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Investment Treaty Practice of China, Japan and Korea Arbitration Academy 2012: Class 1 (July2, 2012) Professor Hi-Taek Shin Seoul National University School.

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Presentation on theme: "Investment Treaty Practice of China, Japan and Korea Arbitration Academy 2012: Class 1 (July2, 2012) Professor Hi-Taek Shin Seoul National University School."— Presentation transcript:

1 Investment Treaty Practice of China, Japan and Korea Arbitration Academy 2012: Class 1 (July2, 2012) Professor Hi-Taek Shin Seoul National University School of Law [work in progress: not to be quoted without permission]

2 Notes The powerpoint files are provided to students of Arbitration Academy As these files are work under progress, no quotation is permitted without the author’s written permission. In preparing the lecture, the author draws upon the expertise and previous studies by G. Wang, W. Shan and N. Gallagher (on Chinese practice), and S. Hamamoto and L. Nottage (on Japanese practice). However, all mistakes, if any, are the author’s own. The author recommends that students review the most recent data contained in World Investment Report 2012 released on July 5, 2012

3 China, Japan and Korea in the World Economy

4 GDP: 7,298 billions(USD) Population: 1348millions Beijing Seoul Tokyo GDP: 1,116 billions(USD) Population: 50 millions GDP: 5,869 billions(USD) Population: 127 millions Source: IMF Base year: 2011

5 List of countries by GDP(Current, USD) 1United States15,094 billions 2China7,298 billions 3Japan5,869 billions 4Germany3,577 billions 5France2,776 billions 6Brazil2,492 billions 7United Kingdom2,417 billions 8Italy2,198 billions 9Russia1,850 billions 10Canada1,736 billions 11India1,676 billions 12Australia1,488 billions 13Spain1,850 billions 14Mexico1,154 billions 15Korea1,116 billions Source: IMF Base year: 2011

6 FDI Inflows into China, Japan, Korea and other major countries (USD millions) inflowsrankinginflowsrankinginflowsrankinginflowsranking United States215, , , ,2491 China83, ,312395, ,7352 China, Hong Kong54, ,621852,394468,9043 United Kingdom196,390291,489471,140345,9087 Russian Federatio n 55, ,002636,500741,1948 Korea2,628668,409407,501356,87332 Japan22, , , , World1,970,9401,744,1011,185,0301,243,671 Source: UNCTAD

7 FDI Outflows from China, Japan, Korea and other major countries (USD millions) outflowsrankingoutflowsrankingoutflowsrankingoutflowsranking United States393, , , ,9051 Germany170,618377,142778, ,8572 France164, , ,949284,1123 China22, , ,530668,0005 Japan73, ,019574,699456,2637 Korea19, , , ,23018 United Kingdom272, ,056344,381711,02027 World2,174,8031,910,5091,170,5271,323,337 Source: UNCTAD

8 Number of BITs Source: UNCTAD, MOFAT, METI, MOFCOM

9 China, Japan and Korea in Global Network of International Investment Agreements BITsFTAs with Investment Chapter Entered into force Signed / not entered into force Entered into force Signed / not entered into force China Japan Korea86680 Source: UNCTAD, MOFAT, METI, MOFCOM

10 Recent FDI Flows and Stocks of China (USD millions) Source: UNCTAD

11 China: from Capital-importer to both Capital-importer and Capital-exporter China - the second largest economy in the world - the second largest recipient of foreign investment - the fifth in terms of outward direct investment ‣ the current Chinese investment policy-orientation is to promote both capital imports and capital e xports.

12 In the late 1970s: China first adopted the ‘open-door’ policy Attracting foreign direct investment (‘FDI’): one of the top policy priorities in the open-door policy. –Legislated special foreign investment laws to promote and control inflow of FDI into China. –The first BIT: with Sweden in The counter-parties of earlier BITs included Western capital- exporting States (U.K., Italy) and Japan The investment policy orientation of Chinese BITs: promote inward foreign investment Very cautious in offering the level of protections to foreign investors: –No national treatment commitment –Only disputes concerning the amount of compensation for expropriation allowed for investor State arbitration.

13 In 1998: a ‘Going Abroad’ strategy focusing on investing abroad A more liberal BIT regime since 1998, after China adopted a ‘going abroad’ policy. Reflecting China’s increasing overseas investment, the new BIT policy is set for the promotion and protection of both inward and outward investments. Chinese Model BIT –First Model BIT used in 1980s –Second Version adopted in early 1990s –Current Version implemented since late 1990s New generation of China’s BIT offers –enhanced protection standard on expropriation and national treatment –All investor-State disputes to be referred to arbitration

14 China’s FTAs with Investment chapter Partnerinvestment chapterDate of signatureDate of entry into force 1ASEAN investment as part of Agreeme nt on Investment of the Frame work Agreement on Comprehe nsive Economic Cooperation Between the PRC and ASEAN ( signed th e Agreement on Investment) Chileno investment chapter New Zealandch Singaporech Pakistanch Peruch Costa Ricach Source: MOFCOM

15 Recent FDI Flows and Stocks of Japan (USD millions) Source: UNCTAD

16 Japan: Traditional Capital-exporter Japan - a member of the G8, and the third largest economy in the world - the seventh in terms of outward FDI - ranked 207 th in the world for inward FDI ‣ Japan’s investment policy reflected its position as a capital-exporter

17 Japan starts to pursue protection of investment as a capital-exporter after 2002 Prior to 2002, rather passive in concluding BITs: –Between 1977 (Egypt) and 2001 (Mongolia), only nine BITs. No model BIT In 2002, policy shift in international investment treaty practice –concluded its first FTA (with Singapore, including an investment chapter) and the pro-investor BIT containing liberalization commitment (with Korea). –Since 2002, seven ‘new-generation’ BITs and thirteen FTAs with investment chapters. –Japanese BITs seek market liberalization in addition to protection of investment

18 Japan’s FTAs with Investment chapter Partnerinvestment chapterDate of signatureDate of entry into force 1Singaporech Mexicoch Malaysiach Philippinesch Chilech Thailandch Bruneich Indonesiach ASEANch Viet Namch Switzerlandch Indiach PeruArt 2.3 refers to Japan-Peru BIT Source: METI

19 Recent FDI Flows and Stocks of Korea (USD millions) Source: UNCTAD

20 Korea: converted to a net capital- exporter, but selectively maintains a capital-importer perspective Korea - a capital-exporting country, seeking more investment opp ortunities and greater protection overseas - a capital-importing country when negotiating with states suc h as Japan, the United States, and the EU, which are major so urces of FDI into Korea ‣ This dual policy recognizes both the potential benefits of IIA s in promoting and protecting Korean companies’ overse as investment and in creating a favourable investment climate attractive to foreign investors in Korea.

21 Until the mid-1990s: a net capital-importing country From 1964 to early 1980s: BITs with major European capital-exporting countries. –BITs largely conformed with the standard models of the respective European counterparty in an effort to promote private investment Since late 1970s, Korea started concluding BITs with other developing countries (since late 1980s with transition economies).

22 After mid-1990s: a net capital exporter From the 1990s, Korea’s BIT counterparties: diverse countries in different stages of economic development. Model BIT developed in 2001 Since 2003, Korea started conclusion of FTAs (first with Chile) which include comprehensive investment chapters. Korea has FTAs with the U.S.A. and EU. FTA negotiation with China has officially started. Talks on tri-party FTA among China, Japan and Korea

23 Korea’s FTAs with Investment chapter Partnerinvestment chapterDate of signatureDate of entry into force 1Chilech Singaporech EFTAArt ASEAN Agreement on Investment under the Framework Agreement on Comprehensive Economic Cooperation among the Governments of the Republic of Korea and the Member Countries of the Association of Southeast Asian Nations Indiach EUno investment chapter (provisionally applied) 7Peruch United Statesch Source: MOFAT

24 Tri-lateral Investment Agreement BITs in place by and between China, Japan and Korea: –China-Japan (1988) –China-Korea (1992, 2007) –Japan-Korea (2002) Tri-lateral Investment Agreement by and among China, Japan and Korea signed on May 13, 2012 – in the process of domestic ratification process of each state.

25 China, Japan and Korea: Common FTA Partner Countries (1) Singapore(2) Peru investment chapterDate of signatureDate of entry into force China-Singaporech Japan-Singaporech Korea-Singaporech investment chapterDate of signatureDate of entry into force China-Peruch Japan-Peru Art 2.3 refers to Japan-Peru BIT Korea-Peruch

26 Objective (1) Encouragement (policy preference) Protection China- Japan (1988) Liberalization (legally binding commitment) Protection Japan-Kor ea (2002) Promotion (policy preference) protection Korea-Chi na (2007) BIT

27 Objective (2) Promotion (policy preference) (Art. 128) Protection China-Peru (2009) Liberalization (legally binding commitments) Protection Japan-Peru (2011) Liberalization (legally binding commitment) Protection Korea-Peru (2011) FTA Investment Chapter Promotion Protection China-Singapore (2008) Liberalization (legally binding commitments) Protection Japan-Singapore (2002) Liberalization (legally binding commitments) Protection Korea-Singapore (2005) FTA Investment Chapter


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