BIPPA basically makes the host country liable for losses within its territory that businesses from the investing country suffer due to war, insurrection or riots--areas that are typically not covered by insurance companies. It also stops the host country from nationalizing foreign businesses without paying them due compensation.[break]
Generally, there is a universal template for such agreements but countries make modifications that suit their needs and interests.
For instance, the BIPPA signed between Nepal and India incorporates two important changes under request from the Nepali side. First, the agreement does not have a retroactive clause and won´t be applicable to Indian businesses established in Nepal before the signing of the agreement.
In the definition of the scope of the agreement, it says, "This agreement shall not apply to any disputes that arose or anything that was settled before its entry into force."
The second important change is with regard to civil disturbances. Generally, the compensation clause of the agreement covers losses against war and civil disturbance.
But Nepal insisted that "civil disturbance" can have different interpretations and wanted to make it more specific so that bandas and strikes are not interpreted as cases of civil disturbance. So the term "civil disturbance" was replaced by insurrection and riots.
"While insurrection takes place against the state, riots happens in a public place. This addition, therefore, clears our concern that the Nepali state would be made to pay for losses accruing from strikes at businesses and bandas," said Rameshore Khanal, former finance secretary and the prime minister´s economic advisor.
This BIPPA does not make the host country liable for losses suffered by foreign businesses within the county due to other reasons such as power cuts and strikes by labor unions, as is generally misunderstood.
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