The emerging fourth generation of Chinese BITs : implications for international investment and economic law

Abstract

Chinese bilateral investment treaties (BITs) – focused on the protection of foreign investment – have evolved through three different generations in terms of form, structure and content. However, in 2013, China accepted pre-establishment national treatment and a negative list approach in the context of its BIT negotiations with the United States. This acceptance is having a crucial bearing on the development of Chinese BITs, as it marked the beginning of a new generation of Chinese BITs addressing both investment liberalization and investment protection. Therefore, the fourth generation of Chinese BITs seems to be emerging. This thesis presents a detailed study of the emerging fourth generation of Chinese BITs, arguing that this will have an important influence on international investment law and international economic law more generally: the fourth generation both reflects evolving trends in international investment law but also – given China’s role in the global economy – marks an important indication of shift of China from a rule taking to a rule leading role.

It is firstly argued that the fourth generation of Chinese BITs will be likely to provide pre-establishment national treatment on the basis of a negative list approach and rebalance the protection of foreign investment and the right of states to regulate. The acceptance of pre-establishment national treatment and a negative list approach has brought reform to China’s domestic regulatory framework for foreign investment, especially the approval of the New Foreign Investment Law in March 2019. This rebalancing would be achieved mainly through more limited definitions of investor and investment, clarification of fair and equitable treatment, clarification of indirect expropriation, inclusion of exception clauses and improvement of the investor-state dispute settlement mechanism.

Secondly, the fourth generation of Chinese BITs needs to be considered in the context of a global backlash against investment arbitration. Investment treaty reform has been undertaken at the national, bilateral, regional and multilateral levels. Against this background, the fourth generation of Chinese BITs could serve as China’s model in the rebalancing debate. Furthermore, China has been involved in a large number of bilateral and regional agreement negotiations for the consolidation of investment rules, and has actively participated in multilateral investment rule making initiatives, as reflected in the G20 Guiding Principles for Global Investment Policymaking and the multilateral framework on investment facilitation at the World Trade Organization.

Thirdly, the fourth generation of Chinese BITs suggests a mutual interaction between China and international investment law, which could be considered as part of the mutual interactions between China and international economic law. On the one hand, China’s participation in international economic law has had a great impact on domestic economic and legal reforms. The draft China-United States BIT and the 2019 New Foreign Investment Law are examples. On the other hand, China, as an emerging major economic power, impacts the development of international economic law. In the field of international investment law, China by and large has been evolving from a rule taker to a rule maker.

In sum, this thesis is a detailed examination of the emerging fourth generation of Chinese BITs and its implications for international investment and economic law.