Research On Capital Controls’ Legitimacy Under International Investment Treaties

Capital control is an effective mean to get rid of the difficulties caused by the financial crisis. Due to the conflicts with financial liberalization, capital control has always been controversial and its legitimacy has not yet been fully acknowledged. Because of the international investment treaties are mostly based on principles of financial liberalization and pay more attention to investment protection, it is more prone to Investment disputes caused by capital controls under the investment treaties. In order to better play the positive role of capital controls to overcome the financial crisis, it is necessary to provide legitimacy for capital controls in the international investment treaties Capital controls can be applied to both direct investment and indirect investment. When it is applied to direct investment, it is not limited to financial services. As a result, the legitimacy of capital controls should include two aspects. On the one hand, through the reasonable arrangement of prudential measures terms, provide justification for capital controls within the financial services. On the other hand, through the reasonable arrangement of exception clauses, including transfer exception clause, essential security exception clause, and temporary safeguards clause, provide justification for capital controls from the outside of the financial services.This thesis consists of3parts by introduction, body and conclusion. And there are4chapters in the body. The first chapter aims to introduce the relationship between capital controls and international investment treaties. Subchapter1is the overview of capital controls. Subchapter2illustrates the legal risks that capital controls may raise under the investment protection treaties. Due to the differences between legal texts in the field of international investment treaties, this thesis divides mainly international investment treaties into two classes, on the basis of whether there is any prudential measures clause or not. The second chapter is focused on the international investment treaties that are not containing a prudential measures clause, and analyzes the way to get the legitimacy of capital controls in such treaties. The third chapter focuses on the prudential measures clause itself and other exceptions clauses in the international investment treaties, analyzing the way to get the legitimacy of capital controls trough such arrangements. China is already began to introduce the prudential measure clause, so the fourth chapter analyzes the current situation of prudential measures clause in China investment treaties and try to give suggestions to perfect the prudential measures clause. The conclusion is that, as the main body of the prudential measures clause, with other exception clauses in investment treaties as supplement, which can be the best way to provide legitimacy of capital controls.