Shifting policies — the standing worry of foreign investors. The Vietnam–China bilateral investment treaty (BIT), signed on 02/12/1992, provides a layer of protection above domestic law, including the right to sue the state in international arbitration (ISDS). This article analyses that shield.
1. What is a BIT? How does it differ from a DTA?
- BIT: an investment protection treaty — between two states;
- DTA: a tax treaty — avoiding double taxation;
- Difference: the BIT protects assets — the DTA only handles tax;
- Complement: both needed — not substitutes;
- Vietnam–China: having both BIT and DTA — two layers;
- Understand correctly: the DTA doesn’t shield — against expropriation or discrimination.
2. The Vietnam–China BIT: overview
- Signed: on 02/12/1992 — an old-generation BIT;
- Character: old generation — narrower than modern BITs;
- Status: still in force — (checked at the time of writing);
- Coverage: each country’s investors — investing in the other;
- Clause details: reading the original text — no inferences;
- Advice: international investment lawyers — analysing.
3. Core BIT protections
- Fair treatment: fair and equitable treatment — (qualitative frame);
- Non-discrimination: national and MFN treatment — per clauses;
- Expropriation: only for public purpose — with compensation;
- Compensation: adequate and timely — per BIT standards;
- Transfers: free transfer — of profits and capital;
- Read original: each clause — of the treaty text.
4. What is ISDS? Suing the state in international arbitration
- Concept: Investor-State Dispute Settlement — investors suing states;
- Different: not suing companies — suing governments;
- When: the state breaching the BIT — expropriation, discrimination;
- Where: international arbitration — ICSID or UNCITRAL (per the BIT);
- Result: compensation awards — enforceable;
- Details: reading the ISDS clause — of the Vietnam–China BIT.
5. When can Chinese investors use ISDS in Vietnam?
- Condition 1: being a Chinese investor — under the BIT’s definition;
- Condition 2: the investment — within protection scope;
- Condition 3: Vietnam breaching — BIT obligations;
- Negotiate first: usually required — talks before suing;
- Time limits: limitation periods — per clauses;
- Assess: ISDS lawyers — case by case.
6. When can Vietnamese investors use ISDS in China?
- Reverse: Vietnamese investors — investing in China;
- Similar: similar conditions — under the BIT;
- Reality: few public cases — (qualitative);
- Barriers: language, cost — suing in China;
- Strategy: structuring — to be able to use it;
- Advice: early — before disputes.
7. Old-generation vs new-generation BITs
- Old generation (1992): narrower scope — concise clauses;
- New generation: more detailed — balancing state rights;
- ACIA 2009: the ASEAN agreement — more comprehensive;
- Compare: reading in parallel — bilateral BIT and ACIA;
- Choose: which mechanism — more favourable;
- Lawyers: analysing — per situation.
8. ACIA: the ASEAN protection layer
- Treaty: ACIA 2009 — the ASEAN Comprehensive Investment Agreement;
- Members: the 10 ASEAN states — not including China;
- Note: China is not an ASEAN member — ACIA is ASEAN-only;
- Correction: Chinese investors can’t use ACIA — against Vietnam;
- Usable by: ASEAN investors — investing in Vietnam;
- Structure: via Singapore/Malaysia — enjoying ACIA.
9. Structuring investments for optimal protection
- Direct: China → Vietnam — enjoying the 1992 BIT;
- Via intermediary: China → Singapore → Vietnam — an extra layer;
- Singapore–Vietnam BIT: a newer generation — (to verify);
- Cost: complex structures — expensive;
- Tax: weighing tax — with protection;
- Advice: tax + investment lawyers — coordinating.
10. Vs only having a DTA: what does the BIT add?
- DTA: preferential tax rates — dividends, interest, royalties;
- BIT: against expropriation — without compensation;
- BIT: ISDS rights — the DTA lacks;
- Combined: DTA + BIT — comprehensive protection;
- Without BIT: only domestic law — and contracts;
- Assess: two layers — better than one.
11. Policy shifts: what does the BIT shield against?
- Withdrawing incentives: cutting promised — tax incentives;
- Expropriation: nationalisation — without compensation;
- Discrimination: worse treatment — than domestic firms;
- Transfer restrictions: blocking — profit transfers;
- Assess: each measure — whether it breaches the BIT;
- Not every: policy change — breaches it.
12. The ISDS process: general steps
- Step 1: negotiating — with the government;
- Step 2: dispute notice — in writing;
- Step 3: filing for arbitration — under the BIT’s clause;
- Step 4: constituting the tribunal — arbitrators;
- Step 5: hearing and award — compensation;
- Time: many years — major costs (qualitative).
13. ISDS costs and risks
- Cost: lawyers, arbitrators — very expensive;
- Time: lengthy — many years;
- Losing risk: losing costs — your own;
- Relations: affecting — relations with the host government;
- Funding: third-party funding — an option;
- Weigh: the dispute value — whether worthwhile.
14. Enforcing ISDS awards
- ICSID Convention: self-executing — among members;
- New York: commercial awards — enforcement;
- State assets: immunity — for some assets;
- Reality: negotiated enforcement — often;
- Details: depending on the mechanism — of the BIT;
- Advice: ISDS specialists.
15. BITs and investment contracts (IRC)
- Two layers: BIT + contract — in parallel;
- Contracts: specific commitments — incentives;
- BIT: the protection floor — minimum;
- Contract breach: not necessarily — a BIT breach;
- Clauses: stabilisation — in contracts;
- Combine: both — best protection.
16. Reviewing BITs before investing
- Read: the BIT text — Vietnam–China 1992;
- Scope: which investments — protected;
- Exceptions: excluded sectors — if any;
- ISDS: the conditions — procedures;
- Compare: other BITs — if structuring via third states;
- File: the analysis — in the project file.
17. Updates: a new BIT being negotiated?
- Picture: monitoring — upgrade negotiations;
- Trend: globally — BIT modernisation;
- Impact: a new BIT — may replace;
- Transition: sunset clauses — extended protection;
- Watch: updating — the picture;
- No speculation: using only — the current text.
18. Misconceptions about BITs
- Thinking DTA suffices: the DTA is only tax — no asset protection;
- Thinking BITs automatic: conditions must be met;
- Overlooking ACIA: mistaken — Chinese investors can’t use ACIA;
- Not reading originals: inferring — clauses;
- Waiting for disputes: learning only then — too late;
- DIY: ISDS is complex — specialists needed.
19. International investment protection checklist
- Vietnam–China BIT — read?
- Protection scope — investment covered?
- ISDS — conditions clear?
- Structure — optimised?
- DTA — combined?
- Lawyers — advised?
20. When policies shift: taking action
- Calm: assessing — the new measure;
- Dialogue: working — with authorities;
- Legal: BIT breached — analysing;
- Keep evidence: every document — decisions;
- Notify: the government — under the BIT;
- ISDS lawyers: at once — don’t delay.
21. Umbrella clauses: elevating contract breaches
- Concept: umbrella clauses — in some BITs;
- Effect: contract breaches — becoming treaty breaches;
- Check: whether the BIT — contains one;
- Read: the original text — carefully;
- Strategy: invoking — where available;
- Limits: tribunals differ — on scope.
22. Cooling-off periods in BITs
- Concept: mandatory negotiation — periods;
- Length: months — per the clause;
- Comply: observing — before filing;
- Evidence: documenting — negotiation efforts;
- Skip: risks — of skipping;
- Plan: calendaring — deadlines.
23. Sunset clauses: protection after termination
- Concept: survival — clauses;
- Length: years — of extended cover;
- Cover: existing investments — protected;
- Check: the BIT text — duration;
- Plan: investing before — termination;
- Advise: specialists — consulted.
24. Documenting the investment for BIT protection
- Records: investment records — complete;
- Approvals: government approvals — filed;
- Transfers: capital transfers — evidenced;
- Correspondence: official letters — kept;
- Timeline: chronologies — built;
- Ready: dispute-ready — files.
Contact us
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This article has been quality-reviewed by the FLAW AI Legal Council
