Public and private international laws: Aspects of the resolution of disputes between foreign banks and Chinese sovereign borrowers

In recent years the People's Republic of China has experienced rapid economic growth, spawned in large measure by dramatic increases in foreign trade and investment. China's adoption of an “open door” policy in the late 1970s also opened up its banking market to foreigners. One result of these developments has been a sharp rise in the number of disputes between Chinese sovereign borrowers and foreign banks. Therefore, the availability of appropriate dispute resolution mechanisms for foreign banks becomes a critical factor in this expansion of international finance. Due to the unique status of sovereign state as a borrower, the role of legal remedies against sovereign defaults under loan agreements is different from those against private loan defaults. This thesis addressed several problematic private and public international law issues in sovereign debt litigations including the state immunity theory, the act of state doctrine, forum non conveniens, and the difficulty in enforcement of foreign judgment. It also offers a comprehensive survey of dispute resolution options in China. The foreign bank operator now has many choices in planning a dispute resolution strategy, and the present work offers analysis of the strengths and weakness of each process, as well as a series of actual banking case studies that provide glimpses of the operational reality.; The following thesis is premised on the principle that party autonomy in international arbitration circumvents conceptual problems and recognizes the need for a unique international dispute resolution forum that addresses intricate political and diplomatic ramifications and state sovereignty issues. These issues typically arise from disputes regarding state contracts between national governments and private foreign parties. The thesis also challenges the popular position supported by both international banking practice and international literature, that international arbitration should be avoided in financial dispute resolution. Followed by a conclusion that all the objections against the suitability of international arbitration as a means to solve international loan disputes have shown themselves to be unfounded, and international arbitration should definitely become an appropriate forum for the resolution of such disputes. As far as disputes between foreign banks and Chinese sovereign borrowers are concerned, arbitration may now, in some circumstances, be considered a more effective alternative than litigation. Arbitration and the recognition and enforcement of an arbitral award may now be recognized as providing a level playing field for international financial transactions between states and foreign private parties.