HONG KONG SAR, CHINA Trends and Developments Contributed by: Lianjun Li, Matthew Townsend, Patrick Chong and Vanessa Fung, Reed Smith
(i) the competent court of the contracting party where the investment was made; (ii) an ad hoc arbitral tri- bunal established under the UNCITRAL Rules; or (iii) any other arbitration institution or arbitration rules as agreed by the parties. Historically, China’s stance on the inclusion of an ISDS mechanism in its investment treaties has evolved sig- nificantly, moving from complete rejection initially to broad acceptance. This evolution can be broadly cat- egorised into three generations as set out below. First generation: complete rejection or limited availability (around 1982-1999) In the first generation of China’s BITs, ISDS provisions were either entirely absent or extremely limited. The first eight BITs concluded by China did not include any ISDS clauses. In subsequent BITs from this peri- od, dispute resolution mechanisms were generally restricted: parties were required to attempt amicable settlement by negotiation or consultation before they may turn to international arbitration, which was only permitted for disputes involving the amount of com- pensation resulting from expropriation. Second generation: acceptance of ICSID (around 1997-2011) The second-generation China’s BITs marked a sig- nificant shift, as China began to accept inclusion of broader arbitration clauses. These treaties allowed for a wider range of disputes, such as legal disputes, or disputes in connection with an investment, to be sub- mitted to arbitration. The most recent generation of China’s BITs features more elaborate provisions on dispute settlement. These BITs typically require parties to attempt amica- ble settlement during a specified cool-off period, and thereafter, allow submission of investment disputes to international arbitration for losses or damages suf- fered by reason of or arising from breaches of obliga- tions under the BITs, with the specific types of admis- sible breaches enumerated in the treaty. Third generation: comprehensive dispute settlement provisions (since around 2007)
This progression reflected China’s increasing open- ness to international arbitration as a way of safeguard- ing the essential rights of investors. Belt and Road Initiative (BRI) and Investor–State Arbitration The BRI encompasses both the land-based “Silk Road Economic Belt” and the “21st Century Maritime Silk Road”, with a goal to enhance connectivity and international co-operation among countries across Asia, Europe and Africa. The BRI is structured around five co-operation priorities – People-to-People Bond, Policy Co-ordination, Financial Integration, Facilities Connectivity and Unimpeded Trade. Limitations of China’s early-generation BITs In light of China’s rising outbound investment, par- ticularly under the BRI, there has been a rise in ISDS cases both against China and brought by Chinese investors in recent years. However, the effectiveness of ISDS mechanisms for investors under the BRI is sometimes constrained. Some BRI countries either lack a BIT with China or have not ratified the ICSID Convention, thereby limiting the avenues for investors to seek recourse under ISDS. This limitation is illustrated by the case of Ping An Life Insurance v the Government of Belgium , ICSID Case No ARB/12/29, the first concluded investment arbitra- tion case brought by a Chinese investor. In this case, Ping An initiated proceedings against the Belgian government under the ICSID Convention. Notably, China and Belgium had entered into two BITs: one in 1986 which limited the arbitration tribunal’s jurisdic- tion to disputes over the amount of compensation for expropriation (“1986 BIT”), and another in 2009 which did not contain such limitation (“2009 BIT”). Ping An based their claim on the alleged breaches of the 1986 BIT but sought to rely on the 2009 BIT for the tribunal’s jurisdiction. The tribunal ultimately held that the 2009 BIT did not apply to cover the pre-2009 disputes in the current case and therefore upheld the Belgian govern-
ment’s objection to jurisdiction. Recent favourable developments
Notwithstanding the constraints of China’s early-gen- eration BITs, a number of positive developments in
118 CHAMBERS.COM
Powered by FlippingBook