Presentation about ICSID cases involving Chinese Investors at Herbert Smith Freehills March, 7th 2018

1. The Role of ICSID in Investment Disputes Involving
Chinese Investors: Are There Better Alternatives?
LCIP- Herbert Smith Freehills
London, 7th March 2018
Dr. Flavio Inocencio
Lecturer in Law
Associate Director of the LLM in Oil, Gas and Energy
Coventry University

2. One Belt One Road: The rise of
Chinese Investors
• China has signed 145 Bilateral Investment Treaties
(BITs) so far, according to the United Nations
Conference on Trade and Development (UNCTAD). Of
these 124 are in force.
• It is also important to say that China is now the
second largest investor after the United States,
according to the 2017 World Investment Report by
UNCTAD.

3. The new Face of China abroad

4. Is ICSID the most viable alternative
for investment arbitration?
• China joined ICSID in 1993 and the answer to this
question is quite relevant, particularly considering
the inflows from China to the MENA region.
• This means that disputes will arise eventually and
Chinese investors (whether State owned enterprises
or private investors) will increasingly challenge
measures that affect their investments and the
minimum standard of protection for foreign
investors.

5. Some Relevant Cases Under ICSID
• Tza Yap Shum v Republic of Peru (ICSID Case
No. ARB/07/6).
• Ansung Housing Corp Ltd. vs. Peoples’ Republic
of China (ICSID case No. ARB/14/25).
• Ping An vs. Belgium (ICSID case No. ARB/
12/29).

6. Tza Yap Shum v Republic of
Peru (ICSID Case No. ARB/07/6
• Arbitration initiated by Tza Yap Shum (Chinese
investor) against Peru because of the “interim
measures” taken by the Peruvian Tax Authority
(SUNAT) regarding TSG (A Company dedicated to
export/import of fishmeal) in which the claimant was
a majority shareholder.
• TSG sough domestic remedies and challenged the
measures of SUNAT. The arbitration tribunal
considered that these measures constituted “indirect
expropriation”.

7. Ansung Housing Co Ltd. vs. Peoples’ Republic of
China (ICSID case No. ARB/14/25)
• Ansung Housing Co Ltd (South Korean Company)
initiates arbitration proceedings against China
relating to an investment in a golf course in Sheyang-
Xian, China.
• The tribunal dismissed the claims because of time
has elapsed .

8. Ping An vs. Belgium (ICSID case No. ARB/
12/29)
• Ping An Life Insurance and Ping An Group Insurance
(Chinese Companies) shareholders of the Fortis group
initiate arbitration proceedings against Belgium
because of measures taken in the Fortis group by the
Belgium Government.
• The tribunal dismissed the claim ratione temporis.

9. What to make of ICSID for Chinese
Investors?
• It is also important to note that although China it is
still a developing country, it is also of the largest
investors and this will grow in the next decades.
• For that reason, it is expected that Chinese investors
will make full use of their rights under BITs and ICSID
will be seen as a preferred forum to protect the
rights of Chinese investors in host countries.

10. Is CIETAC an Alternative to ICSID?
• The China International Economic and Trade
Arbitration Association (CIETAC) has a centre
in Beijing and another in Hong-Kong.
• CIETAC arbitration rules regarding investment
were adopted and can now be used.
• However, the question is whether CIETAC
could gain the trust of countries to include
them in their BITs with China.

11. China-Africa Joint Arbitration Centre
(CAJAC)
• The China-Africa Joint Arbitration Centre was
established in 2015 and it might be one of the
alternative for the settling of disputes related to
commercial disputes in Africa.
• There are two centres, one in Shanghai and the
other in Johannesburg.
• The Centre did not develop institutional rules on
investment arbitration so far, so it’s hard to see
how it will evolve. Its focus seems to be on
international commercial arbitration and not on
investor/state arbitration.

12. Arbitration under the PCA
• We are all aware of the disadvantages of ad hoc
arbitration.
• However, the PCA has been one of the leading
international bodies for arbitration of investment
disputes, particularly under UNCITRAL rules.
• However, looking at enforceability, one can
conclude that it is not a better alternative,
considering the its enforcement derives from the
Treaty and it is quite different from the NY
Convention.

13. Issues with ICSID: A Multilateral
Investment Court?
• There are many issues with ICSID arbitration: lack of
harmonisation/predictability of the disputes, closed
pool or arbitrators, confidentiality of proceedings
lack of appeal of decisions and a forum that is not
perceived as friendly to the interests of states.
• The recent proposal by the European Commission of
a Multilateral Investment Court aims at redressing
the shortcomings of ICSID by involving UNCITRAL.
This can be a game changer in investment arbitration
and in particular for Chinese investors

14. Conclusions 1
• The international minimum standard of treatment
for foreign investors is part of Public International
Law.
• Despite all of the problems of ICSID, the issue of
legitimacy, neutrality and enforcement cannot be
easily solved by alternative institutional forums.
• However, ICSID presents challenges and it is
perceived as biased against states.
• The issue of regulatory space is very important and
needs to be addressed, as relevant countries are
withdrawing from BITs, eg.s South Africa.

15. Conclusions 2
• CIETAC might emerge as a potential alternative forum
for Chinese investors under certain conditions,
particularly if it gains traction in China, considering
that ICSID is seen as a forum friendly to investors.
• This could happen if China adopts a new model BIT
(with new countries) that balances both investor’s
rights with the need to respect regulatory space.
• It is also important to point out that one of the
largest recipients if FDI in the African continent,
Angola doesn’t have a BIT with China.

16. Contact Details
• Dr. Flavio Inocencio
• flavio.inocencio@coventry.ac.uk
• flavioinocencio@gmail.com