发布时间： Wed Apr 10 08:49:01 CST 2024
编者按：“北仲杯”高校仲裁有奖征文大赛旨在鼓励高校法学专业学生熟悉仲裁，为更多青年才俊将来成为仲裁事业推动者奠定基础。大赛自2013年首次举办以来，吸引了众多学子参与，在仲裁界具有广泛的影响力。为了满足读者需要，进一步丰富和繁荣商事仲裁理论研究成果，《北京仲裁》第122辑（2022年第4辑）作为第十届“北仲杯”的获奖论文专刊，在征得获奖作者同意后，将其中8篇获奖论文予以刊载。
ISDS， foreign investment complaint mechanism， administrative review， local remedy
In recent years， alternative dispute resolution （ADR） has become a hot topic of discussion in investor-state dispute settlement， with more and more scholars repeatedly referring to conciliation and mediation in the design of future ISDS. However， only some of them notice that host states are already gradually adjusting their domestic ISDS mechanism in a more collaborative way to settle international investment disputes with mutual consensus instead of unilateral decisions. China， for example， is paying more attention to consensual dispute resolution mechanisms rather than an adjudicative one in international investment dispute settlement against the ongoing ISDS legitimacy crisis. Three signs indicate that change is happening：firstly， the number of administrative review provisions is dropping in recent international investment agreements treaty drafting. Previously， it was the default local remedy mechanism. The number of lawsuits brought by foreign investors against local government has also declined. Secondly， China is advocating the stipulation of cooling-off period provisions in investment treaties， which require a mandatory period for negotiation. Thirdly， a foreign investment complaint-handling mechanism was established nationwide by China’s latest legislation with the feature of negotiation， mediation， and complaint handling.
This article proceeds as follows. It first illustrates the adjudicative model in China’s domestic ISDS and how it has faded recently. The administrative review mechanism will be taken as a significant example. Then， it demonstrates the emerging negotiation model represented by the newly established foreign investment complaint handling mechanism. Its merits， defects， and feature improvements are also discussed. Last， it canvasses several possible motivations for the new trend and its implications for future ISDS reform.
Although ISA has become the most frequently used ISDS option at the global level， local remedies remain a sensible option for investors as they offer cost-saving， efficient， and enforceable solutions. The administrative review is another option for local remedies in investor-state disputes aside from litigation in a national court. In China， the administrative review previously served as a default local remedy option. However， the number of administrative review provisions has decreased these years in China’s treaty drafting.
2.1 Administrative review as a local remedy
In China， administrative review refers to the mechanism that provides a remedy for a natural person， legal person， or any other organization whose right has been infringed by the act of the government or its departments， including the act conducted by its public servant， which is attributable to the government. It is stipulated in the Administrative Review Law of the People’s Republic of China. A competent authority will review the administrative act after receiving the administrative review application from the applicant and then determine the legality and proportionality of the disputed administrative act within 60 days. For example， in the dispute between Hong Kong Carilai company （applicant） and Beijing Municipal Bureau of Commerce （respondent） in 2001， the respondent made an administrative decision to cancel the applicant’s shareholder status of a Sino-Hong Kong joint venture for the reason that applicant failed to invest capital within an appropriate period. The applicant then submitted an administrative review application to the Ministry of Commerce of China （MOFCOM）， which reviewed the administrative decision， held that the basis was non-existent， and canceled the disputed administrative decision.
One of the core functions of administrative review is to implement supervision and self-governance within the administrative system. In other words， administrative review is a supervision system to correct mistakes made by administrative organs. Another notable function of administrative review is the relief function， which colors administrative review with a quasi-judicial feature. Those functions are well illustrated in the Carilai case， in which the MOFCOM， the superior authority of Beijing Bureau of Commerce， is responsible for adjudicating the legality and proportionality of the disputed administrative act， correct the administrative decisions made by the respondent （if there is any）， and protect the lawful right of foreign investor.
Administrative Review provisions are standard in China’s BITs. In principle， Chinese BITs are divided into three or four generations， and the period for each generation is defined differently by various scholars. For instance， Congyang Cai has divided Chinese BITs into three generations in terms of the main features of each generation； Yuwen Li and Cheng Bian have divided them into three generations in terms of the scope of consent to ISA； Qingjiang Kong and Kaiyuan Chen have divided them into four generations marked by four versions of China’s Model BITs. This paper divides China’s BITs into four generations， which are：first-generation BIT （1982-9）， second-generation（1990-7）， third-generation（1998-2009）， and fourth-generation （after 2010）. The early generations of China’s BITs were relatively conservative， which permitted international arbitration only for the ‘amount of compensation for expropriation’ . The third and fourth generations of China’s BITs reflect a liberalizing BIT regime in China， and most of these BITs provide full access to ICSID jurisdiction.
Along with the expansion of investor-dispute provisions in the new generations of China’s BITs， administrative review provisions increasingly appear as pre-arbitration requirements either in the arbitration clauses of BITs or in their Protocols or Appendixes. Almost all third-generation BITs contain clear stipulations that the investor must first have availed of the domestic administrative review procedures before resorting to international arbitration. For example， the China-Uganda BIT allows foreign investors to submit the dispute to ICSID ‘provided that the Contracting Party involved may require the investor concerned to go through the domestic administrative review procedures specified by the laws and regulations of that Contracting Party before the submission to the ICSID’ . Similar statements also appear in Protocols or Appendixes of China’s BITs.
2.2 Reasons for advocating administrative review in previous domestic ISDS
Firstly， China has developed a complex and systematic mechanism of administrative review as an effective measure to resolve administrative disputes to provide relief to the applicant whose legal right was infringed by unlawful or unproportionate administrative action. Thus， it is unsurprising that China applies the already existing domestic dispute resolution system to resolve international investment disputes.
Secondly， almost all of the investment disputes arose from the acts of local governments or the acts of its departments as well as public servants rather than national legislation or regulatory change. Therefore， the administrative review procedure， as a supervision mechanism， is feasible to resolve and curb the disputes before they escalate. Meanwhile， if investment disputes arise from national legislation， the administrative procedure won’t be capable of resolving them. Because the competent authorities belong to the executive branches， which are not entitled to judge the decisions made by the legislative branches， currently， all of the investment arbitration brought against China today was triggered by local governments’ actions. For instance， in Ekran v. China， the People’s Government of Hainan Province nullified the claimant’s subsidiary rights to a leasehold land due to an alleged failure to develop the land as stipulated under local legislation. In Ansung Housing v. China， a dispute arose between the Ansung Housing company and a district-level government based on their investment agreement on the construction of a golf and country club and luxury condominiums in Sheyang-Xian， Jiangsu province. Therefore， unlike the investment arbitration claims launched against other host countries， which may be triggered by a national policy or regulatory change made by central governments， such as the series of cases brought against Spain due to the change of its royal decree about solar policy， The cases against China were mainly caused by actions taken by local governments. Therefore， it’s feasible to apply administrative review to supervise and correct the administrative acts of local governments by the higher level authority， and the relief provided by administrative review is more timely （within 60 days） compared with the lengthy judicial procedure as well as ISA， to some extent.
Lastly， one of the significant functions of administrative review in ISDS is to serve as a precondition of ISA， enabling China to curb， manage， and resolve domestic investment disputes. Specifically， China is motivated to embrace more liberalized investor-dispute provisions in its BITs to protect its increasing outbound investment. At the same time， it is hard for China to estimate the risk of being held liable as the respondent in ISA with its extensive consent to arbitration due to its limited experience. Therefore， the administrative review procedure helps China to balance its interests as a capital importer and a capital exporter.
2.3 A new trend of dropping administrative review in China’s New BIT-making and its implication
Though the administrative review provision was widely used in the third generation of China’s BITs as a precondition of ISA to balance the national interest as a major country of both investment-importing and investment-exporting， there is an emerging trend to drop the administrative review provision in China’s new BIT-making.
An empirical study concerning the administrative review provisions in China’s IIAs reveals that China has started to drop them in its IIAs. It shows that the number of investment treaties concluded by China with a pre-ISA administrative review provision sharply decreased from 43 treaties （in the 2000s） to 6 treaties （in the 2010s）. The statistic reflects an emerging trend to drop pre-ISA administrative review provisions in the new generation （after 2010） of Chinese BITs. Notably， the 2015 China-Australia FTA and 2018 China-Singapore FTA do not include an administrative review provision as a pre-ISA requirement， despite both IIAs incorporating a broad ISA clause. The administrative review is quickly losing attractiveness and significance in China’s foreign investment governance， especially as a pre-ISA requirement， as it could be substituted by other ISDS options， such as consultation， complaint handling mechanism， and International Commercial Courts established by China.
The inherent defects of administrative review may constitute a significant reason for the trend of dropping the provisions in recent BITs. First and foremost， In the administrative review procedure， the competent authority performing the administrative review is not the same agency as the governmental authority that committed the unlawful or unproportionate act， though it’s the following higher-level authority that is directly responsible for the agency’s misconduct. For example， in the Carilia case， the MOFCOM is the competent authority to review the act of Beijing Municipal Bureau of Commerce. The applicant was also able to submit its claim to the People’s Government of Beijing since the commerce bureau is a department of the Beijing government. Those competent authorities to review the administrative decision of the Beijing Municipal Bureau of Commerce are its superior counterparts. However， the competent authorities and the respondent all belong to the executive branch and might be the same authority in the investor’s eyes. Secondly， administrative needs more lacks finality and practical effectiveness because the decision can be submitted to a domestic court after administrative review. For example， in the Carilai case， Beijing Er Shang Group， another investor of a disputed Sino-Hong Kong joint company， brought administrative litigation to the court concerning the administrative review decision made by MOFCOM. The status of Hong Kong Carilai as an investor in the Sino-Hong Kong joint company was confirmed until the end of the second instance. Besides， statistics show that only a small portion of cases have been decided in favor of the applicant in the administrative review procedure of all kinds of administrative disputes. For instance， according to recent statistics， out of 180，796 administrative review cases concluded in 2020， only 26，405 cases（14.6%） have ended in favor of the applicant.
Another possible reason for dropping the administrative review provision is that the requirement， as a form of exhaustion of local remedies， is in contract with the liberation process of Chinese BITs and has lost its significance in the third generation of Chinese BITs. Historically， one of the major functions of these provisions was to serve as a pre-arbitration requirement. It is believed that those pre-arbitration administrative review provisions are stipulations of the exhaustion of local remedies in the third generation of Chinese BITs （1998-2009）. However， as China is increasingly liberalizing its ISA practice to facilitate its outbound investment， the exhaustion of local remedies is gradually replaced by other conditions for arbitration， such as pre-arbitration consultation， time limitation to arbitration， and the exclusion of national taxation from arbitrable matters.
The trend to drop administrative review provisions in China’s BITs-making indicates that the roles of administrative agencies as adjudicators are fading. By contrast， administrative agencies are increasingly playing the role of negotiators in investor-state dispute management.
There are several possible reasons for the fade of roles as adjudicators. First， although administrative agencies， as adjudicators in investment disputes， are capable of correcting the actions of their inferior counterparts and reducing the risk of being sued in international arbitration， the effect of such roles is limited since it cannot substantially preclude an investor from initiating either administrative litigation or international arbitration. Second， the time limitation of administrative review procedures is relatively strict （within 60 days）， and it is hard for administrative review authorities to resolve complex disputes with the time limitation. By contrast， it is easy for investors to wait for 60 days and then launch international arbitration. In this sense， the pre-arbitration administrative review serves as procedural conditions for arbitration rather than handling disputes substantively.
The administrative review mechanism is gradually losing its significance in adjudicating investor-state disputes in China. In contrast， the Mechanism of Coordinating and Handling the Complaints about Foreign Investment （compliant handling mechanism） is increasingly utilized to manage and de-escalate investor-state disputes. Unlike being adjudicators of disputes， the role played by complaint-handling agencies in the complaint-handling mechanism is more akin to that of negotiators who bring the disputing parties to the negotiation table and actively help them reach a settlement agreement.
3.1 Compliant handling mechanism as a new option for ISDS
The complaint mechanism refers to coordinating investment disputes between foreign investors and governmental agencies through ADR methods such as negotiation and conciliation by specific complaint-handling agencies. It has long been used to solve disputes between foreign investors and governmental agencies in China’s provincial governments since 1989. From 1989 to 2014， 16 regulations concerning the complaint mechanism were issued by provincial governments in Guangdong， Hebei， Zhejiang， Henan， etc. The first central regulation about complaint mechanisms was enacted by the Ministry of Commerce in May 2006. However， it failed to establish a national-wide system due to its over-general provisions. A complete system of complaint mechanisms was eventually established in March 2019 after the promulgation of China’s Foreign Investment Law. Article 26 of this law explicitly stipulates that the state shall establish a complaint mechanism for foreign-invested enterprises to promptly deal with the problems reported by foreign enterprises. A few months later， the Ministry of Commerce enacted the Work Measure for Complaints of Foreign-Funded Enterprises to supplement Article 26 of the Foreign Investment Law and to provide more detailed provisions concerning the operation of the complaint mechanism.
The framework of the Complaint Mechanism is， generally， a two-tiered structure， including the National Center for Complaints of Foreign-funded Enterprises （NCCFE） set up by the Ministry of Commerce （MOFCOM） and local complaint handling agencies set up by local people’s governments. The scope of the admissible complaint includes any complaints involving an administrative action or any suggestions to improve investment-related policies and measures made by a foreign-funded enterprise or a foreign investor. After accepting a complaint， the competent center or agency shall fully communicate with the complainant and the respondent， coordinate the handling of the complaint following relevant laws， and promote the proper resolution. The competent agency may organize a meeting between parties， and relevant experts may be invited if needed. A settlement agreement may be concluded between parties due to the complaint procedures， and the respondent will be held liable if it fails to perform the effective agreement. Besides， the competent authority could also submit recommendations to improve relevant policies according to the applicant’s suggestion. The time limit for the complaint handing agency to complete the procedure is 60 working days. There needs to be more national statistics about the complaint handling cases， though several municipal bureaus published the number of complaints they handled. For example， Chongqing city has successfully handled 82 complaint cases submitted by foreign-funded enterprises concerning investment in 2020. The details of those complaint-handling cases have yet to be disclosed. Apart from China， other countries also set up similar mechanisms to coordinate investment disputes. For example， Article 85 of Egypt Investment Law provides that “a ministerial committee entitled ‘ministerial committee on investment dispute resolution’ shall be established to look into the application， complaints or disputes ... arise among the investors and the State”.
Compared with the quasi-judicial administrative review procedure， the complaint handling process resembles ADR means such as conciliation， mediation， or negotiation. The functions of conciliation， mediation， and negotiation overlap inevitably， though they have different characteristics. Conciliation in the international context refers to “a method for the settlement of international disputes of any nature according to which a commission set up by the parties， either permanently or on an ad hoc basis to deal with a dispute， proceeds to the impartial examination of the dispute and attempts to define the terms of a settlement susceptible of being accepted by them， or of affording the parties， with a view to its settlement， such aid as they may have requested” . The conciliation commission will examine the facts and law applicable to the case and then draft a confidential， non-binding recommendation to parties for a peaceful settlement. Similarly， mediation is a method for the peaceful settlement of international disputes involving the participation of a third party to help the parties to the dispute agree to a solution. At the same time， the mediator principally acts as an intermediary， ensuring that channels of communication between the parties remain open to reduce tensions and may. Last， negotiation， as a means of settlement， emphasizes the discussion process between parties through their delegates or appointed negotiators to achieve a common understanding or agreement.
The complaint-handling process shares some common points with the traditional State-level ADR approach but needs to fit neatly into all of them. The complaint handling agency shares some similarities with the third party involved in ADR. It hears the complaints， examines the dispute’s merits， communicates with the disputing parties， and brings them back to the negotiating table. More importantly， it coordinates with the respondent and promotes the conclusion of a settlement agreement. The significant difference between the complaint handling agency and the third party participating in ADR is that the state establishes the agency before disputes arise， rather than being an independent third party jointly appointed by the disputing parties. Admittedly， the complaint handling system has drawbacks， such as a lack of independence or apparent lack of independence from the investor’s viewpoint， which will be demonstrated later. This paper argues that the NCCFE set by MOFCOM is a relatively independent organ from the governmental agencies or local governments.
The complaint-handling procedure is comparable to negotiation， and the complaint-handling agencies act as negotiators. The following cases can well illustrate the new trend in China’s domestic ISDS. In Hela Schwarz GmbH v. People’s Republic of China， Investment disputes arose between Hela， a Sino-German food joint venture enterprise located in Jinan City， Shandong Province， and the government of Jinan City in China， which initiated an urban renewing program in September 2014 and expropriated Hela’s food plant for urban renewing. According to Article 9 of the China-German BIT（2003）， Hela is entitled to submit the dispute to arbitration after a six-month cooling-off period， The protocol of this BIT further provision three pre-conditions for an investor to initiate arbitration：（1） the investor has referred the issue to an administrative review procedure according to Chinese law， （2） the dispute still exists three months after review procedures， and （3） investor has withdrawn its claim to Chinese court if the issue has been brought to a Chinese Court. In this case， Hela brought a lawsuit to the Intermediate People’s Court of Jinan and appealed to the High Court of Shandong Province in 2016 but failed in both trials. It then initiated an ICSID arbitration according to the China-German BIT（2003）. China challenged the jurisdiction of ICSID because there is a concurrency between domestic judicial procedure and international arbitration. More importantly， Hela cannot withdraw the judicial case， which is the pre-condition of the stipulated arbitration. Therefore， the ICSID case is pending at present. However， the scenario would change if the dispute arose in 2020 when China established a two-tiered national-wide foreign-funded enterprise complaint handling mechanism. The investor would be able to submit their complaint to the central complaint handling agency， which will then hear the case， coordinate the dispute between Hela and the People’s Government of Jinan， and promote the disputing parties to reach a settlement agreement rather than determine on the legality and proportionality of the expropriation. Besides， in Ansung Housing v. China， the local government breached its investment contract with Ansung Housing. At the same time， the ICSID tribunal decided in favor of China because Ansung Housing exceeded the three-year time limitation to launch the ISA prescribed in Article 9（7） of China-Korea BIT. The result might have been different if a national complaint mechanism had been established at that time because negotiators in the complaint mechanism would not only consider legal issues in the disputes but also consider the fairness and influence of the disputes.
3.2 The merits and defects of the current complaint handling mechanism
The current foreign investment complaint mechanism has advantages and disadvantages and needs to be further improved.
（1）Merits. Compared with the administrative review， the complaint-handling mechanism has unique advantages， including preventing and de-escalating investor-state disputes， maintaining long-term relationships， and enforcing settlement agreements.
First， it is beneficial to prevent and de-escalate investor-state disputes. Compared with adjudication and arbitration， peaceful settlement means such as conciliation， mediation， and negotiation are less adversarial and result in a non-binding report/ proposal， which is helpful in not only resolving the dispute after it arose and preventing or de-escalating it beforehand. The scope of the complaint-handling mechanism demonstrates that it deals with specific administrative actions that infringe on foreign investors’ legitimate rights and problematic regulatory policies issued by the government， which may trigger disputes in the future. Legislators also stressed in the text of the regulation that one of the principal functions of this regime is to prevent disputes before they escalate.
Second， it can assist parties in maintaining their long-term relationship. Compared with judicial or quasi-judicial approaches to dispute settlement， the complaint mechanism is beneficial to maintaining good relationships between investors and local governments. It optimizes the possibility of a win-win outcome， and neither party is stigmatized as having lost the dispute. Aside from its perceived lack of legitimacy， one of the criticisms of the current ISDS regime is that it increases the severance of the links between the host State and the investor， defeating the very purpose of investment promotion. The criticism reads that “the nature of the relationship between the investor and the State involves a long-term engagement；hence， a dispute resolved by international arbitration and resulting in an award of damages will generally lead to a severance of this link ... arbitration is focused entirely on the payment of compensation and not on maintaining a working relationship between the parties”. Particularly， host States in the Asian region attach importance to face-saving while losing in an international case makes them feel bad not only because of the compensation going to be paid but also because of the shame of losing face. As a result， it is hard for the complaint to maintain the relationship and continue to do business with the host States. By contrast， no one loses face for peacefully settling the dispute under the complaint mechanism.
Third， reaching an enforceable settlement agreement through the complaint mechanism is more accessible than traditional， non-adversarial， and voluntary ADR means. Compared with other widely-known ADR means， the complaint-handling mechanism imposes respondents an obligation to assist with the procedures. By contrast， mediation or negotiation will only succeed if both parties are willing to apply the approach to the negotiating table. In other words， it is easier to bring the disputing parties to the negotiation table in a complaint-handling mechanism because respondents are obligated to cooperate with the negotiators， namely the complaint-handling agencies.
A survey by the International Dispute Resolution team at the National University of Singapore’s Centre for International Law identifies the possible obstacles to settling investor-state disputes. The survey shows that the most significant obstacles come from the States， including the desire to defer responsibility for decision-making to a third party， fear of public criticism or future prosecution for corruption， the existence of multiple stakeholders across all levels of government， etc. Applying the complaint-handling mechanism in settling investor-state disputes may address the concern that states are usually reluctant to settle their disputes through ADR. On the one hand， instead of voluntary participation， the respondent should cooperate with the complaint-handling agency， This increases the chance of successfully settling disputes compared to other voluntary ADR means. On the other hand， the complaint mechanism remains optional rather than mandatory for foreign investors， who are free to decide whether to submit their complaint submissions. Besides， the complaint handling mechanism will allow investors to apply for administrative review or bring their disputes to court.For another thing， the procedure governing the complaint handling mechanism is as flexible as other ADR means. However， the resulting settlement agreement， if concluded by two parties， is binding to both complainants and the respondents. Furthermore， the respondent will be liable if it fails to perform it. Since mediation and conciliation do not produce a binding award， investors might worry that utilizing ADR wastes time and money if the result is non-binding. By contrast， the settlement agreement in the complaint handling mechanism is final and enforceable. Therefore， the complaint-handling mechanism strengthens foreign investors’ confidence in reaching a mutually beneficial， predictable， and enforceable settlement agreement. It reduces their concerns about wasting time and energy engaging in ADR procedures. Besides， since China has already ratified the United Nations Convention on International Settlement Agreements Resulting from Mediation （“Singapore Mediation Convention”）， enforcing the settlement agreement overseas makes the complaint-handling mechanism more appealing to foreign investors.
（2）Defects. Even with this， the current newly established mechanism also has some defects， including the lack of independence and perception of bias， lack of detailed rules and guidelines， lack of expertise， and limited scope of settlement.
First and foremost， there needs to be more independence or at least a perception of bias in the compliant mechanism. The domestic court used to play an essential role in ISDS；nonetheless， the perception of bias and local protectionism make it a less favorable choice than ISA. The concerns about bias and local protectionism might emerge again regarding the complaint mechanism， particularly when the dispute is related to a public policy or regulation that affects a shared interest of the administrative system and even the whole State. Although the negotiators from the complaint handling agency do not necessarily share the same position as the respondent about the regulation or policy， the perception of bias from foreign investors is common and understandable. Such concern might become an obstacle for investors， making them hesitate to submit their complaints or hand their disputes to the competent agency.
The second one is the need for more detailed rules and guidelines. There is a lack of detailed rules and guidance for the complaint agency to follow when handling disputes between investors and local governments （or departments）. It is true that， over the past decades， local governments have developed a series of local regulations concerning the complaint mechanism of foreign-funded enterprises. However， those regulations are fragmented and need to be revised after the enactment of China’s Foreign Investment Law and the central regulation of the ‘Work Measure for Complaint of Foreign-Funded Enterprises’ . The central regulation stipulates the basic procedures and principles applicable to the complaint-handling mechanism， though detailed provisions and guidelines for the complaint-handling agencies are absent. For example， the law and central regulation are silent about the applicable rules to the disputes， the confidentiality of the decision， and the transparency of the complaint-handling procedure. Besides， the central regulation reads that “as required for handling a complaint， the complaint handling agency may solicit the opinions of relevant experts on professional issues”， but says nothing about how the experts are selected， who will be the candidates， and whether parties are allowed to recommend experts.
The third one is the need for the complaint-handling officer to have more expertise. Compared with a conciliation committee， which is usually constituted of a group of persons who are either experts in international law or the dispute’s subject matter， the complaint handling agency is constituted of administrative officers or the leader of the government department， who are neither legal expertise nor are professional conciliators or mediators. One of the most prominent goals that led to the creation of ISA was to “depoliticize the dispute”， removing the dispute from the realm of politics and diplomacy and shifting it into the realm of law. In this sense， the ability to legalize disputes is significant in the ISDS context. However， the administrative officials might need to be more familiar with the legal issue or not think legally about the disputes. Even if the officer is familiar with China’s domestic law relating to the dispute’s subject matter， he or she might be unfamiliar with international investment law， including customary law rules， which are usually applied in ISA.Besides， the success of conciliation or mediation heavily relies on the ability and wisdom of a skillful conciliator or mediator. For example， in the multiparty negotiation with more than 1000 delegates from more than 150 countries concerning the financial clauses in the United Nations Convention of Law of the Sea （UNCLOS）， Chairman Tommy Koh， a skillful negotiator and an ambassador-at-large for Singapore， developed a strategy that helped the negotiation out of the zero-sum dilemma and led to the adoption by consensus of the text on the financial issues. In the conciliation on the continental shelf area between Iceland and Jan Mayen， the chairman Elliot L. Richardson， who was an eminent lawyer and politician， also played an essential role in the success of the conciliation. In short， the complaint handling agency’s lack of expertise might result in difficulties for the two parties in reaching a mutually satisfactory agreement.The last one is a limited scope of settlement. The scope of settlement under the complaint-handling mechanism should also be limited. Unlike that of company officials， the authorities of governmental officials to give their consent to settlement are limited， particularly regarding the settlement of compensation or other financial issues. This defect is interrelated with the nature of the government’s budget. Few governments have an allocated budgetary line within the government for investment treaty claims， awards， and settlement. In China， local governments rarely have a particular budget for the settlement of investment disputes. Accordingly， a significant payment resulting from a settlement agreement requires that a relevant governmental agency （or local government） cut essential programs for the year， which is difficult to negotiate. More specifically， if China loses its case in ISA as a respondent， the treasury will pay the cost and compensation （if there is any）. Suppose governmental agencies or local governments agree to settle disputes with investors through complaint-handling procedures. In that case， the monetary compensation （if there is any） will be paid by respondents from their annual budgets， which is hard to achieve.Therefore， compared with international arbitration， the scope of settlement under the complaint mechanism is limited， especially for financial issues. However， it may be possible for the parties to settle their disputes without making any payment to the investor， such as modifying the terms of a concession agreement or permit， removing obstacles to the current investment， or offering other monetary benefits like tax incentives to cover the loss of investors.
3.3 The improvements of the complaint handling mechanism and the possibility of promoting it in ISDS
Considering the above-mentioned defects， several improvements should be applied to the complaint handling mechanism to make it a better choice in the domestic ISDS context and even a feasible option to be promoted regionally or internationally.First of all， the complaint-handling agency should be financially independent of the local government and directly led by the central complaint-handling agency in the MOFCOM to enhance investors’ confidence in the impartiality and independence of the agency. Second， more detailed guidance should be issued so that local complaint-handling agencies can follow it. Third， the complaint-handling agency can cooperate with a Chinese-based arbitration institution， such as China International Economic and Trade Arbitration Commission （CIETAC） or the Beijing Arbitration Centre （BAC）， to constitute a roster of experts as candidates for the experts complaint-handling mechanism. Two parties should be allowed to appoint experts as advisors during the complaint-handling procedures. Last， the complaint-handling process should be confidential. However， confidentiality does not extend to the fact that a complaint-handling process is taking place or to the outcome of the complaint if significant public interest is involved in the settlement agreement unless permitted by laws or agreed explicitly by parties.Moreover， there are several opportunities for China to promote its complaint mechanism regionally or even internationally：The Belt and Road Initiative might provide the first excellent opportunity. China’s “One Belt， One Road” （OBOR） initiative is a development strategy put forward by President Xi Jinping and started by the Chinese government in 2013. It refers to the New Silk Road Economic Belt， which links China with Europe through Central and Western Asia， and the 21st Century Maritime Silk Road， which connects China with Southeast Asian countries， Africa， and Europe. The heart of the OBOR is to promote transnational infrastructure investment in the countries along the route. While the OBOR initiative witnessed colossal success and prosperity for the infrastructure investment， there needs to be more efficient universal dispute resolution mechanisms， particularly for investor-state disputes， in the OBOR regime currently. Although China set up two China International Commercial Courts （CICC） in Xi’an and Shenzhen to deal with disputes involving the “Silk Economic Belt” and “Maritime Silk Road”， respectively， the jurisdiction of the two courts is limited to commercial disputes. The complaint mechanism can be applied as a valuable approach to resolve the investor-state disputes that arise from OBOR-related investments and fill the gap. While it might be argued that ISA can settle the investor-state disputes involving OBOR-related investment since most of the countries that participated in OBOR are contracting States of the ICSID Convention， The paper submits that it is rare for those countries to consent to the jurisdiction of ICSID tribunals in their BITs. Besides， applying the ICSID Convention to the disputes involving the countries that participated in OBOR is limited by several requirements， such as fork-on-the-road provisions， exhaustion of local remedies， etc.The cooling-off period provisions stipulated in BITs might provide another opportunity to utilize the complaint-handling mechanism. A cooling-off period provision requires disputing parties to use amicable means of dispute settlement for a specified period before initiating international arbitration. These amicable means may include negotiation， conciliation， and mediation but do not include local administrative or judicial remedies. The cooling-off period provision is widely used in Chinese BITs throughout its BIT-making history. The overwhelming majority of the first-generation Chinese BITs include provisions that oblige disputing parties to seek an amicable settlement of disputes for six months as a pre-condition to resort to international arbitration. Similar provisions are also found in the second， third， and fourth generations of Chinese BITs. China’s consistent BIT-making practice concerning the cooling-off period in China provides an opportunity to promote the complaint mechanism to foreign investors from the contracting parties who can resort to the complaint mechanism during the cooling-off period and fulfill the pre-ISA requirement of negotiation or conciliation.
Besides， China is not the only practitioner of the cooling-off period. A study estimates that some 90% of the treaties with ISDS provisions require that the investor respect a cooling-off period before bringing a claim. For instance， treaties concluded by Mexico and the United States require the cooling-off period exclusively before international arbitration. Similar provisions are also contained in regional investment agreements. For example， the ASEAN Comprehensive Investment Agreement （ACIA） signed in 2009 by all ASEAN Member States requires that “in the event of a dispute between an investor and a member State ACIA parties must first seek a resolution of the dispute by consultation and negotiation through a written request delivered by the investor to the host State.” In some treaties and for some arbitral tribunals， the ‘cooling-off’ provision is a mere procedural condition precedent to arbitration with a prescribed time limit. However， if the complaint handling mechanism is utilized in the cooling-off period， it is more helpful to resolve the dispute substantively and fulfill the purpose of ‘cooling-off’ provisions. The widely used ‘cooling-off’ provisions in investment treaties make it easier to promote the complaint mechanism regional or even international.
Considering the international， regional， and domestic backgrounds， we could better understand China’s motivation to embrace a negotiation model in its domestic ISDS approaches.
4.1 Motivations to embrace a negotiation model in local ISDS mechanisms
（1） Criticism of ISDS’ Legitimacy and Proposals for Reform
The last decade has witnessed a series of criticism from States， non-governmental organizations， and scholars of international investment law’s （IIL’s） rules and procedures， with much of the criticism centering on the legitimacy of IIL as well as the ISDS regime. The United Nations Commission on International Trade Law （UNCITRAL） Working Group Ⅲ on Investor-State Settlement Reform （WG Ⅲ） identified three broad categories of criticism， including the concerns relating to the lack of consistency， coherence， predictability， and correctness of arbitral decisions， concerns relating to arbitrators and decision-makers， Furthermore， concerns relating to the cost and duration of ISDS cases. Although the legitimacy of the ISDS regime has come under fire， States have yet to converge on which reforms to pursue among the three main proposals for ISDS reform， which are incremental reform， systematic reform， and paradigm shift reform， respectively. The ongoing crisis of ISDS is an essential motivation for two reasons. First， it spurs China to develop its dispute prevention mechanism to resolve investment disputes domestically and reduce the risk of being sued in ISA. To further manage investment disputes and reduce the potential risk， China has to resolve them substantively through its domestic ISDS means. However， the administrative review provisions usually serve merely as procedure requirements and cannot resolve disputes substantively. Therefore， the complaint handling mechanism is advocated to replay the former to manage investment disputes. Second， the ISDS crisis also gives China an excellent opportunity to join ISDS reform. It is easy to find that China advocates ADR measures and pre-arbitration consultation procedures in its submission to the ISDS reform. Promoting the administrative agencies to change their roles from adjudicators to negotiators in ISDS aligns with China’s position on ISDS reform.
（2） An Asian culture advocating social harmony
Another underlying motivation for the trend is Asian culture. Asian culture attaches great importance to social harmony and is influential to Asian countries and their choices to dispute settlement measures. Generally， Asian countries favor settling their disputes in a less adversarial， cooperative， and face-saving way. China was one of the first contracting parties to the Singapore Mediation Convention. Observers contend that the speed with which the Chinese government signed the Singapore Mediation Convention is evidence that mediation “fits” with Chinese notions of restoring “harmony” in disputes. Another example is the means of dispute resolution chosen by the Association of Southeast Asian Nations （ASEAN）. It reached an agreement on dispute settlement under which ASEAN States are obliged to settle their disputes- arising between each other through friendly negotiations. China’s proposal for ISDS reform clearly stated that a more compelling investment conciliation mechanism should be actively explored in the context of ISDS reform， which emphasizes the value of harmony and can offer the host country and investors a high degree of flexibility and autonomy. As evidenced by the speed with which China signed the Singapore Mediation Convention and the proposals made by China in ISDS reform， China embraces the notion of “harmony” and values ADR means. The concept of “harmony” in Asian culture can be further divided into three core themes：Confucianism， collective inclination， and prevalence of face concerns. Collectivism emphasizes the interest of the group and the aversion to conflict， while face-saving concerns involve preserving respect， avoiding shame， and maintaining harmony and good relations.The new trend of China’s domestic ISDS is interrelated and motivated by its harmony preference and conflict aversion. The complaint-handling mechanism becomes a better choice for China to manage its investment disputes than an administrative review because it helps maintain long-term relationships and save the face of administrative organs through its confidential procedures.
（3） National goal to establish a diversified dispute resolution mechanism
Last but not least， China’s national goal to establish a diversified dispute resolution mechanism （DDRM） motivated the change in domestic ISDS. In 2014， the “Decision of the Communist Party of China （CPC） Central Committee on Major Issues About Comprehensively Promoting the Rule of Law” points out that China shall “improve the mechanism for preventing and resolving social conflicts and disputes， and improve its diversified dispute resolution mechanisms for mediation， arbitration， administrative adjudication， administrative review， and litigation， which are interconnected and coordinated.” The DDRM refers to the dispute resolution system composed of various， co-existing， and coordinating dispute resolution methods， procedures， or regimes （including litigation and non-litigation）. It emphasizes the coordination of litigation and non-litigation methods， the application of comprehensive methods to resolve disputes， and the utilization of multiple-level approaches to prevent and de-escalate disputes. China’s ambition to promote the diversified dispute resolution mechanism is evidenced by the “Report on the Reform of Diversified Dispute Resolution Mechanism of Chinese Courts （2015-2020）” made by the Chinese Supreme People’s Court in 2021， which summarized the progress made by China’s Court system during the five years concerning the diversified dispute resolution mechanism， including the establishment of national-wide conciliation platform and the high usage of conciliation in civil cases（65.04% in 2020）. Further evidence is found in the “Opinions on the Establishment of the Belt and Road International Commercial Dispute Settlement Mechanism and Institutions” issued by China’s State Council and CCP in 2018， which suggested establishing a DDRM to resolve the international commercial disputes arising from the Belt and Road Initiative.The newly established national-wide complaint handling mechanism is a product of the diversified dispute resolution initiative， which advocates conciliation rather than adjudication. More importantly， the core of DDRM is to resolve disputes substantively， and the trend from the adjudication model to the negotiation model promotes a substantive settlement of investment disputes.In conclusion， the global， regional， and domestic backgrounds of the new trend are interrelated， which draws a complete picture of China’s motivations.4.2 Inspiration to the future ISDS reformChina’s unique domestic experience can also provide the following inspiration for future ISDS reform.
（1） The emerging trend of host states’ interest in DPMMs
The trend in domestic ISDS from an adjudication model to a negotiation one reflects the interest of host States to prevent investment disputes before they escalate rather than submit them to adjudicators， such as national judges or international arbitrators. More specifically， it reveals that host states increasingly emphasize dispute prevention and management mechanisms （DPMMs）.According to the definition provided by Roberto Echandi， dispute prevention policies refer to “any course of action adopted and pursued by one or more governments specifically aimed at preventing investor-state conflicts arising under IIAs from escalating into full-blown disputes under those agreements” . The conflict management mechanisms refer to “concrete procedural mechanisms， established either by law or contract， to enable investors and host States to early manage investment-related conflicts and prevent dispute escalation” . Compared with ISA， administrative review， and administrative litigation， which resolve disputes after they arise， the complaint handling mechanism is a conflict management mechanism that emphasizes the prevention and de-escalation of potential disputes. Thus， the new trend in domestic ISDS indicates that China is now paying more attention to DPMMs. Such a trend is also evidenced by the emerging DPMMs in other countries， such as Peru’s Special Commission established under its State System of Coordination and Defense in International Investment Disputes， Korea’s investment ombudspersons， Brazil’s ombudsman， Colombia’s high-level inter-ministerial bodies to develop and coordinate measures to prevent and manage investment disputes， And the complaint committee in Egypt.
（2） A new approach to ISDS reform
As mentioned above， there is an increasing criticism of the drawbacks of ISA as a mechanism for settling foreign investment disputes. Among the three principal paths of ISDS reform identified by the WGⅢ and then summarised by scholars， another proposed path should be noted is the path to reforming the ISDS system by the use of methods of alternative dispute resolution as well as dispute prevention policies and conflict management mechanisms， which enable investors and governments to manage foreign investment conflicts before they escalate into disputes under international investment agreements.
Therefore， China’s experience in adjusting domestic ISDS might inspire ISDS reform. The incremental and systematic ISDS reform proposals focus either on the reform of the ISA procedure or the establishment of an investment court with an appellate mechanism， paying little attention to developing an effective， non-adversarial， preventive regime that fits the interests of the host States that want to attract foreign investors and prevention disputes as well. Hence， the shift of Chinese administrative agencies from adjudicators to negotiators in investor-state disputes could provide a new idea for the current ISDS reform and call for more attention to developing a viable dispute management regime rather than a mere dispute settlement.
Besides， dispute prevention policies and conflict management mechanisms have been applied and advocated in several countries such as Peru， Korea， etc.， as introduced in the last sub-section. In Peru， a special commission was established by its royal decree and is constituted of members from the Ministry of Finance， Ministry of Foreign Affairs， Ministry of Justice， and private investment promotion commission. The functions of the special commission include gathering information on investment disputes， coordinating disputes involving multiple government departments， and disclosing contracts， protocols， and agreements with investment dispute resolution provisions. In Korea， the investment ombudspersons are nominated by the Minister of Commerce Department and appointed by the Korean president to gather investment information， suggest investment promotion policies， and assist in coordinating complaints of foreign-funded enterprises. The practices in investment dispute management in those countries can offer more experience to the new path of ISDS reform.
（3） A bottom-up approach to formulate investment policies
Last， the trend also implies that the Chinese government is embracing a more bottom-up approach to formulating and revising its policies on foreign investment. As a collaborator， the complaint handling agency not only deals with the complaints submitted by foreign investors but also hears investors’ suggestions concerning China’s investment environment and regulations. The complaint-handing mechanism provides a communication channel for investors to interact with regulators， making feature regulations more reasonable and the regulatory change more acceptable to investors. This might inspire other host States about how to balance the State’s interest in regulation and investors’ interest in a stable investment environment.
To conclude， this article argues that China’s domestic ISDS mechanism is gradually shifting from an adjudication to a negotiation model. More specifically， the foreign investment complaint handling mechanism attracts more attention in solving investor investment disputes， while administrative review gradually loses its significance. Several motivations for the trend include the opportunity provided by ISDS reform， the Asian culture advocating harmony， and China’s national goal to establish a diversified dispute resolution mechanism. It reveals China’s instance of preventing and de-escalating investor-state disputes and reflects its national interests as a capital-importing and capital-exporting state. China’s unique domestic experience also inspires future ISDS reform. It indicates an emerging trend of host states’ interest in DPMMs and presents a feasible bottom-up approach to formulate investment policies.
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