Wednesday, October 28, 2020

Evolution of a stance on foreign investment protection

 International investment protection has always been the dominant method used by states which have a sizeable force of foreign investors investing in host states. As a result, developing economies have been at the receiving end of foreign investment claims. However, recent studies show that developing countries are also capital exporting countries. Therefore, their investors now become foreign investors in other hosts states. Does their attitude towards international investment treaties as well as dispute settlement mechanisms like ISDS change when the nature of their role in international trade and investment changes.

This piece in the East Asia Forum thinks so. Giving the eample of China and its Belt and Road Initiative, it explains how Chna is using the international investment legal framework to advance its investors interests in other countries.

Despite some continuing concerns, China today is deeply committed to the BIT system. Rather than viewing international investment law as inherently threatening or constraining, China now sees it as a valuable instrument for protecting its investments and interests abroad. By relying primarily on BITs to protect its BRI investments, China is actively leveraging existing international rules and norms to advance its national interests.

It would be interesting to see the timeframe, provisions and evolution of these BITS as the BRI progressed. How did the provisions and protections change due to experience and investor feedback?

Bryan Mercurio and Deni Sejko explain how the BIT regime is important for the BRI here.The have assessed the set of treaties and aver their inadequacy:

The great majority of investment treaties in force between China and the BRI countries belong to the first and second-generation and are characterized by terms that are encouraged but not required. More importantly they contain investor state dispute settlement (ISDS) clauses with a limited amount of compensation payable to investors in case of expropriation. Thus, early Chinese treaties greatly reduce important protections for foreign investors in clauses related to national treatment, most-favoured nation status, fair and equitable treatment, and full protection and security. Another problem with China’s first- and second-generation BITs is enforcement. They generally provide for the establishment of ad hoc tribunals (with only limited use of ICSID arbitration tribunals) that can only decide cases dealing with the amount of compensation in case of expropriation. In addition, non-ICSID awards require much more complicated enforcement procedures.

They have opined that China needs to be more aggressive in its international investment rule making strategy

There is a general need for China to improve the trade and investment framework with BRI countries, which is recognised by the 2015 Chinese government circular on Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road. President Xi also has advocated for the negotiation of new international agreements that support trade, investment, and enhanced integration along the Belt & Road area.

The Chinese vision in 2015 is clear on this count.

We should speed up investment facilitation, eliminate investment barriers, and push forward negotiations on bilateral investment protection agreements and double taxation avoidance agreements to protect the lawful rights and interests of investors

How the invetsment regime will evolve, what kind of disputes would be brought and what implications they would have to the investment norm making framework may set the agenda for the 21st century international investment regime discourse.


 

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