Developing China’s Investor-State Arbitration Clause

Abstract

It has been half a century since the Washington Convention. Investor-State Arbitration (ISA) is now a hot topic in China and among its trade and investment partners. However, compared to the large volume of international investment treaties, the volume of ISA cases is still small, and doubts are still widespread at the policy-making level and among scholars. These problems, doubts and challenges may reflect the political position and legal culture of different jurisdictions. China’s ISA clause-drafting and practice is not flawless in supporting its investors in ISA or in defending its national interests as a host country. This paper aims to review the main aspects of China’s approach in drafting ISA clauses in the context of the Belt and Road Initiative. It reviews ISA clauses in Bilateral Investment Treaties (BITs) and other international investment agreements (IIAs) between China and the ‘Belt and Road’ region countries and discusses relevant legal issues and controversies. Based on a review and analysis of the issues, divergence and flexibility are identified in existing ISA clauses between China and the Belt and Road regions, although some degree of policy convergence can be found in a few most recent IIAs. It is both a challenge and an opportunity for China to learn from its previous experience of ISA clause-drafting and to integrate its treaty-making approach in the context of the Belt and Road Initiative. The author suggests that a more adaptable Model ISA clause and a more consistent approach to ISA clause drafting would benefit both China and its trade and investment partners, and evaluates the possible international negotiation arenas in which China may propose its new generation of ISA clauses.