Key Characteristics of an Investment Agreement
An investment agreement should clearly outline the terms and conditions of the investment. It should specify how the investment proceeds will be used, any milestones that must be met, and a budget. It should also specify who can make announcements or publish information. The agreement should be signed by both parties. It should also state how the investment will be terminated in case of a disagreement or insolvency.
Some investment agreements contain provisions known as restrictive covenants. These clauses restrict the ability of a later transferee to alter or change the terms of the agreement. These covenants are intended to protect the investment of an investor and ensure the quality of management and the trading position of the company. They are usually found in investment agreements between start-ups and entrepreneurs.
An investment agreement may also contain a waiver clause. This clause is a valuable protection for investors because it allows them to withdraw from the deal if certain conditions are not met. This is particularly helpful when the company has reached a certain milestone, such as completing product development. It should also include any restrictions on the use of funds.
IIAs are important for promoting FDI and creating certainty regarding the relationship between investors. While there is still a lot of debate surrounding the benefits and risks of an IIA, the objective of these agreements is to promote cross-border investment and economic development. Foreign direct investment can bring positive spillover effects to developing countries, and governments aim to create adequate frameworks to attract and encourage FDI.
Dispute resolution is another critical aspect of an investment agreement. An ICSID-style arbitration process helps parties resolve their differences by referring their disputes to a neutral third-party tribunal. It helps protect the rights of investors in both countries. The agreement can also include procedures for consultation. There are numerous options to settle a dispute in an ICSID-like manner.
In addition to governing company operations, an investment agreement outlines the obligations of the company to its investors. These agreements may contain preconditions for funding and promises in exchange for the money. A shareholders agreement, on the other hand, outlines the decision-making arrangements among shareholders. Both documents govern the administration of the company.
The IIA system is dynamic and evolving, and the key characteristics of IIAs are changing rapidly. Recent IIAs tend to include provisions addressing environmental protection, public health, and national security. These provisions reflect current public policy concerns. In addition, the international investment system is subject to other types of international law, including customary international law and the WTO agreement.
Investment agreements should include provisions for dispute resolution and compensation. In addition, the agreement should specify any standards regarding the treatment of foreign investments. Most IIAs cover both direct and indirect investments. They can also regulate cross-border transfer of funds.