Research On Prudential Exception Provisions In International Investment Agreements

The traditional international investment agreements mostly tend to protect the interests of investors,so the phenomenon of the host country be frequently appealed to the international arbitration and their interests be neglected urge various countries to reflect the shortage of the related provisions in international investment agreements,and gradually introduce prudential exception provisions of the free trade agreement into the bilateral investment treaties.The United States and Canada are the earliest countries who introduced prudential exception provisions into investment treaties,China also stipulated prudential exception in the few investment treaties signed in recent years.Thus it can be seen that,introducing prudential exception provisions into the bilateral investment treaties has become the important tools and methods for the most countries to balance the rights and interests puzzle.Based on literature analysis,comparative analysis and other methods,this thesis analyses the definitions,the origin,the background and the functions of prudential exception provisions in international investment agreement.Then this thesis summarizes the characteristics on the entity and procedure aspect of prudential exception.Finally this thesis points out the shortages in China bilateral investment treaties,provides corresponding suggestions,in order to offer references for the negotiation and practice of China bilateral investment treaties.Besides the introduction and conclusion,the thesis is divided into four parts.The first part discusses the definitions,the origin and the functions of prudential exception provisions in international investment agreement.Prudential exception,notwithstanding any other provision of the Treaty,a Party shall not be prevented from adopting relevant or necessary measures,as long as such measures meet the requirements of the agreement,the party do not need to undertake the legal responsibility in violation of the treatyobligation.Prudential exception first appeared in the NAFTA and the GATS,the situation of the host country be frequently appealed to the international arbitration,their interests be neglected and the limit in reference of the essential security exception urge various countries to introduce prudential exception provisions of the free trade agreement into the bilateral investment treaties.As the newborn provision in the investment treaties,prudential exception remedies the shortcoming of the essential security exception in protecting the national interests,allows the host country to take preventive measures to prevent the risks and damage which may threaten the domestic financial market or the financial system,maintaining the sovereignty in the financial problems of the host country,enhancing the ability of the host country to against the financial risks which derives from financial services and investment liberalization,contributing to the normal operation of one country's financial system and the formation of good,stable investment environment.The second part analyzes the contents and the characteristics of prudential exception provisions in international investment agreement.Through analysis of the 2012 U.S.model bilateral investment treaty and the2004 Canada model bilateral investment treaty,it can be seen that prudential exception in international investment agreements has its characteristics in terms of entity and procedure.On the entity aspect,prudential exception is widely applicable,which can apply to all the investment field of the investment agreements;compared with the general exception and essential security exception,it has comparatively loose applicable standard;also,the scope of “prudential reasons” are widely broad,including financial consumer protection,the safety of the financial institutions and the stability of the financial system.Moreover,the existing agreements describe the “prudential reasons” through the expression with “include”,“for example”,which indicates that investment agreements don't list all the prudential reasons.In terms of the dispute settlement of the financial prudential,Where an investor submits a claim to arbitration and the host country invoke prudentialexception as a defense,the joint determination made by the competent financial authorities of both parties on the issue of whether and to what extent the prudential exception is a valid defense to the claim is the precondition for the investor-state arbitration to proceed.Considering the professional and technical of the financial settlement,the expertise or experience with respect to financial law or practice shall be taken into account in the appointment of arbitrators.Moreover,the non-disputing party can participate in the procedure to enhance the transparency of the procedure and provide professional suggestions to the arbitral tribunal.The third part analyses the current status and problems of prudential exception provisions in China investment agreements.China gradually stipulated prudential exception provisions in the few investment treaties signed in recent years,but they have several problems due to the immature text.For example,they have different regulation model which are set in different chapters and have different names;the range of measures can be taken based on prudential reasons are various;the scope of “prudential reasons” is vague;the agreements not provide a clear applicable standard for the parties who need to quote prudential exception,the expression and indication of the provision is unsuitable,also,there is “self-judgment provision” in issue,which can cause the abuse of prudential exception;agreements not stipulate specialized disputes settlement procedure for the financial prudential,have different qualified requirements to the arbitrators,and not involve the participation of the non-disputing party.The fourth part puts forward suggestions to perfect prudential exception provisions in China investment agreements.First,unite the regulations model of prudential exception through establishing unified name and setting under same chapter and section;qualified the range of measures can be taken based on the prudential reasons are various,list the “prudential reasons” as much detail as possible,and define the “prudential reasons” in the form of footnote.Second,definite the applicable standard of the prudential exception,perfect the expression and indication of the provision,identify prudentialexception to be “self-judgment provision”,in order to prevent the abuse.Finally,to perfect the existing disputes settlement provisions: add special precondition for prudential exception disputes,where an investor submits a claim to arbitration and the host country invoke prudential exception as a defense,the joint determination made by the competent financial authorities of both parties on the issue of whether and to what extent the prudential exception is a valid defense to the claim for the investor-state arbitration to proceed;arbitrators should have the expertise or experience with respect to financial law or practice,and allow the participation of the non-disputing party.