814 International Organization require an explicit commitment on the part of the potential host government and involve direct negotiations with the government of potential investors.In this way, BITs up the political ante for the host government and raise expectations of per- formance.The typical BIT offers a wider array of substantive protections than did the customary rule.For example,BITs typically require national treatment and most-favored-nation treatment of foreign investments in the host country,2 pro- tect contractual rights,3 guarantee the right to transfer profits in hard currency to the home country,and prohibit or restrict the use of performance requirements.14 Finally,and perhaps most importantly,BITs provide for international arbitration of disputes between the investor and the host country,5 typically through the Inter- national Center for Settlement of Investment Disputes (ICSID)or the UN Com- mission on International Trade Law (UNCITRAL). The Spread of BITs Despite the aggressive campaign waged by some developing countries against the relevant customary international law,BITs were embraced by many potential host governments.6 Figure 1 documents the geometric growth of both investment trea- ties and mean inflows of FDI as a percentage of GDP from 1960 to 2000.Early BITs typically involved a midsized European power and one of the least devel- oped countries,often in Africa(see Table 1).The negotiation of BITs proceeded at a moderate pace until the mid-1980s,rarely exceeding twenty new treaties per year.Late in the decade,however,the rate of signings accelerated dramatically, with an average of more than one hundred new treaties a year throughout the 1990s. The United States embraced BITs later than did its West European counterparts. Between 1962 and 1972,during which time West Germany entered into forty-six BITs and Switzerland entered into twenty-seven,the United States eschewed such treaties and signed only two Friendship Commerce and Navigation Treaties-with Togo and Thailand.7 One reason for the delayed U.S.participation in bilateral arrangements may have been the hope of retaining a multilateral approach.The United States was one of the most aggressive proponents of the Hull Rule and 12.For example,the 1994 U.S.Prototype Bilateral Investment Treaty,Office of the Chief Counsel for International Commerce,U.S.Department of Commerce;Article 2(1),2(2)(a).For convenience, throughout this article we label the more developed partner in a BIT the "home"country (meaning the home of investors)and the less-developed partner the "host."The treaty obligations bind both parties, but in the vast majority of treaties there is a developed country that will be the source of most FDI and a developing country that will be the recipient. 13.For example,1994 U.S.Prototype BIT,Article I(d)(ii). 14.For example,ibid.,Article V(1-2). 15.For example,ibid.,Article IX. 16.It is interesting to note,however,that some of the most vociferous opponents of the Hull Rule were in fact latecomers to the BITs movement.As of the late 1990s,Mexico for example had signed only two BITs,with Spain and Switzerland.Brazil did not sign a BIT until 1994,and as of the late 1990s none of its 10 bilateral agreements had entered into force.India's pattern is similar to that of Brazil.See (http://www.worldbank.org/icsid/treaties/treaties.htm).Accessed 10 December 2003. 17.Vandevelde 1988.require an explicit commitment on the part of the potential host government and involve direct negotiations with the government of potential investors+ In this way, BITs up the political ante for the host government and raise expectations of per￾formance+ The typical BIT offers a wider array of substantive protections than did the customary rule+ For example, BITs typically require national treatment and most-favored-nation treatment of foreign investments in the host country, 12 pro￾tect contractual rights, 13 guarantee the right to transfer profits in hard currency to the home country, and prohibit or restrict the use of performance requirements+ 14 Finally, and perhaps most importantly, BITs provide for international arbitration of disputes between the investor and the host country, 15 typically through the Inter￾national Center for Settlement of Investment Disputes ~ICSID! or the UN Com￾mission on International Trade Law ~UNCITRAL!+ The Spread of BITs Despite the aggressive campaign waged by some developing countries against the relevant customary international law, BITs were embraced by many potential host governments+ 16 Figure 1 documents the geometric growth of both investment trea￾ties and mean inflows of FDI as a percentage of GDP from 1960 to 2000+ Early BITs typically involved a midsized European power and one of the least devel￾oped countries, often in Africa ~see Table 1!+ The negotiation of BITs proceeded at a moderate pace until the mid-1980s, rarely exceeding twenty new treaties per year+ Late in the decade, however, the rate of signings accelerated dramatically, with an average of more than one hundred new treaties a year throughout the 1990s+ The United States embraced BITs later than did its West European counterparts+ Between 1962 and 1972, during which time West Germany entered into forty-six BITs and Switzerland entered into twenty-seven, the United States eschewed such treaties and signed only two Friendship Commerce and Navigation Treaties—with Togo and Thailand+ 17 One reason for the delayed U+S+ participation in bilateral arrangements may have been the hope of retaining a multilateral approach+ The United States was one of the most aggressive proponents of the Hull Rule and 12+ For example, the 1994 U+S+ Prototype Bilateral Investment Treaty, Office of the Chief Counsel for International Commerce, U+S+ Department of Commerce; Article 2~1!, 2~2!~a!+ For convenience, throughout this article we label the more developed partner in a BIT the “home” country ~meaning the home of investors! and the less-developed partner the “host+” The treaty obligations bind both parties, but in the vast majority of treaties there is a developed country that will be the source of most FDI and a developing country that will be the recipient+ 13+ For example, 1994 U+S+ Prototype BIT, Article I~d!~ii!+ 14+ For example, ibid+, Article V~1-2!+ 15+ For example, ibid+, Article IX+ 16+ It is interesting to note, however, that some of the most vociferous opponents of the Hull Rule were in fact latecomers to the BITs movement+ As of the late 1990s, Mexico for example had signed only two BITs, with Spain and Switzerland+ Brazil did not sign a BIT until 1994, and as of the late 1990s none of its 10 bilateral agreements had entered into force+ India’s pattern is similar to that of Brazil+ See ^http:00www+worldbank+org0icsid0treaties0treaties+htm&+ Accessed 10 December 2003+ 17+ Vandevelde 1988+ 814 International Organization