Definition Of The Legal Status Of State-Owned Enterprises In International Investment Law

With the development of economic globalization,State-Owned Enterprises(SOEs)have also begun to enter into the international economic market and occupied a pivotal position in foreign direct investment.Most SOEs are government-controlled companies or government-shared companies,and have natural connections with the government.In an international perspective,they are usually termed as State-Owned Enterprises,Government-Controlled Entities,and State Enterprises.Two types of SOEs may be involved in international investment activities,one is the SOEs acted as a foreign investor,and the other is the SOEs of the host country.The former mainly refers to the SOEs of capital-exporting countries,which carry out investment activities with the host country through foreign investment;the latter mainly refers to the SOEs of capital-importing countries,which carry out international investment activities jointly with foreign investors by attracting foreign capital.Due to the special connection between SOEs and the government,their status in international investment activities is often controversial.At present,the international community has not yet reached a consensus on the definition of the legal status of SOEs.This article attempts to clarify the definition of the legal status of SOEs by reviewing the relevant regulations of international investment law and arbitration practices,and proposes suggestions to the participation of Chinese State-Owned Enterprises(CSOEs)in international investment activities.This article will be separated into four chapters to state relevant issues.Chapter 1 is mainly about the evolution process of SOEs in international investment activities.This chapter first reviews the origin and development of SOEs,the development of SOEs in international investment activities,and the concerns that SOEs may arise in international investment activities.Secondly,it introduces the development of the international investment governance system and the ISDS mechanism used to settle investment disputes.Finally,a brief overview of the interaction between SOEs and international investment governance is given.Chapter 2 aims to sort out the relevant rules related to SOEs in the international investment law,including relevant provisions in the International Investment Agreements(IIAs),the ICSID Convention and the Responsibility of States for Internationally Wrongful Acts(ILC Acts).By reviewing the definition of "investor"in IIAs,it can be found that some agreements explicitly include SOEs in the scope of protection.Even IIAs that do not explicitly include or exclude SOEs can generally be presumed to protect SOEs.In addition,the ICSID Convention and the ILC Acts emphasize the specific analysis of the behavior involved in the case when judging the legal status of SOEs.The general characteristics of SOEs’ equity structure and capital sources cannot be used as decisive factors in judging their legal status.Chapter 3 mainly introduces investment arbitration cases involving the definition of the legal status of SOEs.In arbitration practice,two analytical methods for judging the legal status of SOEs have been developed,the "actor-based" method and the "act-based" method.The former focuses on reviewing the general characteristics of SOEs’,such as ownership and behavioral purposes to define their legal status,while the latter focuses on reviewing the nature of the SOEs’ conduct involved in the case.Although the second analysis method is more in line with the relevant regulations of international investment law,it has also been criticized for ignoring the review of the purpose of SOEs.A method that considers both purpose and nature of the conduct seems to be admired by many scholars,but whether this method has applicability remains to be tested by future arbitration practices.Chapter 4 introduces the risks that CSOEs may face in international investment activities,and the development stages of the dispute settlement mechanism included in Chinese Bilateral Investment Treaties(BITs).The practice of investment arbitration in China is still in its infancy,and there are relatively few investment arbitration cases in which CSOEs investors are applicants.The method of analyzing the legal status of SOEs used in the current arbitration practice is more beneficial to CSOEs.Therefore,CSOEs investors should actively use investment arbitration to protect their rights and interests when they are involved in investment disputes.However,China should also be aware of the entering of foreign capital to jointly conduct investment with CSOEs,unreasonably resorting to ICSID arbitration to take China as the respondent for assuming responsibility for the CSOEs and suffering unnecessary litigation.At the same time,China should also actively respond to the reform of CSOEs and the formulation of international rules for SOEs.