Page 9 - THE SOUTH CHINA BUSINESS JOURNAL
P. 9
r the past few years. In some cases, in particular
where there is no other agreement outlining
protections for investors or international arbitration
mechanisms in place, this means investors may
be subject to stricter investment conditions and
narrower market access in the host country.
An investor or company that wishes to raise a dispute
against a host country where no active BIT is in force
will have to negotiate directly with the host country
under the local laws and regulations.
In some cases, companies can seek help from their
own government to raise a dispute to the World Trade
Organization (WTO), provided both countries involved
are WTO member states and the rights in question
are protected by a WTO agreement. Claims of IP
infringement have previously been made against China
by the US government on behalf of US companies.
In the absence of government involvement, the
investor has little recourse to seek international
arbitration. Investors do, therefore, take on certain
risks when choosing to enter the China market, and
are advised to conduct due diligence before making
any investment decisions, which includes checking
whether there are investment protections in place
under other agreements.
On the other hand, China has taken several steps
to improve conditions for foreign investors and
companies in recent years, which, at least on
paper, serve to offer fairer treatment even in the
absence of a BIT. Measures include the new Foreign
Investment Law, which includes provisions on
strengthening China’s IP laws. Relevant to US
companies specifically, phase one of the US-China
Economic and Trade Agreement also included
renewed commitments to IP rights and fair and
reciprocal trade.
How can investors get the most out of China BITs?
BITs can be a powerful tool for investors to safeguard
their rights and investments in China and give them
recourse to raise and settle disputes in a neutral
court. However, some BITs are better than others,
and due to certain limitations in provisions, they
should not be seen as a catch-all for any legal dispute
that may arise.
It is therefore crucial for investors to assess and
prepare for non-commercial risks before choosing to
invest in China, and to check whether there are any
BITs or other investment agreements in force with
their home country or business domicile. If there
are agreements in place, investors should familiarize
themselves with the provisions for protected
investments and the mechanisms for arbitration.
SOUTH CHINA BUSINESS JOURNAL 6
where there is no other agreement outlining
protections for investors or international arbitration
mechanisms in place, this means investors may
be subject to stricter investment conditions and
narrower market access in the host country.
An investor or company that wishes to raise a dispute
against a host country where no active BIT is in force
will have to negotiate directly with the host country
under the local laws and regulations.
In some cases, companies can seek help from their
own government to raise a dispute to the World Trade
Organization (WTO), provided both countries involved
are WTO member states and the rights in question
are protected by a WTO agreement. Claims of IP
infringement have previously been made against China
by the US government on behalf of US companies.
In the absence of government involvement, the
investor has little recourse to seek international
arbitration. Investors do, therefore, take on certain
risks when choosing to enter the China market, and
are advised to conduct due diligence before making
any investment decisions, which includes checking
whether there are investment protections in place
under other agreements.
On the other hand, China has taken several steps
to improve conditions for foreign investors and
companies in recent years, which, at least on
paper, serve to offer fairer treatment even in the
absence of a BIT. Measures include the new Foreign
Investment Law, which includes provisions on
strengthening China’s IP laws. Relevant to US
companies specifically, phase one of the US-China
Economic and Trade Agreement also included
renewed commitments to IP rights and fair and
reciprocal trade.
How can investors get the most out of China BITs?
BITs can be a powerful tool for investors to safeguard
their rights and investments in China and give them
recourse to raise and settle disputes in a neutral
court. However, some BITs are better than others,
and due to certain limitations in provisions, they
should not be seen as a catch-all for any legal dispute
that may arise.
It is therefore crucial for investors to assess and
prepare for non-commercial risks before choosing to
invest in China, and to check whether there are any
BITs or other investment agreements in force with
their home country or business domicile. If there
are agreements in place, investors should familiarize
themselves with the provisions for protected
investments and the mechanisms for arbitration.
SOUTH CHINA BUSINESS JOURNAL 6
