State Controlled Entities as Qualified "Investors": Implications for the Pacific Region Investment Treaty Making



Wang, L
(2015) State Controlled Entities as Qualified "Investors": Implications for the Pacific Region Investment Treaty Making. Transnational Dispute Management, 12 (1).

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Abstract

Recent years have witnessed a dramatic development of foreign direct investment (FDI) within the Pacific Rim region, alongside with state controlled entities (SCEs) playing an increasingly prominent role. However, this remarkably rapid growth of FDI led by SCEs has created certain concerns, including notably competitive neutrality (CN) concerns, which have resulted in calls for national and international regulations on such investments. Although national measures have been taken by some States to address such concerns, it is controversial whether and to what extent such SCEs investment should be regulated by international investment agreement (IIAs). Among the many issues, the most significant is the question whether and to what extent such SCEs should be treated as qualified investors under IIAs. This article therefore explores the status of state owned entities under international investment agreements within the Pacific Rim region, by addressing two key issues relating to the definition of investor under IIAs. It first discusses whether SCEs are covered by the definition of “investor” under investment treaties. It then analyses whether such SCEs are entitled to initiate the investor-State dispute settlement (ISDS) mechanism, namely, the “national of [a] Contracting State” requirement under the ICSID Convention. Finally, it discusses the implications for the Pacific Rim region. The review of treaty practices within the Pacific Rim region shows that although the specific language of the “investor” clause varies in IIAs, none of the existing IIA expressly excludes SCEs as qualified investors. It is observed that recent regional agreement negotiations would continuously liberalise and promote FDI, and that limitations and restrictions on SCE investments have been addressed by some developed economies. The ICSID Convention provides a broad coverage for jurisdiction for “nationals” without distinguishing public foreign investors from private foreign investors, but in academia and arbitration practice it is controversial whether SCEs should be limited to access the investor-State arbitration. What is clear is that with the rapid growth of foreign investments by SCEs, the issues of whether the SCEs are qualified as covered investor under the investment treaties and whether SCEs can resort to the ICSID arbitration are likely to be subject to more and more scrutiny and debate. Given the uncertainty resulted from the ambiguity in the bulk of world IIAs and the ICSID Convention on the issue of SCE protection, it is advisable for the governments within the Pacific region to rethink and carefully redefine the relevant terms to achieve further clarify.

Item Type: Article
Depositing User: Symplectic Admin
Date Deposited: 11 Jan 2017 09:35
Last Modified: 01 Oct 2021 07:39
Open Access URL: http://www.transnational-dispute-management.com/ar...
URI: https://livrepository.liverpool.ac.uk/id/eprint/3005015