms "equity investments", "earnings" and "investor",
  • mutual treatment of foreign investors like residents and most-favoured-nation treatment in respect of investments in either country,
  • guarantee of the free transfer of capital and earnings,
  • protection of property, fair compensation in the case of expropriation and the guarantee to take legal action,
  • agreement on international arbitration in case of disputes between the investor and the host country.

With bilateral investment protection treaties the German government has established a dense network of binding provisions for protecting German investments abroad. Investment protection treaties - either in force or preliminary applicable - principally are the precondition for granting investment guarantees.

If no bilateral IPT has been concluded with a host country, the necessary legal protection may be ensured by the legal system in the particular host country. This will have to be verified in each individual case.

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