Legitimacy Determination of EU Supply-chain Security Rules: Starting from the Bilateral Investment Treaties between China and EU Member States

Shen Wei; Chen Xu’anli

doi:doi:10.16538/j.cnki.jsufe.2024.03.010

Summary

The EU and its member states have formulated a large number of supply-chain security rules to restrict or prohibit foreign investments with the core purpose of guaranteeing supply-chain security in key areas. These rules also serve the international economic game to a certain extent and has become an instrumental system to suppress some countries. According to the bilateral investment treaties (BITs) between China and EU member states, except for individual cases, investors can request the arbitration tribunal to review the legality of EU supply-chain security rules and their application. The exercise of police powers by the EU and its member states based on security interests shall be in line with the BITs. Some EU supply-chain security rules violate substantive obligations such as national treatment, most-favored-nation treatment, and fair and equitable treatment, rendering them unlawful. The arbitration tribunal can usually apply expropriation provisions to provide investors with remedies. Some BITs include security and public order exceptions, but existing cases typically interpret these exception clauses restrictively. Therefore, it is challenging to exempt supply-chain security rules from liability through security and public order exceptions if they breach the substantive obligations in the BITs. Chinese investors investing in the EU should utilize the international investment arbitration mechanism to protect their legitimate rights and interests. The quasi-judicial review function of international investment arbitration should be fully utilized to encourage EU member states to standardize, rationalize, and non-discriminatory their application of supply-chain security rules . At the same time, China should be more involved in the development and enhancement of international investment law, promoting the creation of a new generation of investment rules that offer greater investment protection to investors.