Why Are There So Few Investor-State Arbitrations in China? A Comparison with Other East Asian Economies

Abstract

It is not easy to detect East Asia's presence in the field of investor-state dispute settlement (ISDS), despite its large economy. In addition to having less active foreign direct investment (FDI) relative to GDP and fewer investment treaties, East Asian economies and societies seem to possess certain characteristics that have contributed collectively to the dearth of ISDS cases in East Asia. Examples are the short history of international arbitration, the avoidance of litigation, the high proportion of state-owned enterprises in outward FDI from China, and the concentration of FDI in industries in which investor-state disputes are less likely to occur. This trend, however, is likely to change gradually with the ongoing socioeconomic changes in the region, including the increase in both outward and inward FDI, the increasing number of investment treaties, the growing familiarity with international (investment) arbitration among legal experts, the diversification of FDI, and the decreasing fear of administrative litigation.