China's Bilateral Investment Treaties with EU Member States: Gaining a Competitive Advantage Through Investment Protection

September 01, 2007 | BY

clpstaff

The article explores available options to extend the full protection under the 'new generation' of bilateral investment treaties to otherwise unprotected investors.

By Rostislav Pekar and Ondrej Sekanina, Squire, Sanders & Dempsey

China's bilateral investment treaties (BITs), which include several treaties with EU member states, traditionally did not provide for an investor-state arbitration clause. In the past, China's lack of an investor-state arbitration clause made investment arbitration subject to a subsequent agreement to arbitrate, or restricted the scope of the arbitration clause to the determination of compensation for expropriation.1 In 1998, China's policy changed.2 Most BITs that have been signed since 1998, again including several treaties with EU member states, have provided for an unrestricted investor-state arbitration clause that permits an efficient enforcement of all substantive protections.3 Some post-1998 BITs have not yet entered into force.4

INVESTOR-STATE ARBITRATION CLAUSES

Investors cannot realize the tremendous potential of substantive protections granted under BITs without an enforcement mechanism. The only autonomous and efficient enforcement mechanism is investment arbitration. Contrary to common belief, investment arbitration is not necessarily an unpredictable and costly option.

Substantive Protections

The substantive protections granted in BITs between China and EU member states are not uniform. A comprehensive set of protections would include:

· Prohibition of expropriation without prompt, adequate and effective compensation

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