Internationalization with backward international law

Abstract

This article discusses a mechanism for dispute resolution, called the “China model,” for newly-launched panda bonds. This China model contemplates a two-step approach for resolving disputes between Chinese bond investors and foreign sovereign issuers; namely, arbitration in China to settle disputes between the two sides and enforcement of Chinese arbitral awards by courts of foreign sovereigns. This article argues that the existence of the China model reflects a deep tension between China’s goal of internationalization and the backwardness of its international law regime. This is evidenced by China’s adoption of an absolute doctrine of sovereign immunity, which prevents Chinese courts from accepting disputes against foreign sovereigns and was abandoned by developed countries many decades ago. This article further discusses three factors that contribute to the backwardness of China’s international law regime: the continuing impact of historical debt disputes, within which China still defends itself using the absolute immunity doctrine; the failure of China’s approach to rely on international convention to change its position on sovereign immunity; and the challenge of drafting a comprehensive sovereign immunity statute in China due to lack of support among stakeholders within the country.