Research On The Npm Provisions In Sino-Foreign BITs

As one of the great safeguards in BITs, NPM provisions play an important role in the risk allocation and interest balancing between host state and foreign investors. The result of the pending cases involving NPM provisions in ICSID will decide whether the host state shall bear the huge compensation, as well as be of great significance to other states’BITs negotiation. China, as the country who has signed second most BITs throughout the world following Germany, has only less than20%BITs providing NPM provisions, which are of great variety. Since the trend of investment policy becoming increasingly restrictive, rather than liberalizing still remains, the new generation of BITs started paying attention to the rebalancing of the investor-state interests, and the interest that NPM intend to protect is rather important with universal relevance with every state, China should adopt the clause when during Sino-Foreign BITs negotiation. With that useful tool, the host state will be allowed to adopt measures for the pursuance of non-investment objectives without incurring any liability under international law. Even there is a "state of necessity" exception existing under customary international law, the invocation of such exception is subject to several extremely strict conditions, which can be hardly fulfilled. In the current arbitral awards involving no NPM clauses, Argentina never successfully invoked the "state of necessity" exception under customary international law. Besides, whether the "state of necessity" actually relieves the state’s liability is still in dispute. Therefore, in the absence of NPM provisions, the parties of BITs would be drifted in the sea of great uncertainty.China is nowadays ranking top both in its FDI inflows and outflows, having transiformed from a nearly pure host state into the biggest host state as well as a big home state. Therefore, when China concludes new BITs and revises the old ones, she should always bear her right position in mind and make the NPM provisions fit for this transition—maintaining a balance between the regulatory power and protection of the interest of the investment in other countries. In this regard, China may consider bringing the non-investment objectives, such as safety, public health and environment into the preamble of BITs, which reflects the object and purpose of BITs.In general, China should keep equality and reasonableness as a principle when choosing the NPM clauses, as to preventing the other party abusing such kind of provision. China should not blindly pursue BITs’ function of attracting foreign investoment. Moreover, we have to fully aware that the inclusion of the NPM clauses in BITs ought to result in investors demanding higher return for investments made under such a BIT than they would absent the NPM clauses.In relation to the specific clause designing, the current provisions have many problems, such as lack of definitive permissible objectives, with too weak a nexus between the NPM and the permissible objectives, and limitation of the applying scope. Based on the arbitral tribunals’ practice so far, China should deal with the existing problems, and design the clauses with provisions consistent with China’s BITs policy and self-position.