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Hastings International and Comparative Law Review

Authors

Runyang Liu

Abstract

The Investor-State Dispute Settlement (ISDS) mechanism has been widely used in international treaty-making and invoked many times in crossborder dispute resolution. ISDS is a system where a foreign investor can bring claims against a host state for its discriminatory acts upon the investor. As China pursues a new level of outbound investment in the last decade, the ISDS mechanism will apply particularly in the context of investment disputes involving Chinese investors and foreign countries. This note will examine the evolution of ISDS clauses in China’s Bilateral Investment Treaties (BITs), especially with the European Union (EU), as well as these clauses’ implications for Chinese investors seeking remedies under the ISDS clauses. It will start by exploring the context in which the discussion of ISDS arises and some of the main criticisms raised against ISDS clauses in recent years. It will then assess ISDS clauses in China’s BITs and some challenges when consolidating different versions of ISDS provision, followed by a case study of arbitration between Chinese investors and Belgium. When seeking to challenge a state’s action that violates an investor’s rights and interests, ISDS provides limited remedial protection to investors and presents disadvantages to Chinese investors that the Chinese government should be aware of while drafting BITs with the EU. In its ongoing and future treaty negotiations, China should provide a clear-lined arbitral scope, limit uncertainties in its treaty language, and install mechanisms to remedy the lack of transparency in the ISDS system, all while taking into account the importance of its state interests.

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