The Standings Of Chinese SOCs As Investors In ICSID Arbitration

State-owned Companies ("SOC") have been adopted by sovereign states as an important vehicle of investments. Their size, number and influence have been growing remarkably rapid recently. With the increase of overseas investment, the dispute settlement mechanism has become an unavoidable task and investor-state dispute resolution has become an important part of international commercial arbitration. The bilateral and multilateral investment agreements signed by sovereign states are adopted to meet the requirements of increasing overseas investment and International Centre for Settlement of Investment Disputes (the Center or ICSID) has become one of the most popular choices of dispute resolution between investor and host state. However, since ICSID is designated to solve dispute between non-State investors and host states, it brings jurisdictional issues to the tribunal when a SOC is requesting for arbitration against the host State. ICSID tribunals have been using the Broches Test in solving this problem and relying on the nature not the purpose of the SOC’s action to determining its standing. However, scholars are far from satisfied and they argue the purpose should also count. The ignorance towards SOC’s purpose will lead to the misuse of ICSID system and is contradicting with ICSID’s objects.This paper starts from the perspective of ICSID arbitration and focuses on the reality of Chinese SOCs, aiming to discuss the standing of SOCs as investor in investor-host State arbitration. This paper has five parts. The first part introduces the requirements of "investor" in the ICSID Convention and the application of Broches Test in ICSID awards. The second part analysis the scope of "investor" defined in China-related bilateral and multilateral investment treaties. A SOC can only bring a case to ICSID when it meets both the requirements of ICSID Convention and the requirements between its home State and the host State. That means to have the standing before an ICSID tribunal, the SOC first has to meet the requirements of "investor" under the specific investment treaty. The third part tries to identify decisive factors of Chinese SOCs’ actions. It summarizes the concern on Chinese SOCs’ purposes among the international society, the government control over Chinese SOCs and proposes three decisive factors of Chinese SOCs’ action. The fourth part introduces the principles and guidelines proposed by international organizations and domestic law of host States that are aimed at the non-commercial purposes of foreign SOCs. It points out that ICSID is not the most suitable entity to determine the purpose of SOCs’ action and introduces the Santiago Principles, the OECD Guidelines and the domestic regulation of the United States, Canada and Australia. The fifth and also the final part is the conclusion. It argues that although the current application of Broches Test by ICSID tribunals, determining the standing of SOCs purely on the nature of its action, is not sufficient, ICSID tribunal should not be set to identify the purpose of SOCs’ action. It will extremely complicate the ICSID arbitration of the tribunal needs to determine the potential non-commercial purpose of a SOC investor in the decision of jurisdiction. Moreover, host states usually have domestic review mechanism aiming at determining the non-commercial purposes of foreign SOCs’ investment, such as the national security review. This review is often conducted before the establishment of investment thus not subject to the investment treaties, therefore ICSID tribunal can neither exercise jurisdiction. In this case, even though ICSID tribunals come out with the standard to identify the purpose of SOCs’ action, host states can always have their own practice.Through the analysis of ICSID arbitration awards, research papers by Chinese and foreign scholars and the reality of Chinese SOCs, the author purposed that in order to clarify whether Chinese SOCs have the standing as an investor before an ICSID tribunal, first, the Chinese government must make it clear in its investment treaties that Chinese SOCs are included in the definition of "investor"; second, the application of Broches Test should be based on the nature and decisive factors of a SOC’S action. For Chinese SOCs, the three decisive factors are the distance from the political center, the characteristic of state ownership and the characteristic of the industry. The author hopes her efforts in solving this issue can offer some help to Chinese SOCs in the "going out" campaign and to provide some legal analysis in the case of their dispute with host State.