Indirect Shareholder Claims In International Investment Arbitration In The Light Of ICSID Arbitration Practice

The concept of "indirect shareholder claims" is not inherent in international law,but has been derived and developed from the practice of international investment arbitration.Domestic legal systems and bilateral investment treaties deal with shareholder claims for damages in different ways.In general,domestic legal systems restrict or prohibit shareholders from bringing indirect claims.The rationale behind such restrictions is that "the right to claim is vested in the company itself and not in its shareholders".In contrast,in recent years,the right of shareholders to bring indirect claims under BITs has been widely accepted.This is because arbitral tribunals have held that BITs are essentially contracts between states,which are an outward expression of the consent of the parties,and that since the host state has promised special protection to foreign investors in the investment treaty,the tribunal has a duty to uphold the autonomy of the parties.Some scholars have been critical of such decisions by arbitral tribunals,arguing that the tribunal’s conclusion in favour of indirect claims by shareholders conflicts with the principle of non-actionability of indirect losses under national company law and may prejudice the legitimate interests of other shareholders of the company,the company’s creditors and the company,and that the shareholders applying for arbitration may obtain double compensation.Working Group III of the United Nations Commission on International Trade Law(UNCITRAL)has also held successive meetings and explored feasible solutions on the issue of limiting shareholders’ rights to indirect claims in the investor-State dispute settlement system.The author believes that China has transformed from simply importing foreign investment to develop its own economy to one that places equal emphasis on importing and going global.In the field of international investment,China’s persistent denial of shareholders’ indirect claims will not be conducive to protecting the overseas investments of a large number of Chinese investors.China can adopt the principle of "indirect losses are not actionable",but exceptionally recognize the existence of indirect claims of shareholders.On this basis,China should amend and improve the content of investment treaties,strengthen the sharing of relevant litigation resources between national and international investment arbitration institutions,formulate and improve relevant domestic laws and regulations,and encourage companies to deal with this issue autonomously and consensually.