Diffusion of Bilateral Investment Treaties 813 make state promises about the treatment of foreign investment credible.Custom- ary international law,expressed succinctly in the "Hull Rule,"held that "no gov- ernment is entitled to expropriate private property,for whatever purpose,without provision for prompt,adequate,and effective payment therefore."7 Apart from the obvious problem of enforcement,this approach did not allow potential hosts to voluntarily signal their intent to contract in good faith. Both customary international law and its practice were under attack by developing country hosts by the 1950s.The nationalization of British oil assets by Iran in 1951, the expropriation of Liamco's concessions in Libya in 1955,and the nationaliza- tion of the Suez Canal by Egypt a year later served notice of a new militancy on the part of investment hosts.The nationalization of sugar interests by Cuba in the 1960s further undercut assumptions about the security of international investments.3 Mean- while,collective resistance to the Hull Rule in the United Nations was on the rise. In 1962,the UN General Assembly adopted the "Resolution on Permanent Sover- eignty over Natural Resources"that provided for merely "appropriate"compensa- tion in the event of expropriation.Several more UN resolutions followed in the 1970s,along with a string of undercompensated expropriations around the world.10 Bilateral treaties made their debut in the late 1950s,just as consensus on cus- tomary rules began to erode.BITs were innovative in a number of respects.They 6.For a discussion of the historical protection of foreign investment,see Lipson 1985 7.See Cordell Hull's note to the Mexican Minister of Foreign Affairs during a 1938 dispute over land expropriations,reprinted in Green H.Hackworth,Digest of International Law v.3,228 (1942). The Rule itself predates Cordell Hull's statement,and various statements of it can be found in deci- sions from the early part of the twentieth century.See Concerning the Factory at Chorzow (Ger.v. Pol.),1926-29 P.C.IL.(ser.A),Nos.7,9,17,19;and Norwegian Shipowners Claims Arbitration (U.S.v.Nor.)1 Rep.Int'l Arb.Awards 307 (1922). 8.Guzman 1998. 9.These are discussed in Lipson 1985.In 1966 the General Assembly reaffirmed states'rights to nationalize resources without reference to international legal principles.In 1972,the UN General Assem- bly passed Resolution 3041(XXVII),which contained an endorsement of the Trade and Development Board's resolution 88(XII)of 19 October 1972,regarding permanent sovereignty over natural resources, and claimed that compensation for natural resource nationalization cases was to be fixed by the nation- alizing state,with jurisdiction for such cases falling within the sole jurisdiction of the nationalizing country's courts.The 1973 Resolution on Permanent Sovereignty over Natural Resources(Resolution 3171)stated that in the event of nationalization "each State is entitled to determine the amount of possible compensation and the mode of payment."The 1974 Charter of Economic Rights and Duties of States [GA Res.3281(xxix),UN GAOR,29th Sess.,Supp.No.31,50]specified the right of each state"To nationalize,expropriate or transfer ownership of foreign property,in which case appropriate compensation should be paid by the State adopting such measures,taking into account its relevant laws and regulations and all circumstances that the State considers pertinent,"with national courts taking jurisdiction in case of disputes [Art.2(c)]. 10.See Kobrin 1980. 11.Other mechanisms have been used to try to protect foreign investment,of course.One possibil- ity since 1988 is to apply for insurance through the World Bank's Multilateral Insurance Guarantee Agency (MIGA).MIGA covers risks associated with transfer restriction,expropriation,breach of con- tract,and risks relating to war and civil disturbances.See (http://www.miga.org/).Accessed 20 June 2006.U.S.businesses can also insure against risks associated with currency inconvertibility,expropri- ation,and political violence by applying for investment insurance from the Overseas Private Invest- ment Corporation (OPIC),a U.S.government agency.See (http://www.opic.gov/Insurance/).Accessed 20June2006.make state promises about the treatment of foreign investment credible+ 6 Custom￾ary international law, expressed succinctly in the “Hull Rule,” held that “no gov￾ernment is entitled to expropriate private property, for whatever purpose, without provision for prompt, adequate, and effective payment therefore+”7 Apart from the obvious problem of enforcement, this approach did not allow potential hosts to voluntarily signal their intent to contract in good faith+ Both customary international law and its practice were under attack by developing country hosts by the 1950s+ The nationalization of British oil assets by Iran in 1951, the expropriation of Liamco’s concessions in Libya in 1955, and the nationaliza￾tion of the Suez Canal by Egypt a year later served notice of a new militancy on the part of investment hosts+ The nationalization of sugar interests by Cuba in the 1960s further undercut assumptions about the security of international investments+ 8 Mean￾while, collective resistance to the Hull Rule in the United Nations was on the rise+ In 1962, the UN General Assembly adopted the “Resolution on Permanent Sover￾eignty over Natural Resources” that provided for merely “appropriate” compensa￾tion in the event of expropriation+ Several more UN resolutions followed in the 1970s, 9 along with a string of undercompensated expropriations around the world+ 10 Bilateral treaties made their debut in the late 1950s, just as consensus on cus￾tomary rules began to erode+ BITs were innovative in a number of respects+ 11 They 6+ For a discussion of the historical protection of foreign investment, see Lipson 1985+ 7+ See Cordell Hull’s note to the Mexican Minister of Foreign Affairs during a 1938 dispute over land expropriations, reprinted in Green H+ Hackworth, Digest of International Law v+ 3, § 228 ~1942!+ The Rule itself predates Cordell Hull’s statement, and various statements of it can be found in deci￾sions from the early part of the twentieth century+ See Concerning the Factory at Chorzow ~Ger+ v+ Pol+!, 1926–29 P+C+I+L+ ~ser+ A!, Nos+ 7, 9, 17, 19; and Norwegian Shipowners Claims Arbitration ~U+S+ v+ Nor+! 1 Rep+ Int’l Arb+ Awards 307 ~1922!+ 8+ Guzman 1998+ 9+ These are discussed in Lipson 1985+ In 1966 the General Assembly reaffirmed states’ rights to nationalize resources without reference to international legal principles+ In 1972, the UN General Assem￾bly passed Resolution 3041 ~XXVII!, which contained an endorsement of the Trade and Development Board’s resolution 88 ~XII! of 19 October 1972, regarding permanent sovereignty over natural resources, and claimed that compensation for natural resource nationalization cases was to be fixed by the nation￾alizing state, with jurisdiction for such cases falling within the sole jurisdiction of the nationalizing country’s courts+ The 1973 Resolution on Permanent Sovereignty over Natural Resources ~Resolution 3171! stated that in the event of nationalization “each State is entitled to determine the amount of possible compensation and the mode of payment+” The 1974 Charter of Economic Rights and Duties of States @GA Res+ 3281~xxix!, UN GAOR, 29th Sess+, Supp+ No+ 31, 50# specified the right of each state “To nationalize, expropriate or transfer ownership of foreign property, in which case appropriate compensation should be paid by the State adopting such measures, taking into account its relevant laws and regulations and all circumstances that the State considers pertinent,” with national courts taking jurisdiction in case of disputes @Art+ 2~c!#+ 10+ See Kobrin 1980+ 11+ Other mechanisms have been used to try to protect foreign investment, of course+ One possibil￾ity since 1988 is to apply for insurance through the World Bank’s Multilateral Insurance Guarantee Agency ~MIGA!+ MIGA covers risks associated with transfer restriction, expropriation, breach of con￾tract, and risks relating to war and civil disturbances+ See ^http:00www+miga+org0&+ Accessed 20 June 2006+ U+S+ businesses can also insure against risks associated with currency inconvertibility, expropri￾ation, and political violence by applying for investment insurance from the Overseas Private Invest￾ment Corporation ~OPIC!, a U+S+ government agency+ See ^http:00www+opic+gov0Insurance0&+ Accessed 20 June 2006+ Diffusion of Bilateral Investment Treaties 813