I. Customary usage of the terms “BRI disputes” and “BRI jurisprudence”
It is not the purpose of this article to consider (again) the history and developmentFootnote 1 of China's Belt and Road Initiative (BRI) nor to comprehensively describe the strengths and weaknesses (particularly conceptually) of the BRI.Footnote 2 Instead, this article focuses on understanding and deciphering the term “BRI disputes”. In Part I, I begin this process by describing the significant customary usage of the term. For instance, the term “BRI disputes” is already accepted and promoted by many prominent legal organizations – for example, the International Chamber of Commerce and the Hong Kong International Arbitration Centre – and there are also many law firms which do not hesitate to speak about “BRI disputes”; for example, Clifford Chance, Norton Rose Fulbright, etc.Footnote 3 Furthermore, academic papersFootnote 4 and newspapers frequently reference “BRI Disputes”.Footnote 5 Therefore, it is clear that the term “BRI disputes” has become part of the common legal parlance of professionals working in related fields.
Other examples include eBRAM (Electronic Business Related Arbitration and Mediation), an online dispute resolution tool established in 2017 to (amongst others) settle disputes in major BRI infrastructure projects)Footnote 6 and the Singapore International Arbitration Centre, which has been actively promoting itself as an appropriate body to resolve BRI-related disputes by, for example, regularly holding seminars dedicated to the BRI and partnering with relevant organizations in pursuit of improving its BRI-specific services (such as the Joint Seminar and Memorandum of Association with the China International Economic and Trade Arbitration Commission, entitled “Effective Resolution of BRI Disputes”).Footnote 7
Examples from mainland China and internationally include the Wuhan Arbitration Commission, the “One Belt One Road Arbitration Court”,Footnote 8 the “One Belt One Road Arbitration Initiative” (a collaboration between the Kuala Lumpur Regional Centre for Arbitration, the Cairo Regional Centre for International Commercial Arbitration, and the Beijing Arbitration Commission), and the establishment of a Belt and Road subcommittee by the International Bar Association.Footnote 9
The term “BRI jurisprudence”, the philosophy of law applied within the BRI, has also recently emerged.Footnote 10 Although the term “BRI jurisprudence” is contested, an argument can be made that the term is developing.Footnote 11 The idea of developing “BRI jurisprudence” is the anticipation that, over time, a critical mass of BRI-related discussion and practices (from a legal point of view), BRI-related tribunal decisions, and/or BRI-related dispute settlement procedures will develop.
However, it is understandable that there has been an absence of established dispute settlement practices in the ten or so years since the BRI was first officially announced in 2013 for two principal reasons. First, as Chiann Bao explains, “BRI disputes have only recently begun to surface in the last few years (which is consistent with the expected three-to-five-year gestation period of disputes for complex infrastructure projects)”.Footnote 12
Second, the nature of BRI-related dispute cases means that very few have become public, and these have not been the subject of adjudication in any tribunal. These factors also explain why we cannot (yet) see a system of BRI precedents.Footnote 13 Therefore, it is likely that “BRI jurisprudence” will start to become more noticeable over time. Additionally, a system of BRI precedents might yet emerge.Footnote 14
Additionally, Chinese judicial practice has facilitated the identification of the terms “BRI disputes” and “BRI jurisprudence” in the following ways. First, the Supreme People's Court (SPC) has issued two opinions relating to the BRI (in July 2015 and December 2019).Footnote 15 Second, China established the China International Commercial Court (CICC) as part of a trilogy of measures to assist BRI dispute settlement.Footnote 16 The other two measures involved establishing an international commercial experts committee and a convenient, efficient, and low-cost “one-stop” dispute resolution centre to effectively integrate diversified mechanisms, including litigation, mediation, and arbitration.Footnote 17 These two approaches represent a subtle shift by the Chinese judiciary towards “internationalizing” its domestic court system and recognizing that “BRI disputes” require different treatment than regular disputes. Footnote 18
Further, courts in China have also “claimed to have handed numerous ‘Belt and Road cases’”, although the SPC has only published twenty-four model cases (which include both “typical cases” and “guiding cases”).Footnote 19 Unfortunately, these model cases do not significantly add to the analysis since, as Jiangyu Wang states, “[l]eaving aside the label of ‘Belt and Road’, these cases are not more than ordinary civil and commercial cases involving cross-border legal relations”.Footnote 20
Outside of China, it could be contended that the term “BRI disputes” might find its way into the formation of customary international law.Footnote 21 Although this idea might seem rather unlikely, it is widely accepted that customary international law (along with treaty law) is one of the two primary sources of international legal obligations.Footnote 22 It has also been stated that:
Every once in a while, custom has a tendency to leap to the fore even within special fields of international law where it seemed to have ceded primacy to treaties long ago, thereby reminding the international legal profession that it is not just barely alive but is still pulsating with some intensity.Footnote 23
Moreover, any counterargument stating that “BRI disputes” do not possess any elements of customary international law is thus invalid since not enough time has yet elapsed for the crystallization required to become part of customary international law.Footnote 24
II. Approach of legal scholars to the term “BRI disputes”
There is a growing movement among legal scholars to talk about “BRI disputes” and types of “BRI disputes”; for example, Ernst-Ulrich Petersmann identifies at least seven different categories of “BRI disputes”.Footnote 25 Therefore, the term is arguably already used in a somewhat narrower way by some scholars, some of whom also try to define the terms, such as Bernardo Cartoni. Cartoni states that “BRI disputes” are “any dispute arising of a contract related to BRI project (for instance, the construction of a highway or the renovation of a port) and any dispute arising of an investment made under the ‘umbrella’ of BRI”.Footnote 26
Others, such as Stephen Ngo (to whom Cartoni also refers), instead suggest some of the unique characteristics of “BRI disputes”:
As BRI's activities will be considerably broad, involving investment, financing arrangements, co-funding, insurance of projects to civil engineering work, acquisition of land, [and] construction or engineering design. Arguably, [these] will be considered “hot spots” where disputes can arise fundamentally because such mega projects are not without [their] challenges, and they come with risks.Footnote 27
Others who have addressed the unique characteristics of “BRI disputes” include Chiann Bao and Elizabeth Chan, who state, “BRI disputes possess certain unique features that impact both the potential for and timing of disputes and how such disputes are likely to be heard and resolved”.Footnote 28
The features that Bao and Chan list are as follows: first, the host country's instability; second, financing by Chinese financial institutions according to terms and conditions that other financial institutions might not accept; third, construction projects have unusually vast exposure to an extremely large spectrum of risks; and, fourth, Chinese financing is assumed to be driven by geopolitical interests rather than commercial logic.Footnote 29 Additionally, Andrii Zharikov focuses on the fact that “trade finance disputes are inevitable in the BRI” since “BRI projects [are] predominantly in trade, finance, and infrastructure”.Footnote 30
Alternatively, Priyanka Kher and Trang Tran suggest the most significant characteristic is “lack of transparency”. In their analysis for the World Bank on investment protection in the BRI, they stated, “one standout finding is the consistently low score on transparency”.Footnote 31 Furthermore, Kher and Tran focus on the wide variety in investor protection levels when defining “BRI disputes”, stating that “[d]isputes in BRI will involve a diverse set of country laws and regulations, different legal traditions (civil or common law), and multiple court systems of varying levels of effectiveness and capacities”.Footnote 32
Additionally, many other scholars reference a unique category of “BRI disputes” and have developed the classical separation of “BRI disputes” into state-to-state disputes, state-investor disputes, and investor-investor disputes.Footnote 33 For instance, Jiangyu Wang presents a “typology of disputes in the BRI” and suggests that these three types can be elaborated upon (state-to-state disputes arising from China-invested BRI projects, transactional disputes, and international trade and investment disputes in the BRI area).Footnote 34
Similarly, in the context of the characterization of “BRI disputes”, Ping Xiong and Roman Tomasic also develop this classical model for the separation of “BRI disputes” and focus on “the question of how best to resolve disputes arising from BRI trade and investment, and the frictions that arise during the governance of the PRC SOEs in BRI countries”.Footnote 35 Xiong and Tomasic also state that these characteristics have “now become widely recognized in the academic literature”.Footnote 36
Further, by developing (and expanding) this classical model for the separation of “BRI disputes” (that is, separation into state-to-state disputes, state-investor disputes, and investor-investor disputes), legal scholars have presented a narrower approach to the term “BRI disputes”. For instance, and as already mentioned, Petersmann uses the term “BRI disputes” several times and explicitly declares that “[a]t least 7 different kinds of BRI disputes should be distinguished”.Footnote 37 These seven types are Trade Disputes and World Trade Organization (WTO) disputes, investment disputes, financial disputes, intellectual property disputes, commercial disputes, maritime disputes, and energy trade and investment disputes.
However, this separation (state-to-state disputes, state-investor disputes, and investor-investor disputes) appears to miss two important points. First, where a state-owned enterprise (SOE) is the investor, is the enterprise still an investor, or is it the state? Second, are domestic “BRI disputes” fully captured? This is what Susan Finder calls “invisible BRI disputes”. Finder (who is a member of the CICC Panel of Experts) identified this concept of “invisible BRI disputes”, which are “disputes between two or more Chinese parties but linked with a BRI project”, so-called because “In academic and many professional discussions of Belt & Road Initiative (BRI) disputes, the focus is on disputes between the Chinese and foreign parties.”Footnote 38
However, whether or not the delineation of “BRI disputes” is broad or narrow does not affect their uniqueness. Indeed, identifying “BRI disputes” as unique is necessary to justify that “BRI disputes” should have their own label and be treated in a bespoke way. This idea has already been raised partly by China's apparent wish to limit the use of its BRI brand. Indeed, China began drafting rules for projects to be considered BRI projects in 2019 to prevent companies from misusing the BRI label. Specifically, the National Development and Reform Commission was reported to have been working on identifying a list of legitimate BRI projects officially endorsed by the Chinese government so as to prevent confusion about the BRI's scope and limit damage to the BRI's reputation and, at the same time, improve the regulation of BRI projects.Footnote 39 The idea of a “BRI label” is discussed further in Part V.
Nevertheless, the argument of whether “BRI disputes” are unique largely occurs outside of China. For instance, Alyssa Wall states that there is a clear “understanding within China that BRI development leads naturally to conflict, and such conflict requires [a] unique means of resolution”.Footnote 40 To exemplify this, Wall quotes Gao Xiaoli, a Vice-President of the Fourth Civil Division of the SPC and a sitting judge on the CICC, who stated, “[t]he construction of ‘Belt and Road’ is mainly about economic cooperation, which inevitably leads to disputes in the field of trade and investment”.Footnote 41
Unfortunately, within and outside of China, there is still neither a common consensus nor a common framework for the unique characteristics of a “BRI dispute”. Therefore, the following Part of this article presents some examples of the unique features of “BRI disputes” that can help fill this gap in the existing literature. Similarly, this article also considers whether there is any common consensus on defining a “BRI dispute”.Footnote 42
III. Examples of unique features of “BRI disputes”
This Part presents some of the unique features of “BRI disputes”, supported by examples. The analysis represents an attempt to identify common unique features of “BRI disputes” and is not meant to be a comprehensive study. As regards the examples of “BRI disputes”, these were chosen as a random cross-section of “BRI disputes” (based on the availability of data).
Although there is not much data available regarding “BRI disputes”, some actual examples are required to demonstrate the unique features of these disputes.Footnote 43 As regards the number of BRI projects, it has been estimated that there are (only) 2,500–3,000 BRI projects, and it is also estimated that the number is (only) growing at a rate of approximately 500 projects per year (or more).Footnote 44 Furthermore, except for a few cases where official data can be obtained, most available data originates from newspaper sources.Footnote 45 This is unsatisfactory for a few reasons. First, there is the obvious unreliability of newspaper sources (such as the risk of bias, etc.). Second, over-reliance on newspaper reports regarding “BRI disputes” likely skews the analysis by emphasizing certain types of “BRI disputes” over others; for example, newspaper articles are far more likely to surface if the matter is of national significance. Thus, most of the project examples reported in newspapers inherently involve the state.Footnote 46 The following examples of “BRI disputes” are used in the analysis.
First, in Beijing Urban Construction v Yemen, the Chinese investor claimed, according to the China-Yemen Bilateral Investment Treaty (1998), that it was unlawfully deprived of its infrastructure investment (an airport terminal).Footnote 47 While this case is not always identified as a BRI-related dispute because the facts of the case predate the BRI. The case shows the potential for investors in BRI projects to invoke investment arbitration claims when there is an investment claim based on a bilateral investment treaty (BIT) with a BRI participating country. The cause of the dispute was that the Beijing Urban Construction Group alleged that its 2006 construction contract with the Yemen Civil Aviation and Meteorology Authority was unlawfully terminated in 2009 following weeks of state-orchestrated harassment and intimidation.Footnote 48 The case went to the International Centre for Settlement of Investment Disputes (ICSID) in 2014 before it was settled.
Second, in the Hambantota Port Development Project, the Sri Lankan government agreed to convey the Hambantota Port on a 99-year lease to China Merchant Port Holdings in July 2017, which raised an estimated USD 1 billion in debt for the infrastructure project (the port), which was finalized in 2007.Footnote 49 Although the project was agreed upon in 2007 before the BRI was launched, this project can nevertheless be included as an example of a BRI-related dispute since the dispute occurred between 2016 and 2017. China also includes this project as a BRI project.Footnote 50
Third, in East Coast Rail Link, the Malaysian government suspended (in July 2018) and then restarted (in July 2019) an infrastructure project (a high-speed rail line) agreed upon in 2016 because the costs were renegotiated (the original construction costs of RM 65.5 billion were reduced to RM 44 billion).Footnote 51
Fourth, in Dolareh Container Terminal / Dolareh Multi-Purpose Port, the government of Djibouti had (allegedly) unlawfully terminated a 30-year container terminal contract (the concession agreement was signed in 2006) with the United Arab Emirate-based DP World in 2018 and unlawfully allowed China Merchants Port Holdings to operate an alternative multi-purpose port (since 2014) and to construct a new container terminal.Footnote 52 DP World launched (and won) several claims at the London Court of International Arbitration and obtained a United Kingdom High Court injunction against the Djibouti government.Footnote 53 This “BRI dispute” is also said to be the first “BRI dispute” to be heard in a Hong Kong court since DP World also filed a claim at the Hong Kong High Court against China Merchants Port Holdings Company.Footnote 54
Fifth, in Kyauk Pyu Deepwater Port, the Myanmar government delayed (until 2018) an infrastructure project (a port) that was first agreed upon in 2015 as part of the China-Myanmar Economic Corridor.Footnote 55 The project was restarted when a new agreement was reached at a significantly lower cost.Footnote 56 The price was radically renegotiated down from approximately USD 7 billion to USD 1.3 billion.Footnote 57
Sixth, in Jakarta-Bandung High-Speed Railway, the Indonesian government delayed (in May 2018) an infrastructure project (a high-speed rail line) first agreed upon in 2015, following an Indonesian government re-evaluation of the project's design and feasibility, and the 2019 completion date was pushed back to 2021.Footnote 58
Seventh, in Lower Sesan II Dam, the Cambodian government delayed and extended the completion date of an infrastructure project (a power plant) first agreed in 2012.Footnote 59
A. The Chinese Investor is a State-Owned Enterprise (SOE)
The first unique feature of “BRI disputes” is that Chinese SOEs drive most (if not all) major BRI projects. Many scholars state that China's use of SOEs is fundamental to China's economic growth and economic strategy. For example, Ran Li and Kee Cheok Cheong state that China's use of SOEs is the primary differentiating factor identified in the Chinese economy. They state that “[u]nlike the rest of the world, China follows [s]tate-led growth, not private sector growth. State enterprises are at the heart of this model.”Footnote 60 Then, as regards the BRI, Li and Cheong also state, “[g]iven the scale of the BRI, it should be no surprise that [s]tate enterprises will be at the forefront to drive the major projects”.Footnote 61
China's use of SOEs is also crucial to its regionalist foreign policy. For example, Carla Freeman contended that the announcement of the BRI in 2013 marked a “turning point in China's regionalism foreign policy” and that China's regionalism policy has now become “China's regionalism policy 2.0”.Footnote 62 Furthermore, China's use of SOEs is also a significant part of China's embrace of “comprehensive and aggressive economic statecraft as part of its grand strategy”.Footnote 63
The fact that Chinese SOEs appear to be behind many (if not all) of the major BRI projects has a significant impact as regards the settlement of “BRI disputes”. This is because negotiation with an SOE is, arguably, similar to state-to-state negotiation, and investment arbitration by an SOE is, arguably, similar to state-to-state arbitration (these propositions are based on similar arguments to the opposite side of the coin granting SOE's access to arbitration). It should be noted that this does not mean that disputes without SOE involvement do not qualify as “BRI disputes”. Instead, it means only that Chinese SOEs drive most (if not all) major BRI projects. Nevertheless, different approaches are also taken. For example, in the CICC, the presence of a Chinese SOE does not appear to be relevant in determining whether a dispute is a “BRI dispute”.
Furthermore, it is important to point out that the discussion has moved from state ownership per se to de facto state control. For instance, it is stated, “[c]learly the most important debate around China's state enterprises revolves around ownership and governance [although] … China's leadership has come to value control over ownership”.Footnote 64 It will also be shown in the next Sub-Part on “Host Country Instability” (Part III.B) that Chinese government control over companies in BRI projects is key to making the companies behave in ways they might otherwise not do.
Regarding the BRI project examples, SOEs are the drivers of each BRI project example. First, in Beijing Urban Construction v Yemen, the Chinese investor, Beijing Urban Construction Group, was identified by the ICSID Tribunal as a Chinese SOE.Footnote 65 The Tribunal's reasoning to nevertheless allow the arbitration (that Beijing Urban Construction Group acted as a commercial investor in the “fact-specific context”Footnote 66) was particularly controversial, and the controversial debate will be discussed in the next Part (along with other similar cases, such as Beijing Shougang and Others v Mongolia).Footnote 67 Nevertheless, the controversy does not change the identification of Beijing Urban Construction Group as a Chinese SOE.
In the Hambantota Port Development Project, the project developer was China Merchant Ports Holdings, and the funding was from the Exim Bank of China, which are both Chinese SOEs.Footnote 68 In East Coast Rail Link, the project developer was China Communications Construction Company, and the funding came from the Exim Bank of China, which are both Chinese SOEs.Footnote 69 In Dolareh Container Terminal / Dolareh Multi-Purpose Port, the project developer was China Merchant Ports Holdings, a Chinese SOE.Footnote 70 The Kyauk Pyu Deepwater Port project developer was China International Trust Investment Corporation, a Chinese SOE.Footnote 71 In Jakarta-Bandung High-Speed Railway, the project was awarded to a joint venture of China Railway International Group (specifically, China Railway No. 3 Engineering Group Co. Ltd, a Chinese SOE, and a consortium of four state-owned Indonesian enterprises), and the financing was provided by China Development Bank, which is also a Chinese SOE.Footnote 72 In Lower Sesan II Dam, the project was awarded to a joint venture between Cambodia's Royal Group and China's HydroLancang International Energy (with Vietnam retaining a minor stake). HydroLancang International Energy is a Chinese SOE.Footnote 73
B. Host Country Instability
The second unique feature of “BRI disputes” is that many BRI projects are frequently situated in territories that have a combination of political instability, undeveloped and/or unreliable legal systems, and a reputation for weak corporate governance, which generally includes corruption.Footnote 74 Additionally, it is contended (for example, by Lingliang Zeng) that the international and regional situations faced by most of the countries participating in the BRI have become increasingly complicated in recent years.Footnote 75 Nevertheless, China has continued pursuing the BRI despite this, or maybe because of this. This is because, as identified by Patrick Norton, China has perceived geopolitical interests, which means that the substantial risk factors might discourage commercial investors from pursuing an investment altogether or require commercial investors to seek a higher rate of return to justify acceptance of the risks. However, this does not prevent BRI projects from being accepted.Footnote 76
This does not mean that all BRI countries suffer from instability. Some developed countries and regions are listed as BRI countries on China's official BRI website (for example, Austria, New Zealand, Italy, Luxembourg, Malta, Cyprus, Portugal, and Greece).Footnote 77 Therefore, it is noted that “host country instability” may not be a compelling feature of a “BRI dispute”.
Nevertheless, the fact is that many of the BRI projects do appear to be in countries that suffer from instability, and the explanation for this is largely (as stated in the previous Sub-Part, Part III.A) because most (if not all) of the Chinese companies involved in major BRI projects are Chinese SOEs. For instance, Norton states that the Chinese government effectively retains control over SOE decision making, even in formally independent commercial entities. For example, Norton refers to reports suggesting that Chinese officials might anticipate losing between 50% and 80% of their investment in BRI projects in Pakistan and Myanmar but are still willing to proceed.Footnote 78
The following paragraph highlights that all considered BRI project examples are arguably located in countries with an unstable investment climate. Although a case can be made that the East Coast Rail Link project in Malaysia should be treated as an exception since Malaysia is assessed (by the World Bank) as a relatively stable country, Malaysia arguably still fits into this category as it has a relatively large problem vis-à-vis corruption. For example, according to the Transparency International 2022 Report, Malaysia is ranked as low as 61st regarding perceived corruption (versus, for example, Singapore at 5th or Hong Kong at 12th).Footnote 79
Regarding the considered BRI project examples, in Beijing Urban Construction v Yemen, Yemen is regularly reported to be an unstable country; it was ranked 187th in the 2019 World Bank's “Ease of Doing Business” report (the 2019 World Bank Report).Footnote 80 In the Hambantota Port Development Project, Sri Lanka is regularly reported to be an unstable country; for example, Sri Lanka was ranked 99th in the 2019 World Bank Report.Footnote 81 In East Coast Line (as mentioned above), Malaysia can be considered an unstable country as it has a relatively high level of perceived corruption, and it was reported that the project involved some blatantly corrupt practices.Footnote 82 In Dolareh Container Terminal / Dolareh Multi-Purpose Port, Djibouti is regularly reported to be an unstable country; for example, Djibouti was ranked 112th in the 2019 World Bank Report.Footnote 83 In Kyauk Pyu Deepwater Port, Myanmar is regularly reported to be an unstable country; for example, Myanmar was ranked 165th in the 2019 World Bank Report.Footnote 84 In Jakarta-Bandung High-Speed Railway, Indonesia is regularly reported to be an unstable country; for example, Indonesia was ranked 73rd in the 2019 World Bank Report;Footnote 85 and in Lower Sesan II Dam, Cambodia is regularly reported to be an unstable country; for example, Cambodia was ranked 144th in the 2019 World Bank Report.Footnote 86 Additionally, the issue of environmental and social impact assessments being either incomplete and/or inaccurate is exacerbated in BRI Countries where environmental regulation by the government is not strictly enforced.
The explanation for BRI projects being frequently located in countries with an unstable investment climate is that Chinese financing is often considered to be driven by geopolitical interests.
C. High-Risk Construction and Infrastructure Projects
The third unique feature of “BRI disputes” is that many BRI projects are high-risk construction and infrastructure projects. For instance, in many surveys and analyses, infrastructure projects account for up to 80% of BRI projects.Footnote 87 While construction and infrastructure investment is generally perceived to be risky, the risks are thought to be further increased in the BRI context. For example, Bao and Chan state that BRI construction projects, in particular, have unusually vast exposure to an extremely large spectrum of risks.Footnote 88 This is discussed in detail in several papers from Jelena Andrić and others, which state, “[c]ompared to traditional international construction projects, BRI projects are exposed to additional risks since they are geographically distributed and complex in nature and include more stakeholders”.Footnote 89
The evidence that many BRI projects are high-risk construction and infrastructure projects is set out in the preceding paragraph. It is estimated that up to 80% of BRI projects relate to construction and infrastructure projects and that scholars such as Bao and Chan have identified such projects as especially risky. Nevertheless, this does not mean high-risk construction or infrastructure projects do not qualify as BRI projects. This is just one of the characteristics that has been frequently found to be common among “BRI disputes”, but it is not decisive (in determining whether a dispute is a “BRI dispute” or not). As was the case for the other common characteristics identified, attention should be given to the fact that the only purpose of this Part is to try to characterize “BRI disputes”. Different approaches are taken, and, again, in the CICC, for instance, the type of project (infrastructure or construction or anything else) does not appear to be relevant in determining whether or not a dispute is a “BRI dispute”.
As an additional example, which emphasizes the risks inherent in BRI-related construction projects, the Permanent Forum of China Construction Law published a book in 2019 with the specific purpose of identifying the risks to Chinese companies when participating in overseas construction projects.Footnote 90
Also, all considered BRI project examples relate to construction and infrastructure projects. Beijing Urban Construction v Yemen was a project to construct an airport terminal; the Hambantota Port Development Project was a project to construct a port; the East Coast Rail Link was a project to construct a high-speed rail line; the Dolareh Container Terminal / Dolareh Multi-Purpose Port was a project to construct a seaport; the Kyauk Pyu Deepwater Port was a project to construct a port; the Jakarta-Bandung High-Speed Railway was a project to construct a high-speed rail line, and the Lower Sesan II Dam was a project to construct a power plant.
D. Flexible Financing Provided by Chinese Financial Institutions
The fourth unique feature of “BRI disputes” is that many BRI projects involve flexible financing arrangements from Chinese financial institutions. Flexible financing here regards both the financing terms provided by Chinese financial institutions to other Chinese SOEs involved in the project (that is, better terms and conditions such as lower interest rates, longer repayment dates, etc. – which other financial institutions might not be able to offer)Footnote 91 and the financing amounts provided to the host states. It is claimed that China intentionally drags other countries into excessive spending beyond their means by offering a higher amount of loan than is required or the host country can afford, leading to inevitable project failures to the political advantage of China.Footnote 92 The consequences of such flexible financing are, first (as we have seen above), the financing arrangements to Chinese SOEs could even be non-recourse; that is, the loans could be granted without expectations of repayment. For example, Norton referenced reports that suggested Chinese officials anticipated losing between 50 and 80% of their investment in some BRI projects.Footnote 93 Such flexible financing arrangements are possible because the loans are often provided from Chinese SOEs to Chinese SOEs (similar to a situation of the left-hand giving to the right-hand). Second, BRI projects are said to be frequently larger and more expensive than the host country can afford, with it being asserted by the World Bank that, for some countries participating in the BRI, the financing required for the BRI projects may expand their debt to unsustainable levels (which leads to accusations that China is using debt-diplomacy to achieve political objectives).Footnote 94
It should be noted that these views regarding flexible financing are common and appear substantiated, but this does not necessarily mean it is strictly the case. For instance, Lutz-Christian Wolff (among others) has referred instead to the idea that China furnishes “patient capital”.Footnote 95 This also does not mean that projects without flexible financing are not BRI projects. Furthermore, attention should again be given to the fact that different approaches are taken. For instance, in the CICC, again, the type of financing does not appear to be relevant in determining whether a dispute is a “BRI dispute”.
Each BRI project (except Beijing Urban Construction v Yemen) shared similar characteristics of flexible (and, potentially, non-recourse financing) provided by Chinese SOEs and the potential over-indebtedness of the host country. In Beijing Urban Construction v Yemen, the financing was provided by the Arab Investment Fund,Footnote 96 but in the other cases, the financing was provided by a Chinese SOE. For the Hambantota Port Development Project, the funding was provided by the Exim Bank of China;Footnote 97 for the East Coast Rail Link, the funding was provided by Exim Bank of China;Footnote 98 in Dolareh Container Terminal / Dolareh Multi-Purpose Port, the financing was from China Merchant Ports Holding;Footnote 99 in Kyauk Pyu Deepwater Port, the funding came from China International Trust Investment Corporation;Footnote 100 in Jakarta-Bandung High-Speed Railway, the financing of the project was mostly from China Development Bank;Footnote 101 in Lower Sesan II Dam, the funding for the project came mostly from HydroLancang International Energy.Footnote 102
As regards the flexible financing arrangements provided to Chinese SOEs, the Asia Society Policy Institute states that once a project is agreed to, where the Chinese state backs the funder (or has state-backed insurance or similar guarantees), it will be in the project developers interest (that is, in the interest of the Chinese SOE) to expedite the project and bypass comprehensive due diligence.Footnote 103 Flexible financing is also said to lead to the use of “opaque workarounds and side deals” to appropriately incentivize the involved parties for non-viable BRI projects.Footnote 104 Particular instances of such flexible financing (and potentially non-recourse financing) can also be seen in the following examples. For instance, in the East Coast Rail Link, there was inadequate project preparation and/or poor project management because it was reported that the project had been rushed through most steps of the approval and procurement process (that is, the project developer, China Communications Construction Company, is reported to have expedited due diligence).Footnote 105 In Jakarta-Bandung High-Speed Railway, there was reported to be inadequate project preparation and/or poor project management by the consortium (led by China Railway International Group). For example, the Indonesian government re-evaluation in 2018 found a lack of due diligence and described the project as deeply troubled,Footnote 106 there being a lack of transparency. There were reported irregularities in the project bidding, and it was reported that even Indonesian government ministers encountered difficulties obtaining information regarding the project when it was first agreed to.Footnote 107 In Lower Sesan II Dam (in a project led by the Chinese SOE HydroLancang International Energy), there were reported to be inadequate environmental and social impact assessments. For example, the original environmental impact assessment and environmental management plan, which was approved by the Cambodian government two years prior to the project's launch, was criticized for both underestimating the impacts of the project and failing to address concerns regarding the protection of local communities and indigenous culture as well as food security and health.Footnote 108 The Lower Sesan II Dam dispute is also said to be an example of time bombs often created by BRI projects (in this case, there were environmental issues, but in other cases there were other issues such as, for example, the entire project feasibility. By following unreliable environmental and social impact assessments, the extent of the environmental damage might only become evident later on in the project's life cycle, which results in a large disconnect between Chinese rhetoric on implementing best practices and the actual procedures implemented (in this case, the commitment to implement a “green BRI” and the reported substandard environmental practices on the ground).Footnote 109
As regards the over-indebtedness of host countries, in all seven of the BRI project examples considered, it could be seen that the host countries generally have difficulties with debt sustainability. In particular, in the Hambantota Port Development Project, China took possession of the port it built in Sri Lanka because the Sri Lankan government could not afford to repay its debts (particularly its debt to China).Footnote 110 In East Coast Rail Link, the Malaysian government said they decided to suspend the project because the cost was too high and Malaysia did not have the financial capacity to proceed.Footnote 111 In Kyauk Pyu Deepwater Port, the government in Myanmar stopped the project, examined its scale and terms, and found it to significantly exceed what Myanmar could afford or needed. The project was delayed, and the price was reduced from approximately USD 7 billion to about USD 1.3 billion.Footnote 112
E. Project Driven by Geopolitical Interests
The fifth unique feature of “BRI disputes” is that geopolitical interests frequently drive BRI projects. This explains why the Chinese financial institutions advance flexible financing arrangements and, potentially, non-recourse financing to the Chinese SOEs driving the projects. While it has been stated that it is hard to define the term “geopolitical”, a useful summary of its meaning is provided by Boute, who states:
Although the notion of geopolitics is the subject of controversy, the literature generally agrees that, within its broad meaning, geopolitics concerns the interaction between geographical attributes (spatial location, size, topography, borders, climate, and distribution of resources) and international political power.Footnote 113
Other scholars, such as Ziqiang Wan and Shanman Li, discuss the “great strategic significance” of BRI investments.Footnote 114 Furthermore, each of the “BRI disputes” considered is reported to be an example of the project being driven by geopolitical interests.Footnote 115 In Beijing Urban Construction v Yemen, although this was a small project and the financing involved was minor, it is considered that China sees Yemen as having critical geography along maritime routes of strategic importance. That is, Yemen occupies a geostrategic location in international shipping lanes at the juncture of maritime chokepoints, and high-sea strategic access is critical to China's military and economic interests.Footnote 116 In the Hambantota Port Development Project, Carrai refers to Hambantota Port as “A Strategic ‘Pearl’ Along The Maritime Silk Road”. Footnote 117 In East Coast Rail Link (among others) it is said that the construction and operation of the East Coast Rail Link will serve China's strategic goals in Southeast Asia by helping to secure the delivery of Chinese goods by bypassing Singapore and the Straits of Malacca.Footnote 118 In Dolareh Container Terminal / Dolareh Multi-Purpose Port, Djibouti is stated to be the most important port in East Africa due to its strategic location at the junction of the African Horn.Footnote 119 In Kyauk Pyu Deepwater Port, it was reported that the Deep Sea Port offers access for China to the Bay of Bengal and could also solve the Malacca energy security dilemma via the gas pipeline from Kyaukphyu to Kunming, Yunnan.Footnote 120 In Jakarta-Bandung High-Speed Railway, the project is said to demonstrate (among others) the rise in China's economic influence versus Japanese geopolitical and geoeconomic rivalry. Japan has long been a major trade partner, investor, and aid donor to Southeast Asia, but the assignment of the project to China can be interpreted as China eclipsing Japan.Footnote 121 In Lower Sesan II Dam, the project has several potential geopolitical objectives, including furthering China's regional influence and ensuring energy security in Southern China and Cambodia.Footnote 122
Nevertheless, the above can also be seen as conjecture only; asserting that political interests drive the projects is not a fact. Only the stakeholders involved in the specific projects will know for sure. Therefore, there are BRI projects not driven by geopolitical interests, which should not be excluded from the definition of BRI projects.
IV. Alternative approach to characterizing “BRI disputes”
Whilst the previous Part (Part III) provided examples of the unique features of “BRI disputes”, this Part (Part IV) develops a framework for formally identifying “BRI disputes”. We consider each of the following four elements – ratione materiae, ratione loci, ratione temporis, and ratione personae – and then take the ICSID as a proxy for a specific BRI dispute settlement framework. The ICSID, primarily, can be chosen as a proxy for a specific BRI dispute settlement framework since the ICSID is arguably similar to the BRI; that is, it has a limited scope (that is, investment disputes), a limited membership (that is, contracting parties), and limited jurisdiction (that is, based on consent). There are, however, certain key differences between the ICSID and the BRI. For instance, the ICSID is based on a convention and the ICSID's jurisdiction is treaty based, whereas, until now, there has been no BRI convention or specific BRI treaties. Footnote 123 The reference to ICSID dispute settlement does not mean that the definition of “BRI disputes” excludes all disputes that do not fall into the ICSID scope. Accordingly, while some “BRI disputes” might fall into the ICSID scope, the dispute may or may not be settled at the ICSID.Footnote 124
A. Identifying “BRI Disputes” Ratione Materiae
The expression ratione materiae means subject-matter jurisdiction and refers to the tribunal or court's authority to adjudicate in a particular case. Here, the jurisdiction of the ICSID is limited to investment disputes and does not have jurisdiction to hear other types of cases.Footnote 125 The requirements for ratione materiae jurisdiction at the ICSID are limited to situations where there is a legal dispute, the dispute arises from an investment transaction, and there is a direct relationship between the investment transaction and the dispute. However, the ICSID Convention does not provide a definition of investment; hence, whether an investment meets the ratione materiae jurisdiction of the ICSID will be determined with reference to the relevant treaty; that is, the respective treaty (alongside ICSID jurisprudence and precedent). The ICSID has also developed further jurisprudence, such as the requirement of good faith in the investment.Footnote 126 Other relevant ICSID decisions relating to ratione materiae include Salini v Morocco,Footnote 127 Philip Morris v Uruguay,Footnote 128 and Phoenix v Czech Republic. Footnote 129
The ratione materiae problem regarding the BRI is that there is not yet any recognized BRI subject matter. How can we define what is “in” and what is “out”? Therefore, to accurately characterize “BRI disputes”, proposing minimum standards vis-à-vis ratione materiae is necessary. For example, any BRI project must meet the following criteria (mostly taken from the Phoenix v Czech Republic case referenced above): first, a transaction involving two or more BRI countries;Footnote 130 second, a contribution in money or other assets; third, a certain duration; fourth, an element of risk; fifth, an operation made to develop economic activity in the host state; sixth, assets invested in accordance with the law of the host state; and seventh, assets invested bona fide. Furthermore, it is submitted that the best way to prove a “BRI dispute's” ratione materiae jurisdiction would be by using a BRI “project register”; these minimum standards could be used to develop the “terms of reference” for the BRI project registration, and once a BRI project is registered, the ratione materiae jurisdiction (as regards “BRI disputes”) can no longer be contested.
However, it is also acknowledged that these characteristics seem to be more suitable for investment-related “BRI disputes” and less suitable for other types of “BRI disputes” – for example, trade-related “BRI disputes”. Therefore, it is important to consider this when proposing holistic solutions to settle all “BRI disputes”.
B. Identifying “BRI Disputes” Ratione Loci
The ratione loci jurisdiction of the ICSID is problematic as the ICSID Convention does not define its territorial reach. Hence, whether an investment meets the ratione loci jurisdiction of the ICSID will be determined with reference to the relevant treaty (alongside ICSID jurisprudence and precedent).Footnote 131 Many treaties (although not all) contain the requirement that the investment has to be made in the territory of the host state, and, as such, this issue has only been addressed briefly in the ICSID cases of Fedax v Venezuela, Footnote 132 COB v Slovakia, Footnote 133 SGS v Pakistan, Footnote 134 SGS v Philippines, Footnote 135 and LESI Dipenta v Algeria. Footnote 136
The ratione loci problem regarding the BRI is that there is not yet any recognized BRI territory, so how can we define what is “in” and what is “out”? To accurately characterize “BRI disputes”, it is necessary to propose minimum standards vis-à-vis ratione loci – for example, any investment made in a BRI country (recognized as such at the date of the investment). Therefore, if a country – for example, Malaysia – was on a list of BRI countries at the time of a BRI investment, such as the East Coast Rail Line project, it is a BRI project. Alternatively, if a country – for example, Italy – was not on such a list of BRI countries when the investment was made, it is not a BRI project. Regarding ratione loci jurisdiction for “BRI disputes”, similar to ratione materiae, the possibility of officially registering BRI projects will remove many contentious issues concerning the territorial requirements of the BRI project. The issues are as follows: first, whether a list of BRI countries, even if maintained on an official Chinese government website, should be recognized by tribunalsFootnote 137 and, second, the means of accurately deciding if any investments or transactions were made in a country that was a BRI country at the date of the investment or transaction. Additionally, ICSID jurisprudence shows us that the physical connection is not conclusive. However, the tribunal should consider that not all types of protected investments will be made within the territory of host states – for example, financial transactions, loans, or credits.Footnote 138
C. Identifying “BRI Disputes” Ratione Temporis
Numerous ICSID tribunals have dismissed claims based on ratione temporis.Footnote 139 In particular, the ICSID tribunals considered significant aspects relating to the timing of an investment, such as: first, what happens when the investment was made before the treaty came into force? (Cortec Mining v Republic of Kenya); second, what happens if a treaty has not come into force, but a state has signed it? (Tecmed v Mexico and MCI v Ecuador);Footnote 140 third, whether a claim can be initiated after the treaty has been terminated;Footnote 141 fourth, whether continuous or composite acts occurring before the treaty enters into force should be considered in assessing an alleged breach of a treaty (El Paso v Argentina and Spence v Costa Rica);Footnote 142 fifth, whether a claim can become time-barred (Wena Hotels v Egypt, Kardassopoulos v Georgia, and Ansung Housing v China); Footnote 143 sixth, whether it is possible and what should happen if the investment occurred after the breach of the relevant treaty?;Footnote 144 and seventh, what is the impact of a state's denunciation of the adjudicating tribunal; for example, the ICSID? (Venoklim v Venezuela, Blue Bank v Venezuela, Fábrica de Vidrios Los Andes CA, and Owens-Illinois de Venezuela CA v Venezuela).Footnote 145
The ratione temporis problem as regards the BRI is primarily threefold. First, there is no specific BRI treaty. Second, various countries joined the BRI at different times (which might be signalled by signing a cooperation document regarding the BRI with China, such as a BRI-specific Memoranda of Understanding or Cooperation Agreement). Third, it is not precisely clear when the BRI started. Although the official launch is often said to have been in September and October 2013, there are BRI projects which predate this. For instance, the Hambantota Port Development Project in Sri Lanka can be regarded as having been claimed by China as a BRI project, although the project was first agreed to in 2007.Footnote 146 These three reasons mean that there are different time frameworks for BRI investments and BRI membership to characterize “BRI disputes accurately”. It is necessary to propose minimum standards vis-à-vis ratione temporis; for example, any BRI project commencing after September 2013 (the date often considered to be the official launch of the BRI). If these three particular ratione temporis jurisdictional problems are not resolved, it might be problematic for a tribunal to interpret whether or not it has ratione temporis jurisdiction as regards a BRI project. Again, a BRI project registration system could help to resolve the ratione temporis problems.
D. Identifying “BRI Disputes” Ratione Personae
In ICSID arbitration, ratione personae means that the tribunal will generally only have jurisdiction as regards the state that is a party to the investment treaty and an investor who is a national of the other state covered by that treaty. The issue of ratione personae has been relatively common in the ICSID context because if the dispute is not between an ICSID Contracting State and an investor who is a national of another ICSID Contracting State, ICSID will not have jurisdiction.Footnote 147 Relevant ICSID decisions relating to ratione personae are COB v Slovakia, Footnote 148 Maffezini v Spain, Footnote 149 SOABI v Senegal, Footnote 150 Champion Trading and Ameritrade v Egypt, Footnote 151 and Tokios Tokeles v Ukraine. Footnote 152
The ratione personae problem regarding the BRI is that there is no commonly agreed framework regarding whether a claimant and defendant will qualify to receive the protection and adjudication of a tribunal. Moreover, no specific BRI treaty defines ratione personae jurisdiction: to accurately characterize “BRI disputes”, proposing minimum standards vis-à-vis ratione personae is necessary. For example, BRI project “terms of reference” can be agreed upon because of the need for detailed guidance. These could define a BRI investor (for example, a public or private investor from a BRI country).Footnote 153 The “terms of reference” should also address a joint-venture situation. For example, a workable proposal might consider that the BRI investor must own over 50% of the relevant legal entity at the time of the applicable transaction to qualify as a BRI investment. Again, a BRI project registration system could help to resolve the ratione personae problems.
V. A BRI “project register” and BRI “terms of reference”
Part IV develops an alternative definition of “BRI disputes” utilizing the concepts of ratione materiae, ratione loci, ratione temporis, and ratione personae. Further, as regards each of these concepts, it was suggested that the introduction of a BRI “project register” (together with a corresponding BRI project “terms of reference”) might ensure a greater degree of certainty in the BRI.
Greater certainty is also required since there is currently no official list of BRI projects and, additionally, the “yidaiyilu” website does not contain any database or specific details concerning BRI projects – for example, procurement information, project contracts, financing details, or environmental and social impact assessments.Footnote 154 The CICC contains no database or specific information concerning BRI projects. However, the CICC website does list some older examples of typical BRI project-related cases, but it falls far short of a BRI “project register”.Footnote 155
A. BRI “Project Register”
Maintaining a publicly available BRI “project register” would be a significant step in providing certainty to BRI dispute settlement. A BRI “project register” will essentially be a database. At a basic level, it will require that every BRI-related project be registered. It would be expected that such registration could be achieved by completing an online registration form upon the commencement of the project.
It should be hosted online (perhaps utilizing blockchain technologies).Footnote 156 Regarding each specific “BRI dispute”, all project stakeholders will know they are involved in a BRI project. Furthermore, introducing a publicly available BRI “project register” of BRI projects will provide certainty regarding whether a specific dispute is (or is not) a “BRI dispute”.Footnote 157 For instance, the ability to register a BRI project would be expected to generally satisfy the jurisdictional requirements of ratione materiae, ratione loci, ratione temporis, and ratione persona. That is, the minimum standards vis-à-vis ratione materiae, ratione loci, ratione temporis, and ratione personae of “BRI disputes” can be used as thresholds to be met before a project is included in the BRI “project registry”.Footnote 158 Regarding establishing and maintaining the BRI “project register”, it would be ideal for the Chinese government to undertake this role since it is in China's interest to provide greater certainty regarding its BRI projects. Indeed, investment amounts are increased when there is greater certainty regarding the investment landscape (for example, in a similar vein to why BITs were created or why the ICSID exists). Nevertheless, it is suggested that as far as possible, the BRI “project register” will be a neutral system on a public or private blockchain (to reduce any suspicions of unfairness in the operation of the registry). Indeed, blockchain technologies provide for processes and systems to be “based on cryptographic proof instead of trust”.Footnote 159 Also, blockchain technologies simultaneously enable “the single record of truth created by a centralized system while distributing and decentralizing the data management process”. Footnote 160
In the same way, the BRI “project register” would help address the geopolitical implications of the BRI. By providing greater certainty to investors, some of the suspicions (whether real or perceived) that China (or other countries) are manipulating the rules to suit their purposes can be assuaged.Footnote 161 Further, to address privacy concerns regarding the BRI “project register”, the publicly available data should be considered carefully. Perhaps any part of the database with sensitive information could be encrypted and only accessible with appropriate authorization.
An example of such a registration form could be similar to that provided in Figure 1:
Example of the BRI “project register” Registration Form Checklist
Source: Created by the author on 10 February 2023.
Of course, the above example (in Figure 1) of an online BRI “project register” registration form checklist is basic. It is not meant to provide comprehensive details of the form that should be used, but it gives an example of how such a BRI “project register” system might work. Further, if some issues are not resolved by registration, then, presumably, BRI-related investment dispute precedents and jurisprudence could fill in the gaps over time.
Additionally, there are secondary benefits for the BRI as a whole. The benefits would depend upon the details inserted into the BRI “project register” database and its availability to other users. First, BRI project standards can be raised when there are criteria for a project to be classified as a BRI project. For instance, scholars such as Mimi Zou have stated that standards should be raised in the BRI to avoid a “race to the bottom” because “there have been growing controversies over Chinese firms ‘exporting’ poor working conditions to host countries”.Footnote 162 While Zou stated this in the context of labour standards, the principle applies to other areas: the environment.
Indeed, as mentioned in Part I, it is said that the BRI label is unclear and that China has increasingly become aware that there is an element of global criticism towards the BRI label and has started the process of clarifying the purpose, priorities, and scope of the BRI.Footnote 163 Moreover, the BRI brand has become tarnished since many BRI projects have generated a number of problems; for example, controversies related to financing and unsustainable debt, corruption, environmental damage, legal issues, and community opposition.Footnote 164 By introducing a BRI “project register”, there can be a specific protocol to follow to confirm that a project is a BRI project. The label of being listed in a BRI “project register” can become an external indication of quality, similar to how credit ratings work. Consequently, only projects that meet sufficiently high quality, transparency, and accountability standards should be entitled to use the BRI label. It is suggested that a way to do this is to define specific BRI projects by promulgating BRI project “terms of reference” for the entire operation of BRI projects, including BRI dispute settlement (which is addressed in Part V.B).
Second, corruption could be curtailed if a publicly available BRI “project register” existed.Footnote 165 For instance, there does not seem to be any particular operational anti-corruption mechanisms for monitoring, enforcement, and accountability in BRI projects at the moment. However, when maintaining a BRI “project register”, many project-specific details could be provided and made available for public scrutiny, such as procurement information, project contracts, financing details, and environmental and social impact assessments. Furthermore, the BRI “project register” could also provide a link for whistleblowing, which is how many corruption cases are revealed.Footnote 166
Third, if there was a publicly available BRI “project register”, value and efficiency in BRI projects could be increased (depending upon the scope of the registry). First, the value could be increased, especially in project procurement (in case project procurement details are included in the register), because it is widely understood that an open and accessible procurement process will result in improved value in all tenders. In this regard, the bids submitted at the time of the procurement will benefit from these higher standards when the activity in question is disclosed and made available to all project stakeholders.Footnote 167 There would also be a similar increase in value to the entire project management during the project's life cycle (should these project details be inserted into the register). Second, efficiency can also be increased in these cases because project bids can be submitted and evaluated online at the time of procurement, and the entire project's management during its life cycle could also be made available to all project stakeholders transparently and timely.
Additionally, Tim Bunnel states, “‘the BRI’ is a label that serves to bring previously unassociated project sites and non-place-based infrastructural developments into comparative relation”.Footnote 168 Bunnel also considers the work of Sidway and others as well as van Schendel, who believed “placing BRI developments in a critical comparative register ... can open new ‘geographies of knowledge’”.Footnote 169 Bunnel's ideas effectively state that a BRI “project register” has value when comparing projects that use the BRI label. Therefore, an additional benefit of a BRI “project register” is that it can enable project comparison and project study. Without a BRI “project register”, different BRI projects cannot easily be formally compared and studied. In the context of BRI dispute settlement, for example, a BRI “project register” can provide significant value in facilitating comparison between different BRI project dispute resolution procedures (Part V.C below considers the registration of BRI project disputes).
Besides the prestige of being officially listed as a BRI project, further incentives can be put in place to encourage maximum participation in the BRI “project register”. For example, lower risk insurance premiums for projects officially identified as BRI projects (or even a centralized BRI investment project insurance scheme geared towards registered BRI investment projects and, perhaps, a BRI “project register” guarantee scheme (discussed below)); lower financing costs; and greater financing availability for projects officially identified as BRI projects. Punitive measures could be implemented for non-participation in the BRI “project register”. Such measures might include the non-availability of insurance from a centralized BRI investment project insurance scheme, the non-availability of financing for registered BRI projects from authorized providers, an inability to participate in any official BRI procedures, etc.
It is not unreasonable that registered BRI projects should be entitled to certain advantages, such as lower financing costs, since finance providers generally provide preferential rates to safer projects (presumably, a registered project will be safer than an unregistered project since it would be legitimate and have government backing) and, second, funds and financing entities geared to the BRI (such as the Silk Road Fund) can be directed to discriminate towards BRI registered projects when providing financing.
A BRI “project register” guarantee scheme could be introduced to complement the BRI “project register” as it could provide all stakeholders with confidence regarding the BRI “project register”, as well as compensate the injured party in limited and agreed situations (which can be defined in the BRI project's “terms of reference”. For example, where the registry has been used incorrectly or illegally or to provide some compensation to an injured party, such as a contractor, and where a BRI project party fails due to insolvency or illegal acts, etc.).
It is suggested that a BRI “project register” guarantee scheme be implemented as follows. First, a registration fee should be paid when registering a BRI-related project in the BRI “project register” (where, as stated, registration can become an external signal of quality, but not every project can be registered). Second, a portion of the registration fee can be added to a BRI “project register” guarantee scheme fund, which can then be disbursed according to the BRI project “terms of reference”.
B. BRI Project “Terms of Reference”
Since only certain projects will be able to be registered in the BRI “project register”, and for the BRI “project register” to provide as comprehensive information as possible consistently vis-à-vis each BRI-related project registered, it will be necessary to develop detailed BRI project “terms of reference”. For instance, the previous section (Part V.A) discussed many project details, including procurement information, project contracts, financing details, and environmental and social impact assessments, where it is necessary to design the BRI “project register” in such a way that it can capture all of this information, not only at the commencement of the BRI project but also whenever a significant event occurs in relation to a particular BRI project.
Accordingly, the BRI project “terms of reference” would be a comprehensive document or protocol and contain comprehensive information and instructions regarding participation in the BRI “project register” and any other significant information regarding the operation and organization of the entire BRI project. The document or protocol could be issued unilaterally by China (perhaps following a public consultation period) or agreed to multilaterally between China and its BRI partners. It is suggested that the document or protocol be issued by China (following a public consultation period) since a multilateral process might be lengthy and/or face delays. The document or protocol may also be promulgated more efficiently via the issuance of an official guidance document (or similar), perhaps from the Office of the Leading Group on Promoting the Implementation of Belt and Road Initiatives, which is the official overseeing body of the BRI and falls under the remit of the National Development and Reform Commission.
The document or protocol could include the following: a description and templates of the BRI “project register” registration form checklist that must be completed to participate in the BRI “project register”; comprehensive details of the minimum standards vis-à-vis ratione materiae, ratione loci, ratione temporis, and ratione personae of “BRI disputes” in case such an alternative approach is used to identify the thresholds to be met for inclusion in the BRI “project register”; and a description of a significant event about a BRI project so that the BRI “project register” can capture information, not only at the commencement of the BRI project but also whenever a significant event occurs about that BRI project. Furthermore, it can contain the details and parameters of the BRI “project register” guarantee scheme, including a comprehensive description of the situations where the injured party can be compensated by the scheme (in case such a scheme is introduced).
C. Registration of BRI Project Disputes
BRI project disputes could also be registered in the same BRI “project register” or a separate BRI “project dispute register”. It would be expected that such registration can be achieved by completing an online registration form upon the commencement of a dispute, similar to a project being registered in the BRI “project register”.
An example of such a registration form could be as follows:
The above example, in Figure 2, of an online BRI “project dispute register” registration form checklist is very basic. It is not meant to provide comprehensive details of the actual form that should be used, but it provides an example of how a BRI “project dispute register” system might work. Most significantly, there might be a provision in the BRI project “terms of reference” to the effect that the dispute resolution provisions must be agreed upon at the commencement of the BRI project and that these should not be altered. For example, where a dispute resolution forum has been selected, neither party are allowed to submit a claim to a different forum.
Example of the BRI “Project Dispute Register” Registration Form Checklist
Source: Created by the Author on 10 February 2023.
Introducing a publicly available BRI “project dispute register” will provide transparency for the investors involved and all BRI stakeholders regarding, among others: first, whether a specific project is in dispute (or not); second, the reasons identified for the dispute; third, the status of the dispute; and fourth, the dispute process.
In the case of the implementation of a BRI “project dispute register”, there are several advantages. First, there will be increased transparency since project stakeholders will be informed regarding the specific dispute on a timely basis. For instance, all project stakeholders can be alerted whenever there is a development in the dispute. Second, the efficiency of handling each specific “BRI dispute” would be increased because all project stakeholders will be able to participate in the dispute process more easily throughout the dispute's life cycle. For instance, the stakeholder concerned might be able to access specific documents and might also be able to contribute more appropriately to the selected settlement forum or adjudicating body in a timely fashion. Third, predictability can be increased because all BRI stakeholders will be informed regarding all disputes on a timely basis and fully track each dispute process. In particular, all BRI stakeholders might benefit by being better able to see the causes of other (similar) disputes more transparently – for example, by using the BRI “project dispute register” and seeing the choices made (by other parties) as well as the outcomes reached. Fourth, the consistency of adjudication and the efficiency of resolving BRI project disputes can be greatly increased by publishing details of all decisions and awards made by the selected settlement forum or adjudicating body (similar to how the ICSID publishes decisions). It is not suggested that all BRI project disputes be settled in a single forum, as this would be too restrictive of party autonomy. Still, if details are published of all decisions and awards made by each selected settlement forum or adjudicating body, then, very soon, a set of BRI-related investment dispute precedents and jurisprudence will emerge.Footnote 170 This will surely result in more consistent and harmonized adjudication across many available settlement fora and adjudicating bodies. It is also well established that consistency in adjudication is enhanced where there is a set of precedents and jurisprudence to refer to.Footnote 171
The BRI project “terms of reference” (discussed in Part V.B) could provide comprehensive details of how the “project dispute register” would operate and also provide a template for the BRI “project dispute register” registration form checklist that must be completed to participate in the BRI “project dispute register” (in the case of an additional registry, the document or protocol could alternatively specify how BRI project disputes will be recorded). The BRI project “terms of reference” for the entire operation of BRI projects, including BRI dispute settlement, can also provide a pathway for a limitation regarding the range of forums for BRI-related project dispute resolution, and there could also be greater certainty regarding which law or set of rules apply in a “BRI dispute”. This can result in greater transparency regarding the forum selection and choice of law for BRI dispute resolution. For instance, when registering the BRI project dispute in the BRI “project dispute register”, the parties might select a specific dispute settlement option (which cannot be changed later). In this way, it is suggested that the range of forums for BRI dispute resolution can be reduced, and the transparency regarding the forum selection for BRI dispute resolution can be increased. Similarly, by conforming with the BRI project “terms of reference” for the entire operation of BRI projects, including BRI dispute settlement, it is suggested that there can be greater consistency in resolving a “BRI dispute”. Therefore, developing BRI project “terms of reference” can be a powerful way to introduce greater certainty and consistency regarding the resolution of “BRI disputes”.
VI. Conclusion
This article has filled a research gap within the BRI scholarship related to resolving “BRI disputes”. The gap was identifying whether “BRI disputes” have distinct and visible characteristics (and, hence, can be identified). The article has not only presented such a characterization of “BRI disputes”, it has also outlined a practical method for determining the existence and attributes of “BRI disputes” in the future (and with legal certainty) via a BRI “project register”.
Following an exploration of the customary usage of the terms “BRI disputes” and “BRI jurisprudence” in Part I and a consideration of the contribution made by other legal scholars in this area in Part II, this article, subsequently in Part III, identified five unique features of “BRI disputes” (and presented examples from seven “BRI disputes”). The five unique characteristics of “BRI disputes” were found generally in all of the cases looked at: first, that most (if not all) Chinese SOEs drive major BRI projects; second, that many BRI projects are frequently situated in territories that have a combination of political instability, undeveloped and/or unreliable legal systems, and a reputation for weak corporate governance, which generally includes corruption; third, that many BRI projects are high-risk construction and infrastructure projects; fourth, that many BRI projects involve flexible financing arrangements made by Chinese financial institutions (regarding both the financing provided by Chinese financial institutions to other Chinese SOEs involved in the project and the funding provided to the host states); and fifth, that frequently the BRI projects are reputed to be driven by geopolitical interests.
Further, in Part IV, an alternative method to identify “BRI disputes” (for their legal categorization) was identified; that is, the establishment of academic criteria to formally identify “BRI disputes”. The alternative approach to identifying “BRI disputes” was based on the identification of the ratione materiae, ratione loci, ratione temporis, and ratione personae of “BRI disputes” (that is, utilizing the well-known concepts in the context of jurisdictional disputes). After this was identified, minimum standards were presented. For instance, minimum standards vis-à-vis ratione materiae might be: first, a transaction involving two or more BRI countries; second, a contribution in money or other assets; third, a certain duration; fourth, an element of risk; fifth, an operation made to develop economic activity in the host state; sixth, assets invested in accordance with the law of the host state; and seventh, assets invested bona fide. Minimum standards vis-à-vis ratione loci might be any investment made in a BRI country (recognized as such at the date of the investment). Minimum standards vis-à-vis ratione temporis might be any BRI project commencing after September 2013 (the date often considered to be the official launch of the BRI). Minimum standards vis-à-vis ratione personae might be agreed upon BRI project “terms of reference” so that these could define a BRI investor and also address a joint venture situation; for example, a BRI investor must own over 50% of the relevant legal entity at the time of the relevant transaction to qualify as a BRI investment. The consequence might be that only disputes that meet these four criteria could be called “BRI disputes”.
Finally, since the overwhelming contribution of the alternative approach discussed in Part IV has been to highlight the need for the registration of BRI projects, a BRI “project register” and accompanying BRI project “terms of reference” was presented in Part V. This is because, the ability to register a BRI project would generally satisfy the jurisdictional requirements of ratione materiae, ratione loci, ratione temporis, and ratione persona. If some issues are not resolved by registration, then BRI-related investment dispute precedents and jurisprudence would fill in the gaps over time. Additionally, since the focus of this article is on “BRI disputes”, the implementation of a separate and specific BRI “project disputes register” was also presented.
In identifying the unique features of “BRI disputes”, this article has shown that “BRI disputes” appear to have distinct and visible characteristics (and hence, are capable of being identified). Moreover, while it is acknowledged that the characteristics developed are not perfect, the analysis suggests that “BRI disputes” are a unique form of dispute and potentially require commensurate bespoke treatment in the form of further specific BRI-wide protocols. In this regard, it is particularly important to define the category of “BRI disputes” because without identifying what “BRI disputes” are, it is more difficult to propose mechanisms to improve BRI dispute settlement – that is, to formulate and identify specific measures for introducing reforms in BRI dispute settlement.
Additionally, it is important to note that the article provides definitions for the term “BRI disputes” and presents a characterization of “BRI disputes” according to the author's research. However, it has not been established that “BRI disputes” are anything other than ordinary disputes that happen to be associated with a BRI project. As such, the analysis in this article highlights the need for more certainty as regards the BRI project and has suggested that a BRI “project register” is a useful way of providing greater certainty. Indeed, while an academic can make suggestions, it is required that the Chinese state (and courts) create explicit definitions, such as the WTO does for its members.
Similarly, from a more practical perspective, classifying a dispute as a “BRI dispute” without explicit definitions from the Chinese state (and courts) is unrealistic. This is because disputes can be categorised in many ways, and the BRI also encompasses a broad geographical context. Without such explicit definitions, there will also be little impact on dispute settlement since the existing dispute resolution mechanisms (such as litigation, arbitration, and mediation) can (largely) be used without any restriction. Whether or not the dispute resolution institutions currently available in the BRI countries (domestic courts, international commercial courts, arbitration institutions, etc.) can be used depends upon each party's commercial strategy. This arguably creates uncertainty as forum shopping can occur where parties can pursue various dispute resolution avenues based on their power and commercial strategy (rather than on the facts of the case). It is therefore recommended to establish a dispute resolution institution specifically designed for “BRI disputes” (based on BRI projects in the BRI “project register”).
Acknowledgements
The author would like to thank the reviewers for their comments.
Funding statement
None.
Competing interest
The author declares none.
Jamieson KIRKWOOD is a post-doctoral fellow in Finance, Technology, Regulation, and Sustainable Development at the University of Hong Kong, Hong Kong SAR, and Barrister (Middle Temple, England and Wales).
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