⸪ Be the First Investor to Eat Crabs in North Korea: Tips for Bilateral Investment Treaties

As the last economic frontier in Northeast Asia, North Korea is a promising land but at the same time a risky land for foreign investment. The ‘dual-track’ policy of advancing both the political stability and economic development promoted by the present leader of North Korea, Kim Jong-un, has prompted the outside world to speculate that he is determined to gradually open the doors to the economy of North Korea to attract foreign investment as initial capital to mobilise domestic economic growth. By conducting a systemic and comparative analysis of the existing bilateral investment treaties (BIT s) signed by North Korea in the Kim Jong-il era, this article has put forward eight tips that can better prepare those daredevils who are interested in seizing the future opportunity to invest in North Korea in the present Kim Jong-un era. It is predicted that denuclearisation will bring a new era for North Korean BIT s.


Introduction
The Democratic People's Republic of Korea (DPRK), also known as North Korea, is located in the northern part of the Korean Peninsula in East Asia. Since its establishment, North Korea has been ruled by the three-generation lineage from the first leader, Kim Il-Sung (in office between 1948 and 1994), to his son, Kim Jong-il (in office between 1994 and 2011), then to his grandson, Kim Jong-un (in office from 2011 to now). The present leader, namely Kim Jong-un, has set out comprehensive measures to realise his purported 'dualtrack' policy of advancing both the political stability, especially through the nuclear program, and economic development since he came into power in 2011.1 Consequently, the previously forbidden word 'reform' began to appear in North Korea's official discourse,2 and the establishment of dozens of special economic zones (SEZ s) with ostensibly foreign-friendly regulations has prompted the outside world to speculate that North Korea was determined to gradually open its doors to attract foreign investment as initial capital to mobilise domestic economic growth.3 Almost all these SEZ s are located far from residential areas but close to borders, which not only stabilises the national security but also suits to attract foreign investment from its neighbouring countries such as China, Japan, Russia, and South Korea. Despite these positive signals, 'to be the first ones to eat crabs' (a Chinese idiom meaning 'people who are willing to take dangerous and risky chances'), foreign investors might remain concerned about the challenges and risks that they might encounter with. North Korea is the last economic frontier in Northeast Asia.4 However, a series of sanctions imposed by the United Nations Security Council (UNSC) since 2006 constitutes a significant obstacle to North Korea's strategic opening of its economy. Even if these sanctions can be lifted as a result of denuclearisation, North Korea's domestic legal systems may remain a big concern that discourages foreign investment. North Korea has a right to decide which type of foreign investment is eligible to enter into its territory, subject to considerations such as political stability and national security, and to formalise relevant rules and processes in its domestic laws and institutions, including provisions about legal protection and tax benefits to incentivise foreign investment. Apart from domestic legislation and institutions, international legal systems, especially bilateral investment treaties (BIT s), are essential to guaranteeing foreign investors obtain fair treatment and sufficient protection and to providing a certain degree of safeguard so as to increase the confidence of foreign investors. In light of this, this article starts with a discussion of the UNSC sanctions and North Korea's domestic legal frameworks in relation to foreign investment (Section 2) in order to set the scene for a systemic analysis of the existing BIT s involving North Korea (Section 3). Such a systemic analysis of North Korean BIT s has been little explored in literature, and this article seeks to fill this gap by exposing potential legal problems contained in the current design of these BIT s and proposing practical recommendations (Section 4). This article, being purely academic research and holding a neutral position, seeks to offer interested countries reflections on their future BIT negotiations with North Korea and to provide investment tips for foreign investors.

Setting the Scene
A significant obstacle to North Korea's strategic opening of its economy comes from outside the country. The UNSC has adopted a series of sanctions since 2006 with the aim of forcing North Korea to give up nuclear and missile programs in the exercise of its power under Chapter VII of the UN Charter to maintain or restore international peace and security threatened by North Korea's nuclear testing and ballistic missile launching activities.5 These sanctions include, for example, prohibiting or limiting exports of military supplies, luxury goods, crude oil and refined petroleum products to North Korea, banning North Korea's exports of coal, iron, lead, food and agricultural products, machinery and electrical equipment, banning joint ventures, imposing sanctions on money transfers to shut North Korea out of the international financial system, and banning North Korean nationals from working abroad (see Table 1).
There have been questions about the effectiveness of such UNSC sanctions. For example, Jeong looked into available trade data and concluded that UNSC resolution 1718 was ineffective in decreasing North Korea's imports of luxury goods, which had indeed increased from USD 135 million in 2006 to USD 304 million in 2017.6 Nevertheless, as Noland rightly pointed out, these sanctions are comprehensive in the sense of covering about 90 percent of North Korea's trade and constraining investment and financial transactions, despite documented sophisticated sanctions evasion efforts and lax enforcement by some UN member countries.7 Sanctions are not without costs. A major cost of these sanctions, in Frank's view, is a discouragement of 'marketization and intensified contacts with the outside world' and the possibility of destroying 'the seeds of hope for a normalization of North Korea that is the precondition for a sustainable, indigenous, long-term solution of a multitude of issues surrounding that country' .8 In fact, as UNSC sanctions have been extended beyond military and nuclear development and luxury goods to include more comprehensive restrictions about North Korea's access to the international monetary system and trade since 2013, North Korea's foreign direct investment (FDI) inflows had experienced a sharp drop from USD 102 million in 2014 to USD 26 million in 2019, as estimated in the 2020 World Investment Report issued by the United Nations Conference on Trade and Development (UNCTAD),9 despite its legal and institutional changes intended to promote foreign investor confidence especially in the past decade as discussed below. Therefore, it is fair to say that these sanctions must be lifted before North Korea can enjoy real economic progress through foreign investment where BIT s become relevant.
Progress on denuclearisation negotiations since 2018 seemed to give rise to some optimism, which consisted of three rounds of inter-Korean summits (on 27 April, 26 May, and 18-20 September 2018, respectively) and two rounds of United States-North Korea summits (on 12 June 2018, and 27-28 February 2019, respectively) as well as a trilateral meeting among North Korea, South Korea and the United States (on 30 June 2019).10 In the Panmunjom Declaration for Peace, Prosperity and Unification of the Korean Peninsula ('Panmunjom Declaration'), adopted at the first inter-Korean summit on 27 April 2018, North Korea and South Korea agreed on 'the common goal of realising, through complete denuclearisation, a nuclear-free Korean peninsula' .11 The 12 June 2018 United States-North Korea joint statement reaffirmed North Korea's commitment to 'complete denuclearisation of the Korean Peninsula' .12 This joint statement was seen as a prelude to the economic opening of North Korea.13 The ongoing denuclearisation talks seem to shed light on the ultimate lifting of the international sanctions so far as North Korea keeps its commitment. In fact, China and Russia proposed a draft UNSC resolution in December 2019 that would relax sanctions posed upon North Korea, although this proposal was later stymied by the United States.14 Even if these sanctions can be lifted, North Korea's domestic legislation and institutions may remain a big concern that discourages foreign investment. The North Korean government designated the Ministry of Foreign Economic Relations as the responsible institute for dealing with foreign investment 10 According to a recent perception survey conducted by the Korea Institute for National Unification (KINU) on 200 professionals (in the fields of political science, economics, North Korean studies, and international relations in academia, public and private research institutes, and the media, among others), 36% predicted the 'partial denuclearization of North Korea various aspects of foreign investment such as foreign exchange, taxation, land  lease, labour relations, company registration, bankruptcy and other issues, but  legislation is still lacking on some important matters including mergers and  acquisitions, anti-monopoly, build-operate-transfer and public-private partnerships contracts that involve foreign investment. Apart from legislative loopholes, there is also a yawning gap between laws and implementation in reality. What has been seen is that foreign investment in North Korea can sometimes become vulnerable to deteriorating inter-State relations despite the existence of applicable domestic laws. An illustrative example is the Kaesong Industrial Zone (KIZ), an SEZ located 6 miles north of the Korean Demilitarized Zone and 37 miles from downtown Seoul. The KIZ was also the only SEZ that North Korea allowed a foreign government to retain a certain degree of control by selecting mangers of the administrative agency.16 Attracted by high-profit margins due to low wages and the excellent location (close to Seoul as one of the most lucrative consumer markets in the region), 124 South Korean companies were operating in the KIZ by the end of 2015, employing a total of 53,000 North Korean workers.17 Despite the 2002 KIZ Law and its implementing regulations, the access from the South Korea side to the KIZ had been restricted at times of inter-Korean tension. For instance, in February 2016, the South Korea government announced the temporal closure of the KIZ and the recall of all staff, partly as a protest to North Korea's nuclear test in January that year. In response to this, North Korea announced to freeze all South Korean assets and equipment in the KIZ, which South Korea claimed to be illegal. With the peace talks starting in 2018, North Korea and South Korea agreed to set up an inter-Korean liaison office in the KIZ, but North Korea blew up this office in June 2020 as its relation with South Korea deteriorated.
In case of disputes, North Korea's domestic laws or contracts with foreign investors usually do provide dispute settlement mechanisms. However, the judicial system in North Korea is criticised as lacking independence,18 and in practice, negotiations facilitated by governments sometimes seem to play a more prominent role than other means. In August 2012, a Chinese company, Haicheng Xiyang Group, which made a 36-million-euro investment in a venture processing iron-ore powder in North Korea, openly accused the North Korean government of corruption, fraud and violation of its own investment 16 Jeehye  Table 2). In general, these BIT s start with definitions of core terms such as 'investor' , 'investment' and 'returns' , and encapsulate key clauses comprising (i) territorial scope, (ii) substantive protection, (iii) expropriation and compensation, and (iv) dispute settlement mechanisms. This article will examine each of these four key clauses contained in 13 studied BIT s in turn.

3.1
Territorial Scope All the studied BIT s contain a provision defining the applicable territorial scope. With respect to North Korea, the territory over which such BIT s shall apply is usually defined as below: the territorial land, territorial waters, exclusive economic maritime zone and continental shelf over which it exercises sovereign rights or jurisdiction in accordance with its national law and international law.26 Accordingly, the applicable territorial scope should encompass both the land and marine areas subject to North Korea's sovereignty or jurisdiction. Marine areas include territorial seas, the exclusive economic zone (EEZ) and continental shelf. A coastal State enjoys full sovereignty over territorial seas and shall respect other States' right of innocent passage. In respect of EEZs and continental shelves, a coastal State enjoys specific sovereign rights, which are less than full sovereignty and mostly limited to the utilisation and conservation of marine natural resources.
Given the existence of a maritime boundary dispute between North Korea and South Korea in the Yellow Sea,27 a question naturally arising is whether the territorial scope of a BIT signed by North Korea should cover the contested maritime areas that North Korea claims to be under its sovereignty or jurisdiction. This question will become highly relevant if North Korea authorises a foreign investor to explore or exploit marine natural resources in the contested Yellow Sea in the future, the odds of which is indeed high due to North Korea's increasing demands for resources for economic development.28 The Energy 26 The Agreement between the Government of the Republic of Singapore and the Government of the Democratic People's Republic of Korea   Information Administration (EIA) of the US reported that North Korea had no proven oil reserves or petroleum and other liquids production as of July 2015.29 With increasing demands for resources caused by economic development in the future, North Korea may turn its eyes to the Yellow Sea, which is rich in oil and gas potential.30 In light of this, imagine if an investor-State dispute between such a foreign investor and North Korea arises and is submitted to a competent judicial body based on a relevant BIT. One jurisdiction ratione loci question will arise as to whether or not the judicial body has the jurisdiction to trial this dispute.
Before addressing this question, it is necessary to briefly introduce the contested marine areas in the Yellow Sea. The Korean War Armistice Agreement signed in 1953 was designed to 'ensure a complete cessation of hostilities and of all acts of armed force in Korea until a final peaceful settlement is achieved' .31 This agreement draws a military demarcation line (MDL) and requests both sides to withdraw 2 km from this line to establish a demilitarised zone (DMZ).32 Both the MDL and DMZ only apply to the land territory and do not extend to adjacent marine areas. Subsequently, the US-led United Nations Command (UNC) unilaterally drew a maritime demarcation line in the Yellow Sea in 1965, namely the North Limit Line (NLL), in order to prohibit the vessels of the UNC from sailing north of the NLL without special permission.33 The NLL crosses waters presumed to be under uncontested North Korean sovereignty in at least two places.34 It is important to note that 3 nautical miles (M) were the recognised limit for territorial seas at the time of the designation of the NLL, but the law has changed since then, and now the accepted limit for supplemented in 1998, 2009, 2012, 2013, 2016  three-stage methodology is to construct a provisional equidistance line. Once this line has been drawn, an international judicial body then will proceed to determine whether any relevant circumstances require adjustment of the line as the second step. The third step is to examine whether the line results in any significant disproportion between the ratio of the respective coastal lengths and the ratio of the relevant areas allocated to each State. In some circumstances, the provisional equidistance line will become the final demarcation line. The jurisdiction ratione loci question can be examined from the perspectives of different stakeholders including foreign investors, North Korea, and judicial bodies. From the perspective of a foreign investor, the initiation of an investor-State dispute case is to obtain protection against discriminatory practices conducted by the host State. Therefore, it is natural for a foreign investor to support the jurisdiction ratione loci of the competent judicial body by claiming that the territorial scope stipulated by BIT s signed by North Korea should cover the contested maritime areas claimed by North Korea. From the perspective of a host State, North Korea might have mixed concerns. On the one hand, claiming that the territorial scope stipulated by its BIT s does not encompass the contested maritime areas can halt the exercise of jurisdiction by the competent judicial body, and, therefore, North Korea can be immune from any lawsuits pertaining to the contested Yellow Sea stemming from the BIT s. On the other hand, this claim, however, might lead to negative implications for North Korea. The exclusion of the contested marine areas from the applicable territorial scope of the BIT s might weaken North Korea's claims over the contested marine areas, as it might be interpreted that North Korea does not claim to 'exercise sovereign rights or jurisdiction in accordance with its national law and international law' over the contested marine areas. Another adverse effect is that the statements made by North Korea in an investor-State case might trigger the application of judicial estoppel. Judicial estoppel, as defined by Davis, 'prevents a party from asserting a position in one legal proceeding that directly contradicts a position taken by that same party in an earlier proceeding' .43 The rationale behind the doctrine of judicial estoppel is to protect the integrity of the judicial bodies, not the litigants. In other words, this doctrine aims to prevent the litigants from manipulating the judicial bodies into making inconsistent decisions.44 Following this rationale, when it comes to positions of pure law, it does not matter whether the litigants change their positions in a subsequent case or not, as such a change does not threaten the judicial integrity. This is because, according to the principle of iura novit curia ('the court knows the law'), it is incumbent on the judges to find out the applicable law. However, in contrast, when it comes to positions of pure fact, the doctrine of judicial estoppel should, in general, apply.
Neither international jurisprudence nor statutory documents oblige adjudicators 'to actively investigate the facts in all circumstances' , as the international judicial procedure is 'firmly based on the adversarial model in that the primary responsibility for gathering and presenting evidence lies with the parties' ,45 although in theory international judicial bodies are not restricted in their power of fact-finding or in their evidentiary competences to the facts provided by the parties.46 However, international judicial practice has shown that adjudicators tend to adopt a reactive attitude towards fact-finding.47 It is based on such a reality of international law that this research argues that in general, the litigants should not be allowed to contradict their positions of pure facts that are taken in an earlier proceeding. Otherwise, given that international judicial bodies are reactive in fact-finding, the litigants might easily manipulate the judicial bodies into making inconsistent decisions by changing the positions of pure facts in their favour. was related to the plausibility of factual claims.50 Therefore, arguably, whether North Korea exercises sovereign rights or jurisdiction in accordance with its national law and international law over the contested marine areas is primarily a question of fact, as this question must be answered by references to facts and evidence, which relates to the status and extent of the exercise of sovereign rights or jurisdiction by North Korea in the areas concerned, as well as inferences arising from those facts. To this effect, if North Korea makes a statement in an investor-State case that the contested marine areas do not belong to the territorial scope of the BIT s, this statement might be used to be against North Korea in a subsequent case, for example, a maritime dispute case involving North Korea and South Korea. Therefore, in its best interest, chances are slight that North Korea would pose objections to the jurisdiction ratione loci of the competent judicial body. A further question is whether the competent judicial body could motu proprio trial the issue of jurisdiction ratione loci even when the parties do not challenge this issue. According to the principle of nemo judex sine actore (no action, no judge), the answer seems to be in the negative. However, according to the principle of 'competence of competence' , a judicial body is empowered to rule on its jurisdiction. International jurisprudence also indicates that a judicial body must satisfy itself that it has jurisdiction to address the case as submitted even if no disagreement exists between the parties on the jurisdiction. For instance, in Ghana/Côte d'Ivoire, both parties agreed on the jurisdiction of the Special Chamber of the ITLOS in that case, and yet, the Special Chamber still felt it necessary to check whether it had jurisdiction regarding the submission. 51 Yet, what is the chance of an international judicial body holding that a contested marine area falls within the applicable territorial scope of a BIT? The two investor-State arbitrations, namely PJSC Ukrnafta v Russia and Stabil LLC and ten others v Russia, are of significant relevance to the discussion here.  By the same token, international judicial bodies are likely to deem the contested marine areas in the Yellow Sea claimed by North Korea to be part of the 'the territorial land, territorial waters, exclusive economic maritime zone and continental shelf over which it exercises sovereign rights or jurisdiction in accordance with its national law and international law' as stipulated in the existing BIT s signed by North Korea.
Increasing demands for hydrocarbon resources owing to economic development in the future might turn the rich potential of oil and gas in the contested marine areas of the Yellow Sea into an excellent foreign investment opportunity. To secure potential investments in these areas, this research suggests that the future BIT s adopt a similar 'territorial scope' clause contained in the existing BIT s but add a specific reference to include marine areas claimed by North Korea. The 'territorial scope' clause can thus be framed as follows: North Korea's territory over which a BIT shall apply include the territorial land, territorial sea, exclusive economic zone and continental shelf over which it exercises or claims to exercise sovereign rights or jurisdiction in accordance with its national law and international law.57

Substantive Protection
The studied BIT s all contain provisions on substantive protection to foreign investors and their investment. These provisions usually consist of full protection and security (FPS), fair and equitable treatment (FET), the umbrella clause,58 national treatment (NT) and most-favoured-nation (MFN) treatment for foreign investment. A systemic and comparative study of these provisions in existing North Korean BIT s in this section seeks to provide good practices and lessons learned that could inform the formulation of future North Korean BIT s.

3.2.1
Full Protection and Security, and Fair and Equitable Treatment A majority of studied BIT s contain FPS and FET in two separate provisions, while some contain FPS and FET in one single provision.59 Some BIT s mention FET twice: the first absorbed in the FPS provision, and the second referred to again in the investment treatment provision.60 Which formulation would maximize the protection of investment?
To answer this question, a close examination of existing North Korean BIT s might help. It is noted that most North Korean BITs grant FPS at all times (i.e. from entry to exit) for foreign investment.61 FPS guarantees that contracting States have an obligation to provide protection against forcible interference by individuals and State organs such as armed forces.62 Some arbitral tribunals expanded this concept to further request States to provide legal safeguards 57 Singapore State failed to provide FPS, including the failure of preventing the seizure of the investment and of taking restoring measures.70 However, the focuses of FPS and FET are indeed different. FPS asks States to take proactive measures including establishing a factual legal framework to ensure security and taking necessary measures to protect investments against adverse actions.71 In contrast, FET requests States to desist or refrain from unfair and inequitable treatment for foreign investment.72 Therefore, despite the interrelationship between FPS and FET, this article would encourage BIT s to contain both clauses to maximise the possible legal protection of foreign investment.

3.2.2
The Umbrella Clause Concerning the studied BIT s, six of them include the umbrella clause.73 The umbrella clause, also known as the obligations observance clause, requests host States to observe obligations that they have entered into with regard to foreign investment, reinforcing the fundamental principle of pacta sunt servanda in public international law.74 For instance, Article 2.3 of the North Korea-Denmark BIT provides: 'Each Contracting Party shall observe any obligation it may have entered into with regard to investments of investors of the other Contracting Party.' A literal reading of this clause seems to suggest that investors can initiate international arbitration when a host State (including its organs and local governments) breaches an investment contract, because this breach also constitutes a breach of the BIT.75 However, is this formulation of the umbrella clause the best strategy for North Korean BIT s?
In real cases, the implications of an umbrella clause are not this straightforward but instead quite controversial,76 as evidenced in distinctive decisions that arbitral tribunals made in the Société Générale de Surveillance SA (SGS) 70 Wena The umbrella clauses in some existing North Korean BIT s (e.g. the North Korea-Denmark BIT) are phrased in broad terms and share more similarity with the one contained in the Philippines-Switzerland BIT, and therefore, the holding in SGS v Philippines likely applies. This is also confirmed by international jurisprudence developed after SGS v Pakistan and SGS v Philippines.85 It is further noted that the umbrella clause is not limited to contractual commitments.86 In Enron v Argentina case, the Tribunal concluded that the phrase 'any obligation' in the umbrella clause in the Argentina-US BIT should be interpreted to cover all obligations, regardless of their nature,87 including a State's obligations assumed under unilateral acts through legislation and regulation.88 It follows that the enactment of law and regulations, which causes the losses of investment, may entail the violation of States' obligations under the umbrella clause in a BIT.89 Therefore, this research recommends the future BIT s with North Korea to phrase the umbrella clause in broad terms (e.g. 'any obligations') to ensure substantive protection. As inspired by SGS v Pakistan, an additional recommendation is to place the umbrella clause together with the substantive provisions, to indicate that this clause provides substantive standards to be followed by States.

3.2.3
National Treatment and Most-Favoured-Nation Treatment Almost all the studied BIT s contain both NT and MFN clauses in either one article or two separate articles.90 This shows that North Korea is open to adopting these two standards into its BIT s. NT requests host States to make no negative distinction between foreign and their national investors and shall take positive measures to raise the level of promotion and protection of foreign A potential point of discussion in negotiating a future BIT with North Korea is whether NT and MFN apply at pre-and/or post-establishment of investment. Pre-establishment treatment covers the entry conditions of the investment.93 Post-establishment treatment applies from the start-up to the liquidation and disposition of the investment.94 Applying MFN to the preestablishment phase means that a host State cannot grant access to certain sectors to some investors while not to other investors or to impose additional conditions, or in other words, foreign investors should be granted the rights to invest on the same terms as other foreign counterparts.95 In contrast, limiting the application of MFN to the post-establishment phase entails that MFN only protects investors after their entry to the market, but before that host States can set different entry requirements for foreign investors.96 The same discussion applies to NT.
According to international law as it currently stands, the general principle is that host States maintain the power to screen and regulate the entry of foreign investment to the domestic market in line with their industrial policies and development needs.97 In practice, the pre-establishment phase of investment is often left to be determined by domestic laws and policy, which is easier to be adjusted than in the case of a BIT,98 and MFN and NT generally apply to the post-establishment phase.99 However, one exception is that MFN  In terms of the existing North Korean BIT s, none of them have explicitly mentioned the application of MFN and NT to the pre-establishment phase of investment, and therefore, MFN and NT in these BIT s should be interpreted as applicable to the post-establishment phase of investment only. Depending on specific needs, a State might consider including the question about whether MFN and NT cover the pre-establishment phase of investment (as the NAFTA does) as a potential point of discussion during its BIT negotiation with North Korea.
Another point of discussion relates to the applicability of MFN and NT in SEZ s, where North Korea grants more beneficial investment conditions (e.g. fiscal and regulatory incentives, and infrastructure support) than non-SEZ s. All the existing North Korean BIT s exclude the application of MFN and NT to SEZ s. For instance, Article 3.4 of the North Korea-China BIT sets forth that MFN and NT presented in prior sections: shall not be construed so as to oblige one Contracting Party to extend to the investors of the other Contracting Party the benefit of any treatment, preference of privilege by virtue of: (a) any customs union, free trade zone, economic union and any international agreement resulting in such customs union, free trade zone and economic union …101 The non-application of MFN and NT in domestic SEZ s is more relevant to the discussion here, as North Korea has not joined any regional or international in the pre-establishment phrase. 2020 out of 2576 mapped treaties contain NT in the post-establishment phrase, 168 out of 2576 treaties contain NT in the pre-and postestablishment phrase, and no treaty contains NT in the pre-establishment phrase only.

Expropriation and Compensation
The fact that the Korean War has not formally ended owing to the absence of a peace treaty might have certain legal implications for foreign investors, where the expropriation and compensation clause performs an important role. All the studied BIT s include provisions relating to expropriation against and compensation for the investment of investors from the contracting parties.
First, the provisions on expropriation use largely identical language, which provides that any measures of expropriation, nationalisation or other measures of effect equivalent to nationalisation or expropriation (generally called 'expropriation') shall not be taken unless the following four cumulative conditions are satisfied: (1) for the public interests; (2) under the domestic legal procedure; (3) without discrimination; and (4) against compensation. Most of the BIT s also provides the investor with a right to prompt review.106 It means that the investor affected is entitled to request a judicial or other independent authority of the contracting party to review whether the measure of expropriation or valuation is taken in the manner compatible with its domestic laws.107 Second, the provisions on compensation for losses or damage can be roughly divided into two types. The first type simply sets forth that in case the investment of the investor of one contracting party suffer losses or damage due to war or other armed conflicts, a state of national emergency, revolt, insurrection or riot in the territory of the other contracting party, the latter contracting party is obliged to accord treatment, which may include restitution, indemnification, compensation or other settlement, if any, no less favourable than that it accords to investors of any third State or its own investors. It infers that the contracting party can accord no treatment provided that it does not grant any treatment to any third State or its own investors. Apart from the requirement of the no-less-favourable treatment, the second type of provisions on compensation provides that under certain circumstances, the contracting party cannot be exempt from paying compensation. Specifically speaking, the contracting party is obliged to accord restitution or prompt adequate and effective compensation. This is to the extent that the losses or damage suffered by the investor in the territory of that contracting party result from requisitioning or destruction by its forces or authorities, which is neither caused in combat action nor required by the necessity of the situation.
Notably As mentioned earlier, on 27 April 2018, North Korea and South Korea signed the Panmunjom Declaration, in which both sides agreed to work together to end the Korean War and start a new era of peace. However, the Panmunjom Declaration contains mere non-binding political declarations and does not amount to a peace treaty that can bring an official end to the Korean War.109 Therefore, technically speaking, the Korean War is still ongoing. What are the legal implications of this conclusion for foreign investors? For example, if the investments of foreign investors suffer losses or damage within the territories of North Korea, can North Korea use war as a justification to exempt itself from paying compensation to these investors to the extent that it does not grant any treatment to any third State or its own investors?
In theory, this risk exists, as the Korean War has not been formally ended. It is also noted that North Korea is not a party to the Multilateral Investment Guarantee Agency (MIGA), which is an international financial institution that offers political risk insurance and credit enhancement guarantee to investments against non-commercial risks including wars, terrorism and civil disturbance. Given that MIGA insures foreign investment 'originating in any MIGA member country that … [is] destined for any developing member country' ,110 foreign investment in the territory of a non-member State such as North Korea is not eligible to obtain the protection from the MIGA regime. Before a peace treaty comes into existence and takes effect, for risk prevention, other States may, in their BIT s with North Korea, ask North Korea to guarantee that it will not use the Korean war as an excuse to evade its obligations of paying compensation.

3.4
Dispute Settlement All the studied North Korean BIT s offer foreign investors an access to pursue remedies against host States for violation of their rights. These BIT s consist of two types of dispute settlement clauses: the State-to-State dispute settlement (SSDS) clause, and the investor-State dispute settlement (ISDS) clause. The rights to claim are also granted by North Korean domestic law, which confirm the application of both local and international remedies. For instance, the Foreign Investment Law provides that any foreign investment dispute should be settled through negotiation, and in case of failure in negotiation, it shall be settled by a court or an arbitration body in North Korea, or to be brought to an arbitration agency in a third country.111 The 2012 Rason SEZ Law further specifies that foreign investors can file administrative litigation, administrative mediation, or arbitration with arbitral institutions including those established inside the SEZ or outside North Korea to resolve investment disputes.112

3.4.1
State-to-State Dispute Settlement Mechanism The SSDS clause under North Korean BIT s usually concern disputes relating to the interpretation and application of BIT s.113 All the studied North Korean BIT s, except the one with Bangladesh, provide a general two-step procedure for the settlement of inter-State disputes (see Table 3).114 The first step sets up a cooling-off period for the disputant parties to conduct consultations and negotiations between them with regard to the dispute at stake. Consultations and negotiations are part of the peaceful means to settle international disputes.115 Consultation, which is one kind of negotiation in the broad sense, requests a party to consult with the affected party before the former makes a decision or takes a proposed action that may harm the latter.116 Respecting the cooling-off period,117 most of the studied BIT s allow a State party to make an arbitration request if a dispute cannot be settled through consultations and negotiations within certain periods, usually three to six months. 118 However, contracting States should be aware that in practice the cooling-off period might be treated as 'a mere defect of form' that would not hamper the jurisdiction if courts or tribunals find that the dispute in question apparently cannot be settled through consultations and negotiations within the coolingoff period. For instance, in Nicaragua, the Treaty of Friendship, Commerce and Navigation between the United States and Nicaragua, which provided the jurisdictional basis for this case, stipulated as follows: Any dispute between the Parties as to the interpretation or application of the present Treaty, not satisfactorily adjusted by diplomacy, shall be submitted to the International Court of Justice, unless the Parties agree to settlement by some other pacific means.119 The United States claimed that the reference in the above provision to disputes 'not satisfactorily adjusted by diplomacy' required an attempt to adjust the dispute as a prerequisite of a submission to the ICJ.120 In the circumstances of this case, the United States further argued that the fact that Nicaragua had never raised in negotiations with it the application or interpretation of the treaty in question amounted to a failure to satisfy the treaty's own terms for invoking the compromissory clause.121 However, the ICJ did not support the United States' argument, holding that the prior negotiation amounting to no more than 'a mere defect of form' would not be insisted upon as a prerequisite for jurisdiction if the disputes apparently could not be adjusted by diplomacy.122 In the second step, an arbitral tribunal consisting of three arbitrators shall be constituted. Depending on the specific treaties, within either two or three months of the receipt of the request for arbitration, each contracting State shall appoint one member of the tribunals. Afterwards, these two members then select the chairman of the tribunal. The chairman usually shall be appointed within two to three months from the date of the appointment of the other two members. North Korean BIT s usually require that the chairman shall be a national of a third country.123 The arbitral tribunal shall reach the award by a majority of votes, which is binding upon the dispute parties. About the costs of the proceeding, the parties in dispute shall bear their respective costs, including the costs of its appointed arbitrators, the costs of its representation in the 123 When contracting States fail to constitute the arbitral tribunals after the required negotiation period, the contracting State may make a request to the president of the ICJ to appoint the chairman of the arbitral tribunal. When the president happens to be a national of either contracting party, or if the president is prevented from the discharge of this functions, the member of the ICJ next in seniority, including the vice-president, will then be invited to make the appointments. But it reminds that the ICJ is not responsible for the substantive disputes, but only for the selection of the arbitrator in accordance with the BIT. arbitral proceedings, the relevant costs of the chairman and other remaining expenses in equal.

3.4.2
Investor-State Dispute Settlement Mechanism ISDS provisions in BIT s provide foreign investors with direct access to bring claims against host States if their investment is expropriated or they suffer from unfair treatment. Most North Korean BIT s first set up a 'cooling-off period' before a foreign investor can commence ISDS proceedings against a host State. These BIT s then continue to provide foreign investors local and/ or international remedies to resolve investment disputes in either vertical or horizontal approaches. These provisions cover the question of the 'exhaustion of local remedies' , the application of 'arbitration rules' , and the enforcement of arbitral awards.

3.4.2.1
Cooling-Off Period The studied North Korean BIT s contain provisions imposing a requirement in the ISDS clause about a 'cooling-off period' .124 These BIT s usually set up preliminary alternatives, stating that attempts should be made to settle investment disputes through various possible approaches between the parties to the conflict, including amicable consultation,125 amicable negotiations,126 and other friendly ways.127 If the disputes cannot be thus resolved within a certain period (usually six months), the disputing party may seek local or international remedies. 128 In practice, the application of the 'cooling-off period' in investment arbitration produces a great deal of uncertainty. Arbitral tribunals hold that parties are always able to enter into good faith negotiations in order to settle disputes and might not need an application of the cooling-off period. 129 Concerning the efficiency and cost-effectiveness of the procedure, arbitral tribunals might avoid unnecessary time being spent waiting for pre-arbitration proceedings. 130 The SGS v Pakistan tribunal held that arbitral tribunals generally consider the cooling-off period to be merely procedural but not mandatory.131 However, the Enron v Argentina tribunal regarded the provisions of the cooling-off period provisions as a pre-condition to arbitration, and held that a failure to comply with the cooling-off period provisions resulted in a lack of jurisdiction.132 Despite controversies, it has been argued that the question of whether or not the cooling-off period amounts to a condition precedent to arbitration depends on the terms used in the agreement.133 When the agreement stipulates that the parties 'shall' or 'must' have a cooling-off period, this becomes a pre-condition to arbitration, and when the terms 'may' and 'can' are used, the parties are not subject to legal obligations. Most existing North Korean BIT s use the term 'shall' , stating that any investment dispute shall, as far as possible, be settled amicably through negotiations between the parties to the dispute.134 Accordingly, foreign investors are obliged to conduct negotiations or consultations with the appropriate host State during the cooling-off period.

3.4.2.2
Provisions of Remedies The provisions of remedies in the ISDS under the North Korean BIT s follow either a vertical or a horizontal approach (see Table 4). A vertical approach means that the ISDS mechanisms under the North Korean BIT s provide only one available approach for solving investor-State disputes. Either a domestic court in the host State or an international arbitral tribunal is the sole juridical institution available for settling investment disputes.135 Considering that the vertical approach offers an exclusive option, foreign investors should be reminded of the pros and cons of each option. First, domestic courts can be more efficient in providing redress owing to their power and resources in issuing provisional measures and implementing judgements. However, litigation in the domestic courts of a host State is sometimes seen as lacking the objectivity desired by foreign investors,136 and being bound to apply domestic law, domestic courts might sometimes find it difficult to meet the international rules and standards.137 In terms of North Korea, the system of courts is often criticised as lacking independence,138 partly because the Supreme People's Assembly (SPA; the highest institution of State power that exercises legislative power) (or the Presidium of the SPA when the SPA is not in session) supervises the Central Court (the supreme juridical organ), while the Central Court supervises the judicial activities of all the other Courts.139 Second, by comparison, investor-State tribunals can achieve an efficient and effective settlement of disputes, fostering the international rule of law and an investment-friendly environment.140 Investor-State arbitration is the most common dispute resolution mechanism in BIT s, but it is not devoid of criticism.141 Investor-State arbitration can be subject to challenges such as the legitimacy and transparency of the mechanism, the independence and impartiality of the arbitrators, and the consistency and coherence of the arbitral awards.142 Consequently, contracting States should be fully aware of the advantages and disadvantages of these two types of remedies before negotiating a vertical approach with North Korea.
It is more common that an ISDS under a North Korean BIT applies the horizontal approach, including both local and international remedies, and allows the disputed parties to freely select its favourable option to resolve disputes. One option is the local remedy, which allows a foreign investor to opt to submit its case for settlement either to the competent court or to an administrative tribunal of the host State. Another parallel option is that foreign investors can submit cases to an international arbitral tribunal. Two observations can be made based upon existing North Korean BIT s.  Second, all North Korean BIT s except the Bangladesh-North Korea BIT allow disputes to be settled by an ad hoc arbitral tribunal.145 These BIT s usually request the ad hoc arbitral tribunal to be constituted under the UNCITRAL Arbitration Rules.146 In addition to this, the Singapore-North Korea BIT also allows foreign investors to submit their investment arbitration claims to any other applicable arbitral institution or under any other arbitral rules, subject to party autonomy. Similarly, the Switzerland-North Korea BIT allows the arbitral proceedings administered under the additional ICSID facility rules by the secretariat of the ICSID. In this way, although North Korea is not a member of the ICSID Convention, the additional ICSID facility rules can still apply.

3.4.2.3
Exhaustion of Local Remedies The requirement about the exhaustion of local remedies means that a foreign national who is allegedly harmed by the State must first seek redress for the alleged damage through the administrative and judicial system of that State, until a final decision has been rendered, before it can initiate international proceedings directly against the State.147 For example, Article 9 of the China-North Korea BIT requires the exhaustion of local remedies by stating that: the Contracting Party involved in the dispute may require the investor concerned to exhaust the domestic administrative review procedure specified by the laws and regulations of that Contracting Party before submission of the dispute to the above-mentioned arbitration procedure.
ISDS practice indicates that the requirement for the exhaustion of local remedies is waived unless a treaty has expressly required it.148 In ICSID arbitrations, according to Article 26 of the ICSID Convention, disputing parties consenting to arbitration are simultaneously deemed to consent to the exclusion of any other remedy unless otherwise stated. In non-ICSID arbitrations, arbitral tribunals hold that the BIT s grant foreign investors direct access to 145  international arbitration without requiring the exhaustion of local remedies.149 Consequently, under the North Korean BIT s, if the contracting States prefer to have the exhaustion of local remedies as a pre-condition to access to international investment arbitration, this preference should be expressly stipulated in the respective BIT.

3.4.2.4
Arbitration Rules All the North Korean BIT s were concluded before 2009, but the UNCITRAL Rules were modified and revised in 2010 and 2013 after first announced in 1976. In particular, the 2013 revision incorporated the UNCITRAL Rules on Transparency for Treaty-Based Investor-State Arbitration.150 At the time of the negotiation and conclusion of all the North Korean BIT s, State parties were only aware of the 1976 rules but not the subsequent revised versions. According to the 1976 rules, if the parties to a contract have agreed in writing that disputes arising from that contract shall be referred to arbitration under the UNCITRAL Arbitration Rules, such disputes shall be settled under the current version of the rules subject to any modification that the parties may agree in writing.151 Similar provisions are also found in the 2010 and 2013 versions of the rules.152 This makes it clear that unless the interested States make a separate agreement that modifies the current version of the rules, the latter should apply. Therefore, most of existing BIT s in this study should apply the latest version of UNCITRAL Rules unless the party States agree otherwise.153 Turning to future BIT s, contracting States should be reminded that the newly revised rules will apply unless the parties opt for the old rules. Different arbitral rules may grant different rights to the parties to a dispute, and therefore, foreign investors are recommended to take careful account of specific arbitration rules that they are eligible to apply.

Enforcement of ISDS Awards
The enforcement of ISDS awards is another concern to which foreign investors might draw critical attention. The parties to a dispute are bound by the arbitral award and have an obligation to enforce the award. In an ICSID arbitration, the contracting State shall recognise an award rendered according to the ICSID Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State.154 The recognition and enforcement of these arbitral awards might be sought in the host State, in the investor's home State, or in any other State that is a party to the ICSID Convention, subject to the availability of suitable assets.155 The execution of the award is governed by the laws on the execution of judgements in the State in which enforcement is sought. As North Korea is not a member of ICSID, foreign investors cannot yet enforce ISDS awards by making use of the ICSID mechanism.
The enforcement of non-ICSID arbitral awards might rely on the national law of the place of enforcement, and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards where it is applicable.156 However, North Korea is not a party to the New York Convention either. Therefore, when a foreign investor wins a case on the basis of a North Korean BIT, and wishes to enforce the award in North Korea, the national law of the place where the enforcement is sought, namely the domestic law of North Korea, applies.
Another available method for a foreign investor to enforce an award is through bilateral cooperation or agreements regarding the enforcement of arbitral awards. A comprehensive provision in relation to enforcement under the BIT would help foreign investors secure the execution of arbitral awards. For instance, the Singapore-North Korea BIT provides that 'each Contracting Party shall ensure the recognition and enforcement of the award in accordance with its relevant laws and regulations' .157 This straightforward provision ensures that the contracting States have a responsibility to enforce the awards, while foreign investors have a clear legal basis to ask for execution. Since North Korea is neither a party to the ICSID Convention nor the New York Convention, foreign investors can only enforce their awards through the domestic law of North Korea. To provide additional guarantee of enforcement for their investors, a contracting State may consider inputting in its future BIT with North Korea an enforcement provision similar to the one used in the Singapore-North Korea BIT.

4
Conclusion: Implications for Future BIT s Just as Tutankhamun, an Egyptian pharaoh, said, 'I have seen yesterday; I know tomorrow' ,158 the preceding analysis of the existing BIT s can entail several implications for potential BIT s with North Korea in the future. In particular, the first to fourth implications concern the clauses of 'territorial scope' , 'substantive protection' , 'expropriation and compensation' and the SSDS, respectively. The fifth to eighth implications relate to different provisions of the ISDS clause, including the 'cooling-off period' provision, the 'exhaustion of local remedy' provision, the 'arbitral rules' provision, and the 'recognition and enforcement' provision. First, with respect to the 'territorial scope' clause in the future BIT s, this research suggests that the future BIT s adopt a similar 'territorial scope' clause contained in the existing BIT s but add a specific reference to include marine areas claimed by North Korea such as the Yellow Sea. The 'territorial scope' clause can thus be framed as follows: North Korea's territory over which a BIT shall apply include the territorial land, territorial sea, exclusive economic zone and continental shelf over which it exercises or claims to exercise sovereign rights or jurisdiction in accordance with its national law and international law.159 Second, concerning the 'expropriation and compensation' clause, the Panmunjom Declaration signed by North Korea and South Korea does not have the effect of formally ending the Korean War. Hence, if the investments of foreign investors suffer losses or damage on the territories of North Korea, the risk remains that North Korea might use war as a justification to exempt itself from paying compensation to these investors to the extent that it does not grant any treatment to any third State or its own investors. Moreover, since North Korea is not a party to MIGA, foreign investment in the territory of North Korea are not eligible to obtain the protection from the MIGA regime. Therefore, this research recommends that before a peace treaty comes into existence and takes effect, for risk prevention, the contracting States may stipulate in their BIT s that the Korean war cannot be used as a justification to evade the payment of compensation.
Third, the existing BIT s contain various substantive protection provisions, including FPS, FET, the umbrella clause, NT and MFN, showing the open attitude of North Korea in embracing diverse legal protection for foreign investors. To establish a comprehensive protective environment for foreign investment, countries in their negotiation with North Korea are recommended to consider the inclusion of both FPS and FET in BIT provisions, phrasing the umbrella clause in broad terms to expand the scope of protection, and an express mention about which stages of foreign investment are covered by NT and MFN standards.
Fourth, for the design of the SSDS clause, some of the existing BIT s prescribes a two-step procedure, which allows a State party to initiate arbitration or litigation proceedings if a dispute cannot be settled by negotiation or consultation. If a two-step procedure is intended, for the sake of clarity and certainty, this research recommends the contracting States to set forth a cooling-off period in their BIT s, such as three or six months. Yet, even if a cooling-off period is specified, foreign investors should be reminded that when an inter-State dispute is submitted to a court or tribunal according to the BIT concerned, preceding international jurisprudence tends to suggest that the court or tribunal would consider the lack of a cooling-off period a mere defect of form that cannot hamper its jurisdiction over the case.
Fifth, a 'cooling-off period' provision may also be contained in the ISDS clause. However, whether this provision prohibits the parties from submitting a case for adjudication before the 'cooling-off period' passes remain highly disputable in international jurisprudence. After analysis, this research argues that if the provision sets forth that parties 'shall' or 'must' , instead of 'may' or 'can' , have a cooling-off period, then the exhaustion of such a cooling-off period is a prerequisite for the initiation of relevant arbitration or litigation proceedings. Accordingly, to ensure clarity and predictability, this research recommends the contracting States use the wording such as 'shall' or 'must' for the 'cooling-off period' provision in the ISDS clause.
Sixth, States might insert an 'exhaustion of local remedy' provision in the ISDS clause. For instance, the China-North Korea BIT requires the exhaustion of the domestic administrative review procedure before an investor from either of these two States can submit a dispute to the ad hoc arbitration provided in this BIT.160 Notably, the international judicial practice widely rec-ognises that unless otherwise provided, BITs should grant foreign investors direct access to international remedies without requiring the exhaustion of local remedies. Therefore, this research recommends States that favour the application of the exhaustion of local remedies to explicitly insert an 'exhaustion of local remedy' provision in the ISDS clause. Otherwise, the absence of this provision entails that the exhaustion of local remedies is not required.
Seventh, about the 'arbitral rules' provision of the ISDS clause, the existing BIT s have selected either the ICSID Rules or the UNCITRAL Rules. For future BIT s, it is important to realise that the selected arbitral rules might change over time. For instance, ICSID is currently in the process of amending its rules and regulations.161 Hence, if the contracting State parties to the new BIT s do not intend to apply any revised version of the selected arbitral rules automatically, they shall state this intent explicitly in the BIT s.
Eighth, considering that North Korea is not a member or party to the ICSID or the New York Conventions, the recognition and enforcement of the ISDS awards as a result of the judicial remedies provided by the BIT s are not secured. Therefore, this research suggests the contracting States incorporate a 'recognition and enforcement' provision that obliges them to recognise and enforcement relevant ISDS awards. A preceding example of such a provision is the Singapore-North Korea BIT, which provides that '[e]ach Contracting Party shall ensure the recognition and enforcement of the [arbitral] award in accordance with its relevant laws and regulations' .162 To conclude, North Korea is a promising land but at the same time a risky land for foreign investment. By conducting a systemic and comparative analysis of the existing BIT s signed by North Korea in the Kim Jong-il era, this article has put forward eight tips that can better prepare those daredevils who are interested in seizing the forthcoming opportunity to invest in this last economic frontier in Northeast Asia.

Biographical Note
Dr. Xuechan Ma completed her PhD at Leiden University and is currently a climate change specialist at the Food and Agriculture Organisation of the United Nations. Dr. Anran Zhang (corresponding author) completed his PhD at Erasmus University Rotterdam.