Toward A Comprehensive EU-China BIT-Challenges And Opportunities

The purpose of my thesis is to determine the key legal'ingredients'that may form the content of the EU-China Bilateral Investment Treaty currently under negotiation. Launched in November 2014, the negotiations for an EU-China investment agreement aim to streamline the current BITs between China and EU Member States into a single, comprehensive text, providing for high investment protection, an efficient dispute settlement mechanism and elimination of investment barriers. The main questions that 1 engaged to answer are:what is the legal framework that governs the Sino-EU investment relations at present and what makes is it unsatisfactory? What are the key provisions normally featuring in investment treaties according to the international and bilateral treaty practice? What novel elements are expected to be added in the new generation BIT? What strategic objectives are pursued by each side in the negotiations? And last but not least, I attempt to identify some of the difficulties that may arise as negotiations advance to new stages.I chose this theme due to its actuality and importance for the future development of the Sino-EU economic relations. The significance of this endeavor is highlighted by the fact that this is the first investment negotiation that the EU conducts on behalf of its member states since the Lisbon Treaty became effective. The Lisbon Treaty provides the European Union with exclusive competence in the field of foreign direct investment; therefore the negotiations can be viewed as an opportunity to put the Union's new powers to the'test'. Depending on the outcome, it may help straightening the member states" confidence in the Union, or may lead to an opposite result. The research is based on the legal documents and academic research that are most significant for the bilateral investment relations. For explicative purposes, I referred to several recent international agreements that the EU and China concluded with other states.The thesis is structured on six chapters, each addressing a specific aspect that is relevant for my research. Chapter one introduces the reader to the theme by offering a brief analysis of the economic relations between EU and China, showing the stages of their evolution and the situation today. Also, it shows the steps taken in the negotiation process up to this point and the achievements that were made.The second chapter provides an overview of the legal framework that governs the Sino-EU investment relations at present. The 26 BITs concluded between China and the EU member states (with the exception of Ireland) represent the main legal instruments on the matter. They lay down the general rules on the admission, standards of treatment, expropriation, and compensation for losses, repatriation of profits, dispute settlement, and so on. At the end of the chapter I provided, for informative purposes, a brief account of the main investment vehicles available to foreign investors in China.The third chapter addresses the investment dispute settlement matter, while administering an overview of the main mechanisms available under the international law. The most common and popular dispute settlement mechanism is arbitration (institutional or ad-hoc). Some difficulties arise from the mismatch of the two sides'approaches regarding the conditions in which the trial takes place (e.g. transparency, arbitration nature). While China showed reluctance to the acceptance of ISDS arbitration, the EU investors are among the largest users of this mechanism. The potential unavailability of the ICSID dispute settlement mechanism may be a drawback for investors protected only under an EU investment treaty. It is important to mention that the Supreme Peoples Court of China recognized for the first time, in April 2014, that a non-PRC arbitral institution can legally administer an arbitration seated in the PRC (see:Longlide case). An element of novelty in the new BIT is that the respondent in a claim brought by a Chinese investor against an EU member state will be the Union itself.The fourth chapter discusses the possibility of including market access provisions in the new investment treaty, and if yes, under what conditions. The pre-establishemnet phase of investment is not addressed in none of the existing Sino-EU MS BITs. This discussion is of high importance for China in particular, because it will require that equivalent treatment is granted to Chinese and EU investors in the process of reviewing and authorizing investments, issuing business licenses, etc. Also, it will touch upon the sectors listed in the 'negative list', and on the requirements for setting up businesses. The EU wishes for more openness in the service sector, such as for instance banking, non-banking financial institutions and insurance sectors that are perceived to be among the most isolated from foreign investment.The fifth chapter talks about the investment protection standards that are traditionally the primary focus in any negotiation. The new agreement shall aim to maintain the rights currently available under the existing BITs, while at the same time standardize the levels of protection for all investments, thus ensuring more reciprocity in the business relationships. The most common standards are:non-discrimination, full protection and security, most favorite nation, national treatment, expropriation with due compensation, unrestricted repatriation of profit. In line with the recent trend in treaty making, the new generation BIT is very likely to add several new elements touching upon intellection property rights, data protection, corporate social responsibility, human rights and environmental standards.The sixth chapter provides a case study of the Chinese Investment opportunities in Eastern Europe, with a particular focus on Romania. As revealed by the official government documents, Romania was one of the favorite destinations for the first Chinese investment in Europe. A brief overview on the legal background of Chinese investment in Eastern European is given, while at the same time assessing the impact of their on the respective economies.The talks for a Sino-EU BIT represent a major step towards straightening the bilateral economic relations. The negotiations will involve concessions and compromises on both sides: however, the mutual benefits overweight the risks. A new comprehensive investment agreement may also pave the way for a future free trade agreement with great benefits for both economies that are already strongly interlinked.