Research On Fork-in-the-Road Clause In Sino-foreign Investment Treaties

Fork-in-the-Road Clause is a kind of clause concerning how to settle investment disputes between investors and countries in international investment agreements.Investors have to make a choice between local litigation and international arbitration.Once the choice is made,it is irrevocable.Fork-in-the-Road Clause is a compromise,reached by developed and developing countries,between fully accessible international arbitration and limited international arbitration which requires exhaustion of local remedies.Since Fork-in-the-Road Clause was introduced into the United States and Panama Bilateral Investment Treaty(BIT)in 1982 for the first time,many countries followed and it has gradually become a necessary clause in BIT,including China.Currently,China has 103 BITs in force,70 of which stipulate Fork-in-the-Road Clause,and the occurrence rate is as high as 68%.From this respect,China is a real big country with Fork-in-the-Road Clause.Fork-in-the-Road Clause is deeply influenced by the universally accepted and applicable principles of international law,which is also an important reason why it can be accepted and used by many countries up to now.From the stance of the origin,exhaustion of local remedies rule is the prerequisite for the emergence of Fork-in-the-Road Clause.It results from mutual consultation between developed and developing countries on whether the principle of exhaustion of local remedies isapplicable in the field of international investment arbitration.From the stance of procedure,Fork-in-the-Road Clause pursues the value of balance between fairness and efficiency,which embodies the principle of due process indirectly.International arbitration and domestic litigation are opposing and either-or that can not coexist.It can save the remedy cost,reduce the risk of parallel procedures,improve the efficiency of dispute settlement and make full use of judicial resources.With the change of the times,Fork-in-the-Road Clauses both at home and abroad are also evolving.In China,Fork-in-the-Road Clause has two ways of application and three ways of expression.It keeps pace with the times,abandons the old and brings forth the new.The number is growing and the content is more systematic and comprehensive.The scope of application of investment disputes has gone through three stages: affirmative regulation,unrestricted regulation and negative regulation.What's more,the exhaustion of local administrative review has become an essential requirement for foreign investors.Reflecting on the evolution of the Fork-in-the-Road Clause in Sino-foreign investment agreements,it can find that reasons for the emergence of Fork-in-the-Road Clause are no longer sufficient,China's international status has already changed,and the whole international community is calling for the reform of investment dispute settlement mechanism.In the new era,China should attach importance to Fork-in-the-Road Clause.As the founder of Fork-in-the-Road Clause and the home country with largest number of investors who initiate international investment arbitration,the United States is deeply influenced by the North American Free Trade Agreement(NAFTA).Since NAFTA came into force,America firmly upholds Fork-in-the-Road Clause with written waiver,which shows in its BITs with developing countries.However,the conclusion of United States-Mexico-Canada Agreement(USMCA)in 2018 seems to indicate that the United States has a tendency to accept the exhaustion of local remedies before international arbitration.The evolution of American Fork-in-the-Road Clause enlightens China that Fork-in-the-Road Clause hasdrawbacks and even is out of date.China should be vigilant in peace time,analyze the potential problems of Chinese Fork-in-the-Road Clause and prepare to solve them based on lessons of foreign countries and China's national conditions.Only by linking up with other relevant laws can investment agreements be truly implemented.However,the current Fork-in-the-Road Clause in China's investment agreements does not link up smoothly with China's domestic laws and other international agreements.On the one hand,when BIT and domestic law differ in the time limit of administrative review,and the relationship between administrative review period and friendly consultation period is unclear,Fork-in-the-Road Clause has difficulty in the cohesion with domestic law.In China,if the time limit is not extended,the longest time for dispute settlement through administrative reconsideration is 120 days.BITs generally stipulate that the administrative review period shall not exceed 90 days,three months or four months.BITs do not specify whether the period of domestic administrative relief is included in the period of friendly consultation.If it is not included,investors should seek for administrative review after the friendly consultation.However,domestic law requires that disputes should be filed for administrative reconsideration within 60 days.This means that once the friendly consultation period is over,investors will inevitably lose the right to reconsider,which will not meet the requirement of pre-administrative reconsideration.As a result,disputes will be “locked in” the host country.If included,the period of administrative reconsideration does not coincide with that of friendly consultation.In many cases,the former is shorter than the latter.Administrative review period shall not be stipulated in BITs and shall be directly applied to host country's law.Whether the administrative review period and friendly consultation period start at the same time or not depends on whether the investor initiates administrative review or not.On the other hand,Fork-in-the-Road Clause conflicts with withdrawal provisionsof host countries and dispute settlement clauses in other BITs,which makes the choice of selecting dispute resolution is not sole.Fork-in-the-Road Clauses in Chinese BITs lack clear provisions on withdrawal,some fail to show the relationship between withdrawal of court and arbitration,and some fail to mention whether investors can sue in court after withdrawal of arbitration.Fork-in-the-Road Clause does not explain what is nolle prosequi,which can only be explained by the laws of the host country.In some countries,once investors apply for withdrawal of an action,the court should permit.In some countries,the court decides whether investors can drop a lawsuit or not.Fork-in-the-Road Clause can not adjust the conflicts of multiple international arbitration procedures,which will make the same dispute being arbitrated simultaneously.China can introduce written waiver into BITs to fix the loophole of withdrawal.The first withdrawal from litigation or arbitration is allowed but the second is prohibited.The content of waiver extends to the dispute settlement procedure initiated under any agreement between the third country and the parties to the dispute.The criteria for identifying “the same dispute” are ambiguous and the host countries' public interests are being challenged,which make the interests between investors and the host country unbalanced.Fork-in-the-Road Clause has the suspicion of unreasonable tendency towards one side.On the one hand,Fork-in-the-Road Clause in most Chinese BITs does not involve the determination of “the same dispute”,nor does domestic law.In practice,the criteria of arbitral tribunals are not uniform,some adopt formalistic criteria,and some adopt substantive criteria.The two criteria have their own advantages and disadvantages,and the international community has not reached a conclusion on this.Without uniform criteria,the abidance of Fork-in-the-Road Clause or not is handicapped by one side.In China,“the same dispute” can adopt the criteria of “the same fact + the same claim”.When disputes are caused by the same administrative act or related administrative act of the host country,and both the arbitration and litigationseek for a common purpose,that is,to obtain relief for the administrative act of the government,they belong to the “same dispute”.The determination of “the same dispute” applies not only to two parallel procedures of arbitration and litigation,but also to two or more international arbitration procedures.If an investor resorts to different international arbitration tribunals in accordance with the same BIT or different BITs,the subsequent arbitral tribunal shall terminate the arbitration or merge the arbitration as long as the dispute satisfies the requirement of “the same fact + the same claim”.On the other hand,Fork-in-the-Road Clause has no exception to the application scope and completely deprives the host country's right to choose dispute resolution,which make the public interests being challenged.Most Fork-in-the-Road Clauses apply either to acquisition compensation or any investment-related disputes without exceptions.As long as disputes fall within the scope,investors can directly appeal to international arbitration even if the host country's administrative acts take public interests into consideration.If the arbitral tribunal supports the investor's appeal,the host countries should also fulfill it.Fork-in-the-Road Clause does not provide host country the right to choose dispute resolution,which not only makes it impossible for the country to use domestic remedy mechanism to defend its rights,but also deprives the countries' opportunity to relieve investors through domestic procedures.In practice,some arbitral tribunals disregard public interests and reach a verdict in support of foreign investors.A negative list can be used to limit the scope of investment disputes,where disputes involving public interests can only be remedied domestically.Fork-in-the-Road Clause is not the only way to solve investment disputes between the state and investor.Returning to the principle of exhaustion of local remedies and establishing a permanent dispute settlement body similar to the court are all worth exploring.In the future,China can perfect Fork-in-the-Road Clause and carry out the pilot project of the new investment dispute settlement mechanism at thesame time.There is neither good nor bad for different dispute settlements,only appropriate or not.The final approach still depends on the consultations between contracting parties.