A Chinese Perspective on the Investment Court System in the Context of Negotiating EU-China BIT

AuthorNing Hongling and Qi Tong
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NING Hongling
QI Tong
Due to the EU’s proposal of Investment Court System (ICS), it is necessary for China to
evaluate the ICS and consider its own stance towards Investor-State Dispute Settlement
(ISDS). Under the initiative of One Belt One Road (OBOR), whether and to what extent China
would accept ICS require an in-depth analysis of the coherences and divergences between the
EU and China, as well as the effect of core features of the ICS. It could be concluded that
bilateral ICS is not more effective than traditional ISDS system, whereas in general
Multilateral Investment Court (MIC) is more likely to ensure a fair and efficient adjudication,
with some deficiencies and even severe challenges that need to be addressed. From a Chinese
perspective, it is suggested that (a) MIC should integrate Chinese elements; (b) MIC should
become f riendly to developing countries; (c) MIC should become friendly to investors; (d)
MIC should be replaced by a substantial Multilateral Investment Treaty gradually.
Since 1 December 2009 when Lisbon Treaty1 entered into force,
foreign direct investment (hereinafter referred to as “FDI”) has
formed part of the European Union (hereinafter referred to as
“EU”)’s exclusive competence.2 Hence, the EU is in the process of
establishing itself as a new leading participant in concluding bilateral
investment treaties (hereinafter referred to as “BITs”), as well as free
trade agreements (hereinafter referred to as “FTAs”) with investment
chapters with a third state.
In 2013, the EU initiated its BIT negotiation with China, the first
ever investment agreement negotiated by the European Commission
(hereinafter referred to as “EC”) on behalf of its 28 member
countries.3 Because of the size and importance of the EU-China
bilateral investment relationship and the leading roles both parties
have played in the global spread of BITs, the negotiation of EU-
1 Treaty of Lisbon Amending the Treaty on European Union and the Treaty Establishing the
European Community, Dec. 13, 2007, 2007 O.J. (C 306) 1.
2 Treaty on the Functioning of the European Union, Mar. 25, 1957, art. 207.
3 EU investment negotiations with China and ASEAN, EUR. COMMN. (Oct. 18, 2013),
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China BIT will be a watershed event in global investment treaty
practice, and the prospective EU-China BIT will have significant
influence beyond China and the EU. Currently, the EU and China
have already completed 16 rounds of negotiation, with the most
recent one being held in mid-December 2017 in Brussels. The
negotiation has already stepped into specific text-based phase,
indicating a critical stage of negotiation. Investor-state dispute
settlement (hereinafter referred to as “ISDS”), which has long been
considered a crucial ingredient of effective investment protection,4
may be one of the key factors that would influence the outcome of
Traditional ISDS system, originating from 1960s, is an
international arbitration system where arbitrators appointed by an
investor and the host state on ad hoc basis adjudicate the investment
disputes arising between the two parties. The ISDS system is
expected to provide a neutral forum for settling investor-state
disputes fairly, in substitute for the national court system of the host
state and diplomatic protection of the home state.
However, with the boom of ISDS cases since late 1990s, the
ISDS system has given rise to heated debates and criticisms
worldwide, and has been questioned within the EU. Main concerns
relate to the legitimacy and transparency of the system, the
inconsistent and erroneous arbitral decisions, independence and
impartiality of party-appointed arbitrators, and the cost- and time-
intensity of arbitrations.5 Thus the EU is determined to reform and
reshape the ISDS system. In the draft text of Transatlantic Trade and
Investment Partnership (hereinafter referred to as “TTIP”)’s
investment chapter in 2015, the EU proposed a bilateral Investment
Court System (hereinafter referred to as “ICS”) to the other
contracting party, i.e. the US.6 A tribunal is composed of one or
4 August Reinisch, The Likely Content of Future EU Investment Agreements, (M. Bungenberg, J.
Griebel, S. Hobe & A. Reinisch eds.), INTERNATIONAL INVESTMENT LAW: A HANDBOOK, at 1900
5 See UNCTAD, Investor-State Dispute Settlement, UNCTAD S eries on Issues in International
Investment Agreements II, New York and Geneva, 2014.
6 See Commission draft text TTIP investment, EUR. COMMN (Sept. 2015), http://trade.ec.europa.e
u/doclib/docs/2015/september/tradoc_153807.pdf; EU’s proposal for Investment Protection and
Resolution of Investment Disputes(TTIP) (the EU’s proposal), EUR. UNION (Nov. 12, 2015),
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three judges selected on a rotation basis by the President, rather than
the disputing party, from judges pre-appointed by the two treaty
parties for a fixed term. The award issued by the tribunal may be
subject to review in an appellate tribunal, the composition of which
is similar to that of the first instance tribunal. In fact, bilateral ICS is
only a transition. What the EU really intended is launching a
Multilateral Investment Court (hereinafter referred to as “MIC”)
system, which resembles the World Trade Organization (hereinafter
referred to as “WTO”) Appellate Body. Details of MIC are still open
for discussion, but the MIC is expected to be a permanent body with
key features of domestic and international courts.7
The EU’s proposal of ICS has drawn a lot of attention from
academics worldwide. Most of them assess the pros and cons of the
bilateral ICS, 8 discuss the suitability of a WTO-style dispute
settlement mechanism in investment regime9 or challenges that the
ICS would face,10 or focus on specific issues of ICS such as the
enforceability of awards rendered by the court.11 Some of them
explore the compatibility of ICS with the EU judicial system.12
These legal researches are beneficial to help analyze the potential
effects of the envisaged ICS or MIC in general. However, each
country’s policy priorities may be different due to various
circumstances. Hence, the first and essential step to evaluate
7 See The Multilateral Investment Court project, http://trad e.ec.europa.eu/doclib/press/index.cf
m?id=1608 (last visited Oct. 10, 2018).
8 Belen Olmos Giupponi, Recent Developments in the EU Investment Policy: Towards an
Investment World Court? 26 J. OF ARB. STUD. 175, 175 -230 (2016); Robert W. Schwieder, TTIP and
the Investment Court System: A New (and Improved?) Paradigm for Investor-State Adjudication, 55
COLUM. J. OF TRANSNATL L. 178, 178-227 (2016).
9 Stephen S. Kho, Alan Yanovich, Brendan R. Casey and Johann Strauss, The EU TTIP Investment
Court Proposal and the WTO Dispute Settlement System: Comparing Apples and Oranges? 32(2)
ICSID REV. 326, 326345 (2017); Filippo Fontanelli et al., Lights and shadows of the WTO-Inspired
International Court System of Investor-State Dispute Settlement, (Loukas Mistelis and Nikos Lavranos
eds.), 1 EUR. INV. L. AND ARB. REV. 191, 191-263 (2016).
10 Eduardo Zuleta, The Challenge of Creating a Standing International Investment Court, (Jean E.
JOURNEYS FOR THE 21ST CENTURY 403, 403-23 (2015).
11 August Reinisch, Will the EU’s Proposal Concerning an Investment Court System for CETA and
TTIP Lead to Enforceable Awards? The Limits of Modifying the ICSID Convention and the Nature of
Investment Arbitration, 19 J. OF INTL ECON. L. 761, 761786 (2016); Rob Howse, Designing a
Multilateral Investment Court: Issues and Options, 36 Y. B. OF EUR. L. 209, 209236 (2017).
12 Dr. Laurens Ankersmit, The Compatibility of Investment Arbitration in EU Trade Agreements
with the EU Judicial System, 13 J. FOR EUR. ENVTL & PLANNING L. 46, 46-63 (2016).

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