朱永锐：“一带一路”基础设施项目中的国际投资仲裁简要分析

Investment arbitration is a smaller component when compared to commercial arbitration, but this does not diminish its importance. In fact, investment arbitration holds great significance due to its commercial and political implications.

The smaller nature of the component can be inferred by examining the caseload. The ICSID’s official website displays 17 cases that involve Chinese parties while other sources suggest there have been 45 cases as of 2021. Despite this, the commercial significance of these cases is apparent as the amount in controversy can reach billions of US dollars. The Yukos case, for instance, awarded damages amounting to US$ 500 million.

Investment arbitration has significant political implications, as it deals with disputes between investors and states in areas that are often highly politically sensitive, such as natural resources, infrastructure, and public services. I believe there are real needs to say something about the political implications as they set investment arbitration apart from conventional commercial arbitration.

First, one of the major political implications of investment arbitration is the potential impact on government policy and decision-making. Investment treaties and the investor-state dispute settlement mechanism can restrain governments' ability to regulate in the public interest. 

Second, another political implication is related to the relationship between investors and states. Investment arbitration can be seen as a means of addressing power imbalances between investors and states by providing a neutral forum to resolve disputes. In the eyes of investors, investment treaties and investment arbitration are invaluable tools for protecting foreign investment and enabling economic development while some states have criticized investment arbitration as an interference with their sovereignty. It can also be seen as a tool for powerful investors to bully states into accepting their demands, particularly in situations where the state lacks the resources to navigate the complex legal process of investment arbitration.

Third, furthermore, investment arbitration can impact the relationship between states by raising issues of sovereignty and international obligations.  

Over the last decade, Chinese parties’ participation in investment arbitration has been on the rise. 

How has China's ICSID cases evolved over time? Here are some important information that you can consider:

1. China has been a member of the ICSID since 1993. ICSID is a World Bank-affiliated organization that provides a forum for the settlement of investment disputes between foreign investors and host countries.

2. China's first ICSID case occurred in 2003 when a Malaysian company, Metal-Tech Ltd, filed a claim against the Chinese government for expropriating its investment in a metal processing plant. The case was eventually settled in 2007, with Metal-Tech receiving compensation from the Chinese government.

3. Since then, China has faced an increasing number of ICSID cases. As of 2021, China has been involved in 45 ICSID cases, ranking it fourth globally after the United States, Spain, and Venezuela.The accuracy of the statistics may be questionable as some investment disputes may arise between the host country and Chinese company subsidiaries that are registered in a third jurisdiction, making their nationality less clear.

4. The BAC Report indictaes that 15.44% of the enterprises interviewed were once involved in investment disputes with the host country and 3.68% opt for using investment arbitration to settle disputes. The Report indicates that the BRI still holds certain geopolitical risks, exposing businesses to potential conflicts such as renationalization of the host country and infringement of fair and equitable treatment clauses. Alongside the conventional commercial dispute resolution measures, it's imperative for Chinese enterprises to remain receptive to investor state conflict resolution mechanisms to protect their lawful rights and interests. 

5. ICSID cases involving China have primarily involved disputes with European and American investors, with the majority of cases related to the energy and mining sectors.

6. China has a mixed record in ICSID arbitration, with some cases ending in the investor's favor, and some cases ending in China's favor. Notably, in 2016, China's claims were rejected in an ICSID case brought by a Philippines mining company, OceanaGold.

7. In recent years, China has become more wary of ICSID arbitration and has taken steps to reduce its exposure to such disputes. In 2017, China withdrew from the ICSID Convention's Additional Facility, a mechanism that allows parties to arbitrate disputes outside of the ICSID Convention framework.

Infrastructure and energy transactions and disputes are often associated with investment disputes.

Mr Li[ Mr Li Zhiyong, General Counsel and Chief Compliance Officer of CSCEC International Construction Co Ltd] just now mentioned in his speech that “Investment Arbitration may increase”. It is also my estimate. Disputes over infrastructure and energy projects are often closely related to investment disputes, as in these projects, the other party is sometimes the sovereign state or its agencies or other entities run by the state. 

So, when confronted with a dispute regarding infrastructure or energy, it is important to keep in mind that the matter could potentially result in an investment arbitration. It is imperative to approach the situation cautiously and with appropriate foresight.     

An investment arbitration tribunal’s jurisdiction originates from many sort of legal instruments such as the ICSID Conevention, bilateral or multilateral investment treaties and other agreements.

Below are some of my comments on China's BITs and BRI related MOUs

1. China is a contracting country of ICSID Convention and has signed BITs with over 140 countries. These treaties provide investors with a framework for investment protection, including rights such as national treatment, fair and equitable treatment, and protection against expropriation.

2. Apart from BITs, China has signed several multilateral investment treaties, including the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) , the Agreement on Government Procurement (GPA) and the ASEAN-China Investment Agreement 2009, the ICSID case between PowerChina HuaDong Engineering Corporation (Chinese), China Railway 18th Bureau and Vietnem filed in November 2022 is based on this Agreement. 

3. China has signed free trade agreements (FTAs) with several countries, including Australia, New Zealand, Singapore, and South Korea. These agreements not only provide for tariff reduction but also include investment provisions to protect and promote foreign investment.

4. None of the treaties provides the definition of BRI. The relevant content of BRI exits in those MOUs between China and other countries participating in the initiative. These MOUs typically cover a range of areas, including infrastructure, trade, investment, and cultural exchange. 

5. As Mr Chen[1] said, as of January 6th, 2023, China has signed over 200 documents on Belt and Road cooperation with 151 countries and 32 international organizations, which aims to boost infrastructure development and investment in countries along the Belt and Road. 

6. One of the main focuses of the BRI is infrastructure development, and many of the MOUs have been signed in this area. This includes agreements on the construction of railways, highways, ports, airports, and power plants. 

7. Some notable MOUs include:

(1)the China-Pakistan Economic Corridor

(2)the construction of the Jakarta-Bandung high-speed railway in Indonesia, and 

(3)the building of the Port City Colombo in Sri Lanka. 

China's investment treaties differ from those of other major global economic powers in a few key ways. 

First, China's investment treaties often contain more protective provisions for the investor, such as broad definitions of expropriation and a requirement for compensation in cases of indirect expropriation. This reflects China's emphasis on attracting foreign investment and protecting the interests of its investors abroad.

Second, China's investment treaties tend to be more bilateral, meaning they are negotiated and signed between two countries rather than through a multilateral forum such as the World Trade Organization. This approach allows China to tailor its treaties to the specific needs and interests of each partner country.

Third, China has been more willing to include state-owned enterprises in its investment treaties, reflecting the dominance of SOEs in its economy. This can create challenges for other countries seeking to compete with Chinese investors on a level playing field.

Overall, while there are some similarities between China's investment treaties and those of other major economic powers, China's approach reflects its unique economic and political context and its strategic focus on expanding its global economic influence.

What are the key legal issues that arise in investment arbitration cases related to Belt and Road projects?

1. Investment arbitration cases related to Belt and Road projects often involve disputes over the terms of investment agreements, including provisions related to dispute settlement, governing law, and jurisdiction. I have seen many strange arbitration agreements. 

2. Disputes may arise when the host country's laws and regulations conflict with investors' interests or expectations.

3. Expropriation and nationalization: Nationalization or expropriation of assets without adequate compensation is a common issue in investment arbitration cases related to Belt and Road projects. Investors may seek damages or compensation for the loss of their investments.

4. Environmental and social issues: Belt and Road projects may involve significant environmental and social risks, including land acquisition, displacement of local communities, and damage to natural habitats. Disputes related to these issues may arise in investment arbitration cases.

5. Corruption and bribery: Corruption and bribery are significant challenges to investment arbitration cases related to Belt and Road projects. Investors may allege corruption and seek compensation for losses resulting from corrupt practices.

6. Political risk: Belt and Road projects often involve political risk, including changes in government policy, political instability, and civil unrest. Disputes related to political risk may arise in investment arbitration cases.