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Investment Treaty Arbitration

Last verified on Monday 31st July 2023

Investment Treaty Arbitration: China

Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

Overview of investment treaty programme

1. What are the key features of the investment treaties to which this country is a party?

China

 

Substantive protections

Procedural rights

BIT contracting party or MIT

Fair and Equitable Treatment (FET)

Expropriation

Protection and security

Most-favoured-nation (MFN)

Umbrella clause

Cooling-off period

 

Local courts

Arbitration

Albania BIT (1 September 1995)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Algeria BIT

(28 January 2003)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Argentina BIT (1 August 1994)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Limited

Armenia BIT (18 March 1995)

Yes

Yes

Yes

Yes

No

No

No

Limited

Australia BIT (11 July 1988)

Yes

Yes

Yes

Yes

No

3 months

Yes

Limited

Austria BIT (11 October 1986) with Protocol (17 September 2012)

Yes

Yes

Yes

Yes

Yes

No

Limited (to amount of compensation for expropriation)

Limited

Azerbaijan BIT (1 April 1995)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Bahamas BIT (signed on 4 September 2009)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Bahrain BIT (27 April 2000)

Yes

Yes

Yes

Yes

No

5 months

Yes

Limited

Bangladesh BIT (25 March 1997)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Barbados BIT (1 October 1999)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Belarus BIT (14 January 1995)

No

Yes

No

Yes

No

No

No

Limited

Benin BIT (signed on 18 February 2004)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

BLEU (Belgium-Luxembourg Economic Union) BIT (1 December 2009) (replacing 1984 BLEU BIT)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Bosnia and Herzegovina BIT (1 January 2005)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Botswana BIT (signed on 12 June 2000)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Brunei Darussalam BIT (signed on 17 November 2000)

Yes

Yes

Yes

Yes

Yes

6 months

Limited (to legality of, and amount of compensation for, expropriation)

Yes

Bulgaria BIT (21 August 1994) with Protocol (26 June 2007)

Yes

Yes

Yes

Yes

No

No

Limited (to legality of expropriation)

Limited

Cambodia BIT (1 February 2000)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Cameroon BIT (24 July 2014)

 

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Canada BIT (1 October 2014)

Yes

Yes

Yes

Yes

No

4 months

Limited (to expropriation and valuation of investment)

Yes

Cape Verde BIT (1 January 2001)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Chad BIT (signed on 26 April 2010)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Colombia BIT (2 July 2013)

Yes

Yes

Yes

Yes

No

9 months

Yes

Yes

Congo BIT (1 July 2015)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Congo, Democratic Republic of the BIT (17 November 2016) (replacing 1997 Congo BIT)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Costa Rica BIT (20 October 2016)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Côte d'Ivoire BIT (signed on 30 September 2002)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Croatia BIT (1 July 1994)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Cuba BIT (1 December 2008) (re-sign)

Yes

Yes

Yes

Yes

No

180 days

No

Yes

 

Cyprus BIT (29 April 2002)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Czech Republic BIT (1 September 2006) (replacing 1991 Czech Republic BIT)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Denmark BIT (29 April 1985)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Limited

Djibouti BIT (signed on 18 August 2003)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Egypt BIT (1 April 1996)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Limited

Equatorial Guinea BIT (15 November 2006)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Estonia BIT (1 June 1994)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Ethiopia BIT (1 May 2000)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Finland BIT (15 November 2006)

Yes

Yes

Yes

Yes

Yes

3 months

Yes

Yes

France BIT (20 August 2010) (replacing 1984 France BIT)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Gabon BIT (16 February 2009)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Georgia BIT (1 March 1995)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Germany BIT (11 November 2005)

Yes

Yes

Yes

Yes

Yes

6 months

Limited (to legality of, and amount of compensation for, expropriation)

Yes

Ghana BIT (22 November 1990)

Yes

Yes

Yes

Yes

No

No

Limited (to legality of expropriation)

Limited

Greece BIT (21 December 1993)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Limited

Guyana BIT (26 October 2004)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Hungary BIT (1 April 1993)

Yes

Yes

Yes

Yes

No

No

No

Limited

Iceland BIT (1 March 1997)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Limited

Iran, Islamic Republic of BIT (1 July 2005)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Israel BIT (13 January 2009)

Yes

Yes

Yes

Yes

No

6 months

Limited (to expropriation and valuation of investment)

Limited

Italy BIT (28 August 1987)

Yes

Yes

Yes

Yes

No

6 months

Limited (to legality of, and amount of compensation for, expropriation)

Limited

Jamaica BIT (1 April 1996)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Japan BIT (14 May 1989)

No

Yes

Yes

Yes

No

6 months

Limited (to legality of, and amount of compensation for, expropriation)

Limited

Jordan BIT (signed on 15 November 2001)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Kazakhstan BIT (13 August 1994)

Yes

Yes

Yes

Yes

No

No

No

Limited

Kenya BIT (signed on 16 July 2001)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Korea, Dem. People's Rep. of BIT (1 October 2005)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Korea BIT (1 December 2007) (replacing 1992 Korea BIT)

Yes

Yes

Yes

Yes

Yes

4 months

Yes

Yes

Kuwait BIT (24 December 1986)

Yes

Yes

No

Yes

Yes

6 months

Yes

Limited

Kyrgyzstan BIT (8 September 1995)

Yes

Yes

Yes

Yes

No

No

No

Limited

Laos BIT (1 June 1993)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Latvia BIT (1 February 2006)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Lebanon BIT (10 July 1997)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Limited

Libya BIT (signed on 4 August 2010)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Lithuania BIT (1 June 1994)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Macedonia, The former Yugoslav Republic of BIT (1 November 1997)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Madagascar BIT (1 July 2007)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes (both local and international arbitration)

Malaysia BIT (1 April 1990)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Mali BIT (16 July 2009)

Yes

Yes

No

Yes

Yes

6 months

Yes

Yes

Malta BIT (1 April 2009)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Mexico BIT (6 June 2009)

Yes

Yes

Yes

Yes

No

6 months

Limited (to expropriation and valuation of investment)

Yes

Moldova, Republic of BIT (1 March 1995)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Mongolia BIT (1 November 1993)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Morocco BIT (27 November 1999)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Mozambique BIT (26 February 2002)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Myanmar BIT (21 May 2002)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Namibia BIT (signed on 17 November 2005)

Yes

Yes

No

Yes

No

6 months

Yes

Yes

Netherlands BIT (1 August 2004)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

New Zealand BIT (25 March 1989)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Limited

Nigeria BIT (18 February 2010) (replacing 1997 Nigeria BIT)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Norway BIT (10 July 1985)

Yes

Yes

Yes

Yes

No

6 months

Limited (to legality of, and amount of compensation for, expropriation)

Limited

Oman BIT (1 August 1995)

Yes

Yes

No

Yes

No

6 months

Yes

Limited

Pakistan BIT (30 September 1990)

Yes

Yes

Yes

Yes

No

1 year

Limited (to legality of, and amount of compensation for, expropriation)

Limited

Papua New Guinea BIT (12 February 1993)

Yes

Yes

Yes

Yes

No

6 months

No

Limited

Peru BIT (1 February 1995)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Philippines BIT (8 September 1995)

Yes

Yes

Yes

Yes

No

6 months

Limited (to legality of expropriation)

Limited

Poland BIT (8 January 1989)

Yes

Yes

Yes

Yes

No

1 year

Limited (to legality of, and amount of compensation for, expropriation)

Limited

Portugal BIT (26 July 2008) (replacing 1992 Portugal BIT)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Qatar BIT (1 April 2000)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Limited

Romania BIT (1 September 1995) with Protocol (16 April 2007)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Russian Federation BIT (1 May 2009) (replacing 1990 Russian Federation BIT)

Yes

Yes

No

Yes

Yes

6 months

Yes

Yes

Saudi Arabia BIT (1 May 1997)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Serbia BIT (12 September 1996)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Limited

Seychelles BIT (signed on 10 February 2007)

Yes

Yes

No

Yes

No

6 months

Yes

Yes

Sierra Leone BIT (signed on 16 May 2001)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Slovenia BIT (1 January 1995)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

South Africa BIT (1 April 1998)

Yes

Yes

Yes

Yes

Yes

6 months

Limited (to expropriation and valuation of investment)

Yes

Spain BIT (1 July 2008) (replacing 1992 Spain BIT)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Sri Lanka BIT (25 March 1987)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Limited

Sudan BIT (1 July 1998)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Sweden BIT (29 March 1982) with Protocol (27 September 2004)

Yes

Yes

No

Yes

No

3 months

Yes

Yes

Switzerland BIT (13 April 2010) (replacing 1988 Switzerland BIT)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Syrian Arab Republic BIT (1 November 2001)

Yes

Yes

Yes

Yes (only available to investors of Syrian Arab Republic)

No

1 year

Yes

Limited

Tajikistan BIT (20 January 1994)

Yes

Yes

Yes

Yes

No

No

No

Limited

Thailand BIT (13 December 1985)

Yes

Yes

Yes

Yes

No

No

Limited (to legality of expropriation)

No

Trinidad and Tobago BIT (7 December 2004)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Tunisia BIT (1 July 2006)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Turkey BIT (11 November 2020) (replacing 1990 Turkey BIT)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Turkmenistan BIT (4 June 1994)

Yes

Yes

Yes

Yes

No

No

No

No

Uganda BIT (signed on 27 May 2004)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Ukraine BIT (29 May 1993)

Yes

Yes

Yes

Yes

No

No

No

Limited

United Arab Emirates BIT (28 September 1994)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Limited

United Kingdom BIT (15 May 1986)

Yes

Yes

Yes

Yes

Yes

6 months

Limited (to expropriation and valuation of investment)

Limited

United Republic of Tanzania BIT (17 April 2014)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Uruguay BIT (1 December 1997)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Uzbekistan BIT (30 December 2011) (replacing 1992 Uzbekistan BIT)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Vanuatu BIT (signed on 7 April 2006)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Viet Nam BIT (1 September 1993)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Yemen BIT (10 April 2002)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Zambia BIT (1 February 2014)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Zimbabwe BIT (1 March 1998)

Yes

Yes

Yes

Yes

No

6 months

Yes

Limited

Note: unless otherwise specified with respect to specific BITs listed above, the reference to ‘limited’ procedural rights in this table refers to the rights involving/with respect to/tied up with/concerning the amount of compensation for expropriation only.

 

 

Substantive protections

Procedural rights

FTAs/MIAs

Fair and Equitable Treatment (FET)

Expropriation

Protection and security

Most-favoured-nation (MFN)

Umbrella clause

Cooling-off
period

 

Local courts

Arbitration

ASEAN Investment Agreement (2010)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Australia FTA (20 December 2015)

No (subject to further negotiations)

No (subject to further negotiations)

No

Yes

No

120 days

No

Limited (national treatment only)

Cambodia FTA (1 January 2022)

No

No

No

No

No

No

No

No

The FTA reaffirms the commitments under Cambodia BIT (1996) and ASEAN Investment Agreement (2009).

 

Chile FTA (1 October 2006); Supplementary Agreement on Investment (signed on 9 September 2012)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Costa Rica FTA (8 April 2010)

No

No

No

No

No

No

No

No

The FTA reaffirms the commitments under Costa Rica BIT (2007).

Georgia FTA (1 January 2018)

No

No

No

No

No

No

No

No

Further assessment of the Georgia BIT (1993) will be conducted.

Iceland FTA (1 July 2014)

No

No

No

No

No

No

No

No

The FTA recognises Iceland BIT (1994).

Korea FTA (20 December 2015)

Yes

Yes

Yes

Yes

No

4 months

Yes

Yes

Mauritius FTA (1January 2021)

Yes

Yes

Yes

Yes

No

180 days

Yes

Yes

New Zealand FTA (1 October 2008)

Yes

Yes

Yes

Yes

No

6 months

Yes

Yes

Pakistan FTA (1 July 2007)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Peru FTA (1 March 2010)

Yes

Yes

Yes

Yes

Yes

6 months

Yes

Yes

Regional Comprehensive Economic Partnership (RCEP) (1 January 2022)

Yes

Yes

Yes

Yes

No

No (subject to further negotiations)

No (subject to further negotiations)

No (subject to further negotiations)

Singapore FTA (1 January 2009)

No

No

No

No

No

No

No

No

ASEAN Investment Agreement (2009) shall, mutatis mutandis, be incorporated into this FTA.

 

Switzerland FTA (1 July 2014)

No

No

No

No

No

No

No

No

The contracting parties affirm their commitment to review the investment legal framework after the entry into force of this FTA.

 

The information contained in the two tables above is publicly available at the following sources: UNCTAD Investment Policy Hub accessed on 28 July 2023; Ministry of Commerce of the People’s Republic of China (MOFCOM), List of Bilateral Investment Treaties signed by China accessed on 28 July 2023; China FTA Network of the Ministry of Commerce of the People’s Republic of China accessed on 28 July 2023.

 

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

Qualifying criteria – any unique or distinguishing features?

2. What are the distinguishing features of the definition of “investor” in this country’s investment treaties?

China

Issue

Distinguishing features in relation to the definition of “investor”

Approach to define investors

In early generations of Chinese BITs, two separate definitions of investors were often adopted: one for individuals and legal entities from China, and the other one for individuals and legal entities from the other contracting state (eg, Sweden BIT (1982), which were subject to different approval requirements, Singapore BIT (1985)). Single definition has become the norm in new generations of Chinese international investment agreements (IIAs, including BITs and FTAs) (eg, Tunisia BIT (2004), Russia BIT (2006) and Australia FTA (2015)).

Scope of protected investors

In the Canada BIT (2012) and Australia FTA (2015), the protected investors extend to those that seek to make a covered investment. However, the protections to such investors are limited to national treatment and MFN treatment by far.

Natural persons

Typically, Chinese IIAs require a natural person to be a national or citizen according to the law of the other contracting party (eg, Norway BIT (1984), Poland BIT (1988)). Some newer Chinese IIAs extend protection to ‘permanent residents’ on certain conditions or with exceptions (eg, Australia FTA (2015), New Zealand FTA (2008)). Some Chinese IIAs adopt a combined criterion, requiring both nationality and an additional factor such as ‘residence or domicile’ (eg, former Yugoslavia BIT (1995)), or ‘place of business’ (eg, Bosnia and Herzegovina BIT (2002)). A few Chinese BITs expressly exclude protections to investors with dual nationalities (eg, Iran BIT (2000), Uruguay BIT (1993)), while other IIAs do not touch upon this issue.

A Hong Kong or Macao citizen has been found to be eligible to seek protection from the host state in reliance on Chinese IIAs so long as he or she is a qualified Chinese national under the treaty in dispute (see, eg, Tza Yap Shum (Hong Kong) v Peru (ICSID Case No. ARB/07/6). This proceeding was brought by a Hong Kong individual investor on the basis of the China–Peru BIT (1994)).

Corporate entities

Most Chinese IIAs provide that a corporate entity must be incorporated or established in accordance with national law (eg, UK BIT (1986)). Some Chinese BITs incorporate additional criteria of seat or domicile (eg, ‘seat in the territory’ in the Italy BIT (1985) and Germany BIT (2003), ‘domiciled in the territory’ in the Austria BIT (1985)), and/or control/interest (eg, ‘substantial or controlling interest’ in the Brunei BIT (2000), ‘predominant interest’ in the Oman BIT (1995), ‘controlled indirectly’ in the Seychelles BIT (2007)) insofar as an entity established in a third state is concerned.

A few BITs concluded by China in the early 1980s (eg, the Sweden BIT (1982)) provide that only Chinese companies authorised or permitted to make an investment are deemed protected investors. Such authorisation requirement is no longer seen in the later generations of Chinese IIAs.

It remains in controversy whether corporate entities in Hong Kong and Macao may also be entitled to protection under Chinese IIAs. This issue was previously discussed in Sanum v Laos (UNCITRAL Rules, PCA Case No. 2013-13).

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

3. What are the distinguishing features of the definition of "investment" in this country’s investment treaties?

China

Issue

Distinguishing features in relation to the concept of “investment”

Approach of definition

Chinese IIAs usually provide for a broad definition of investment by way of a non-exclusive list of different categories of assets covered by the treaty. As exceptions, each of the Germany BIT (2003) and Japan–Korea Trilateral Investment Agreement (TIA) (2012) includes certain objective characteristics of investment in addition to a non-exclusive list of protected assets.

In accordance with local law requirement

Chinese IIAs often contain an express clause requiring any investments to be ‘in accordance with the laws and regulations’ of the host state (eg, Norway BIT (1984), Netherlands BIT (2001)), or each contracting state to admit such investment in accordance with its laws and regulations (eg, UK BIT (1985), Uganda BIT (2004), Korea BIT (2007)).

Indirect investment

Newer generations of Chinese IIAs have clearly extended the protection to indirect investment, by providing, for example, that the investment includes ‘every kind of investment/asset invested directly or indirectly by the investors’ (eg, Gabon BIT (1997), Portugal BIT (2005)). The Germany BIT (2003) further defines the meaning of ‘invested indirectly’. The Spain BIT (2005) adopts a different method to effectively cover ‘indirect investment’ by including in the definition of investments ‘investments made in the territory of one Contracting party by any company of that same Contracting Party which is actually owned or controlled by investors of the other Contracting Party’.

Change in form of investment

Most Chinese IIAs state that any alternation or change in the form of investment shall not affect their character as an investment (eg, Kenya BIT (2001), Finland BIT (2004)).

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

Substantive protections – any unique or distinguishing features?

4. What are the distinguishing features of the fair and equitable treatment standard in this country’s investment treaties?

China

Issue

Distinguishing features of the fair and equitable treatment standard

Illustrations of the FET standard

The majority of Chinese IIAs provide that each contracting party shall accord fair and equitable treatment to investments and activities associated with the investments (eg, Bulgaria BIT (1989), Ghana BIT (1989)) and returns of investors (eg, United Arab Emirates BIT (1993)).

Some IIAs specify that the meaning of the FET standard includes, for example:

  • the obligation not to deny justice in any legal or administrative proceedings (ASEAN Investment Agreement (2009));
  • the obligation to ensure that, having regard to general principles of law, investors are not denied justice or treated unfairly or inequitably in any legal or administrative proceeding affecting the investments of the investor (New Zealand FTA (2008));
  • the obligation to ensure that investors of one contracting party shall not be denied fair judicial proceedings by the other contracting party or be treated with obvious discriminatory or arbitrary measures (Tanzania BIT (2013)); and
  • the obligation to ensure that investors of one contracting party shall not be wilfully rejected to fairly judicial proceedings by the other contracting party or be treated with obvious discriminatory or arbitrary measures (Uzbekistan BIT (2011)).

On the other hand, some treaties have listed the legal or de facto obstacles to FET, which mainly mean, but are not limited to:

  • non-equitable treatment of all kinds of restrictions on the means of production and management, non-equitable treatment of all kinds of restrictions on sale of products at home and abroad, as well as other measures with similar effect (Madagascar BIT (2005)); and
  • any discriminatory restriction on the purchase or transport of raw materials and auxiliary materials, energy and fuels, as well as the means of production and operation of all types, any hindrance of the sale or transport of products within the country and abroad, as well as any other measures that have a similar effect (Seychelles BIT (2007)).

International law/customary international law/minimum treatment

Some treaties have specifically linked the FET standard to international law by way of providing that:

  • each party shall accord fair and equitable treatment in accordance with customary international law and/or the generally recognised principles of international law (eg, France BIT (2007), Colombia BIT (2008), Turkey BIT (2015)); and
  • the concept of FET does not require treatment in addition to or beyond that which is required by the international law minimum standard of treatment (eg, Peru FTA (2009), Korea FTA (2015), Colombia BIT (2008), Canada BIT (2012)).

Legitimate expectation

Some FTAs have expressly excluded a party’s legitimate expectation from the content of FET. In other words, the mere fact that a party takes or fails to take an action that may be inconsistent with an investor’s expectations does not constitute a breach of FET, even if there is loss or damage to the covered investment as a result (eg, the Mauritius FTA (2019)).

Exception to FET

The Morocco BIT (1995) specifically sets out an exception to FET to the extent that necessary measures taken for maintaining public order shall be excluded from such treatment (in Chinese ‘缔约一方投资者在缔约另一方领土内的投资应享受公正和公平的待遇，以及全部的和完整的保护和安全，但仅由于维护公共秩序所必须的措施除外’).

The Madagascar BIT (2005) similarly provides that measures for reasons of security, public order, health, ethical and environmental protection and other reasons shall not be regarded as obstacles to FET.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

5. What are the distinguishing features of the protection against expropriation standard in this country’s investment treaties?

China

Issue

Distinguishing features of the “expropriation” standard

Scope of application

Chinese IIAs protect investors from nationalisation or expropriation of investments, directly or indirectly. The protection against indirect investment is realised usually by referring to protection from measures having ‘similar effect’ (eg, Argentina BIT (1992)) or an ‘effect equivalent to’ (eg, Denmark BIT (1985), Mongolia BIT (1991)), or ‘tantamount to’ (eg, Greece BIT (1992), Mexico BIT (2008)) nationalisation or expropriation.

A few new Chinese IIAs further expressly carve out measures related to intellectual property rights, which are taken pursuant to other available international agreements (eg, Canada BIT (2012)), from the protection against expropriation.

Right to regulate for a public purpose

A few new Chinese IIAs specify the right of the contracting party to regulate for a public purpose, which will not be considered as expropriation unless the measures are extremely severe or disproportionate in light of its purpose, have not been taken in good faith and in a non-discriminatory way (eg, Canada BIT (2012), Japan–Korea TIA (2012)).

Criteria for expropriation

Chinese IIAs usually provide for four conditions for a lawful expropriation, namely that an expropriation must be for the public interests, under the domestic legal/due procedure, non-discriminatory and against compensation (eg, Egypt BIT (1994), Canada BIT (2012)). In the Japan–Korea TIA (2012), the international standard of due process has also been incorporated to distinguish a lawful expropriation from an illegal one.

The Canada BIT (2012) and Japan–Korea TIA (2012) take a step further to indicate expressly the specific criteria for the constitution of an indirect expropriation.

Compensation

 

Some earlier Chinese BITs only provide that the compensation shall be equivalent to the value ‘at the time when expropriation is proclaimed’ (eg, Poland BIT (1988), Bulgaria BIT (1989)). Newer Chinese IIAs incorporate the definition of ‘fair market value’ and provide that the value shall be that ‘immediately before the expropriation’ or ‘before the impending expropriation became public knowledge’ (eg, Finland BIT (2004), Peru FTA (2009)).

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

6. What are the distinguishing features of the national treatment/most-favoured-nation treatment standard in this country’s investment treaties?

China

Issue

Distinguishing features of the “national treatment” and/or “most favoured nation” standard

Scope of MFN treatment and NT

All of China’s IIAs include NT and/or MFN clauses.

The equality of treatment applies to the management, conduct, operation, maintenance, use, liquidation, sale and other forms of disposal of investments (eg, Denmark BIT (1985), Chile FTA (2012)) or investments and associated activities (eg, Italy BIT (1985), Greece BIT (1992)), or returns and business activities in connection with the investment (eg, Japan BIT (1988), Lithuania BIT (1993)). Certain treaties have expressly provided equality of treatment with respect to the admission, establishment and/or acquisition of investments (eg, New Zealand FTA (2008), Peru FTA (2009), Korea BIT (2007), Uzbekistan BIT (2011)).

Under the Japan BIT (1988) and Korea BIT (2007), the equality of treatment expressly applies to the contracting party’s nationals and companies’ access to the courts of justice and administrative tribunals and agencies both in pursuit and in defence of their rights.

The specific application scope also includes prohibition of discriminatory measures against the joint ventures in which the investors of the other contracting party participates and investments the investors of the other contracting party have made (eg, Austria BIT (1985)) and unreasonable or discriminatory measures against investments by investors of the other contracting party concerning local content or export performance requirements (eg, Finland BIT (2004)).

Common exceptions to MFN treatment and/or NT

In some treaties, MFN treatment and/or NT are expressly limited by contracting party’s laws and regulations (eg, Jordan BIT (2001), Chile FTA (2012)).

MFN treatment may not include the benefit of any treatment, preference or privilege by virtue of free trade agreement, free trade zone, custom union, economic union or agreement relating to avoidance of double taxation or for facilitating frontier trade (eg, Peru FTA (2009), Norway BIT (1984)) or border trade agreement (eg, Kazakhstan BIT (1992), Ukraine BIT (1992)).

Treaty-specific exceptions to MFN treatment and/or NT

In the ASEAN Investment Agreement (2009), it is specifically stated that the MFN treatment shall not include:

  • any preferential treatment accorded to investors and their investments under any existing bilateral, regional or international agreements, or any forms of economic or regional cooperation with any non-party; and
  • any existing or future preferential treatment accorded to investors and their investments in any agreement or arrangement between or among ASEAN member states or between any party and its separate customs territories.

The South Africa BIT (1997) contains specific exceptions as to programmes and economic activities specifically aimed to promote, protect and advance persons and groups of persons that have been disadvantaged as a result of past discriminatory practices in the Republic of South Africa; and in the circumstance where a contracting party accords special advantages to development finance institutions with foreign participation and established for the exclusive purpose of development assistance through mainly non-profit activities, that contracting party shall not be obliged to accord such advantages to development finance institutions or to other investors of the other contracting party.

The Thailand BIT (1985) carves out treatment, preference or privilege that is extended by virtue of ‘the grant to a particular person or company of the status of a “promoted person” under the laws of the kingdom of Thailand on the promotion of investments; or the grant to a particular person or company of the status of a “favoured person” under the laws of the People's Republic of China on the promotion of investment’.

The France BIT (2007) expressly provides that no provision in respect of the treatment of investments may be construed as preventing the contracting party from adopting any provision aimed at regulating the investments carried out by foreign investors, and the conditions under which such investors undertake their activities, within the framework of measures designed to protect and encourage cultural and linguistic diversity.

Reservations made by the contracting parties

Certain reservations in respect of MFN treatment and/or NT have been made by the contracting parties. For example, in the Bulgaria BIT (1989), the contracting parties reserve the right to make or maintain, in accordance with the legislation of its state, exceptions from NT, and such new exception shall only apply to investments made after the entry into force of such exception; in the Peru FTA (2009), with respect to NT and MFN treatment, the parties reserve the right to adopt or maintain any measure that accords differential treatment to socially or economically disadvantaged minorities and ethnic groups.

There are also exceptions with respect to certain industries, such as cultural industries related to the production of books, magazines, periodical publications or printed or electronic newspapers and music scores (eg, Peru FTA (2009), fisheries and maritime matters (eg, New Zealand FTA (2008)), aviation (eg, Australia FTA (2015)) where the parties reserve the right to adopt or maintain any measure that accords differential treatment.

Extension to the whole treaty

Most China IIAs are silent as to whether NT and MFN obligations extend to every other obligation under the treaty.

However, there are exceptions where the treaties expressly prevent the MFN obligation from extending to dispute resolution clause (eg, Uzbekistan BIT (2011), Canada BIT (2012)).

Extension to other treaties

The Bosnia and Herzegovina BIT (2002) and Netherlands BIT (2001) expressly provide that if the provisions of law of either contracting party or obligations under international law existing at present or established hereafter between the contracting parties in addition to the present Agreement contain a regulation, whether general or specific, entitling investments by investors of the other contracting party to a treatment more favourable than is provided for by the present agreement, such regulation shall, to the extent that it is more favourable, prevail over the present agreement.

Scope of MFN treatment and NT regarding measures related to investment losses due to war, other armed conflicts, state of national emergency or other similar events

Nationals or companies of one contracting party whose investment suffer losses in the territory of the other contracting party owing to war, other armed conflicts, state of national emergency or other similar events shall be accorded treatment no less favourable than that accorded to nationals or companies of any third state, if the other contracting party take any measures relating to such losses (eg, Norway BIT (1984), Italy BIT (1985)).

The Malaysia BIT (1988) further specifies that such treatment is as regards restitution, indemnification, compensation or other settlement, if any.

Interplay between NT and MFN treatment

The more favourable treatment between NT and MFN treatment would apply (eg, Cameroon BIT (1997), Yemen BIT (1998), Jordan BIT (2001)).

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

7. What are the distinguishing features of the obligation to provide protection and security to qualifying investments in this country’s investment treaties?

China

Issue

Distinguishing features of the “protection and security” standard

Extent of obligations

The majority of China’s IIAs contain the obligation to accord protection and security.

However, the expressions for providing such protection may vary from treaty to treaty. For example, it may be provided that investments shall enjoy ‘full protection and security’ (eg, Malaysia BIT (1988), Bulgaria BIT (1989)), ‘protection and security’ (eg, Denmark BIT (1985), Australia BIT (1988)), ‘protection’ (eg, Mongolia BIT (1991), Philippines BIT (1992)), ‘full protection’ (eg, Laos BIT (1993),  Russia BIT (2006)), ‘adequate protection’ (Italy BIT (1985)), ‘the most constant protection and security’ (eg, Thailand BIT (1985), Japan BIT (1988)), ‘constant protection and security’ (eg, Argentina BIT (1992)), Congo BIT (2000)), ‘adequate and full protection’ (eg, Gabon BIT (1997)), ‘full legal protection’ (eg, Iran BIT (2000)), ‘continuous protection’ (eg, Nigeria BIT (2001)), ‘full and complete protection and safety’ (eg, Benin BIT (2004), Uganda BIT (2004)), ‘full and constant protection and security’ (eg, Korea BIT (2007)).

There are certain clarifications in a limited number of treaties with respect to the extent of obligations which can be categorised as follows:

  • in some treaties, it is clarified that the ‘full protection and security’ standard does not imply, in any case, a better treatment to that accorded to nationals of the contracting party where the investment has been made (eg, Colombia BIT (2008), Peru FTA (2009));
  • in some treaties, it is clarified that the ‘full protection and security’ requires that contracting parties shall take reasonable and necessary police measures when performing the duty of guaranteeing investment protection and security (eg, Uzbekistan BIT (2011), Turkey BIT (2015));
  • in the ASEAN Investment Agreement (2009) and New Zealand FTA (2008), it is clarified that ‘full protection and security’ requires each party to take such measures as may be reasonably necessary to ensure the protection and security of the investment of investors of another party;
  • in the Korea FTA (2015), ‘full protection and security’ requires each party to provide the level of police protection required under customary international law; and
  • in RCEP (2020), ‘full protection and security’ requires each party to take such measures as may be reasonably necessary to ensure the physical protection and security of the covered investment.

International law/customary international law/minimum treatment

The obligation to provide full protection and security is not generally linked with international law or customary law. There are a small number of exceptions where it is expressly provided that:

  • each party shall accord full protection and security in accordance with customary international law (eg, Chile FTA (2012), Korea FTA (2015)); and
  • the concept of ‘full protection and security’ does not require treatment in addition to or beyond that which is required by the international law minimum standard of treatment (eg, Mexico BIT (2008), Canada BIT (2012)), and does not create additional substantive rights (eg, Korea FTA (2015), Mauritius FTA (2019)).

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

8. What are the distinguishing features of the umbrella clauses contained within this country’s investment treaties?

China

Issue

Distinguishing features of any “umbrella clause”

Scope of protection

Many Chinese BITs contain an umbrella clause. Most of these Chinese BITs adopt broad language applying the protection to ‘any obligation’ or ‘any commitments’ (eg, Denmark BIT (1985), Congo BIT (2000), Malta BIT (2009)).

Nevertheless, this clause is absent in the Chapter ‘Investment’ in several new FTAs concluded by China (eg, Australia FTA (2015), Korea FTA (2015)).

Qualification of the obligation

Some Chinese IIAs contain narrower formulations as to the scope of the state’s obligations. For example, in the Japan–Korea TIA (2012) and Tanzania BIT (2013), the obligations are limited to ‘any written commitments in the form of agreement or contract’. In several Chinese BITs concluded in 1980s, the scope of the commitments is limited to ‘the documents of approval of investment’ or ‘the approved investment contracts’ (eg, Denmark BIT (1985), Kuwait BIT (1985)). In the Thailand BIT (1985), by way of an example, the state is only requested to observe any commitment ‘in accordance with its law’.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

9. What are the other most important substantive rights provided to qualifying investors in this country?

China

Issue

Other substantive protections

Free transfer of payment

Most of China’s IIAs contain a provision requiring the contracting parties to permit investors to transfer funds related to an investment or activities associated with an investment freely (eg, Australia BIT (1988), Finland BIT (2004)). Such protection is always subject to the laws and policies of both parties.

The transfer may also be restricted in very exceptional circumstances where the contracting party may exercise through equitable, non-discriminatory and good faith basis regulatory measures in accordance with time limits specified by the International Monetary Fund (IMF) in exceptional balance of payments difficulties and through powers conferred to it by law (eg, Finland BIT (2004), Mexico BIT (2008)).

Non-impairment

A large number of China’s IIAs include an express prohibition of unreasonable or discriminatory measures against the management, maintenance, use, enjoyment and disposal of the investments (eg, New Zealand FTA (2008), Switzerland BIT (2009)).

In some treaties, such prohibition shall be without prejudice to the contracting party’s laws and regulations (eg, Argentina BIT (1992), Gabon BIT (1997)).

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

10. Do this country’s investment treaties exclude liability through carve-outs, non-precluded measures clauses, or denial of benefits clauses?

China

Issue

Other substantive protections

Denial of benefits

This clause is rarely seen in early generations of Chinese IIAs. Many of China’s new IIAs after 2008 include such a clause that permits the state to deny the application of the agreement to the investor as a legal person if it is owned or controlled by a person of a third state or the host state. Normally, further qualifications must be satisfied to invoke this clause that, for example, the investor has no substantive operation in the territory of the other contracting party (eg, New Zealand FTA (2008)), the application of this clause is subject to prior notice and consultation between the contracting parties (ASEAN Investment Agreement (2009)), or the denying state maintains no diplomatic or normal economic relations with, or maintains certain sanctions or measures against, the third state that owns or controls the disputing investor (eg, Uzbekistan BIT (2011), Japan–Korea TIA (2012)).

Subject-matter exclusion

Many Chinese IIAs exclude any restrictions or prohibitions on the state’s right to take actions to protect its essential security interests (eg, most Chinese FTAs signed after 2000), to protect the public health or prevent diseases and pests in animals or plants (eg, Mauritius (1996)), and protect its public order, ethical and environment (eg, Madagascar (2007)).

That said, the Columbia BIT (2008) provides for specific pre-conditions for the exclusion to apply. Many Chinese FTAs also specify the scope of the essential security exception to cover measures taken in time of war, relating to nuclear materials or traffic in military materials and services (eg, Iceland FTA (2013)).

Measures relating to financial services or taxation

The clause on financial services is not commonly seen in Chinese IIAs. In the Canada BIT (2012), the contracting party is accorded the power to adopt reasonable measures relating to financial services for prudential reasons.

Several of China’s earlier BITs contain a complete exclusion of the application of the BIT to taxation matters (eg, Singapore (1985), Mauritius (1996)), while others are silent on taxation measures. Many newer Chinese IIAs include a limited carve-out for taxation measures by way of stipulating that the treaty shall not apply except for the specified clauses (eg, Canada BIT (2012)).

Restriction on arbitrable matters

Many early Chinese IIAs (ie, BITs before 1999) only allow matters involving/relating to/concerning ‘amount of compensation’ for the expropriation to be capable of resolution by international arbitration (eg, Sri Lanka BIT (1986), UK BIT (1986)).

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

Procedural rights in this country’s investment treaties

11. Are there any relevant issues related to procedural rights in this country’s investment treaties?

China

Issue

Procedural rights

‘Cooling-off’ period

The majority of China’s IIAs contain a cooling-off period, mostly of six months (eg, Italy BIT (1985), Denmark BIT (1985)), during which settlement negotiations might occur, before the investor exercises its right to resort to international arbitration.

‘No U-turn’ or ‘waiver’ clause

Certain IIAs permit investors to opt for international arbitration after commencing a claim for relief in domestic courts. However, if the investor decides to submit the dispute to international arbitration, then it must withdraw its case from the domestic court before a final judgment has been delivered on the subject matter (eg, Sweden BIT (1982), ASEAN Investment Agreement (2009)). In the meantime, there are a few treaties providing that no claim may be submitted to arbitration without the prerequisite waiver of a right to bring a claim in another forum (eg, Chile FTA (2012), Korea FTA (2015)).

Fork in the road

Some of China’s IIAs contain a fork in the road clause, according to which investors must choose either to pursue their claim through the local courts and competent authorities or through international arbitration (eg, Argentina BIT (1992), Seychelles BIT (2007)).

Exhaustion of local remedies

There are some BITs and FTAs giving recourse to arbitration only after local remedies have been exhausted. For example, in the Sweden BIT (1982), it is specifically provided that China, when acting as a contracting state involved in a dispute, may require the investor concerned to exhaust the domestic administrative review procedure specified by the laws and regulations of China before submitting the dispute to the international arbitration.

Institutional or ad-hoc arbitration

While some treaties provide that the dispute shall be submitted to an international arbitral tribunal or ad hoc arbitral tribunal without designating an arbitration institution (eg, Malaysia BIT (1988), Egypt BIT (1994)), some China’s IIAs allow investors to choose between ICSID or an ad hoc tribunal in accordance with the UNCITRAL rules (eg, Sweden BIT (1982)) or provide recourse to ICSID conciliation board or arbitration board (eg, Japan BIT (1988), Papua New Guinea BIT (1991)) or to ICSID arbitration only (eg, Peru BIT (1994)) or to an ad hoc tribunal in accordance with the UNCITRAL rules only (eg, Namibia BIT (2005)).

Moreover, some treaties have provided an array of choices as to the possible forum. For example, under the ASEAN Investment Agreement (2009), the investor could submit the dispute, at its choice:

  • to the courts or administrative tribunals of the disputing party, provided such courts or administrative tribunals have jurisdiction;
  • under the (ICSID) Convention and the ICSID Rules of Procedure for Arbitration Proceedings, provided that both the disputing party and the non-disputing party are parties to the ICSID Convention;
  • under the ICSID Additional Facility Rules, provided that either of the disputing party or non-disputing party is a party to the ICSID Convention;
  • to arbitration under the UNCITRAL Rules; or
  • if the disputing parties agree, to any other arbitration institution or under any other arbitration rules.

Restrictions on the right to refer matters to arbitration

The majority of treaties concluded by China in 1980s and 1990s provide that only disputes over the ‘amount of compensation’ for expropriatory measures may be submitted to an international arbitral tribunal (eg, Italy BIT (1985), Armenia BIT (1992)). Such restrictions have been dispensed with in the latter IIAs, with the scope of arbitration extending to all disputes (eg, Chile FTA (2012)).

Conduct of arbitration

Many treaties have specifically provided guidance as to the procedure for constitution of an arbitral tribunal, the procedure of the arbitration and allocation of costs of arbitral tribunal (eg, Norway BIT (1984), Italy BIT (1985), Kuwait BIT (1985)). In some treaties, there is also guidance as to the contents and relief to be included or awarded in the arbitral award (eg, Korea FTA (2015), Colombia BIT (2008), Congo BIT (2011)).

Applicable law

While some treaties are silent as to which law would govern the parties’ dispute, there are a number of treaties concluded by China (mostly) in the 1990s explicitly providing that the arbitral award shall be made in accordance with the domestic laws including the rules of conflict of the contracting party that accepts investments and in accordance with the provisions in the present agreement as well as the principles of international law generally recognised and adopted by both contracting parties (eg, Mongolia BIT (1991), Kyrgyzstan BIT (1992)).

Time limits

The submission of a dispute to conciliation or arbitration may be subject to certain time limits. For example, in the ASEAN Investment Agreement (2009), the submission of the dispute to conciliation or arbitration shall take place within three years of the time at which the disputing investor became aware, or should reasonably have become aware, of a breach of an obligation under this Agreement causing loss or damage to the investor or its investment; and the disputing investor shall submit written notice of its intent to submit such dispute to conciliation or arbitration at least 90 days before the claim is submitted. Such time limits can also be found in the Korea BIT (2007) and Chile FTA (2012).

Preliminary issues

The Australia BIT (1988) provides that the arbitral tribunal shall decide all questions relating to its competence. The Colombia BIT (2008) provides that before ruling on the merits, the tribunal shall rule on the preliminary questions of competence and admissibility.

China’s other IIAs do not address how preliminary issues shall be dealt with.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

12. What is the approach taken in this country’s investment treaties to standing dispute resolution bodies, bilateral or multilateral?

China

China’s IIAs have not incorporated reference to any standing or permanent dispute resolution bodies. That said, China has been supportive of the reform of the current mechanism of investor-state dispute settlement featured by ad hoc arbitration. The China–Australia FTA (2015) has made a positive exploration by obliging the contracting parties ‘to commence negotiations with a view to establishing an appellate mechanism to review awards’ within three years of it entering into force.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

13. What is the status of this country’s investment treaties?

China

According to the statistics of UNCTAD, China has signed 145 BITs (of which 22 were terminated, 16 were signed but have not come into effect, and the remaining 107 are in force) and around 20 FTAs containing investment-related rules. Although the investor-state arbitration practice involving Chinese IIAs has exemplified inconsistencies on the interpretation of Chinese IIAs, particularly on the scope of arbitrable matters arising from the earlier Chinese BITs, China has been proactively participating in the negotiation and signing of new FTAs or multilateral investment treaties (including those to replace the old BITs or FTAs) with other jurisdictions and groups. The current FTAs in negotiation include, inter alia, Korea, Peru and Panama FTAs.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

Practicalities of commencing an investment treaty claim against this country

14. To which governmental entity should notice of a dispute against this country under an investment treaty be sent? Is there a particular person or office to whom a dispute notice against this country should be addressed?

China

Government entity to which claim notices are sent

A notice of dispute can be sent to the Ministry of Commerce of China (MOFCOM). The Department of Treaty and Law of MOFCOM is the specific department responsible for representing China to handle investment treaty disputes against the Chinese government.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

15. Which government department or departments manage investment treaty arbitrations on behalf of this country?

China

Government department that manages investment treaty arbitrations

It is MOFCOM that manages investment treaty arbitrations on behalf of the Chinese government.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

16. Are internal or external counsel used, or expected to be used, by the state in investment treaty arbitrations? If external counsel are used, does the state normally go through a formal public procurement process when hiring them?

China

Internal/external counsel

Generally, China uses external counsel who work together with MOFCOM officials to defend treaty claims. MOFCOM selects panels of Chinese law firms and international law firms through a public tender process conducted every three years. When a specific case arises, MOFCOM appoints external counsel from the existing panel members of law firms after going through a separate public procurement process by way of invited competitive bidding.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

Practicalities of enforcing an investment treaty claim against this country

17. Has the country signed and ratified the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965)? Please identify any legislation implementing the Washington Convention.

China

Washington Convention implementing legislation

China signed the Washington Convention on 9 February 1990 and ratified it on 1 July 1992. The Washington Convention entered into force for China on 6 February 1993. It also applies in Hong Kong and Macao following the resumption of sovereign over Hong Kong on 1 July 1997 and Macao on 20 December 1999 respectively.

On ratifying the Washington Convention, China notified ICSID that ‘pursuant to Article 25(4) of the Convention, the Chinese Government would only consider submitting to the jurisdiction of the International Centre for Settlement of Investment Disputes disputes over compensation resulting from expropriation and nationalization.’

There has been no specific national legislation implementing the Washington Convention.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

18. Has the country signed and ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the New York Convention)? Please identify any legislation implementing the New York Convention.

China

New York Convention implementing legislation

China acceded to the New York Convention in 1987 with two reservations made: (i) China will apply the New York Convention on the basis of reciprocity (‘reciprocity reservation’); and (ii) China will apply the New York Convention only to differences arising out of commercial legal relationships under Chinese law, excluding disputes between foreign investors and the host state (‘commercial reservation’). It also applies to Hong Kong from 1 July 1997 and Macao as declared on 19 July 2005.

To implement the New York Convention, the Supreme People’s Court of China issued a Notice on the Implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Acceded to by China (Fa Jing Fa (1987) No. 5), which was effective from 10 April 1987. Article 290 of China’s Civil Procedure Law also provides that Chinese courts shall handle the application for recognition and enforcement of foreign award in accordance with, inter alia, the international conventions concluded or acceded to by China.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

19. Does the country have legislation governing non-ICSID investment arbitrations seated within its territory?

China

Legislation governing non-ICSID arbitrations

There is no such specific legislation under Chinese law.

Under the current Chinese Arbitration Law, inter alia, only parties with equal status (which excludes the possibility of investor-state arbitration) can resort to arbitration. It is therefore doubtful whether the parties to any non-ICSID investment arbitration would consider selecting China as the seat of arbitration.

That said, amendments to China’s Arbitration Law were proposed by the Ministry of Justice in July 2021 for public consultation. It is hoped that new amendments could be incorporated to provide legislative support for conducting ad hoc arbitrations seated in China.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

20. Does the state have a history of voluntary compliance with adverse investment treaty awards; or have additional proceedings been necessary to enforce these against the state?

China

Compliance with adverse awards

As at the date of preparation of this questionnaire, China has not been a party to an adverse investment treaty award.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

21. Describe the national government’s attitude towards investment treaty arbitration.

China

Attitude of government towards investment treaty arbitration

In general, China has been holding positive attitude towards investment treaty arbitration and believes that the investor-state dispute settlement (ISDS) mechanism is generally worth maintaining. As a matter of fact, MOFCOM released Guidelines for Enterprises to Use Investment Treaties in June 2021 to help investors navigate the provisions of Chinese BITs and use them for arbitration in the event of dispute resolution.

China welcomes the reform initiative of UNCITRAL toward the ISDS mechanism. As submitted by China to the Working Group III of UNCITRAL in July 2019, in particular, China is in favour of setting up a permanent appellate mechanism on a multilateral basis, while it also attaches importance to the party’s right to appoint arbitrators.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

22. To what extent have local courts been supportive and respectful of investment treaty arbitration, including the enforcement of awards?

China

Attitude of local courts towards investment treaty arbitration

This issue remains untested in practice in China because no award or decision made under an investment treaty arbitration has been put before a Chinese court for recognition and/or enforcement. Insofar as ICSID awards are concerned, China has not designated a court or authority for the purpose of recognising and enforcing ICSID awards, as provided for under the Washington Convention.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

National legislation protecting inward investments

23. Is there any national legislation that protects inward foreign investment enacted in this country? Describe the content.

China

National

legislation

Substantive protections

Procedural rights

FET

Expropriation

Other

Local courts

Arbitration

Foreign Investment Law and Regulation for Implementing the Foreign Investment Law (both effective on 1 January 2020)

It provides for equal treatment requirement to foreign-invested enterprises (FIEs) in government procurement and standard development work.

Yes. Expropriation is not allowed except it is taken for public interest, in accordance with statutory procedures, and against fair and reasonable compensation given in a timely manner.

It provides for pre-establishment national treatment, observation of commitments, and protections in relation to, inter alia, free transfer of monetary funds, and intellectual property rights.

Yes. It provides for a complaint mechanism for FIEs, which does not prejudice the FIEs’ right to resort to administrative review or lawsuit against relevant measures under Chinese law.

N/A.

 

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

National legislation protecting outgoing foreign investment

24. Does the country have an investment guarantee scheme or offer political risk insurance that protects local investors when investing abroad? If so, what are the qualifying criteria, substantive protections provided and the means by which an investor can invoke the protections?

China

Relevant guarantee scheme

Qualifying criteria, substantive protections provided and practical considerations

China Export & Credit Insurance Corporation (SINOSURE)

Sinosure is a state-funded insurance company, which is authorised to provide overseas investment insurance to Chinese investors. Its overseas investment (equity or debt) insurance is designed to protect Chinese investors from economic losses resulting from political risks such as expropriation, exchange restrictions, war and political riot and breach of contract in the country where the outbound investment is made. The National Development and Reform Commission of China and Sinosure were requested to jointly set up a risk prevention mechanism for key overseas investment projects as early as 2005. Sinosure has also been playing a key role in China’s Belt and Road Initiative since it was launched in 2013.

Multilateral Investment Guarantee Agency (MIGA)

China signed and ratified MIGA in 1988 and was a founding member. China is the sixth biggest shareholder of MIGA. Chinese investors are eligible to purchase political risk insurance from MIGA in respect of their medium or long-term investments (including new projects and new investment into existing projects) in a developing member country. The insurance provided by MIGA covers the risks of currency inconvertibility, transfer restriction, expropriation, war, terrorism, civil disturbance, breach of contract and non-honouring of financial obligations.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

Awards

25. Please provide a list of any available arbitration awards or cases initiated involving this country’s investment treaties.

China

Awards

AsiaPhos Limited and Norwest Chemicals Pte Ltd v People's Republic of China, ICSID Case No. ADM/21/1, Award, 16 February 2023 (Singapore BIT (1985))

Shift Energy and others v Government of Japan, Award, 1 February 2023 (Hong Kong–Japan BIT (1997)) 

Zhongshan Fucheng Industrial Investment Co Ltd v Federal Republic of Nigeria, UNCITRAL Rules 2013, Final Award, 26 March 2021 (Nigeria BIT (2001)) 

Sanum Investments Limited v Lao People’s Democratic Republic (I), PCA Case No. 2013-13, UNCITRAL Rules 2010, Award, 6 August 2019 (Laos BIT (1993))

Philip Morris Asia Limited v The Commonwealth of Australia, PCA Case No. 2012-12, UNCITRAL Rules 2010, Award on Jurisdiction and Admissibility, 17 December 2015; Final Award Regarding Costs, 8 July 2017 (Hong Kong–Australia BIT (1993))

(1) China Heilongjiang International Economic & Technical Cooperative Corp., (2) Beijing Shougang Mining Investment Company Ltd, and (3) Qinhuangdaoshi Qinlong International Industrial Co Ltd v Mongolia, PCA Case No. 2010-20, UNCITRAL Rules 1976, Award, 30 June 2017 (Mongolia BIT (1991))

Beijing Urban Construction Group Co Ltd v Republic of Yemen, ICSID Case No. ARB/14/30, Decision on Jurisdiction, 31 May 2017 (Yemen BIT (1998))

Ansung Housing Co, Ltd v People's Republic of China, ICSID Case No. ARB/14/25, Award, 9 March 2017 (Korea BIT (2007))

Tza Yap Shum v Republic of Peru, ICSID Case No. ARB/07/6, Award, 7 July 2011; Decision on Annulment, 12 February 2015 (Peru BIT (1994))

Ping An Life Insurance Company of China, Limited and Ping An Insurance (Group) Company of China, Limited v Kingdom of Belgium, ICSID Case No. ARB/12/29, Award, 30 April 2015 (BLEU BIT 1984, 2005)

Pending Proceedings

China as Respondent

Goh Chin Soon v People's Republic of China, PCA Case No. 2021-30, UNCITRAL Rules 2010 (Singapore BIT (1985))

Jason Yu Song v People’s Republic of China, PCA Case No. 2019-39 (UK BIT (1986))

Hela Schwarz GmbH v People’s Republic of China, ICSID Case No. ARB/17/19 (Germany BIT (2003))

Proceedings brought by Chinese investors

Wang Jing, Li Fengju, Ren Jinglin, Xu Changshung, Wang Xinlei, Liu Yanning and others v Ukraine, PCA, UNCITRAL Rules (Ukraine BIT (1992))

China Machinery Engineering Corporation v Republic of Trinidad and Tobago, ICSID Case No. ARB/23/8 (Trinidad and Tobago BIT (2002))

PowerChina HuaDong Engineering Corporation (HDEC) and China Railway 18th Bureau Group Company Ltd (CR18g) v Socialist Republic of Vietnam (I), ICSID Case No. ARB(AF)/22/7 (ASEAN Investment Agreement (2009))

PowerChina HuaDong Engineering Corporation and China Railway 18th Bureau Group Company Ltd v Socialist Republic of Vietnam (II), ICSID Case No. ADM/23/1 (Vietnam BIT (1992))

PCCW Cascade (Middle East) Ltd v Kingdom of Saudi Arabia, ICSID Case No. ARB/22/20 (Saudi Arabia BIT (1996))

Huawei Technologies Co Ltd v Kingdom of Sweden, ICSID Case No. ARB/22/ (Sweden BIT (1982))

Qiong Ye and Jianping Yang v Kingdom of Cambodia, ICSID Case No. ARB/21/42 (ASEAN-China Investment Agreement (2009))

Alpene Ltd v Republic of Malta, ICSID Case No. ARB/21/36 (China - Malta BIT (2009))

Fengzhen Min v Republic of Korea, ICSID Case No. ARB/20/26 (Korea BIT (2007))

Sanum Investments Limited v Lao People’s Democratic Republic (II), ICSID Case No. ADHOC/17/1 (Laos BIT (1993)) 

Beijing Everyway Traffic & Lighting Tech Co, Ltd v The Republic of Ghana (I), PCA Case No. 2021-15 (Ghana BIT (1989)) 

Wang Jiazhu v The Republic of Finland, UNCITRAL Rules 2013 (Finland BIT (2004)) 

Discontinued proceedings or status unknown

Goh Chin Soon v People's Republic of China, ICSID Case No. ARB/20/34, procedure discontinued on 25 August 2021 (Singapore BIT (1985)) 

Macro Trading Co, Ltd v People’s Republic of China, ICSID Case No. ARB/20/22, procedure discontinued on 10 September 2021 (Japan BIT (1988))

Ekran Berhad v People's Republic of China, ICSID Case No. ARB/11/15, procedure discontinued on 16 May 2013 (Malaysia BIT (1988), Israel BIT (1995))

Eugenio Montenero v People's Republic of China, UNCITRAL Rules 1976, status unknown (Switzerland BIT (2009))

Jetion Solar Co. Ltd and Wuxi T-Hertz Co Ltd v Hellenic Republic, UNCITRAL Rules 1976, withdrawn (Greece BIT (1992)) 

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

Reading List

26. Please provide a list of any articles or books that discuss this country’s investment treaties.

China

Article/book

Tong Qi, ‘China’s International Investment Strategy: Bilateral, Regional, and Global Law and Policy’, Edited by Julien Chaisse, ICSID Review - Foreign Investment Law Journal, Volume 35, Issue 1-2, winter/spring 2020, Pages 174–178

Qingjiang Kong, Kaiyuan Chen, ‘ISDS Reform in the Context of China’s IIAs’, ICSID Review - Foreign Investment Law Journal, Volume 36, Issue 3, Fall 2021, Pages 617–635

Huawei Sun, ‘Political Risk Insurance’, The Investment Treaty Arbitration Review (fourth edition), Barton Legum (ed.), Law Business Research, 2019

Norah Gallagher, ‘Role of China in Investment: BITs, SOEs, Private Enterprises, and Evolution of Policy’, ICSID Review - Foreign Investment Law Journal, Volume 31, Issue 1, Winter 2016, Pages 88–103

Gallagher, Norah, Wenhua Shan, 'Chinese investment treaties: policies and practice', Oxford University Press, 2009

J. Romesh Weeramantry, ‘Investor–State Dispute Settlement Provisions in China’s Investment Treaties’, ICSID Review – Foreign Investment Law Journal, Volume 27, Issue 1, Spring 2012, Pages 192–206

Wenhua Shan and others, ‘National Treatment for Foreign Investment in China: A Changing Landscape’, ICSID Review –- Foreign Investment Law Journal, Volume 27, Issue 1, Spring 2012, Pages 120–144

Wei Shen, ‘Evolution of Non-discriminatory Standards in China’s BITs in the Context of EU-China BIT Negotiations’, Chinese Journal of International Law, Volume 17, Issue 3, September 2018, Pages 799–840

Kim M. Rooney, ‘ICSID and BIT Arbitrations and China’, Journal of International Arbitration, Volume 24 Issue 6, 2007, Pages 689–712

Disclaimer: Views in this questionnaire represent the authors’ personal views only and shall not be relied upon as the views of the firm or the Chinese government.

Answer contributed by Huawei Sun, Chang Liu and Xingyu Wan
Zhong Lun Law Firm

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