China’s Investment Treaty Policy
---Recent Changes and Future Direction
Wenhua Shan
Xi’an Jiaotong University, China
Oxford Brookes University, UK
Contents:
I.
II.
III.
IV.
China’s Investment Treaty Programme:
Three Generations
The Third Generation Investment
Treaties: Key Changes (eg Mexico BIT
2008)
Implication for Investment Arbitration:
Renta 4 v Russia
Future Direction: the New Model BIT
Draft
I. China’s Investment Treaty
Programme: Three Generations
◦ Tests:
 National Treatment, and
 Investor-State Arbitration (ICSID),
◦ 1982-1989: The Launch of the BIT Programme
and the First generation BITs
◦ 1990-1997: ICSID Accession and the Second
Generation BITs
◦ 1998-present: The Canadian BIT Talks and the
Third generation BITs
◦ Current BIT Talks: USA, Canada etc.
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
19
88
19
87
19
86
19
85
19
84
19
83
19
82
Annual Growth of BITs 1982-2007
16
14
12
10
8
6
4
2
0
79
19
20
20
20
20
20
20
20
20
19
19
19
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07
06
05
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02
01
00
99
98
97
96
95
94
93
92
91
90
89
88
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86
85
84
83
82
19
-1
9
FDI In China (1979-2007) Unit: $ 100 Million
800
700
600
500
400
300
200
100
0
Chinese outward investment 1990-2007 (unit: $ 100 million)
200
180
160
140
120
100
80
60
40
20
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
China's Forex Reserve 1980-2007 (unit: $ billion)
1800
1600
1400
1200
1000
800
600
400
200
0
-200
II. The Third Generation Investment
Treaties: Key Changes
1. National treatment
2. Transfer
3. Investor-state dispute
resolution
1. National Treatment:
From “Best Effort” soft NT to
“Grandfathered” hard NT
UK BIT 1986: Best effort NT
“…either Contracting Party shall to the
extent possible, accord treatment in
accordance with the stipulations of its laws
and regulations to the investment of
nationals or companies of the other
Contracting Party the same treatment as
that accorded to its own nationals or
companies.”
Mexico BIT 2008:
Grandfathered NT
ARTICLE 3
National Treatment
1. Without prejudice to its laws and regulations at the
time the investment is made, each Contracting Party shall
accord to investors of the other Contracting Party treatment no
less favorable than that it accords, in like circumstances, to its own
investors with respect to the operation, management, maintenance,
use, enjoyment or disposal of investments.
2.
Without prejudice to its laws and regulations at the
time the investment is made, each Contracting Party shall
accord to investments of investors of the other Contracting Party
treatment no less favorable than that it accords, in like
circumstances, to investments of its own investors with respect to
the operation, management, maintenance, use, enjoyment or
disposal of investments.
NZ FTA Ch 11 2008:
Grandfathered NT with more details




Article 138 National Treatment
Each Party shall accord to investments and activities associated with
such investments, with respect to management, conduct, operation,
maintenance, use, enjoyment or disposal, by the investors of the other
Party treatment no less favourable than that accorded, in like
circumstances, to the investments and associated activities by its own
investors.
Article 141 Non-Conforming Measures
◦ 1. Article 138 does not apply to:
◦ (a) any existing non-conforming measures maintained within its
territory;
◦ (b) the continuation of any non-conforming measure referred to in
subparagraph (a);
◦ (c) an amendment to any non-conforming measure referred to in
subparagraph (a) to the extent that the amendment does not
increase the non-conformity of the measure, as it existed
immediately before the amendment, with those obligations.
2. The Parties will endeavour to progressively remove the nonconforming measures.
2. Transfer
Reduced restrictions
From ‘in accordance with the applicable laws
and regulations’ (of the host state)
to “Without prejudice to any applicable
formalities pursuant to its laws and
regulations” (of the host state)
Korea BIT 1992
“Article 8
1. Investors of either State shall, in
accordance with the applicable laws and
regulations of the other State, be guaranteed
in respect of the investment, the transfer
out of the territory without delay in any
freely convertible currency of, in
particular, though not exclusively; …”
Mexico BIT 2008
Article 8
Transfers
“ 1. Without prejudice to any applicable
formalities pursuant to its laws and
regulations, each Contracting Party shall
guarantee to an investor of the other
Contracting Party that all payments related
to an investment in its territory may be
freely transferred into and out of its
territory without delay. Such transfers shall
include, but not be limited to:…”
3. Investor-State Dispute Resolution
From “ad hoc” arbitration for “amount
of compensation for expropriation”
(AOC disputes) (first generation)
 To ICSID arbitration for AOC dispute
(second generation); and
 To ICSID arbitration for all/any (investorstate) disputes (third generation)

Netherlands BIT 1985

“3. Disputes concerning the amount of compensation
to be paid when measures of expropriation,
nationalisation or other similar measures have been
taken which cannot be settled according to the
provisions of paragraph 1 of this Article within a
period of six months from the date either party
requested amicable settlement shall if the
investor so wishes be submitted either to the
competent court of law of the Contracting Party
receiving the investment or to international
arbitration.” (further details in Protocol)
Peru BIT 1994

3. If a dispute involving the amount of compensation for
expropriation cannot be settled within six months after resort
to negotiations as specified in Paragraph 1 of this Article, it
may be submitted at the request of either party to the
international arbitration of the International Center for
Settlement of Investment Disputes (ICSID), established by the
Convention on the Settlement of Investment Disputes
between States and Nationals of Other States, signed in
Washington D.C., on March 18, 1965. Any disputes concerning
other matters between an investor of either Contracting
Party and the other Contracting Party may be submitted to
the Center if the parties to the disputes so agree. The
provisions of this Paragraph shall not apply if the investor
concerned has resorted to the procedure specified in
Paragraph 2 of this Article.
Germany BIT 2003




Article 9 Settlement of Disputes between Investors and
one Contracting Party
(1) Any dispute concerning investments between a
Contracting Party and an investor of the other Contracting Party
should as far as possible be settled amicably between the parties in
dispute.
(2) If the dispute cannot be settled within six months of the date
when it has been raised by one of the parties in dispute, it shall, at
the request of the investor of the other Contracting State, be submitted
for arbitration.
(3) The dispute shall be submitted for arbitration under the
Convention of 18 March 1965 on the Settlement of Investment
Disputes between States and Nationals of Other States (ICSID),
unless the parties in dispute agree on an ad-hoc arbitral tribunal to
be established under the Arbitration Rules of the United Nations
Commission on the International Trade Law (UNCITRAL) or other
arbitration rules.
NZ FTA Ch 11
Article 152 Consultation and Negotiation
Any legal dispute arising under this Chapter between an investor of one Party and the
other Party, directly concerning an investment by that investor in the territory of that
other Party, shall, as far as possible, be settled amicably through consultations and
negotiations between the investor and that other Party, which may include the use of nonbinding third-party procedures, where this is acceptable to both parties to the dispute. A
request for consultations and negotiations shall be made in writing and shall state the
nature of the dispute.
Article 153 Consent to Submission of a Claim
1. If the dispute cannot be settled as provided for in Article 152 within 6 months from the
date of request for consultations and negotiations then, unless the parties to the dispute
agree otherwise, it shall, by the choice of the investor, be submitted to:
(a) conciliation or arbitration by the International Centre for the Settlement of Investment
Disputes (“ICSID”) under the Convention on the Settlement of Disputes between States
and Nationals of Other States, done at Washington on March 18, 1965; or
(b) arbitration under the rules of the United Nations Commission on International Trade Law
(“UNCITRAL”);
provided that the investor shall give the state party 3 months’ notice prior to submitting
the claim to arbitration under paragraph 1(a) or 1(b).
Mexico BIT 2008
ARTICLE 13
Arbitration: Scope and Standing and Time Periods
1. An investor of a Contracting Party may submit to arbitration a claim that
the other Contracting Party has breached an obligation set forth in
Chapter II, and that the investor has incurred loss or damage by reason
of, or arising out of, that breach.
2. An investment may not make a claim under this Section.
3. A disputing investor may submit the claim to arbitration under:
 the ICSID Convention, provided that both the disputing
Contracting Party and the Contracting Party of the investor are
parties to the ICSID Convention;
 the ICSID Additional Facility Rules, provided that either the
disputing Contracting Party or the Contracting Party of the
investor, but not both, is a party to the ICSID Convention;
 the UNCITRAL Arbitration Rules; or
 any other arbitration rules, if the disputing parties so agree.
III. Implications for Investment
Arbitration

For both foreign investors (v Chinese
Government) and Chinese investors (v
foreign government):
◦ The changing international legal landscape:
◦
◦
◦
◦
Maffizini
Plama
Rosinvest
Renta 4
More likely for ODI than for FDI
◦ Other elements (for FDI in China):
◦ Economic
◦ Political
◦ Structural/cultural
◦ Other elements (for ODI from China)
 Dramatic increase
 High risk destinations
 Sinosure Country Risk: of the 67 states encouraged to
invest, 70% with high or very high risk (34 Grade D (very
high), 11 (high))
 Tza Yap Shum v. Republic of Peru (ICSID Case No.
ARB/07/6): First Chinese BIT case, pending
IV. Future Direction: the New Model
BIT Draft
◦ More or less active in BIT negotiations?
◦ One or two or more Models?
◦ More Liberal or Restrictive?
 A refined but not reversed Model BIT Draft
 An alternative “balanced” model (see Gallagher & Shan, China
Investment Treaties: Policies and Practice, OUP 2009)
◦ The US BIT negotiations: a long march?
Thank you!