Performance Requirements in Investment Treaties IISD Best Practices Series

This report by the International Institute for Sustainable Development (IISD) examines how performance requirements (PRs)—stipulations imposed on foreign investors to achieve specific development goals—are treated in international investment treaties. It analyzes the tension between the use of PRs to foster sustainable development and the prohibitions on such measures found in WTO agreements and bilateral investment treaties (BITs), highlighting the risks to the policy space of developing countries.

• Performance requirements (PRs) are tools used by states to align foreign direct investment (FDI) with national development goals, such as increasing local content, creating jobs, ensuring technology transfer, and promoting research and development (R&D).
• The WTO Agreement on Trade-Related Investment Measures (TRIMs) prohibits specific PRs that discriminate between local and foreign products or restrict imports and exports, though developing countries and least developed countries (LDCs) may be eligible for temporary exemptions.
• While most traditional bilateral investment treaties (BITs) are silent on PRs, a growing minority of treaties—often those involving the United States and Canada—include "TRIMs+" clauses that prohibit a wider range of PRs, including those applicable during the pre-establishment phase.
• The inclusion of PR prohibitions in BITs increases the risk for host states because it allows private investors direct access to investor-state arbitration, whereas WTO disputes are handled at the state-to-state level.
• Investment tribunals have shown inconsistent interpretations of PR prohibitions; for example, in Lemire v. Ukraine, the tribunal deferred to the state's goal of promoting cultural inheritance, while in Mobil Oil v. Canada, the tribunal took a broad view, ruling that R&D spending requirements breached NAFTA despite Canada's reservations.
• To preserve policy space, the report suggests that developing countries should avoid prohibiting PRs in BITs, include clauses expressly authorizing them, or use specific safeguards such as grandfathering existing measures and excluding PR disputes from investor-state arbitration.

APA

International Institute for Sustainable Development (n.d.). Performance Requirements in Investment Treaties IISD Best Practices Series. https://www.iisd.org/system/files/publications/best-practices-performance-requirements-investment-treaties-en.pdf

Chicago

International Institute for Sustainable Development. Performance Requirements in Investment Treaties IISD Best Practices Series. n.d. https://www.iisd.org/system/files/publications/best-practices-performance-requirements-investment-treaties-en.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Performance Requirements in Investment Treaties IISD Best Practices Series |url=https://www.iisd.org/system/files/publications/best-practices-performance-requirements-investment-treaties-en.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopmentndperformance, author = {{International Institute for Sustainable Development}}, title = {{Performance Requirements in Investment Treaties IISD Best Practices Series}}, institution = {International Institute for Sustainable Development}, url = {https://www.iisd.org/system/files/publications/best-practices-performance-requirements-investment-treaties-en.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }