Investing in the United States

Investing in the United States

Is the US Ready for FDI from China?

Studies in International Investment series

Edited by Karl P. Sauvant

This essential book analyzes the regulatory and operational challenges that foreign direct investors face in the United States, as well as the ways in which these challenges can be overcome.

Chapter 6: International Investment Law Protections for Chinese Investment into the US

Mark Kantor

Subjects: business and management, international business


Mark Kantor* INTRODUCTION Under US bilateral investment treaties (BITs) and the investment chapters of US free trade agreements (FTAs; collectively, “US international investment agreements” or US IIAs), the investors and investments covered by those agreements are normally entitled to a number of important substantive protections, among them: (1) compensation at fair market value for expropriation; (2) treatment in accordance with minimum international standards (including “fair and equitable treatment,” “full protection and security” and a prohibition on “denial of justice”); (3) national treatment; (4) most-favored-nation treatment; (5) protection against trade-related investment measures like “local content” requirements; (6) free transferability and convertibility of funds transfers related to investments into and out of the US; and (7) the right to select senior management for the US investment. Investors may enforce their claims directly by means of a claim for damages in investor–state arbitration. Today, China and the United States are not mutual parties to any bilateral or multilateral international investment agreements. However, the protections afforded by US IIAs may still be available to Chinese enterprises investing in the US if the Chinese enterprise invests through an intermediate operating company having the nationality of a third country, so long as that third country is a party to such an international instrument with the US. That process is often called “treaty-shopping.” Moreover, following 17 months of exploratory talks between the two countries, China and the US began negotiation of a BIT in the context of the regular trade discussions held between the two countries...

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