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Bilateral investment treaties: an empirical analysis of the practices of Brazil and China

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Abstract

Bilateral investment treaties (BITs) have proliferated, particularly in the last two decades. Among the large emerging markets, Brazil and China are the largest emerging countries in South America and Asia, respectively. Foreign investors have mostly perceived these two countries as the sought-after places with great potentialities and attractiveness. However, Brazil and China have adopted completely different strategies regarding BITs. The objective of this paper is to make an empirical and comparative study of the experiences of Brazil and China by answering the following questions: Why did the two large emerging economies adopt such different positions concerning BITs? Does the hostile approach or the proactive approach depend exclusively on economic and political factors? What are the advantages and disadvantages of the BITs? Do the practices of Brazil and China reflect the problems or the positive impacts of the existing BITs?

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Notes

  1. Dolzer and Schreuer (2008), p. 2 and UNCTAD (2008), p. 14.

  2. Peterson (2004).

  3. According to UNCTAD’s statistics, there were more than 70 BITs concluded respectively in 2005 and 2006, but in 2007, there were 65 BITs concluded and in 2008 the number went down to 59. During the first 6 months of 2009, there were only 25 new BITs. Vide Recent Developments in International Investment Agreements (2008-June 2009), UNCTAD (2009).

  4. For example, the Republic of Bolivia, the Republic of Ecuador, and the Bolivar Republic of Venezuela.

  5. UNCTAD (2008), p. 43.

  6. UNCTAD (2006a), p. 10.

  7. Some new BITs do not adopt a very extensive definition of “investment” but choose to define the term in economic conditions, with the characteristics of an investment, excluding explicitly various types of capital that do not belong to the category of investments, provided by the agreements.

  8. Namely, in some agreements signed by Canada and the United States of America, the meaning of the minimum standard of treatment in accordance with International Law and the concept of indirect expropriation are clarified. Some contracting parties attach directives and criteria to determine if in a specific situation, the act of indirect expropriation really happens.

  9. In this sense, the promotion of foreign investments cannot be achieved at the cost of public health, security, environment, and non-observance of internationally recognized labor rights.

  10. In arbitration procedures, we can find more transparency, namely, open trials, the publicity of legal documents, and the possibility for representatives of civil society to submit reports of “amicus curiae” to arbitral tribunals.

  11. UNCTAD (2005).

  12. World Development Indicators Databases, World Bank, 10 September, 2008.

  13. UNCTAD (2008), p. 55.

  14. Speech of the Secretary of Trade and Services of Ministry of Development, Industry and Foreign Trade of Brazil, Mr. Edison (2008).

  15. Ibidem.

  16. Speech delivered by the Deputy General-Director of the Department of Foreign Investment Administration of the Ministry of Commerce of China, Ms. Huang (2008).

  17. Data of the Ministry of Commerce of China, available at (http://www.gxi.gov.cn/jjyx/jjyx_jjfx/jjyx_jjfx_yxzk/jjyx_jjfx_yxzk_gn/200901/t20090116_102277.htm).

  18. UNCTAD (2007), p. xvi, p. 20.

  19. UNCTAD (2008), p. 19. Vide also Nítolo (2008), available at (http://www.sescsp.net/sesc/revistas_sesc/pb/artigo.cfm?Edicao_Id=309&breadcrumb=1&Artigo_ID=4825&IDCategoria=5524&reftype=1).

  20. The BITs that were signed by Brazil and referred to the National Congress are: Portugal (9 February, 1994), Chile (22 March, 1994), United Kingdom (19 July, 1994), Switzerland (11 November, 1994), France (21 March, 1994), Germany (21 September, 1995). The following BITs were signed but not sent to the National Congress: Finland (28 March, 1995), Italy (3 April, 1995), Denmark (4 May, 1995), Venezuela (4 July, 1995), the Republic of Korea (1 September, 1995), Cuba (26 June, 1997), the Netherlands (25 November, 1998), Belgium and Luxembourg (6 January, 1999). In addition, at the regional level, the Protocol of Colonia (17 January, 1994) and the Protocol of Buenos Aires (5 August, 1994) were not ratified too.

  21. Vide STF, Carta Rogatória No. 8.279.

  22. One exception is the investment made in the scope of guaranties against non-commercial risks of MIGA (Multilateral Investment Guarantee Agency). Brazil is a contracting party of the Seoul Convention of 1985 that created MIGA (this treaty was approved by the Decree-Law No. 66, of 16 September, 1992), In Brazil, MIGA has financed nearly 40 investment projects, with an amount of US$1.8 billion. More information is available at (http://www.miga.org/regions/index_sv.cfm?stid=1531&country_id=30&hcountrycode=BR).

  23. de Carvalho (2008).

  24. Zerbini (2003).

  25. Namely, the Brazilian Commercial Code allows the partners to solve their disputes through arbitration (paragraph 3 of Article 100); in 2001, the Arbitration Council of Market (Câmara de Arbitragem do Mercado, CAM) in the Stock Market in São Paulo was created. Vide Pucci (2005), pp. 82–7.

  26. Vide, for example, the position of Labor Party of Brazil and the comments concerning the signed BITs, information available at (http://www.pt.org.br/assessor/acordeco.htm). Vide also the arguments in this sense, represented by the Federal Senator Odacir Soares (1998).

  27. Perrone-Moisés (1998), p. 28.

  28. Just like the position supported by Sornarajah (2004).

  29. Walde and Dow (2000), Peterson (2004), p. 9; UNCTAD (2003).

  30. See BIT Brazil-France, article 8.

  31. Manning-Cabrol (1994).

  32. Trindade (1984), p. 24 e the following pages. Ver também Mello (1993), p. 135.

  33. “The Law shall not exclude any injury or threat to a right from the consideration of the Judicial Power” (paragraph XXXV of Article 5 of the Brazilian Constitution).

  34. “Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State. A Contracting State with a federal constitution may enforce such an award in or through its federal courts and may provide that such courts shall treat the award as if it were a final judgment of the courts of a constituent state” (no. 1 of Article 54 of the Convention of ICSID).

  35. Pucci (2005), p. 86.

  36. Ibidem.

  37. Lima (2008), Available at ( http://www.ambito-juridico.com.br/site/index.php?n_link=revista_artigos_leitura&artigo_id=4874).

  38. More details can be found at Baldwin et al. (2006).

  39. “A Petrobras tem vários negócios na rede produtiva do setor, como o refino e o transporte de hidrocarbonetos, além da exploração do gás nas principais regiões produtoras do Brasil. Entre 1996 e 2004, a empresa garante ter investido US$ 990 milhões na Bolívia…A polémica lei criou o novo imposto de 32% sobre a produção das empresas, o que as companhias do sector acreditam que afretará o desenvolvimento do sector e prejudicará seus investimentos. A Petrobras controla 8,5 triliões de pés cúbicos das reservas de gás boliviano (17,5% do total do país, calculado em 48,7 triliões de pés cúbicos)… As companhias que pedem um acordo amigável apelaram para tratados de protecção recíproca de investimentos assinados pela Bolívia com Espanha, Reino Unido, Estados Unidos e França. A diferença no caso da Petrobras é que não existe um tratado semelhante entre Brasil e Bolívia.” For more information, vide the report “Brasil espera acordo sobre investimentos na Bolívia” in FinanceOne (2005).

  40. Vide comments on the report of the World Bank (2008).

  41. Ibidem.

  42. de Almeida (2008).

  43. For example, the Convention of ICSID does not exclude the use of the host country’s law as applicable law by the arbitral tribunal, according to Article 42 of this Convention.

  44. João Luís Rossi and Rafael de Sá Marques, “Investimento Estrangeiro Direto: Experiência Chinesa e Sugestões para o Brasil”, in Furlan and Felsberg (2005), p. 125.

  45. The sources of foreign investment law of China can be found at three levels: (1) constitutional provisions, (2) laws, administrative regulations, and ministerial norms of national level, and (3) local regulations and administrative norms at local level. With regard to the direct regulation on foreign investment enterprises, there are three basic laws as well as respective detailed regulations. The three laws are the Law on Chinese-Foreign Equity Joint Ventures, the Law on Chinese-Foreign Contractual Joint Ventures, and the Law on Foreign-Capital Enterprises.

  46. The first BIT of China was signed with Sweden in 1983.

  47. Standing Committee of the People’s National Congress (2006), Report of the Committee of Foreign Affairs.

  48. The international treaties that depend on the ratification of the Standing Committee of the People’s National Congress refer to those (1) treaties of friendship and cooperation, treaties of peace, and others with similar political nature; (2) treaties and agreements related to the national territory and the delimitation of boundaries; (3) treaties and agreements related to judicial assistance and extradition; (4) treaties and agreements that contain articles inconsistent with the law of the People’s Republic of China; (5) treaties and agreements subject to ratification, stipulated by the contracting parties; and (6) other treaties and agreements subject to ratification. Recently, various proposals have been presented by the deputies about the revision of Law on Procedure of Conclusion of International Treaties, in which the deputies point out the ambiguity of functions of the Standing Committee’s People’s National Congress and the State Council to ratify international treaties. Vide, for instance, the proposal of the Delegation of Hainan Province in the plenary session of the People’s National Congress in 2008, available at (http://www.hainan.gov.cn/data/news/2008/03/47925/).

  49. For instance, Article 142 of General Principles of the Civil Law, Article 238 of the Civil Procedure Law, and Article 72 of Administrative Procedure Law.

  50. For instance, the application of the Convention of Vienna on the Representation of States in their Relations with International Organizations of a Universal Character, the Convention of Vienna on Consular Relations, and the Berne Convention and other signed BITs with other countries, by China.

  51. Chen and Cai (2007), p. 387. Vide also Zeng (2008), (http://fdi.gov.cn/pub/FDI/98qth/ltyyth/20080909/2008090901/01/t20080909_97005.htm).

  52. Calculated on the basis of the data of the Ministry of Commerce of China (2008).

  53. Vide BIT China-United Kingdom. Consult also the comments made by Berger (2008). Vide infra for details.

  54. UNCTAD (2008), p. 15.

  55. UNCTAD (2006b), p. 3.

  56. Gu (2005), p. 12.

  57. The position of the Ministry of Commerce of China can be found at (http://finance.people.com.cn/GB/1037/4035230.html).

  58. 2007 Statistics Bulletin of China’s Outward Foreign Direct Investment, available at (http://cn.chinagate.cn/reports/2009-03/09/content_17410755.htm); vide also the interview of the Minister of Commerce of China, Mr. Chen Deming, about the role of promoting China’s development through the domestic and international markets, (http://news.sohu.com/20090908/n266545223.shtml).

  59. The Protocol attached to the BIT China-Germany, Article 1.

  60. BIT China-Portugal, Article 1.

  61. For instance, in the BIT China-Singapore (1985), Article 4 provides treatment of the most favored nation.

  62. For instance, in the Protocol of the BIT China-Japan, No. 3 provides: “For the purpose of the provisions of paragraph 2 of Article 3 of the Agreement, it shall not be deemed “treatment less favorable” for either Contracting Party to accord discriminatory treatment, in accordance with its applicable laws and regulations, to nationals and companies of the other Contracting Party, in case it is really necessary for the reason of public order, national security or sound development of national economy.”.

  63. Vide the BITs China-Portugal, China-the Netherlands, China-Germany, China-Finland.

  64. For example, the Protocols of the above-mentioned BITs.

  65. For example, vide the old BIT China-Portugal signed on 3 February, 1992, article 4 (1).

  66. Vide BIT China-Finland, Article 4 and BIT China-Portugal, Article 4.

  67. Vide BIT China-India, article 5 and Chen and Cai (2007), pp. 150 and the following.

  68. Vide Article 3 of the Protocol of BIT China-India.

  69. “Any Contracting State may, at the time of ratification, acceptance or approval of this Convention or at any time thereafter, notify the Centre of the class or classes of disputes which it would or would not consider submitting to the jurisdiction of the Centre. The Secretary-General shall forthwith transmit such notification to all Contracting States. Such notification shall not constitute the consent required by paragraph (1).”.

  70. For instance, BIT China-Iceland, Article 9 (3).

  71. BIT China-Trinidad, Article 10 (2b).

  72. BIT China-Peru, Article 8 (3), BIT China-Germany (Protocol, Article 6).

  73. For example, BIT China-Argentina, Article 8.

  74. Namely, the provisions of the Washington Convention, Articles 25 (1), 26, and 42 (1). Vide Chen (2006) and Chen (2007).

  75. Chen and Cai (2007), p. 384.

  76. Chen (2006, 2007).

  77. Vide, for example, Furtado (1989).

  78. For example, the BITs of Brazil with Denmark, Finland, and the Netherlands.

  79. It is worth mentioning the proposals of revision for the Constitution that aim to establish a mechanism of previous approval by the legislative for negotiations of international agreements in Brazil, according to the model of Trade Promotion Authority of the United States of America. Vide also the comments of de Faria (2008).

  80. Aldo and Paulino (2009), p. 112.

  81. For example, for Chinese investors, the Brazilian legal system of tax revenue is very complicated and is changed frequently; the acquisition of real estate is very difficult; and obtaining of environmental approval is complex. Vide a report available at (http://www.coolloud.org.tw/node/17713).

  82. Kirkpatrick et al. (2006).

  83. In certain cases, the individual can become an autonomous subject of the International Law (e.g., in International Humanitarian Law and in the area of international protection of human rights). Because most international norms comprise situations pertaining to individuals, in other words, the effects impinge on the juridical sphere of the individual. In the same way, with the depoliticization and jurisdictionalization of international trade, in the area of international investments, individuals and companies have recourse to international arbitration.

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    Dan Wei

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Wei, D. Bilateral investment treaties: an empirical analysis of the practices of Brazil and China. Eur J Law Econ 33, 663–690 (2012). https://doi.org/10.1007/s10657-010-9157-z

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