Arbitration Under Foreign Investment In China

Abstract

Despite the position of China as the 2^nd largest investment destination for foreign direct investment, and the 6^th largest outward investment country in the world, the number of arbitration or litigation cases conducted in China for settling the investment disputes between foreign parties and Chinese parties is very few. Foreign investors and the international community seem to have no confidence in the arbitration and court systems in China. Not only is it due to China’s cultural skepticism towards the law, but also to its underdeveloped court system particularly in the enforcement of arbitration awards. Notwithstanding the efforts Chinese government has taken in improving its judicial and arbitrational scheme , it is still claimed by the foreign investors that the Chinese arbitration system is still locally protective. Therefore, for the purpose of attracting more foreign direct investment and also for preparing its investors “Going Global” for investor-state proceedings in the future, China has adopted a new attitude in concluding Bilateral Investment Treaties by including the investor-state arbitration in its Model Bilateral Investment Agreement and regional treaties, and accepting the jurisdiction of ICSID, or other third party institutions. However, China needs to weigh the advantages and disadvantages brought by these strategic changes. Attracting foreign investment without sacrificing its distinctive national interests and interest of Chinese parties including those of its investors abroad are an onerous task for Chinese leaders to accomplish.