Investor‑State Arbitration Clausesof Chinese BITs18 September 2012, Munich
China Ratified 100 BITsOnly 3 BITs withoutInvestor State Arbitration Clause‑97 BITs havearbitrationclauses3 BITS donthavearbitrationclauses
Types of Arbitration Consents inChinas BITsFull Investor-Statearbitration clauseArbitration Clausefor the Compensation Amount
Arbitration Clausefor the Compensation Amount• only disputes concerning the amount ofcompensation for expropriation can be submitted toan international arbitration tribunal.
An example of Arbitration Clausefor the Compensation AmountChina Peru BIT‑• Article 8 (1) Any dispute between an investor ofone Contracting Party and the other ContractingParty in connection with an investment in theterritory of the other Contracting Party shall, asfar as possible, be settled amicably throughnegotiations between the parties to the dispute.
China Peru BIT‑• Article 8 (2) If the dispute cannot be settledthrough negotiations within six months, eitherparty to the dispute shall be entitled to submitthe dispute to the competent court of theContracting Party accepting the investment.
China Peru BIT‑• Article 8 (3) If a dispute involving the amount ofcompensation for expropriation cannot be settledwithin six months after resort to negotiations asspecified in Paragraph 1 of this Article, it may besubmitted at the request of either party to theinternational arbitration of the International Center forSettlement of Investment Disputes (ICSID),established by the Convention on the Settlement ofInvestment Disputes between States and Nationals ofOther States, signed in Washington D.C., on March18, 1965.
China Peru BIT‑• Article 8 (3) Any disputes concerning other mattersbetween an investor of either Contracting Party andthe other Contracting Party may be submitted to theCenter if the parties to the disputes so agree. Theprovisions of this Paragraph shall not apply if theinvestor concerned has resorted to the procedurespecified in Paragraph 2 of this Article.
Tza Yap Shum v. Republic ofPeru• Tza Yap Shum v. Republic of Peru, ICSID Case No ARB/07/6(based on the China-Peru BIT) is the first case brought by aChinese investor before ICSID based on a BIT. The case is stillpending, following a jurisdictional award that was made on 19June 2009 that had to determine the scope of such an "amountof compensation" consent to arbitration.• Mr Tza Yap Shum, a Hong Kong resident, issued proceedingsagainst Peru under the China-Peru BIT, claiming compensationfor the alleged expropriation of his Peruvian fish flour company.The two parties disagreed over the scope of Perus consent toinvestor-state arbitration.
Tza Yap Shum v. Republic ofPeru• Peru objected to the tribunals jurisdiction, arguing that according tothe Article 8 Para 3 of the relevant BIT the tribunal enjoyedjurisdiction only over the "amount of compensation" but did not havethe right to determine whether there had been an "expropriation"within the meaning of the treaty. Peru argued that the determinationof whether or not there had been an expropriation should besubmitted to the local court. However Article 8 Para 3 last sentenceof the treaty stipulated that if the investor had first brought a disputeto the local court, he would be precluded from taking the dispute toan international arbitration tribunal under the BIT. After carefulconsideration, the tribunal determined that it did have jurisdiction todetermine not only the amount of compensation but also whetherthe act of the Peruvian Government fell within the meaning of"expropriation" in the BIT.
“Full" Investor-State Arbitration• The second type of clause, which can be describedas "full" Investor-State Arbitration, provides that alldisputes arising from the investment are included inthe scope of international arbitration.
An example of Full ArbitrationClause China-South Africa BIT• The China-South Africa BIT signed on 1997 is thefirst BIT entered into and ratified by China thatstipulates consent to full I-S A:• Article 9 (1) Any dispute between an investor of onecontracting Party and the other Contracting Party inconnection with an investment in the territory of theother Contracting Party shall, as far as possible, besettled amicably through negotiations between theparties to the dispute.
China-South Africa BIT• Article 9 (2) If the dispute cannot the settledthrough negotiations within six months, eitherParty to the dispute shall be entitled to submitthe dispute to an international arbitral tribunalprovided that the Contracting Party involved inthe dispute may require the investor to initiateadministrative review procedures in accordancewith its laws and regulations, and provided thatthe investor has not submitted the dispute to adomestic court of that Contracting Party.
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