The Phenomenon Of "Arbitrage" Under International Investment Law And Its Countermeasures

In international investment practice,a growing number of investors obtain the nationality of the targeted State through nationality planning,so as to achieve a higher level of investment protection.Traditionally,it is believed that the sole purpose of investors’ nationality planning is to obtain the protection of more favorable investment treaties and the cause of multinational corporations’"arbitrage"only exists within the system of international investment law which is a subsystem of international law.However,practice shows that sometimes investor’s one nationality planning behavior will lead to benefits both in the regime of international tax law and international investment law,part of"arbitrage" is actually the "spillover effect" of tax "treaty shopping".Up to now,the "decentralized" investment arbitral tribunal has not explicitly prohibited any kind of "arbitrage" of multinational corporations,but there are two different approaches when dealing with this problem:the supportive one,and the restrictive one.In the context of "arbitrage",the respondent states will raise a series of objections to deny the legality of "arbitrage".Meanwhile,countermeasures are taken to regulate "arbitrage" in order to eliminate negative effects.In the context of great changes in current international investment system,summarizing the countermeasures exist in international investment agreements(IIAs),accessing risks of "arbitrage" faced by China,providing suggestions and plans which in line with China’s conditions so as to perfect the investment law system is of great significance for China to continue attracting and utilizing foreign investment as well as safeguarding national interests and public order.In view of this,in addition to the introduction and conclusion,this paper is consist of four chapters.The first chapter discusses the causes of multinational corporations’"arbitrage" phenomenon under international investment law.First of all,this chapter points out that in the investment law system,there exists the phenomenon that multinational corporations take advantage of differential treatments among IIAs in order to "arbitrage".Secondly,further analysis shows that part of "arbitrage" comes from the spillover effect of tax "treaty shopping".At the end,in the context of fragmentation of international law,this paper compares tax "treaty shopping" and investment "arbitrage",summarizes the common ground of international tax regime and international investment regime,explains the mechanism of "spillover effect",and provides a new explanation for the causes of multinational corporation’s "arbitrage"phenomenon.Chapter two focuses on analyzing the arbitration practice of multinational corporations’ "arbitrage" phenomenon under international investment law.This paper discusses the type of objections raised by respondent states and the key factors in decisions on the problem of legality of "arbitrage".Then it summarizes two approaches when the tribunal dealing with the "arbitrage"problem and make comments on them respectively.As a whole,the tribunal does not distinguish between two different types of "arbitrage" when dealing with related cases.Chapter three analyzes the influence of "arbitrage" phenomenon under international investment law and its countermeasures."Arbitrage" not only satisfies the interests of investors,but also bring negative effects such as increasing the risk of being sued and higher litigation cost of the host state,violating the reciprocity principle of investment treaty and deepening the legitimacy crisis of the arbitral tribunal.This chapter bases on the multilateralism direction and investment treaty reformation direction,studies the main countermeasures towards "arbitrage" around the world,and analyzes the feasibility of each means at the present stage.Chapter four evaluates the possibility of "arbitrage" under Chinese IIAs and puts forward regulating suggestions.Taking 2008 as the boundary,this chapter divides the IIAs signed by China into the old/new generation,and demonstrates an empirical analysis on the relevant clauses.The "old generation"IIAs do not contain provisions specifically target at "arbitrage",but this dose not inevitable accompanied a higher risk of being "arbitraged",the seat principle and the cautious attitude towards ISDS in some treaties act as a buffer.The "new generation" IIAs contain more targeted regulations on"arbitrage",and devote to maintain the balance between regulating "arbitrage"and expanding the scope of investment protection.According to different circumstances,China should adopt different ways to deal with "arbitrage",such as announcing joint interpretation,reforming investment treaty text and applying the principle of good faith.