The size and complexity of projects falling under China’s Belt and Road Initiative (BRI) give rise to substantial risk of disputes between investors and their contracting parties in the host states. These risks are further amplified by these projects’ susceptibility to the actions and policies of the host states themselves. Local governments, whether directly or through their agents and organs, grant concessions and licences, enter into state contracts, guarantee tax exemptions and generally exercise the inherent power of a sovereign to regulate investment activity in its own territory. However, a number of emerging BRI jurisdictions are classified as ‘high sovereign risk jurisdictions’. Some have a complex political history with China.

This article addresses, in the infrastructure context, the circumstances in which investor-state dispute settlement (ISDS) might be available for People’s Republic of China (PRC)-related BRI disputes, and the relationship between treaty and contractual claims.

Availability of ISDS claims for PRC-related infrastructure disputes

ISDS is a dispute resolution mechanism – largely positivist in nature and based on international treaties and investment agreements – by which investors seek to recover their lost investments or to protect their existing investment projects from adverse state action. Other investment protection tools include political risk insurance, negotiation, conciliation and diplomatic protection.

Oct-Dec 2019 issue

Fangda Partners