On Financial Regulatory Issues In International Investment Law

In the post-financial crisis era,the linkage between International Investment Law and International Financial Law has become more in-depth.At the same time,the content of financial regulation in the international investment law has undergone three important evolutions:(1)The flow of multinational financial investment grows stably;(2)The financial services clauses in international investment agreements incorporate new issues;and(3)The number and complexity of investment arbitration cases involving the financial industry has increased.This series of new developments show that financial regulatory issue has become a comprehensive issue that requires urgent systematic research under the framework of international investment law.On the other hand,China's policy of perfecting the new system of open economy and further expanding the opening up of the financial industry put forward a realistic demand for supervision of the financial industry to link up with the rules of international investment law.However,the current international investment law system has many limitations on the issue of financial regulation,leading to the imbalance between foreign investment protection and the host state's financial regulatory rights.This article examines financial regulatory issues in international investment law and aims to explore the equilibrium mechanism between financial investment protection and financial regulatory rights.The author believes that this balance process should be dynamic and systematic.It should be constantly revised and adjusted according to the contemporary features and the future direction of the development of the rules,and systematic research should be conducted.This article believes that the financial industry as a sensitive industry that embodies the host state's domestic regulatory powers shows more caution,complexity,and technicality in balancing the interests of foreign investors and the host state's financial regulatory rights.It is therefore necessary to make an overall study from four perspectives of clauses design,negative lists,domestic regulatory measures and dispute settlement.On the basis of analyzing main legal issues from different perspectives in the field of international financial investment,this article will explore theoretical sublimation and framework design.Financial prudence is a peculiar regulatory principle for the financial industry.It is typical to be studied in the international investment law system.This article believes that when dealing with financial prudential issues in international investment law system,the standard for the judgment of financial prudential measures should be that the prudential measures should be “prudential reasons” and related to “financial services”,and even there will be additional “reasonable” requirements.It is more reasonable to decide a financial prudential measure through the consultation between the financial authorities of two parties,and it will help to reach a consensus on the definition of financial prudential measures.For the scope of application of financial prudential carve-out,the scope of the clause content depends on the relevant definition in IIAs.With regard to the application field,it is more appropriate to limit the financial prudential carve-out into financial sector where there is no explicit provision in the IIAs or cannot be judged from the structural arrangement of IIAs.Finally,in the application of financial prudential carve-out,attention should also be paid to legal links with other exceptions,especially the “Necessity” defenses in customary international law and essential security exceptions.The financial non-conforming list is a bridge linking international investment rules and host state's financial regulatory measures.Financial infrastructure non-conforming measures,non-conforming measures of restrictions on foreign capital and non-conforming measures of senior management and the board of directors are the three basic types of financial non-conforming measures.This thesis suggested that the financial non-conforming measures in the new generation of FTAs or BITs may not necessarily be more open than the GATS financial service commitment,but it is divided into different types of measures.Specifically,in the negotiation of a new generation of FTAs or BITs,the financial infrastructure non-conforming measures can be directly based on GATS financial service commitments to a large extent;for the restrictions on foreign participation,generally the restrictions on the proportion of shares held by some countries have been relaxed or set more flexible than during the GATS period.For the nationality requirements of the senior management and the board of directors,there is some situation that the financial non-conforming measures in FTAs are more restricted than in GATS commitments.In addition,for some countries that are not clearly stipulated in the GATS,such as the qualification requirements of shareholders,the financial non-conforming measures in FTAs and BITs can be more specific.Finally,as far as China is concerned,the formulation of the list of financial non-conforming measures should comprehensively consider factors such as the compilation method,interpretation rules,ratchet mechanism,and the overlap of market access obligations and national treatment obligations.For the examination of the legality of the financial regulation measures adopted by the host states under the international investment law system,sovereign debt restructuring measures,bank rescue measures and capital flow regulatory measures were selected as the research objects.These three types of measures are commonly adopted by various countries after the outbreak of the global financial crisis in 2008 and have been resorted to in international investment arbitration.This paper proposes that a country's financial regulatory measures include not only the usual regulatory policies under stable and sound economic conditions,but also include the response measures taken in the event of an emergency such as economic and financial crisis.Sovereign debt restructuring measures,bank rescue measures and capital flow regulatory measures often affect a larger range of investors' interests and have their own characteristics.Those investors include bondholders,depositors and other related investors.Based on the foregoing issues,this thesis systematically studies the financial dispute resolution mechanism in international investment law.This thesis believes that the most common characteristic of the current financial dispute settlement mechanism in IIAs is that the Contracting Party limits the scope of financial international investment dispute settlement and establishes procedural filtering for the purpose of protecting its financial regulatory sovereignty.In addition,the arbitrators who hear financial investment disputes should have professional knowledge or experience in financial services law or practice.In fact,in the process of financial international investment dispute resolution,various dispute resolution procedures such as government consultations,amicus curiae and mediation all play a decisive role,and multiple methods should be used to resolve disputes in a comprehensive manner.Finally,this article proposes that when dealing with financial regulation in international investment law,the financial service clauses in international investment agreements should be grasped as a whole picture.The definitions of financial services,financial service suppliers and financial institutions stipulate whether it is applicable to financial service rules or international investment rules,while national treatment,market access,cross-border financial services and financial prudential carve-out stipulate specific obligations and exceptions.Second,we must deeply grasp the linkage between international investment law and international financial law,link financial prudential issues,financial investment non-conforming measures rules,the legality of host country's financial regulatory measures,and financial dispute resolution mechanisms in international investment law,and focus on legal issues that distinguish international financial investment from investment in other industries,so as to explore the establishment of a balance mechanism between the protection of overseas financial investment and the host country's financial regulation sovereignty.Thirdly,the scope of application of financial service rules under BITs and FTAs should also be clarified,and the horizontal division and coordination of financial service rules and investment rules should be carried out to avoid the uncertainty caused by the application of specific rules.Finally,it is necessary to grasp the essence of financial investment non-conforming measures,and comprehensively use embedded reservations,exception clauses and negative list rules in the design of international investment treaties,so as to reserve sufficient room for financial supervision policy for the host state.