A Study On Legal Issues Of Responsing To Risks In Chinese Overseas Investment

Since the implementation of the strategy of "Going outside" for almost20years, China has been transforming into a capital-exported country from a capital-imported one, which is definitely a enormous event. Investing abroad is a important strategy for Chinese foreign economic development, which needs to cope with various risks, especially the legal risks during investment overseas. From the perspective of international law, studying and analyzing on how to response to such risks shall be very important and necessary.The goal of this paper is to provide useful suggestions of responsing to Chinese investment overseas on the basis of analyzing related theories and practice internationally. Meanwhile, in order to strengthen the pertinence of writing and to provide a norm form, the dissertation starts by focusing on investment in African countries. It is need to say, the reasons of focusing on Africa lies not only that the risk of investing there is probably the biggest, but also that Sino-African relationship is complicated due to we have investments and economic assistance there, therefore, it is of value of studying and representative.The paper composes of5chapters and studies on the risk-related issues such as treatment clause of BITs, effectiveness of investment contracts, mechanism of redress respectively, and on expropriation, the biggest risk overseas(mainly as indirect expropriation), in order to involve all aspects relating to the responsing to risks overseas.The Introduction is divided into purposes of the paper, the current situation of research home and abroad, the main methods of research and the innovations. The paper believes the research on overseas investment is far from satisfaction as China is becoming a capital-exported country from a capital-imported one, meanwhile, wars and civil disturbance happened in north African countries in the first part of2011also justifies the necessity on researching on this subject. The author believes that the research made abroad is leading us no matter in extension or depth, especially their method of case-study is of great value to be learned from. The paper studies texts, cases, and use the method of comparison and other ones. Also, the paper tries to make some innovations on the traditional sovereignty of economy, the effects of some special investment contracts, the methods of accounting on the compensation of expropriation, and the analysis of the agreement on international arbitration.Chapter one "The summary of Research on Legal Affairs of Responsing to risks in Chinese Overseas Investment", starts by analyzing the concepts of overseas investment and Chinese overseas investor, also defines the theory of Chinese overseas investment. The paper believes the connotation of overseas investment should be the on composing capital-based and enterprise-based at the same time, any international economic activities of setting or acquiring enterprises through any kind of assets should belong to overseas investment in terms of international law. The extension of overseas investment should be open-ended. The paper also believes the indirect investment should be exclude, and the investment must accord with the need of quantities and the host countries'demands. On the concept of Chinese overseas investor, the paper defines in the aspects of natural persons and non-natural persons, while the main part is the nationality of non-natural persons, on the subject the paper suggests that the standard of capital control should be accepted in order to strengthen the responsing to risks for Chinese investors. On the theory of Chinese overseas investment, the paper thinks that this should be set on the basis of theory and specific conditions on the basic of analyzing international main investment theory. The paper summarizes the Chinese overseas investment and its4characters, and suggests that the economic assistance for African countries should be done according to laws using developed countries experience as reference. As will be discuss below, the paper summarizes the mainly4investment risks overseas, and makes suggestions on the levels of the mother country and the investors respectively.Chapter two "the investment treatment clauses on Chinese overseas investment", by studying the authentication application of4investment treatment clauses in Sino-foreign BITs (main the Sino-Africa BITs), the purpose is to direct the value and the operation responsing to Chinese overseas investment risks. As for the FET clause, the paper believes that its connotation is not very clear which is probably useful to the protection of investors, there are two opinions on the standard on the application of the clause:strict legal responsibility and subjective offence, to which the former should be more appropriate in terms of protecting investors. As for the specific application of FET clause, the paper analyzing the5aspects, namely the stability transparency and the legitamite respect of investors, apply with investment contracts, due process of law, the principle of good faith, free from menace and intrusion. Meanwhile, the paper also makes5suggestions on the application of Chinese overseas investment. As for the Protection and Security clause, the paper analyzes its values and operations on protecting from physical damages and protecting the investors legal interests, among which the response methods to the host countries'public activities and personal activities should be separate. While as for the protection of legal interest, thanks to the different opinions in the cases of CME and Lauder, the international opinion on this issue still from identical. At the same time, the paper also makes3suggestions on the application. As for MFN clause, the paper mainly focuses on the procedural application. The paper analyzes whether it accords with the principles of similarity and the adventitious in the same subject according to the UN Draft on the MFN clause. As result, the paper proposes3thinking points on the basis thereof. As for NT clause, the paper believes that the Sino-foreign BITs are mainly full post establishment one. On the application of the clause, the paper makes2main values by analyzing the case of Champion Co. of2006, and also clarifies3basic conditions on the application of Sino-foreign BITs.Chapter3"The responsing to investment state contract for Chinese overseas investment". The chapter suggests that all investment contracts should include specific and clear stability clause in order to stabilize the implementation of contracts and be useful for the claims to the damages made by host countries. At the same time, in order to response to highest risks in the ones of the biggest investment areas, the paper analyzes how to response to risks in exploration and construction. As for the former one, the paper suggests that the key is to make the host countries to give clear and specific governmental assurance; as for the latter, the paper suggests that first of all, such contract should be included in the category of investment in BITs so that to be given international protection, meanwhile, as for construction carried by the form of BOT, the investor should choose specific one in accordance with the conditions of host country. The paper tacks with the risk faces with accusation of so-called odious debts related contracts and bribery ones. As for the former, the paper suggests that Chinese investor should claim the justice of the contracts on the basis of the function and the character, and also should be awareness of such contracts in some special countries, especially in Africa. As for the latter, the paper, on the discussing of different opinions of pros and cons on this issue, makes3suggestions, firstly, the investor should behave themselves according to related international conventions and law, also, the contracts involving bribery can and should be arbitral heard, since bribery issues is a universal one and should not be excluded from arbitration just for national interest. The paper is of the opinion that the proof standard of bribery should be higher than normal civil and commercial standard to be just for related parties.Chapter4"The responsing to risk of expropriation in Chinese overseas investment". The paper starts by analyzing the legality of expropriation and its compensation standard, and focuses on the4conditions of legality, namely for the sake of public interest, non-discrimination, compensation and due process of law. As for the standard of expropriation, the paper, based on the Sino-foreign BITs, points out that the expression of legality of expropriation has made some changes, after made analysis on full compensation and part compensation, which can be advantageous for investors. As for the standard of compensation, the paper believes that the difference of standards is of little value, the provisions of the standard of market value does getting closer to full compensation standard but does not necessarily adopt Hull formula, and Chinese investors should avail themselves of prompt and effective compensation since they are all included in Sino-foreign BITs with different approaches. The paper believes the calculation method of expropriation compensation is a practical issue, to which the question of on-going concern enterprise is the precondition. On the basis of World Bank's Guidelines of Foreign Direct Investment Treatment, the paper analyzes the2basic elements. Consequently, the paper analyzes the book-values and DCF methods. After that, the paper suggests the Chinese investors should claim the DCF method and related4suggestions. Due to the indirect expropriation is the main form of expropriation nowadays, the paper analyzes the concept of indirect expropriation, its great influences in international investment in the last20-30years and the3main forms thereof. The paper studies the creeping expropriation, impartial expropriation and omissions and proposes suggestions on the basis of theory and case study. There is a difficulty on how to separate the indirect expropriation from just governmental methods. As for the two opposite opinions, the paper suggests that correct way should be done from the degree of interference of investors'assets, whether the host country has been benefited from related activities, the legitimate anticipation of investors, the balance between public and personal interests, and the lasting period of activities adopted. As for the standard of indirect expropriation, the standard of effectiveness along with purpose should be suggested. Meanwhile, the development on the latest indirect expropriation and especially the regulation in the protocol of2006Sino-India BIT is very elaborated and full, which of great of studying.Chapter5"the relief mechanism on the responsing to risks in Chinese overseas investment". This chapter has2volumes, the overseas investment insurance mechanism and dispute settlement mechanism. The paper analyzes the concept and the character of overseas investment, and makes suggestions on perfection of the subrogation and overseas insurance system after using developed countries'overseas investment system as reference. As for the mechanism of overseas investment dispute settlement, the paper points out the arbitral method should prevail on the analyzing the political, judicial and arbitral methods. Due to the value of diplomatic protection in overseas investment, the paper also touches related issue thereof. As for the issue of international arbitration in overseas investment, the paper prefers the settlement method should be of ICSID along with UNCITRAL on the comparison of these two methods. For this purpose, the paper makes some analysis on the jurisdiction of ICSID, including material and personal issue. As to material jurisdiction, the paper, by starts with25.1of Washington Convention, focuses on the first case relates with the definition of investment——Fedax case, and draws the conclusion that the definition of investment has been expanding in ICSID arbitration. As for the personal jurisdiction, the paper such definition of investor has also been expanding in ICSID arbitration. Therefore, the paper suggests we should regard such tendency of arbitration with joint will to without privities with reason, in order not let the jurisdiction getting over expanded. Lastly, because of the importance of the way on agreeing to arbitration, the paper analyzes whether and how to make the umbrella clause, waiting clause and fork-in-road clause in deciding to agree to arbitration.