China’s and India’s Differing Investment Treaty and Dispute Settlement Experiences and Implications for Africa

Loyola University Chicago Law Journal Volume 49 Issue 2 Winter 2017 Article 8 2017 China’s and India’s Differing Investment Treaty and Dispute Settlement Experiences and Implications for Africa Won Kidane Follow this and additional works at: https://lawecommons.luc.edu/luclj Part of the Law Commons Recommended Citation Won Kidane, China’s and India’s Differing Investment Treaty and Dispute Settlement Experiences and Implications for Africa, 49 Loy. U. Chi. L. J. 405 (). Available at: https://lawecommons.luc.edu/luclj/vol49/iss2/8 This Article is brought to you for free and open access by LAW eCommons. It has been accepted for inclusion in Loyola University Chicago Law Journal by an authorized editor of LAW eCommons. For more information, please contact . China’s and India’s Differing Investment Treaty and Dispute Settlement Experiences and Implications for Africa Won Kidane* This Article examines China’s and India’s differing investment treaty and dispute settlement experiences and the resulting implications for Africa. It attempts to answer the question of whether there is evidence of China’s and India’s attempt to take advantage of the default structural imbalance enabled by centuries of international investment laws and institutions that favor the investor. The Article begins by presenting the background of the current economic reality and trends that necessitate the evaluation of the existing rules and institutions. It then presents a detailed assessment of this phenomenon by focusing on the investment cases brought against India for context, followed by a critical appraisal of India’s reaction to the perceived deficiencies of the existing system as evidenced by its new BIT Model Text and the text’s implications for Africa. Next, the Article evaluates the most important body of evidence that comes in the form of bilateral investment treaties, i.e., China’s and India’s investment treaties with African states. Finally, it offers a summary of conclusions. INTRODUCTION ............................................................................. 406 I. CHINA, INDIA, AND AFRICA: THE POLITICAL RHETORIC, THE ECONOMIC REALITY, AND THE LEGAL INFRASTRUCTURE ...... 410 A. Political Rhetoric ......................................................... 412 B. Economic Reality ......................................................... 413 i. China’s Contemporary Economic Relations with Africa .................................................................... 413 ii. Indian Investment in Africa .................................. 416 C. Legal Infrastructure ..................................................... 417 D. Conclusion ................................................................... 422 II. CHINA'S AND INDIA’S INVESTMENT TREATY EXPERIENCE WITH * Won Kidane is a Fulbright Scholar and a tenured Associate Professor of Law at the Seattle University School of Law. He teaches and writes in the areas of international arbitration and litigation, international and comparative law, and international investment law. 405 406 Loyola University Chicago Law Journal [Vol. 49 DEVELOPED NATIONS OF THE NORTH .................................... 423 A. China and the North .................................................... 423 B. India and the North ...................................................... 426 C. China’s Precautions and India’s Disappointments ..... 426 D. India as a Respondent State ........................................ 428 i. Decided Cases ........................................................ 429 ii. Settled and Pending Cases .................................... 434 E. Conclusion ................................................................... 444 III. THE NEW INDIAN BIT MODEL TEXT AND ITS IMPLICATIONS FOR AFRICA.................................................................................. 445 A. Evolution of the Draft and the Final Model Text: A Comparative Look ...................................................... 445 B. Fundamental Assumptions ........................................... 446 C. Substantive Rules ......................................................... 447 i. Meaning of Investment........................................... 447 ii. Treatment of Investment ....................................... 449 iii. Expropriation and Compensation......................... 451 D. Investor and Home State Obligations.......................... 455 E. Investor-State Dispute Settlement ("ISDS") ................. 457 F. Conclusion ................................................................... 461 IV. CHINA'S AND INDIA’S BIT APPROACHES TOWARD AFRICA .... 463 A. Substantive Protections................................................ 464 i. Investment Protection ............................................. 464 ii. Expropriation and Compensation .......................... 468 B. Dispute Settlement ....................................................... 470 C. Conclusion ................................................................... 473 V. SUMMARY OF CONCLUSIONS ................................................... 474 INTRODUCTION The story of mankind over the last 500 years, as historian Philip Snow aptly describes, “has been in very large measure the story of the response of Asia and Africa to the alien culture of Europe and, lately, the United States.”1 In the middle of the last decade, progressing this narrative further, Martin Wolf of the Financial Times characterized the economic rise of China and India as “the most important story of our age. It heralds the end, in the not too distant future, of as much as five centuries of 1. PHILIP SNOW, THE STAR RAFT, CHINA’S ENCOUNTER WITH AFRICA xiii (Cornell Univ. Press, 1988). 2017] China’s and India’s Differing Experiences 407 domination by the Europeans and their colonial offshoots.” 2 Other scholars have suggested that “[t]he WTO [World Trade Organization] deadlock demonstrates that the conventional wisdom is changing, namely that the powerful developed countries, leaving aside the differences among themselves, can no longer easily impose their common will upon developing countries.”3 As the centuries’ old economic and power hierarchy gradually showed notable variability and the flow of investment increasingly defied traditional patterns, it raised the question of whether such variability and change set in motion a shift in the normative milieus. The economic shift is empirically demonstrable,4 but the shift in the ground rules and the implications for contemporary world economic order requires a systematic investigation.5 Among other matters, this scrutiny must answer the question of 2. Muthucumarswamy Sornarajah & Jiangy Wang, Introduction and Overview, in CHINA, INDIA AND THE INTERNATIONAL ECONOMIC ORDER 1 (Muthucumarswamy Sornarajah & Jiangy Wang eds., 2010) (citing Martin Wolf, Asia’s Giants Take Different Routes, FIN. TIMES (Feb. 23, 2005), https://www.ft.com/content/1caa807a-8510-1 (...truncated)