The Evolution of National Security at the Interface between Domestic and International Investment Law and Policy: The Role of China

As China’s economy grows and the global economy is increasingly digitalised, the concept of national security is taking on increasing significance. Contrary to its quiet history, the security exception has now been invoked by different parties in ongoing disputes at the World Trade Organization. Similar exceptions exist in many international investment agreements and lie at the core of domestic jurisdictions’ regulatory frameworks for reviewing foreign investments. At the domestic level, these reviews have shifted to focus particularly on China and on a new category of ‘data’. Continued expansion of the meaning of security as a basis for rejecting foreign investment applications poses a threat to the benefits of economic integration, while allowing international tribunals to review these decisions by ruling on the meaning of this exception is likely to be counterproductive. Alternatives exist at the domestic and international levels. Domestically, a focus on evidence-based assessments and the imposition of behavioural or structural conditions as an alternative to rejecting foreign investment applications may help to mitigate security concerns. International guidelines and principles are already established to assist investors and investment agencies in this regard. Further rule reform at the international level may allow a more specific focus on agreed solutions to data concerns in place of a general acceptance of security as a catch-all response to perceived threats of foreign investment.