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China launches first Investment Arbitration Rules to defend rights

China has stipulated its own Arbitration Rules on disputes over foreign investment issues, which will take effect on Oct 1 this year. It’s the country’s first legislation in this field.

A foreign investment dispute normally happens between a company investing overseas and a government of the host country. In most cases, it takes arbitrators, instead of courts, to judge.

The Chinese government is increasingly confronted by foreign firms as one of the world’s top destinations for foreign investment.

But officials say Chinese companies have long been in a difficult position to defend their rights under foreign arbitration rules. Western economies like the US and UK are now increasingly using arbitration as a weapon to confront the Chinese government or firms. That’s why China needs more options to get out of trouble.

“There are cases in which the Chinese side was treated unfairly because of a lack of understanding in Chinese laws and practices. We hope China’s Arbitration Rules can help reduce unnecessary losses on both sides,” said Wang Chengjie, Secretary General of China International Trade Arbitration Commission.

The International Centre for Settlement of Investment Disputes (ICSID) is the world’s first institution specializing in resolving legal disputes and forging conciliation between investors. Over 150 countries have signed the ICSID agreement so far.

China became its contractual member in 1993. Analysts say China’s rolling out of its own international investment rules will not only help protect Chinese firms’ overseas interests, but also benefit the Belt and Road projects as its foreign investment grows.