The EU-China Investment Treaty

Business district Beijing © Fotalia

Business district Beijing © Fotalia

The European Commission is currently negotiating a bilateral investment treaty (BIT) with China. Such a treaty should guarantee investment protection and improve market access for German companies. However, the negotiations are proving to be difficult.

To date, little is known about the negotiations, which began in 2013 and are reported to be difficult. The treaty is intended to replace the 26 existing BITs between China and EU Member States (Ireland does not have a BIT with China, while Belgium and Luxembourg have a joint treaty). At the beginning of 2016, agreement was reached on the scope of the agreement. More than two years later, in the summer of 2018, China submitted its negotiating offer. As far as is known, this consists essentially of international obligations to which the country has already committed itself – for example, within the framework of the General Agreement on Trade in Services (GATS). After more than five years of ongoing negotiations, this is hardly a satisfactory state of affairs for European industry. For this reason, BDI hopes that progress will be made at the upcoming EU-China Summit spring 2019.

Market Access is as Important as Investment Protection

In the past, European BITs have focused on investment protection. However, this treaty brings up another important theme – market access. Chinese market access for European companies remains extremely limited. The ongoing negotiations offer an opportunity to improve that access. In any event, there is scope for optimization, not least because China continues to pursue a selective investment policy. Thus, one of the demands of German industry is that the compulsory establishment of joint ventures be abolished in all branches.

Dispute Settlement

Another issue covered by the negotiations is whether disputes (as in German BITs) should be resolved through ad hoc arbitration tribunals or  through an investment court system (ICS) (as in the European free trade and investment agreement with Canada, CETA, or in the agreement with Vietnam).

In a position paper, BDI has laid out its expectations for a BIT with China. The paper also describes investment relationships and provides background on investment policy.