A missing part in international investment law: The effectiveness of investment protection of Taiwan's BITs vis-à-vis ASEAN states

• Main Author: LIU, Han-wei
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2009
• Subjects: Taiwan; BIT; ASEAN; entity sui generis; unrecognized state; Asian Studies; International Law
• Online Access: https://ink.library.smu.edu.sg/sol_research/4423; https://ink.library.smu.edu.sg/context/sol_research/article/6381/viewcontent/228700116_oa.pdf
• Institution: Singapore Management University

Taiwan, classified as an “unrecognized state” or an “entity sui generis” by most international law scholars, has been excluded from most major international organizations and agreements for decades. This diplomatic isolation has had a negative influence on the protection of Taiwan’s overseas investments. This Article explores the six bilateral investment treaties (“BITs”) that the Taiwanese government has reached with the Association of Southeast Asian Nations (“ASEAN”) States and compares the weaknesses of the Taiwanese agreements with the investment frameworks established within ASEAN States. This Article concludes that Taiwan’s BITs with six ASEAN Member States fail to serve the very aim of a BIT.First, investment treaties are entered into on the assumption that they will provide security for investors through the recognition of standards of treatment, compensation for expropriation, and repatriation of profits. While this assumption has been challenged, BITs nevertheless present a solution in tackling the “obsolescing bargain” problem and preventing ex-post opportunism of host states. By contrast, the BITs that Taiwan has reached with ASEAN States could hardly serve this end.A lack of disciplining power is central to these six BITs’ ineffectiveness. Additionally, among other issues, lack of sovereignty seriously weakens the effectiveness of the BITs. Despite the fact that these six BITs are concluded through semi-official organs of each state’s governing bodies, they are nonetheless treaties and are binding upon the Taiwanese government and its ASEAN counterparts. Yet in theory, these BITs fall within the ambit of public international law and are interpreted in accordance with principles of international law. Without UN membership and legal standing before the ICJ, Taiwan can hardly place checks on its ASEAN partners. Further, without a definite timeframe or specified procedures through which Contracting Parties may appoint arbitrators, interstate dispute settlement clauses under these BITs are not powerful enough to reduce the host state’s opportunistic behavior in the post-investment stage. Investor-state dispute settlement provisions, on the other hand, may arguably render the “obsolescing bargain” problem even more severe in that the terms and conditions of arbitration proceedings are subject to post hoc negotiations of the parties to the dispute.Taiwan’s sovereignty issues cannot soon be solved due to its political reality. Those defects as to dispute settlement provisions – both interstate and investor-state as described above – call for a more in-depth consideration. At the very least, there should be a definite timeframe for a “cooling off” period and a clear default rule whereby the parties to a dispute may proceed to form the arbitral tribunal.Notwithstanding these defects, Taiwanese investors may make use of the current investment framework of ASEAN. The flexible definition of an “ASEAN investor,” together with the national treatment and Most Favored Nation (“MFN”) provisions, in particular, may adjust Taiwanese investors’ disadvantaged position vis-à-vis the investors from any third state which concluded an enhanced BIT with ASEAN States. Such a strategy, however, is better regarded as an expediency. To prevent the potential hollowing-out of Taiwan’s industries and disinvestment of foreign investors, the Taiwanese government should consider renegotiating its BITs directly.