International Law On Diplomatic Protection Of Stockholders And The Relevant Suggestions To The Maturity Of Chinese Law

With the rapid development of international economy, transnational investments has been booming. It is common for an investor to set up a company as his investment. If there is an injury to the personal right of an investor, the investor is legally right to ask diplomatic protection from the country of his nationality after the exhaustion of local remedies. However, if a company's right is infringed, under international customary law, the state of nationality of company is entitled to exercise diplomatic protection. Since the close economic relationship between shareholders and the company, under specific circumstances, the state of nationality of shareholder is also entitled such a right. This thesis is based on the two cases of International Court of Justice, and introduces the draft on diplomatic protection by International Law Commission. By analyzing laws and regulations of different countries, the thesis outlines some relevant suggestions to Chinese law since Chinese local law is under maturity in this issue.The thesis consists five chapters,Chapter One introduces the legal basis of diplomatic protection of stockholders. Firstly this article talks about the intention of diplomatic protection and then the detailed legal basis of diplomatic protection of shareholders. Finally it emphasizes the value of this issue.Chapter Two analyzes the two classic case of International Court of Justice. Barcenola Traction Case launches a principle on this issue, there is a distinction between the right of company and shareholders. The state of nationality of shareholders is entitled to exercise diplomatic protection in case of an injury to the shareholder. The state of nationality of company has the right to the company unless the specific circumstances. ELSI case is kind of supplement to the principle set by Barcelona Traction Case. ELSI case emphasizes the priority of the bilateral investment diplomatic treaties. Besides, it reaffirms the distinction between the right of company and shareholders and put the definition of right of shareholders to the local law of different states.Chapter Three introduces the draft of diplomatic protection by International Law Commission. The Commission spent ten years on this draft. Article 11, 12 and 17 talks of the protection of shareholders. Article 11 states that the State of nationality of shareholders in a corporation shall not be entitled to exercise diplomatic protection in respect of such shareholders in the case of an injury to the corporation unless:(a) The corporation has ceased to exist according to the law of the State of incorporation for a reason unrelated to the injury; or(b) The corporation had, at the date of injury, the nationality of the State alleged to be responsible for causing the injury, and incorporation in that State was required by it as a precondition for doing business there.Article 12 says that to the extent that an internationally wrongful act of a State causes direct injury to the rights of shareholders as such, as distinct from those of the corporation itself, the State of nationality of any such shareholders is entitled to exercise diplomatic protection in respect of its nationals.Article 17 Draft makes it clear that the present draft articles do not apply to the alternative special regime for the protection of foreign investors provided for in bilateral and multilateral investment treaties.Chapter Four introduces local laws and practice of different countries. The state like United States, Britain or France is willing to expand the right of diplomatic protection over its nationals while the host counties to the foreign investment insists the entitlement of protection of the company.Chapter Five states the current economic and legal background of China on foreign investment, our country needs to place more importance on this issue. China needs to make clear our principle on diplomatic protection of shareholders. By understanding the draft provision of diplomatic protection and learning from other countries, China needs to perfect its local law and regulations and detail the articles concerning the right of shareholders in bilateral investment protection treaties.