The focus of this chapter is on monetary transfer provision (MTPs) in bilateral investment treaties (BITs). MTPs in BITs regulate the transfer of funds related to investment in and out of the host country. This chapter tackles the question whether the imposition of capital-flow management measures (CFM measures) by a host State violates broad and unqualified MTPs in BITs that guarantee transfer of funds in and out of the country without any exceptions. The chapter addresses this question by introducing CFMs and the different ways by which international law regulates the freedom of States to impose them. It then analyses the relationship between the different approaches adopted under the IMF Articles on the one hand, and BITs on the other; this involves an inquiry into questions of norm conflict as well as systemic treaty interpretation. Having discussed rules specifically addressing CFM measures, the chapter moves on to discuss alternative options for host countries to respond on the basis of generally available defences. The chapter finally concludes by observing that the method for resolving the conflict is through the legislative route where countries enter into MTPs that recognise the right of countries to impose CFM measures. Keywords: BITs, capital flow management measures, IMF, monetary transfer provisions.
Due to the adjudication of a large range of regulatory measures under investment treaty arbitration (ITA), the belief that bilateral investment treaties (BITs) fail to balance investment protection with a host country's right to regulate has gained currency as of late. In order to balance investment protection with regulation, many scholars have advocated for the use of public law principle of proportionality to interpret BITs. This paper critically examines the application of the principle of proportionality in BITs under four heads. First, given the fact that many questions related to independence and impartiality of ITA remain unanswered, the use of proportionality in ITA might further dent the credibility of the system by granting significant discretion to arbitrators. Second, proportionality principle has been applied in a flawed manner by many arbitral tribunals, which raises doubts about its application. Third, one should be very careful in relying on jurisprudence of European Court of Human Rights and the WTO to support the application of proportionality in ITA because of the many contextual differences between the two. Fourth, when interpreting BITs, application of principle of proportionality in many instances will completely ignore the clear textual language and thus violate the rules of treaty interpretation.