Research On Diplomatic Protection Of Chinese Corporations In Foreign Investment

In recent years, more and more Chinese corporations move towards the internationalmarket and the scale of foreign investment is continually expanding, which followed by therights and interests of corporations are infringed unceasingly. Damages caused by politicalrisks are always difficult to solve by non-diplomatic protection. Therefore, diplomaticprotection plays an important role to protect the rights and interests of Chinese corporationin foreign investment.This paper is a systematic study on diplomatic protection of Chinese corporations inforeign investment, which mainly divided into four parts, involving foreign investment ofcorporations and the general theory of diplomatic protection, conditions of diplomaticprotection of corporations in foreign investment, the status quo and political risks ofChinese corporations in foreign investment, and current situations and improvement ofChinese corporations in foreign investment.The first part analyzes the connotation of foreign investment，and points out thatcorporations face huge political risks in foreign investment and the importance ofdiplomatic protection for the remedy of political risks. Then the paper expounds the generaltheory of the diplomatic protection, and illuminates that there are different participants inthe process of diplomatic protection of corporations in foreign investment，and clears outthe ways of diplomatic protection the state can use.The second part stresses three conditions of diplomatic protection of corporations inforeign investment. First, when rights and interests of corporations are damaged, thenationality state can exercises the right of diplomatic protection, and it should meetcontinuous nationality principle. Second, the substantial condition of diplomatic protectionis the actual damages principle. Whether host nation has an internationally wrongful act isthe basic condition to determine states responsibility. The nature of political risks is thewrongful act of host nation. The treatment standard of foreign investment is the key factorto judge whether the host nation violates its international obligations. Thirdly, it is aboutexhaustion of local remedies principle. This principle demands that corporations mustexhaust local remedies, but Draft Articles on Diplomatic Protection has prescribed theexceptions.The third part is the status quo and political risks of Chinese corporations in foreign investment. Recently, Chinese corporations mainly have four characteristics, namely,continuous expansion of investment scale, wide distribution and high concentration ofinvestment regions, changes from simplification to diversification of investment industriesand innovation in investment ways and diversified corporation nature. Political risks facedby Chinese companies in foreign investment include traditional political risks and newpolitical risks, mainly containing expropriation or nationalization risk, national war andcivil strife risk, government default risk, restriction of exchange risk, national securityreview risk and government special permission review risk.The fourth part expounds current situations and improvement of Chinese corporationsin foreign investment. In the face of political risks faced by Chinese corporations in foreigninvestment, on the one hand, China lacks combat experience of diplomatic protection. Onthe other hand, domestic legislation on diplomatic protection of Chinese corporations inforeign investment is seriously lagging behind. Therefore, China should improve the systemof diplomatic protection of Chinese corporations in foreign investment as soon as possible.First of all, China should actively participate in formulating and research of internationalrules. Secondly, China should improve the domestic legislation related to diplomaticprotection, and clarify related issues about diplomatic protection through ForeignInvestment Law being established. Finally, China should accumulate experience ofdiplomatic protection and improve supporting implementation mechanisms.