Abstract This chapter explores the relationship between free transfer clauses and exchange restrictions. The transfer of funds provision is a common feature of bilateral investment treaties (BITs). The free transfer provision is particularly important in difficult economic times, when the host country faces complex policy trade-offs. It argues that over the past two decades, the rise of a new generation of BITs has led to a patchwork liberalization of the capital account. This liberalization is slow and gradual, but the general direction is clear: greater openness. Taken together, the universe of existing BITs and free trade agreements (FTAs) substantially limits countries' freedom to impose restrictions on the capital account. This liberalization does not appear to follow general principles other than increased openness. It risks undermining macroeconomic stability and complicating the resolution of future financial crises.
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