Restrictive ISDS clauses under Chinese BITs: interpretations and implications for China

ABSTRACT The majority of investment arbitration cases based on Chinese BITs have involved restrictive ISDS clauses, the interpretation of such clauses diverged in arbitration practice. Given the large presence of the restrictive ISDS clauses in Chinese BITs, it will certainly impede Chinese investors to seek jurisdiction of international investment arbitration. In the meantime, the interpretation of such clauses by tribunals will continue to occur frequently, which is an uncertain factor for both the Chinese government and its overseas investors. As China’s dual role in two-way investment, China needs to consider the protection of both the host state and its investors. To deal with the challenges from the predominance of the restrictive ISDS clauses in Chinese BITs, China seems to be updating its restrictive BITs from a multilateral level, and the Chinese investors may circumvent the restrictive BITs by relying on investment contracts or host state’s national laws to seek international arbitration.