Research On The Expropriation In BOT Project

In 2013, September and October, Chinese President Xi Jinping proposed the significant initiative of jointly building “The Silk Road Economic Belt” and “the 21 st Century Maritime Silk Road”(“One Belt, One Road”) in his visit of countries in the Central Asia and Southeast Asia, which won the great concern of international community. After that, National Development and Reform Commission(NDRC), Ministry of Foreign Affair and Ministry of Commerce(MOFCOM) jointly published the Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road on March the 28 th, 2015, which put an emphasis that infrastructural facilities connectivity is a priority area for implementing the initiative and cooperation. While BOT(Buy-Operate-Transfer) mode, as a popular investment and cooperation method for infrastructure construction worldwide, is getting more and more focus from China, and will be an important method in infrastructure construction of “One Belt, One Road” with the help of foreign investors. However, there is not a clear law or a regulation to specify the BOT mode, the legislation of BOT investment mode is not complete, and a proper legal environment for BOT project has not been formed, which may lead to some disputes of international investment. Expropriation is one of the common disputes. In contrast, in western countries, they have made some progress of BOT project practice, and there are also some arbitration or judgment on expropriation issue. The practical experience of western countries in the BOT project will provide China with some beneficial references on how to implement BOT project.This essay analyzes BOT project in the context of expropriation law. A BOT mode is a contract, and contractual rights are a type of investment that has been widely litigated at investment tribunals. However, BOT contracts are unique in their structure and purpose. BOT modes are a developing financial model that governments are using in order to mitigate the varied pitfalls of purely private or public management and financing of large projects. The unique financial structure of BOT projects has led to the formation of a distinct legal framework for expropriation that responds to the characteristics of disputes arising out of failed BOT projects.This essay is organized into four parts. Part I describes the concepts of expropriation, indirect expropriation and the particularities of expropriation issue under BOT mode. As the private investor does not own the title during the process of the BOT project, generally, the expropriation issue under BOT mode is indirect expropriation; as the franchise agreement of BOT project is concluded between the private investor and the government, the expectation of the possible interest and economic value to be deprived is relevantly definitive through the draft of contract clause; Part II analyzes the standards to define expropriation under BOT mode. It provides a summary of the facts of each case and the framework for expropriation that each tribunal utilized with the respect of reasonable expectation of investment interest, the deprivation of the investment value and the nature of the government. Among them, when discussing the deprivation of the investment value, we can analyze the issue from three different respectives: the decrease of economic value, the deprivation of control right and the duration of the influence. Part III distills a clear framework for analyzing expropriation claims that arise out of failed BOT projects. This framework places limits on a host state’s sovereignty only to the extent to which it acts outside the scope of its role as a party to the contract and places a disproportionate burden on the foreign investor. An investor cannot depend on a BIT to remedy his poor business judgment. Finally, the author has put forward with some measures to deal with the expropriation issue in BOT projects with the practical situations in China, which mainly contains to perfect the intent of BITs, to prevent the definition of investment from being magnified and to make the definition of indirect expropriation clear.