Despite the large and growing importance of foreign direct investment (FDI), the international legal investment framework is highly fragmented. The contention put forward in this paper is that this situation is unsatisfactory because it creates transaction costs for multinational enterprises (MNEs) which range from the cost of legal advice to the cost of the uncertainty about rights and obligations. This paper points out a way to a future multilateral investment agreement by proposing answers to the following questions: (1) Which issues should be tackled on the multilateral level? (2) What are the optimal regulations for these issues from an economic perspective?, and (3) What is politically feasible?