Outward Foreign Direct Investment Protection and the Effectiveness of Chinese BIT Practice

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Outward Foreign Direct Investment Protection and the Effectiveness of Chinese BIT Practice

in The Journal of World Investment & Trade


1 See United Nations Conference on Trade and Development (UNCTAD), World Investment Report: TIle Shift Towards Services, 2004, p. 1925.

2 See Xiang l3enwu, 7lie Emyirical Studies ou Determinants and Effects of China's Direct Investment Abroad, Social Sciences Academic Press (China), 2005, pp. 61-62, 67; Xong Xiaoqi, Overseas Direct lnvestment Risks Prevention, Economics Sciences Press, 2004, p. 196. 3 Ministry of Commerce (China) (Moc:), Statistics Commiiniqui of 2004 Chinese Outward Foreign Direct Investment (lIon:finalldal sector), p. 1; available at: .http://www.fdi.gov.cn/common/infojsp?id=Al3COOUOOUOU000026189.. last visited 10 June 2006. ; MoC, Chinese Outward Foreign Direct Investment Statistics 2005; available at: supra note 3, p. 1. e General Office of Moc, Notice on the Establishment of Data-Checking System toward Chinese Outward Foreign Direct Investment to Dijfermt Countries and Areas; available at: 7 Moc, supra note 3, pp. 2 and 3.

x Sec UNCTAD, Prospects for Foreign Direct Investment and the Strategies oJ Transnatinnal Corporations (2004-2007), United Nations, 2004, p. 15. 1 See Zhou Bin and Zhang Zhaoyi, China has bewme the fourth biggest FD/ source; available at: I/ subjcct3/main.asp?id=7&P=2>, last visited 10 May 2006. r° 48.4 per cent of the businesses investigated expressed the intention to invest abroad in two years, and 70 per cent of the total businesses investigated will invest abroad in four years. 20 per cent of the businesses investigated predicted that their total amount of overseas investment will be more than US$ 10 million. See Editing Note, Sunery of the Trends and Intentions of Chinese Enterprises' Investment Abroad, International Economic Cooperation, No. 3, 2005, p. 7. ' rr Xiang Bcnwu, supra note 2, pp. 68-69. tz Moc, supra note 4. r 5 Moc:, Die top 20 destinations of cumulative Chinese 0�1 up to the year 2003; available at: �http://www.chiiiafdi.gov.cn/ chinese/article_view.asp?id=930>, last visited 1 October 2005. 14 Moc, supra note 3, p. 9.

l� Cf. Yao Wang and Cai Xiaojun, Summary of Stl/dy of "Going Abroad" Strategy in China, Economy and Management Studies, No. 10, 2005, p. 20. 16 According to Moc, this Catalogue is open to change; see at: .http://www.mofêom.gov.cn/aarticle/a/200407 1 20040700250926.htrtil,, last visited 1 June 2006. 17 23 countries are from Asia, including: Thailand; Singapore; the Lao People's Democratic Republic; Myanmar; Viet Nam; Cambodia; the Philippines; the United Arab Emirates; Malaysia; Indonesia; Brunei Darussalam; India; Pakistan; Bangladesh; Afghanistan; East Timor; the Democratic People's Republic of Korea (Dn2x); Mongolia; Japan; South Korea; Iran; Saudi Arabia; and Turkey. 18 13 countries are from Africa, including: Egypt; Sudan; Algeria; Mauritius; Mali; Nigeria; Kenya: Tanzania; Zambia; Mozambique; Namibia; Madagascar; and South Africa. 'v 11 countries are from the Americas, including: Canada; the United States of America; Mexico; Cuba; Argentina; (:hile; Trinidad and Tobago; Brazil; Venezuela; Jamaica; and Suriname. =° Five countries are from Oceania, including: Australia; New Zealand; Papua New Guinca; Fiji; and Vanuatu. 21 15 countries arc from Europe, including: Sweden; France; the United Kingdom; Iceland; Germany; the Netherlands; Poland; the Czech Republic; Hungary; Romania; Russia; Kyrgyzstan; Kazakhstan; Uzbekistan; and Azerbaijan. -= There are 56 developing countries, including transitional States. 23 See Ministry of Foreign Affairs (China) (MFA), China's African Policy Paper (January 2006), Part IV; available at: Sino-Africa has great potential in the field o( mutual investment; available at: , last visited 10 June 2006. 24 Li Changjiu and others, What risks do Chinese Enterprises face while investing abroad, global Times, 21 June 2006, at 11.

25 Xiang Benwu, supra note 2, p. 75. 26 Moc:, supra note 3, p. 7. 27 See: Enhance to Implore Overseas Natural Resource — Report of Outwarrl Investment by Central Enterprises, Macroeconomics Study, No. 8, 2004. z9 UNCTAD, supra note 1, pp. 25, 27. 3o See Moc, Report of Trends qfforeigii Trade (Spring 2005); available at: ,http://news.xinhuanet.comlfortune/ 2005-04/29/coiiteiit 2893977.htm>, last visited 10 March 2006.

31 It now is SASAC. 32 It can be inferred that, for a long time, Chinese OFDI had been mainly conducted by trading corporations. See Xong Xiaoqi, supra note 2, p.198. ;3 As Zeng Peiyan, Vice Premier of the State Council, said, in 2004 China's imports and exports totaled US$ 1.15 trillion, ranking 3rd among all nations in the world, and it attracted US$ 60.6 million in foreign investment, the second-highest amount worldwide, bringing the aggregate value of inward foreign investment to over US$ 560 billion. In 2004, China's gross domestic product amounted to US$ 1.65 trillion, see:

34 The Central Committee of the Cpc, Decision on Some Issues concerning the Improvement of the Social Economy Market; available at: supra note 15, p. 21. 36 See the State Council, Decision of the State Council on Reforming the Investment System, Parts u and in; available at: ,http://news.xinhuanet.coll1/zhengfu/2004-07 /26/content_1648074.htm', last visited 10 June 2006. '� Ibid., Annex, Part XIII. 31 In regard to the more detailed examination and approval procedure by Nuac, see NDRC, Interim Regulation on Examination and Approval of Investment Items Abroad (911012004); available at: Provisions on the Examination and Approval of Investment to Run Enterprise Abroad; available at: (http://www.mofcom.gov.cii/aarticle/b/bf/200410/20041000288020.litiiil>, last visited 20 June 2006.

40 Ibid., Article 4. i� Ministry of Foreign Trade and Economic Cooperation, Interim Rules oil Foreign Trade Barrier Investigation; available at: ,http://news.xinhuanet.com/zhengfuI2002-09/29/contcnt_580381.htl1l'' last visited 10 Junc 2006. On 21 January 2005, Moc issued Foreign Trade Barrier Investigation Rules replacing the Interim Rules. 12 Moc, Obstacle Report Rules oil the Investrnent to Different Countrie.c; available at: Industrial Guidance Catalogue cf Investment to Foreign Countries; available at: ,http://fec2.iiiofcom.gov.cn/ aarticle/)aws/200408/20040801240263.html', last visited 24 June 2006. ^5 With a sharp comparison, since 1995 the Chinese government has issued three versions of the Industrial Guidance Catalogue of Investment for inward investors. 46 Moc, Circular of Country Catalogue of Guiding Investment in Processing Trade of Textile Clothirrg in Latin America; available at: Circular of Country Catalogue of Guiding Investments in Processing Trade of Textile Clothing in Asia; available at: .http://www.mofcom.gov.cn/aarticle/b/bf/200404/20040400215654.htmh, last visited 2 June 2006. 4" Moo, Circular of Country Catalogue 4 Guiding Investment in Processing 1'rade of Textile Clothing in Southeast-Africa; available at: http://www.iiiofcoiii.gov.cn/aarticle/b/bf/200403/2004030019102-�.htn-�,, last visited 2 June 2006. a9 In 2005, the total amount of M&A by Chinese enterprises reached US$ 6.2 billion; the amount in 2004 and 2000 was US$ 4.8 billion and US$ 1.8 billion, respectively. Liu Ji, a famous economist, predicted that China would play the leading role in the current "Fifth Wave "of global M&A. See Editing Board, top Yen Overseas Investments, Chinese Investment, No. 1, 2006, p. 91. 50 Moc and SAFE, Notice about Reporting System for the Overseas Merger and Acquisition Related Matters of Enterprises; available at: http://www.mofcom.gov.cn/aarticle/b/bf/200505/20050500087223.litriil>, last visited 2 June 2006.

� The State Council, Regulation on Suspending of Cross-border Merger and Acquisition and Strengthening of Administration of Outward Investment, 1994. 5'- Moc and SAFE, supra note 50, Preamble. 5' MoF and Moc, Circular on Issue Conrernirrg Early Stage Fee Support on Foreign Investment and Foreign Economic Cooperation Project in the Natural Resource Items in 2004; available at: http://www.iiiofcom.gov.cn/aarticle/b/bf/ 20U41O/20041000295100.htl1Ù" last visited 25 June 2006. According to Article 8(4) of the Circular, a single investment item can be supported with the amount of no more than 4 million Yuan, about US$ 500,000. � MoF and Moc, Regulation on Special Fund for Foreign Econnrnic and Technical Cooperation; available at: China'., Outward Foreign Direct Investment: FtASlMicn Firm Survey, p. 16; available at: Notice on Giving Credit Support to the Key Overseas Investment Projects Encouraged by the State; available at: http://www.ecnii-kjy.com/news/showiiews.asp?newsid=547,, last visited 25 June 2006. 57 Notzc and CDB. Notice of National Development and Reform Commission and China Development Bank about the Relevant Issues on Providing More Financittq Support to Key Overseas-invested Projects; available at: �http://www.fdi.gov.cn/ ltlaw/lawmfOFDIsp.jsp?id=ABCOOOO()000000012479&appId=h, last visited 25 June 2006.

58 SAFE, Circular of the State Administration of Foreign Exchange on Adjusting the Management Mode of Overseas Financial fiuarantees as�Provided by Banks within Chinese Territory for Overseas Investment Enterprises; available at: Cirarlar on Enhancing the Reform Pilots regarding the Administration of Foreign Exchange for Overseas Investment; available at: Promote inward and outward capital,flow; available at: ,http://www. safe. gov. cii/model safe/iiews/new detailjsp?ID=90000000000000000,501&id�3&typc=4,, last visited 10 June 2006. 61 SAFE, Notice of the State Administration of Foreign Exchanqe on Adjustiraq Some Foreign Exchange Management Policies concerning Oversees Investments; available at: , last visited 10 June 2006. 62 It was reported that the main reason was that the insurance rates were too high to be acceptable to the insured; see: Notice Contenting Relevant Issues on Setting up a Risk Prevention Mechanism for Key Overseas Investment Projects; available at: .http://www.jxdpc.gov.cn/cyzc/cytzcz/lywzI/20050822/160508.htm.. last visited 10 May 2006. 64 Ibid., Article 7. 65 In 2005, SrNOSUkF handled 9 investment insurance cases, including 7 newly written ones and 2 renewed covers. The amount insured was US$ 520 million, up 333.4 per cent from the year 2004. By the end of 2005, the outstanding liability with investment insurance was US$ 660 million. See SrNOSUtZF, Annual Report 2005, p. 26. In 2006, SINOSUR.E has issued several polices; see: � /news,, last visited 1 June 2006.

(l(t Moc, Imploring International Market through increasing Export Trade is not Eiicoiiraged; available at: Mtt;.4 in China: Political Risk Insurance Helps Investors Push Projects Ahead; available at: , last visited 10 June 2006. 68 Jeswald W. Salacusc and Nicholas P. Sullivan, L7o Biis Really Work?: An Evaluation of Bilateral Investment Treaties and Their Grand Bar,qain, Harvard International Law Joumal, Vol. 46, No. 1, 2006, p. 76.

"`' See, in detail, Andrew T. Guzman, Why LDCS Sign 1'renties that Hurt l7mrn: Explaining the Popularity of Bilateral Investment Treaties, Virginia Journal of Intemational Law, Vol. 39, 1997. See also M. Sornarajah, The Intemntioual Law on Foreign Investment, Cambridge University Press, 1996, pp. 258-259. 70 G.A. Res. 3201, U.N. GA01�,, 6th Special Session, Supp. No. 1, at 3, U.N. Doc. A/9559 (1974), reprinted in 13 I.L.M. 715 (1974). " Guidelines on the Treatment of Foreign Direct Investment, reprinted in ICSID Rev.-F.1.L.J., Vol. 7, No. 2, 1992. 72 Ibid., Guidelines IV and v.

73 For the positive opinions, see, for example, Salacuse and Sullivan, supra note 68, pp. 95-110. For the negative opinions, see, for example, Kenneth J. Vandevelde, Investment Liberatinn and Economic Development: The Role of Bilateral Investment '1'rratirs, Columbia Journal of Transnational Law, Vol. 36, 1998, p. 524. The World Bank also casts doubt upon the function of BtTS; see World Bank, World Development Report 2005-A Better Investment Climate for Evrryoue, World Bank and Oxford University Press, 2004, p. 177. �a Though he negates that there is a causal relationship between BITS and capital inflow, Vandevelde admits that BITS are helpful to reduce investment risks by stabilizing the legal framework within which the investment will operate, and this is also the major benefit for developing countries to conclude BITS; Vandevelde, supra note 73, pp. 525, 523. �5 According to Roberto Danino, former Secretary-General of IcsD, up to late in the year 2005, more than 1,500 BITS stipulated Icsii) clauses. See Roberto Danino, Opening Remarks presented at dre Syrnposium on "Making the Most of International Investment Agreements: A Common Agenda co-organized by ICSID, OECn and UNCTAD, 25 December 2005, Paris. �h Take Argentina, for example. Since the 1990s, Argentina has completely accepted ICSID jurisdiction in over 20 Bn s. 77 In this regard, the Maffezini case is classic; see Emilio Agustin Maffezini v. Kingdom of Spain, ICSID Case No. AW /97/7, Decision on Objections to Jurisdiction of 25 January 2000. As to the development of MFtv in arbitral jurisdiction in the IcsD system, see Locknie Hsu, MFnr and Dispute Settlenrent-When the Tuaiti Meet, 7J.W.I.T. 1, February 2006, pp. 29-33. �" In this regard, see Carlos E. Alfaro and Pedro M. Lorcnti, The Growing Opposition of Argentina two Arbitration Trib,mals-A COIlflict between International and Domestic Law? 6J.W.I.T. 3, June 2005, p. 417. 79 As to the Calvo Doctrine, see generally Manuel R. Garcia-Mora, The Calvo Clauses in Latin American Constitutional Law and International Law, Marquette Law Review, Vol. 33, 1994. As to the Calvo Doctrine and ICSID, see James C. Baker and Lois J. Yoder, Icstv and Calvo Doctrine: A Hindrance to Fore(R" Direct Investment to LDM, Ohio State Journal on Dispute Resolution, Vol. 5, 1989.

'0 Vandevelde, supra note 73, p. 525. 11 Karl P. Sauvant, New Sources of Fm: The BRics-Outward FDifrom Brazil, Russia, India and China, 6J.W.I.T. 5, October 2005, p. 642. R2 Ibid., p. 639. 13 This is well exemplified by the fact that international investment arbitrations have increased dramatically since the 1990s and most of the defendants are developing countries. See UNCTAD, Issue, Related to International Arrangements: Investor-State Dispute and Policy Implications, TD/B/Cot�t.2/62, 14 January 2005.

84 Country Risk is divided into four grades-A, B, C, and D-from low to high, and every grade is furthers divided into two sub-grades from low to high, for example, Grade A is divided into A1 and A2. K5 SINOSURE, The List of Country Risk, (unpublished), 2005. It It should be added that these 67 countries are not totally included in SINOSURE's List of Country Risk, ibid. Therefore, if we take account of this fact, the ratio becomes higher. � SASAC, supra note 28. Also see UNCTAD, China: An Emerging Fm Outward lnvestvr, p. 7; available at:

H9 In the Nell' Path J''' China's Peaceful Rise and the Future of Asia, presented at the Bo'ao Forum for Asia 2003, Professor Zheng Bijiang first proposed the "Peaceful Rise" strategy. See Zheng Bijian, Peaceful Rise — China's New Road to Development, Central Party School Publishing House, 2005, pp. 9-20. Zheng's proposal was immediately accepted by the Chinese government. In a speech in December 2003 at Harvard University, Wen Jiabo, Premier of the State Council of the People's Republic ofChina, expressed officially China's determination to rise peacefully; see Wen Jiabo, 1'urninR Your Eyes to China; available at: Mtite Paper on Peacefid Develoyrnent Road oj China (12/22/2005); available at: �http://www.china.org.cn/chinese/zhuanti/book/1069230.htm>, last visited 1 June 2006. For the authoritative descriptions of China' strategy of "Peaceful Rise", see Zheng Bijian, supra note 89. '�r In this regard, it is well known that it is strong pressure from the U.S Congress that made the attempt of China's National Offshore Oil Corporation (CNOOC) to purchase Unocal Corporation, a U.S. Energy company, eventually fail. See Ben White, Chinese Drop Bid To Buy L7.S. Oil Film; available at: Position Paper of the People's Republic oJ China on the United Nations Reforms, issued on 7 June 2005, points out that the reform should be conducive to enhancing the authority and efficiency of the Council and strengthening its capacity to deal with global threats and challenges. Increasing the representation of developing countries should be given priority. Developing countries, who account for more than two-thirds of the UN membership, are seriously under-represented on the Security Council. This situation must be reversed. More countries, the small and medium-sized ones in particular, should be given more opportunities to enter the Council on a rotating basis to participate in its decision making process. See: `http://www.fmprc.gov.cn/eng/zxxx/t199318.htm>, last visited 1 June 2006.

93 Shang Ming, Review and Artalysis on China's Foreign Commerce and the Related Regal Practice in 2005, Journal of International Law (in Chinese), Vol. 12, No. 4, 2U05, p. 7. `" UNCTAD, Recent Developments in International Investment Agreements, UNC'rnD/WaB/ITE/ItT/2005/1, 30 August 2005. °5 For the latest developments in these negotiations, see: �http://www.fmprc.gov.cn/chn/wjdt/1179/ tl62188.htm'. last visited 1 June 2006. 11 For the latest developments in these negotiations, see: ,last visited 1 June 2006. 98 Zcng Huaquan (ed.), International Investment Law, Peking Press, 1999, pp. 432-435. yy China-Netherlands BIT, Article 3(3). t°° China-Gennany BIT, Article2(2). 101 See, for example, Protocol of the China-Germany BIT, Article 3. t°2 See, for example, China-Sweden BIT, Article 4. t°3 China-Germany 13IT, Article 6.

104 According to Article 5 of the Protocol of the China-Germany BIT, the transfer shall comply with the relevant 'formalities" stipulated by the present Chinese laws and regulations relating to exchange control. 105 See, for example, China-U.K. BIT, Article 7(1). ioc China-Barbados BIT, Article 9. 107 These 21 countries as the other parties to Sino-foreign BITS include: Finland; Congo; Botswana; Cyprus; Sierra Leone; Mozambique; Kenya; the Netherlands; Myanmar; Bosnia and Herzegovina; Trinidad and Tobago: Jordan; Cote d'lvoire; Guyana; Germany; Benin; Latvia; Uganda; Djibouti; Tunisia; and the DeltK. Of course, not all Sino-foreign BITS concluded after 1998 completely accepted ICSID arbitral jurisdiction. As a matter of fact, from 1998, the year that the China-Barbados BIT was concluded, up until 10 June 2006, 8 of the 26 newly concluded Sino-foreign BITS did not accept IcsiD arbitral jurisdiction, and the China-Benin BIT just partly accepted IcstD arbitral jurisdiction. See Wei Yanru, On the Impropriety o_f China's Recent Complete Acceptance of ICSID jurisdiction, Journal of International Economic Law (in Chinese),Vol. 13, No. 1, 2006, p. 111. 108 Shang Ming, supra note 93, pp. 7-8.

109 Salacuse and Sullivan, stipra note 68 , pp. 8(>-81. "° China-Barbados BIT, Article 11. 111 China-Germany BIT (2003), Article 11. "2 A few of the Sino-foreign BITS concluded earlier include such rules; see, for example, the China-Mongolia BIT, Article 10. 113 See, for example, China-Bosnia and Herzegovina BIT (2002), Article 10; China-Benin BIT (2002), Article 11; China-Guyana BIT (2004), Article 11; China-Latvia BIT (2004), Article 12; China-Ethiopia BIT (1998), Article 11; China-Dvt�tc BIT (2005), Article 11. "' Salacuse and Sullivan, supra note 68, p. 81. "5 China-Latvia 13IT, Article 14(3). 11(, China-Norway Bit, Article 9(4). 117 China-Finland Brf, Article 15(3).

III Zeng Huaquan (ed.), supra note 98, pp. 426, 436. 119 Ibid., pp. 432-435. 120 China-Bosnia and Herzegovina BIT, Article 3(1). t2t See, for example, China-Germany BIT (2003), Article 2(2). tz2 China-Finland BIT, Article 3(2). 123 See, for example, protocols of the China-Germany BIT, China-Finland BIT, China-Bosnia and Herzegovina BIT, but these "Freeze Clauses" are applied to China only. 124 See, for example, China-Cote d'lvoire BIT, Article 3(3); China-Guyana BIT, Article 3(2); China-Benin BIT, Article 3(1); China-Latvia BIT, Article 3(2). In this regard, the China-Bosnia and Herzegovina Brr is exceptional.

126 See, for example, Hsu, supra note 77, pp. 25-34. 127 Of course, compared with local remedies provided by the host country, international remedies provided by the ICSID mechanism are not necessarily more beneficial to foreign investors. However, foreign investors are provided with more choices to access justice. 128 See, for example, U.S.A.-Argentina BIT, Article 2(2)(b). 129 The main reason probably is that, since the international rule-making process was traditionally dominated by the Western world, China is always skeptical about the fairness and equity of international law, including in the field of investment. 1311 Zcng Huaquan (ed.), supra note 98, p. 440. '3' See, for example, China-Bosnia and Herzegovina BIT, Article 2(2); China-Guyana Brr, Article 2(2). '3z Zeng Huaquan (ed.), supra note 98, pp. 437-439, 444. r33 On the latest discussions, see, for example, Christoph Schreuer, Fair and Equitable Treatment in Arbitral Practice, 6J.W.I.T. 3, June 2005, pp. 364-385. 134 Zhu Xiaojing, Fair and Equitable Treatment in NArTA Arbitration, Journal of International Economic Law (in Chinese), Vol. 13, No. 3, 2006. r35 According to Article 1131 (2) of the NAFTA, Interpretations of the Free Trade Commission are binding upon the relevant arbitral tribunal.

°6 NAFTA Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions, 31 July 2001; available at: , last visited 10 June 2006. � China-Yemen BIT, Article 3(1). 138 China-Cape Verde BIT, Article 3(2). 9 China-Finland 131T, Article 3. 140 Zeng Huaquan (ed.), supra note 98, p. 445. 141 See, for example, China-Germany BIT, Article 4(2). �a= See, for example, China-Yemen BIT, Article 4(1); China-Ukraine BIT, Article 4(1). 143 These intemational conventions especially include the relevant human rights conventions, such as the International Covenant on Civil and Political Rights (General Assembly resolution 2200A (xxi) of 16 December 1966). According to Article 14 of the Convention: "All persons shall be equal before the courts and tribunals and everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law."

141 RudolfDolzer and Margretc Stevens, Bilateral Investment Treaties, Martinus NijhoffPublishers, 1995, p. 106. �;e Zeng Huaquan (ed.), supra note 98, p. 453. 146 Ibid., pp. 454-455. 147 See, for example, China-Guyana BIT, Article 4(2). 149 See, for example, China-Thailand BIT, Article 5(1). ray See, for example, China-Qatar BiT, Article4(2). 'S° See, for example, China-Sweden BIT, Article 3(1). rsr Zeng Huaquan (ed.), supra note 98, p. 454. For recent such BITS, see, for example, China-Cote d'lvoire BIT, Article 4(2); China-Botswana BIT, Article 4(2); China-Ethiopia BIT, Article 4(2). 152 See, for example, China-Bcnin Bit, Article 4(2); China-Latvia BiT, Article 4(2); China-Guyana BIT, Article 4(2); China-Gennany BIT, Article 4(2).

1-11 See, for example, China-Benin BIT, Article 6(1); China-Cote d'lvoire BIT, Article 6(1). Is4 Zeng Huaquan (ed.), supra note 98, p. 461. �5s See, for example, China-Bosnia and Herzegovina BIT, Article 6(4); China-Yemen BIT, Article 6(3). tsb See, for example, China-Barbados BIT, Article 5; China-Guyana BIT, Article 5. 157 See, for example, China-Barbados BIT, Article 5; China-Ethiopia BIT, Article 5; China-Yemen BIT, Article 5. 151 See, for example, China-Guyana BIT, Article 5(1); China-DNttK BIT, Article 5; China-Cote d'lvoire BIT, Article 5(1). 159 See, for example, China-Bosnia and Herzegovina BIT, Article 5; China-Benin BIT, Article 5. In this regard, the China-U.K. BIT concluded in 1986 was exceptional. 161 Kenneth J. Vandevelde, tlttited States Investment Treaties: Policy and Practice, Law and Taxation Publishers, 1992, pp. 213-214. 162 Though different in expression, all relevant Sino-foreign BITS provide that the destruction or requisition of foreign investors' property by the forces or authorities of the other Contracting Party, mhich was not caused in combat action or was not required by the necessity of the situation, shall be compensable. See, for example, China-Cote d'lvoire BIT, Article 5(2); China-Finland BIT, Article 5(1). tcs See, for example, China-U.K. BIT, Article 4(2); China-Cote d' Ivoirc BiT, Article 5(2). tb^ China-Finland BIT, Article 5(2).

165 For instance, Article 6 of the Protocol of the China-Germany BIT stipulates: "With respect to investments in the People's Republic of China an investor of the Federal Republic of Germany may submit a dispute for arbitration under the following conditions only: (a) the investor has referred the issue to an administrative review procedure according to Chinese law, (b) the dispute still exists three months after he has brought the issue to the review procedure, and (c) in case the issue has been brought to a Chinese court, it can be withdrawn by the investor according to Chinese law." Similar content can also be found in the Protocol of the China-Finland BIT. 166 See, for example, Chen An, Four Creat Safeguards in Bilateral Investment Agreements Shouldn't be Rashly Dismantled during Sino-foreign Negotiatiott--Comments on Critical Provisions concerning Dispute Settlement in the u.s. and Canada's Model BiTS Text, Journal of International Economic Law (in Chinese), Vol. 13, No. 1, 2006, pp. 3-37; Wei Yanru, On the Impropriety of China's Recent Complete Aaeptance of ICSID Jurisdiction, Joumal of International Economic Law (in Chincsc), Vol. 13, No. 1, 2006, pp. 109-144; Wang Hailang, Falling Behind or Going Far Beyond the Zjm;f?—CAtKa'! Consent to theJurisdiction o_f ICS1D, Journal of International Economic Law (in Chinese), Vol. 13, No. 1, 2006, pp. 145-182. 167 Shang Ming, supra note 93, pp. 9-10. 168 The three countries are Germany, the Netherlands and Finland. is9 The 19 countries are Barbados, Congo, Botswana, Cyprus, Sierra Leone, Mozambique, Kenya, Burma, Bosnia and Herzegovina, Trinidad and Tobago, Jordan, Cote d'lvoire, Guyana, Benin, Latvia, Uganda, Djibouti, Tunisia, and the Deitx.

I�u Moc, supra note 3, p. 13. The four developing countries include Mozambique, Myanmar, Trinidad and Tobago, and DPax. The two countries are Germany and the Netherlands.

t�3 See, for example, China-Switzerland BIT. Article 5. ��4 See, for example, China-Guyana l3rr, Article 10(2); China-Germany BIT, Article 10(2). t�5 See Christoph Schreuer, Travelling the Brr Route — Of Waiting Periods, Umbrella Clauses and Forks in the Road, 5J.W.I.T. 2, April 2004, pp. 250-251. 176 Zeng Huaquan (ed.), supra note 98, p. 487. 177 SCS Societe Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01 /13, Decision of the Tribunal on Objections to Jurisdiction, paras. 168, 170; available at: t�8 Scs Société Generale de Surveillance S.A. v. Republic o% tlte Philippines, ICSID Case No. AKIS/02/6, Decision of the Tribunal on Objections to Jurisdiction, 29 January 2004, para. 128; available at: 171 Cms Gas Transmission Company v. Argentine Republic, 1(:sii) Case No. Aan/O1/8, para. 303; available at: ,http://www.worldbank.orglicsid/cases/CMS- Award.pd£, last visited 10 May 2006.

180 Sce Shu Xiaohong, International Justice in the Changillg World, Peking University Press, 2005, pp. 129-140. 181 Vandevelde, supra, footnote 161, 1992, p. 25. 182 See in detail, Section III of this article. r"3 See, for example, Agreement between China and Zambia concerning the establishment of the Mixed Economic and Trade Commission, 22 October 1986. rR4 Also, in accordance with the Agreement on Trade-Related Investment Measures, China can seek remedy under the WTO dispute settlement system against any such measures taken by the specific WTO Member. r"5 The main reason is that these developed countries are confident in the "fairness and efficacy of their governments and legal system". See Carlos G. Garcia, All the Other Dirty Little Secrets: Investment Treaties, Latin America, and the Necrssary Evil of Investor-State Arbitration, Florida Journal oflntemational Law, Vol. 16, 2004, p. 314. See Barton Legum, Lessons LeamedJrol1l the NAFTA: The New Generation of U.S. Investment Treaty Arbitration Provision, IcsiD Rev.-F.IL.J., Vol. 19, No. 2, 2004. 187 In the latest practice of the United States and Canada, the first countermeasure is that some kinds of disputes are prohibited to resort to international arbitration. See Wang Hailang, supra note 166, pp. 150-159. The second one is to seek the establishment of an appellate system in the current arbitration mechanism. See U.S.-Chile BIT, Annex 10-H.

18R See Shan Wenhua, ']7ie Deatlr and Revival of Calvo Doctrine-Recent Changes of Attitude of 4qislations concerning International Investment in Latin-American Coiititties and 77teir Implications for China, Journal of International Economic Law (in Chinese), Vol. 13, No. 2006, pp. 193-201. 18'1 Denise Manning-Cahrol, The Irnminent Death of the Calvo Clause and the Rebirth of the Calvo Principle: Equality of Foreign and National Investors, Law and Policy in International Business, Vol. 26, 1994, p. 1169. ''"' Shan Wenhua, supra note 1138, p. 199. '`" The Country Risk in 22 countries is marked Grade A. All of them are developed countries, including Andorra, Liechtenstein, Luxembourg, Switzerland, Japan, Singapore, Austria, Belgium, Denmark, Finland, France, German. Iceland, Italy, the Netherlands, Norway, Spain, Sweden, the United Kingdom, Australia, Canada and the United States. See SrNOSUttE, supra note 85. 1')2 See, for example, the Protocol of the China-Germany BIT, Article 3.

See U.K.-Albania BIT, Article 3. 194 See, for example, the Protocol of the China-Germany BIT. 191 However, a few Sino-foreign BITS, such as the China-Thailand BIT and the China-Singapore BIT, do not establish a mechanism of this kind. 196 See, for example, China-Germany BIT, Article 13; China-Cluyana BIT, Article 13. See, for example, C',hina-Republic of Korea Bit, Article 14; China-Japan 13IT, Article 14. See NneTn, Article 2001. 1'" It is NAFTA tribunals' liberal interpretation of the content of "fair and equitable treatment" stipulated in Article 1105 of the NAFTA that prompted the F rc to issue a special note in July 2001. See NAFTA F rc;, supra note 136.


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