Law professor Leon Trakman writes about China's "prolifering investment treaty program":
Notwithstanding China’s endorsement of investor-state arbitration more than a decade ago, only one investor claim has been initiated against it and it was withdrawn. This does not necessarily mean that foreign investors will not make such claims in the future, but rather that proceeding against China, from an economic rationalist perspective, is likely to be contentious, costly and dilatory. However, these concerns are not peculiar to China. Economically and politically powerful states, not least of all the United States, are less frequently subject to investor-state arbitration than poorer states for much the same reason.
What is increasingly apparent, however, is that China is preparing itself for investor-state proceedings against it in the future. This is evident, for example, in China’s growing interest in the functioning of the International Center for the Settlement of Investment Disputes [ICSID], among other institutions, in its inclusion of investor-state arbitration in its Model Bilateral Investment Agreement and in the various regional and bilateral agreements it has concluded.
What is also apparent is that China is well aware that the price of negotiating treaties to promote both inbound and outbound investment is the prospect that foreign investor claims will inevitably be lodged against it. However, China is also aware that the investment benefits may well outweigh these costs. After all, China has grown into the second largest economy in the world. It is the second largest recipient of foreign direct investment [FDI]. It is sixth in outward FDI. It well appreciates the economic rationalist reasons for promoting such investment, along with the risks.
With all of the investment treaties it has now signed, how many cases will there be against China in the future?
... the accusation that few foreign investors are likely to bring ISA claim against China is comparable to their reluctance to bring claims against other powerful countries. Germany, with the largest number of BITs, has been subject to only one such claim. This is not to deny that foreign investors that lodge ISA claims against China will face formidable resistance from a centrally directed economy with the financial muscle and capacity to mount a consolidated defense in the national interest. What is contended is that it is too early in China’s participation in the BITS revolution to conclude that China will be impervious to foreign investor claims, or will necessarily deter, or readily win claims brought against it. It is simply too early to make such a prediction. ...
And what will be the reaction when Chinese foreign investors start bringing cases?
The attitude towards investor-state is worth watching in a number of countries right now, but China might be the most interesting.
