Investor-state Dispute Resolution Research Articles

The ASEAN-China Investment Agreement: A regionalization of China’s BITs

On 15 August 2009, the Agreement on Investment of the Framework Agreement on Comprehensive Economic Cooperation between China and the Association of Southeast Asian Nations was signed in Bangkok, Thailand. The Investment Agreement is the last one of the ASEAN-China free trade agreements. This paper analyzes the provisions of the new agreement, especially those on the scope of application, national treatment, MFN treatment, expropriation, and investor-state dispute resolution. Then, the paper compares the new agreement with other international investment agreements concluded by China or ASEAN. In comparison with the existing BITs between China and individual ASEAN member states, there are significant changes in the Investment Agreement which provides higher standard of investment protection. In this respect, the Investment Agreement is ‘new wine in a new bottle’. Nevertheless, such a standard of investment protection is common in the BITs signed by China since 2000 which constitute a new generation of Chinese BITs. Moreover, unlike some other investment agreements in the free trade arrangements, such as the Chapter 11 of the NAFTA and the ASEAN Comprehensive Investment Agreement, the Investment Agreement rarely touched upon the issue of investment liberalization, although the Framework Agreement of ASEAN-China FTA provided for creating a liberal investment regime and the ASEAN member states had insisted on provisions of investment liberalization in the negotiations of the Investment Agreement. In this respect, the Investment Agreement represents ‘old wine in the new bottle’. This paper concludes that China is not prepared to undertake investment liberalization obligations in its FTAs, negotiating an investment agreement in China’s FTA arrangements has been regarded as an opportunity to update its old BITs. The ASEAN-China Investment Agreement is rather a regionalization of Chinese BITs and an example of China’s influence on rule-making on regional level.

The ASEAN-China Investment Agreement: A Regionalization of Chinese New BITs

On 15 August 2009, the Agreement on Investment of the Framework Agreement on Comprehensive Economic Cooperation between China and the Association of Southeast Asian Nations was signed in Bangkok, Thailand. The Investment Agreement is the last one of the ASEAN-China free trade agreements. This paper analyzes the provisions of the new agreement, especially those on the scope of application, national treatment, MFN treatment, expropriation, and investor-state dispute resolution. Then, the paper compares the new agreement with other international investment agreements concluded by China or ASEAN. In comparison with the existing BITs between China and individual ASEAN member states, there are significant changes in the Investment Agreement which provides higher standard of investment protection. In this respect, the Investment Agreement is ‘new wine in a new bottle’. Nevertheless, such a standard of investment protection is common in the BITs signed by China since 2000 which constitute a new generation of Chinese BITs. Moreover, unlike some other investment agreements in the free trade arrangements, such as the Chapter 11 of the NAFTA and the ASEAN Comprehensive Investment Agreement, the Investment Agreement rarely touched upon the issue of investment liberalization, although the Framework Agreement of ASEAN-China FTA provided for creating a liberal investment regime and the ASEAN member states had insisted on provisions of investment liberalization in the negotiations of the Investment Agreement. In this respect, the Investment Agreement represents ‘old wine in the new bottle’. This paper concludes that China is not prepared to undertake investment liberalization obligations in its FTAs, negotiating an investment agreement in China’s FTA arrangements has been regarded as an opportunity to update its old BITs. The ASEAN-China Investment Agreement is rather a regionalization of Chinese BITs and an example of China’s influence on rule-making on regional level.

Five Justifications for Investment Treaties: A Critical Discussion

The article examines five justifications for the investment treaty system. These include the justifications: (1) that investment treaties are a means to encourage foreign direct investment; (2) that investment treaties respond to the bias and unreliability of domestic courts; (3) that investment treaty arbitration advances the rule of law in the resolution of investor-state disputes; (4) that investment treaties affirm the sovereignty and bargaining strategies of states; and (5) that investment treaties were endorsed by the democratic processes of states. The discussion concludes with recommendations that states exercise greater care when considering entry into the system or, more likely, the maintenance or renewal of existing treaties, and that states consider options for reform of the arbitration mechanism.

Judicial Supervision of NAFTA Chapter 11 Arbitration: Public or Private Law?

THE NAFTA investment chapter, Chapter 11, relies on an individualized regime of enforcement for violations of the treaty's investment standards.1 A NAFTA-based foreign investor may initiate a claim directly under Chapter 11 for compensation for losses caused to the investor by a NAFTA state's breach of the rules. The claim is submitted to an arbitration tribunal constituted under the rules of either the Additional Facility of the International Centre for the Settlement of Investment Disputes (ICSID) or the United Nations Commission on International Trade Law (UNCITRAL).2 If a Chapter 11 tribunal concludes that the NAFTA host state violated the relevant treaty standards, the tribunal may award damages to the investor.3 The award is given the force of domestic law through existing structures of international commercial arbitration – represented primarily by the New York Convention – which adopt the principle of judicial deference to arbitration tribunals.4 A Chapter 11 award is not the same as a typical commercial arbitration award arising from a dispute between private parties. At its root, the authority for Chapter 11 arbitration comes from the consent of state parties to NAFTA, not from a contract. Thus, the consent of one of the disputing parties in a Chapter 11 arbitration – the host state – is made via an instrument of public international law. Moreover, the general effect of Chapter 11, like bilateral investment treaties, is to regulate host states' exercise of public authority in relation to foreign investors. In this regard, NAFTA standards could be viewed as analogous to rules of domestic public law that protect individuals by limiting state authority, although in the international sphere. On the other hand, Chapter 11 imports rules and structures of international commercial arbitration into investor-state dispute resolution. As such, the arbitration of a dispute under Chapter 11 closely resembles classical commercial arbitration between private parties. This contradiction in the public and private law aspects of Chapter 11 reveals a basic tension in investor-state arbitration under modern investment treaties. Is investor-state arbitration more like public law adjudication or commercial arbitration? Or is it a hybrid, and if so should public or private law principles take precedence in a particular circumstance?

Improving Russia's Foreign Direct Investment Policy Regime

All countries - developing and developed alike - find it difficult to stay competitive without inflows of foreign direct investment (FDI). FDI brings to host countries not only capital, productive facilities, and technology transfers, but also employment, job skills and management expertise. These ingredients are particularly important in the case of Russia today, where the pressure for firms to compete with each other remains low. With blunted incentives to become efficient, due to inter-regional barriers to trade, weak exercise of creditor rights and administrative barriers to entrants - including foreign invested firms - Russian enterprises are still in the early stages of restructuring. This paper argues that the policy regime governing FDI in the Russian Federation is still characterized by old paradigm of FDI, established before the Second World War and seen all over the world during the 1950s and 1960s. Indeed, Russia is host to relatively little new paradigm FDI-investments characterized by state-of-the-art technology and world-class competitive production linked to dynamic global (or regional) markets. The paper suggests specific policy recommendations: (i) amend the newly enacted FDI law so as to give national treatment for both right of establishment and for post-establishment operations; abolish conditions that are inconsistent with the agreement on trade-related investment measures (TRIMs) of the WTO (such as local content restrictions); and make investor-State dispute resolution mechanisms more efficient, including giving foreign investors the opportunity to seek neutral, binding international arbitration; (ii) strengthen enforcement of property rights to improve corporate governance incentives; (iii) simplify foreign investor registration procedures and make them rules-based and transparent; and (iv) extend guarantee schemes covering basic non-commercial risks.