Reforming Investment Protection: A Comparative Analysis of the EU and China

Abstract

This article provides a comparative analysis of the European Union’s (EU’s) and China’s approaches to international investment law reform. While the EU has been referred to as a ‘systemic reformer’, which promotes significant institutional reform, China’s emerging model of investment protection remains unclassified. In the first part, this article describes the progressive emergence of China’s investment law regime. It argues that the Chinese model of investment protection may be viewed as an outright tool of foreign economic policy. Accordingly, China’s reform’s approach is a middle ground between systemic and incremental reforms. By contrast, due to its democratic nature, the EU has adopted a value-driven model. In this respect, this article posits that the political science scholarship on democracy may shed a different light on the EU’s institutional approach, and thus enrich the debate on investment law reform. The second part analyses the proposed Comprehensive Agreement on Investment (Proposed CAI) between the EU and China, which has been signed but not ratified. After showing that convergence was achieved on substantive protection, it argues that democratic imperatives explain the EU’s preference for a court system. Nevertheless, non-democracies often do not face the same incentives, which may generate disagreements regarding the dispute settlement design for investment claims. European Union, China, CAI, international investment law, democracy, dispute settlement