On The Investor State Arbitration Clause In Chinese BITs

Bilateral Investment Treaties(BITs) were created in1950s and emerged in1980s. Chinastarted negotiating and concluding BITs from1980s. To initiate international investmentarbitration against host state, is a fundamental procedural right given to investors under BITs.In Chinese BITs singed after the middle of1980s, investors were also endowed with suchright. In contrast with the convenience of investor state arbitration mechanism, under the stateto state dispute resolution, e.g., settling dispute under the auspices of International Court ofJustice(ICJ), the investor has to recourse to the consent of its home country to bring his claimto ICJ, rather than by himself.With the foundation of ICSID and proliferation of investor state arbitration clause inBITs, case loads of investor state arbitration accelerated. China, only second to Germany, hasconcluded the most BITs comparing to other countries. In addition, taken into consideration ofthe burst of Chinese outbound investment, and Tza Yap Shum case awarded under theauspices of ICSID, it is urgent to do a study on Chinese investor state arbitration clause.This thesis will elaborate the Chinese investor state arbitration clause with reference tocases. With the gradual development, investor state arbitration clause has emerged in ChineseBITs，of which the content and the scope have developed substantially. The first part of thisthesis deals with the fundamental issues of investor state arbitration clause, such as its history,development and function. This will help the reader to understand investor state arbitrationmore comprehensively, which will facilitate the latter understanding and discussion in thispaper.The second part will be guided by text method in analyzing the two different generationBITs. This part will concentrate on the issue such as applicable procedural rules that can bechosen by investors, the scope of dispute that can be addressed by the international tribunals,consent of arbitration and fork in the road clause. By comparing with other model BITs ofother countries, this part will discuss the flaws in Chinese investor state arbitration clause.In the third part, with reference to the first case arbitrated under Chinese BIT, Tza YapShum case, the author will analyze the interpretation of “disputes involving the compensationof expropriation” in Chinese BITs and its application. Then, this part will address theimplication of this case.The fourth part, bearing in mind the practice of developed countries on investor state arbitration clause, will propose how to implement and improve the investor state arbitrationclause in Chinese BITs. There are two methods, one is to detail the content of investor statearbitration clause, such as defining the scope of “disputes arising from investment”, toimplement safeguards for initiating the international arbitration proceedings, and research inthe field of review mechanism of arbitral awards. The other is to add exception clause relatingto investor state arbitration clause in BITs. With these measures, investor state arbitrationclause will protect our state sovereignty and Chinese outbound investment interestssimultaneously.