SCOPE OF ARBITRATION IN CHINESE BITS: POLICIES & IMPLICATIONS

Guang Hong, University of Miami School of Law

Abstract

This article starts by analyzing the different ingredients that have come together to formulate the current state of China’s policy toward foreign investment. These ingredients are non-exhaustive in nature but are essential in setting the context for the issue to be discussed. Next, we move into the core issue: What are the implications of Bilateral Investment Treaties (“BITs”) that contain arbitration clauses, which incorporates a “narrow” or “broad” scope of arbitration? Specifically, how does the scope of arbitration affect foreign investors conducting Foreign Direct Investment (“FDI”) in China and how does it affect Chinese investors who conduct FDI abroad? In order to answer these questions we start by analyzing First Generation BITs, which contained a restrictive scope of arbitration. Next, we will analyze Second Generation BITs, which have recently been signed between China and countries such as Germany, Finland, and the Netherlands. These BITs contained a broad scope of arbitration. Taken account of these implications I will then address some of the issues that have arisen since the implementation of Second Generation BITs. Next, I will demonstrate some of the policies that may have led China to construe this new generation of BITs. This analysis will begin by briefly surveying the economic development from China’s reform in 1979 to the present in conjunction with China’s attitude toward investment arbitration over this period of time. I conclude that China’s attitude and policy toward investment arbitration has been inextricably intertwined with the development of its economic structure.