Thursday, September 22, 2011

To arbitrate or not? China and Taipei are deciding

China and Taipei have been negotiating a bilateral investment treaty. Some of the major points of differences between the parties has been highlighted here.

The report states that China is vehemently opposed to the inclusion of a binding investor-State arbitration mechanism in the treaty. It suggests the alternative of mediation, which Taipei is not ready to accept. The report suggests that the reason for China's opposition to an investor-State arbitration with Taipei investors in the fear of "internationalization of cross-strait issues since it has long deemed Taiwan as part of China's territory".

I fail to comprehend how allowing investor-State arbitration will compromise China's claims of sovereignty over Taipei any more than the very entering into a treaty with Taipei and conferring substantive rights on Taipei investors does. A treaty, under Article 2 of the Vienna Convention on the Law of Treaties is, "an international agreement concluded between States in written form and governed by international law, whether embodied in a single instrument or in two or more related instruments and whatever its particular designation" [Though there are other categories of treaties involving international organizations, etc. this is the only definition that is relevant to an agreement between two geographic entities]. By entering into a treaty with Taipei, China concedes that Taipei is a State or at the very least a an independent subject of international law. Of course, China may try to word the "treaty" to say that it is without prejudice to its claims of sovereignty. It may even go a step further and state that the instrument in question is not a treaty at all.

In any case, the point remains that if there is a threat to China's claims it arises from the very act of concluding the instrument and not from including an arbitration mechanism within that instrument.

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