The Legal Framework of Eu-china Investment Relations: A Critical Appraisal (China and International Economic Law)

414 Pages·2005·1.84 MB·English

by  Wenhua Shan

THE LEGAL FRAMEWORK OF EU-CHINA INVESTMENT
RELATIONS
China and International Economic Law Series
Editors-in-General: Wenhua Shan, Qing Zhang and Xin Zhang
The Legal Framework of EU-China Investment Relations: A Critical
Appraisal Wenhua Shan
To Christy and Charlie
The Legal Framework of
EU-China Investment Relations
A Critical Appraisal
WENHUA SHAN
OXFORD AND PORTLAND, OREGON
2005
Published in North America (US and Canada) by
Hart Publishing
c/o International Specialized Book Services
920 NE 58th Avenue, Suite 300
Portland, OR 97213-3786
USA
Tel: [phone] or toll-free: (1) 800 944 6190
Fax: [phone]
Email: [email protected]
Website: www.isbs.com
© Wenhua Shan, 2005
Wenhua Shan has asserted his right under the Copyright, Designs and Patents Act
1988 to be identified as the author of this work.
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any mean, without the prior
permission of Hart Publishing, or as expressly permitted by law or under the terms
agreed with the appropriate reprographic rights organisation. Enquiries concerning
reproduction which may not be covered by the above should be addressed to Hart
Publishing at the address below.
Hart Publishing, Salter’s Boatyard, Folly Bridge, Abingdon Rd, Oxford, OX1 4LB
Telephone: [phone] Fax: [phone]
Email: [email protected]
Website: http//:www.hartpub.co.uk
British Library Cataloguing in Publication Data
Data Available
ISBN-13: 978-1-84113-391-4 (hardback)
ISBN-10: 1-84113-391-4 (hardback)
Typeset by Forewords, Oxford
Printed and bound in Great Britain by
TJ International, Padstow, Cornwall
Foreword
By Professor Sir Elihu Lauterpacht CBE QC
Thisisaremarkablebookonasubjectofgrowingimportance.Itdealswith
themannerandextenttowhichthoseoftheworld’smosttraditionalecono-
mies assembled in the European Union invest in the world’s most rapidly
expanding economy. China’s success in attracting foreign direct investment
(FDI)inthelastdecadeisunprecedented.In2003ithadbecomethelargest
FDIrecipientintheworld,outstrippingeventheUnitedStates.Threeyears
earlier the EU had already become the largest foreign investor in China, its
investment having increased more than twenty-five fold since 1986.
PreviousmajorstudiesoneconomicrelationsbetweentheEUandChina
havefocusedprincipallyontrade,ratherthaninvestment.Thepresentwork
fillsagapinresearchonthelawofEUinvestmentinChinabycomprehen-
sivelyexaminingthreerelevantareasoflaw,namely,internationalinvestment
law (including especially bilateral investment treaties), EU law and Chinese
law itself.
Thestudyiscriticalandconstructive:critical,forexample,ofsomeaspects
of the Chinese investment regime and the applicable international treaties;
constructive,forexample,initssuggestionsforreformandthedevelopment
of an improved legal framework for EU-China investment relations.
DrShan’sscholarlyworkwillbeofgreatvalueasaguidetoEUinvestors,
as an aid to China in its relations with those investors and as an academic
resourceforallwhoareinterestedinthisareaofincreasingsignificance.Heis
tobecongratulatedonhisimaginationanddedicationincollectingsomuch
materialthatisnoteasilygathered,onpresentingitinsuchlucidformandon
his perceptive and positive comments.
E Lauterpacht
Emeritus Director of the Lauterpacht Research Centre
for International Law
University of Cambridge
October 2004
v
Acknowledgements
AACCKKNNOOWWLLEEDDGGEEMMEENNTTSS
ThisbookisbasedonmysecondPhDdissertation,whichhasbeensubmitted
toandapprovedbytheUniversityofCambridge.Itisalsothemainoutcome
ofmyseven-yearresearchlifeinEnglandsinceSeptember1998whenIfirst
setfootonthisforeignland.AsIhavesaidelsewhere,whenonearrivesina
foreigncountry,itisratherlikebeginningasecondlife.Inmybrief‘second
life’,therehavebeenmanypersonsandmanyeventsthatIwillneverforget.
Yetitwouldnotbepossible,norwoulditbeappropriate,to listthemallhere.
However,Imusttakethisopportunitytoacknowledgethosewhohavehada
significant impact on my dissertation and subsequently this book.
Firstandforemost,Iwouldliketoexpressmydeepestappreciationtomy
supervisor and friend Mr. Daniel Bethlehem QC. Without his stimulating
guidanceandenduringsupportandencouragement,Iwouldhaveneverbeen
abletostartthisresearchproject,letalonecompleteit.Secondly,Iwouldlike
to express my deep gratitude to my College Contact, Professor Sir Elihu
Lauterpacht.Asaleadinginternationallawyer,SirElihasofferedmenotonly
insights into how to do research and how to write a dissertation, but also
fatherlyadviceandcarerelatingtobothmycareerandmyfamily.Iwillnever
forgetthatthefirstbouquetofflowersthatmysonCharlesreceivedwasfrom
Sir Eli and his wife Lady Lauterpacht,soon after Charlie was born in Cam-
bridge. Sir Eli has also kindly written a Foreword for this book.
I would also like to thank Professor Alan Dashwood who supported my
applicationforaPhDstudentshipanddirectedmystudies,particularlyinEU
law,duringmyfirstyear.IwouldalsoliketoshowmyappreciationtoProfes-
sor Michael Palmer, Professor Kevin Gray, Professor James Crawford, Mr.
Nicholas Sinclair-Brown, Professor Vincent Johnson, Professor Simon
Deakin,ProfessorHANDepeiandProfessorLIXueling,whohavegivenme
importantandgeneroussupportinthePhDprojectandinmycareer.Special
acknowledgement should also go to Miss Noelle L’Hommedieu. Her help
with regard to both linguistic and academic matters relating to the disser-
tation was invaluable.
I want to express my appreciation to my lovely college, Trinity College,
which has provided a comfortable home for me and my family, a home in
boththephysicalandthespiritualsense.Ithankher,inparticular,foraward-
ingmetheExternalResearchStudentship, withoutwhichIwouldhavenot
vi
Acknowledgements vii
beenabletoconductthisresearch.IwouldlikeespeciallytothankProfessor
AmartyaSen,Dr.ChristopherThomasMorley,Dr.JeanKhalfa,Mr.Alexan-
derPaulSimm,Mr.DavidColeman,Mrs.HazelFelton,Mrs.HélèneSutton
and Ms. Sheila Roberts, for their care and support. I also acknowledge
respectfullytheCommitteeofVice-ChancellorsandPrincipalsoftheUniver-
sitiesoftheUnitedKingdom(CVCP,nowUniversitiesUK)forawardingme
anOverseasResearchStudentship(ORS)andtheCambridgeOverseasTrust
(COT)foranHonoraryCOTScholarshipandaFellowshipoftheCambridge
Overseas Society.
IwouldliketothanktheFacultyofLaw,theLauterpachtResearchCentre
for International Law (LRCIL) and the Centre for European Legal Studies
(CELS) for their world class scholarship environment (and free lunches!). I
am particularlygratefulto Miss AlisonHirst and Dr.Matt Kramerfor han-
dlingvariousofficialmattersinrelationtotheDegreeCommittee.Ithankthe
Squire Law Library staff for being patient and considerate when I left the
library late in the evening, which was not rare. I am also grateful for the
friendshipandhelpfromstaffoftheLRCIL,particularlyMrs.AnneSkinner,
Mrs. Glen Howard, Miss Cairo Robb, Mr. Edward Helgeson, Dr. Roger
O’Keefe,Dr.JohnBarker,Dr.SandraBunn-Livingstone,Dr.JoannaGomula,
Ms. Karen Lee and Miss Shelly Brereton.
Myresearch,particularlythefieldwork,hasreceivedsupportfrommany
people outside the University. I would like to thank Lord Brittan for kindly
referring my queries to relevant officials of the European Commission.
Dr. Amanda Joan Perry kindly helped in designing the Questionnaire.
AlthoughforreasonsofconfidentialityIcannotidentifytheintervieweesand
participants in the Questionnaire, I am most grateful for their cooperation
and support. I also thank Oxford Brookes University, particularlyProfessor
SusanMcRae,ProfessorDerekElsom,ProfessorDianaWoodhouse,Profes-
sorPeterEdge,ProfessorMeryllDeanandDr.LucyVickers,andtheEastAsia
Institute of the National University of Singapore, particularly Professor
WANGGungwuandProfessorJohnWONG,fortheirsupportinthewriting-
up of this book.
IthankMr.RichardHartofHartPublishingandhisteamforbeingvery
supportiveduringtheproductionofthisbook,aswellasthisseries.Portions
of some chapters of this book have appeared in the Journal of World Trade
(Vol.34No.5),theChineseJournalofInternationalLaw(Vol.1,No.2),the
JournalofWorldInvestment(Vol.2No.3andVol.3No.2),theManchester
Journal of International Economic Law (Vol. 2, No. 2) and the Journal of
World Investment and Trade (Vol. 6, No. 2). I thank these journals for their
kind permission.
Almostfinally,IwanttothankmymentorsandfriendsinCambridgeand
theUK,particularlyfortheirsupport,helpandunderstandingwhenIserved
asthePresidentofboththeCambridgeChineseStudentsandScholarsAsso-
ciation (CSSA-CAM) and the United Kingdom Chinese Law Association
viii Acknowledgements
(UKCLA). I especially thank His Excellency Ambassador MA Zhengang,
former Chinese Ambassador to the UK, and many other officials from
theChineseEmbassyfortheirinvaluablesupport.IalsothankLadyMirrlees,
Dr. YUAN Boping, Mr. YE Liang, Mr. WANG Shiyun, Mr. LI Xihe, Mr.
AlbertShuyuanLEE,Mr.JIANGWeibin,Mr.ZENGJianqiu,Ms.JINLimin,
Ms.CAOLi,Mr.Mon-HanTsai,Ms.CarolineFoster,Mr.RalphWilde,Ms.
Rania Katsirea and Ms. Lucky Huang, for their friendship and care.
Last but not least, my biggest thank you must go to my family. I deeply
appreciatethe sacrifices my wife Christy Xin Wang has made in supporting
my research. Although my son Charlie is too young to understand, he has
been one of the most important sources of strength and happiness, particu-
larly during difficult times. I would like to express my gratitude to my
mother-in-lawwhohasbeenagreathelptomeandmyfamily,particularlyin
lookingafterCharlie.Imustalsothankmyparentsandgrandparents,inpar-
ticular,mygrandfather,whofirstinspiredmeandledmeintothewonderful
intellectual world.
Wenhua Shan
Oxford, April 2005
Contents
CCOONNTTEENNTTSS
Foreword by Professor Sir Elihu Lauterpacht CBE QC v
Acknowledgements vi
List of Abbreviations xix
List of Tables xxii
List of Charts xxiv
List of Cases xxvi
List of Treaties and other International Legal Instruments xxviii
List of Chinese and EC Legislation xxxiv
Introduction 1
I European Investment in China: Past History and Present
Situation 5
I.1 Nationalisation (1949–1957) 7
I.2 Exclusion (1958–1977) 10
I.3 Resumption (1978–1992) 10
I.4 Rapid Increase (1993–1999) 13
I.5 Further Development (2000–) 14
II The Role of Law in the Development of EU Investment in
China 17
III Existing Research on the Law of EU Investment in China 19
IV This Book: Purposes, Scope and Research Methods 20
IV.1 Purposes 20
IV.2 Structure 20
IV.3 Definitions 21
IV.4 Research Methods 22
IV.4.1 The Questionnaire 23
IV.4.2 The Interviews 26
ix
x Contents
Part I The Current Legal Framework of EU Investment in China:
The Components 29
1 Chinese Law on Inward Investment 31
1.1 The ‘Opening-up’ Policy and Foreign Investment Law
Making in China 31
1.2 The Current Chinese Foreign Investment Law System 33
1.2.1 Composition of the Current Chinese Foreign
Investment Law System 33
1.2.1.1 Constitutional Provisions 33
1.2.1.2 National Laws and Regulations 34
1.2.1.3 Sub-National Regulations 35
1.2.2 The Features of the Current Chinese
Foreign Investment Law System 37
1.3 The Principal Forms of Investment 39
1.3.1 Equity Joint Venture (EJV) 39
1.3.2 Contractual Joint Venture (CJV) 40
1.3.3 Wholly Foreign Owned Enterprise (WFE) 41
1.3.4 Joint Exploitation (JE) 42
1.3.5 New Forms of Foreign Investment 43
1.3.5.1 Build-Operate-Transfer (BOT) 43
1.3.5.2 Stock Company with Foreign
Investment (SCFI) 44
1.3.5.3 Holding Companies with Foreign
Investment (HCFI) 45
1.3.5.4 Merger and Acquisition (M&A) 45
1.4 Recent Amendments to Major FDI Laws in China 46
1.4.1 Background to the Amendment 47
1.4.2 The Changed Rules 48
1.4.3 An Evaluation of the Amendments 50
1.5 Further Reform of the Chinese FDI Law System 51
1.5.1 A Unified FDI Code 51
1.5.2 A Universally Applied Company Law 53
1.5.3 An FDI Code plus a Universally Applied
Company Law 53
1.6 Conclusion 54
2 EU Law on Outward Investment 55
2.1 The EU’s External Investment Competence 55
2.1.1 The Existence of EC’s External Investment
Competence 56
2.1.1.1 Express Competence 57