Regulating the Corporate Governance of State-Owned Enterprises in Investment Arbitration

Abstract

The renaissance of sovereign investment is one of the defining economic trends of the 21st Century. While many States have benefitted, and continue to benefit, from an influx of state- backed foreign investment, this embrace is not without its hesitancies. Host States are particularly concerned that state-owned enterprises (SOEs) pursue non-commercial policy objectives, maintain lower levels of transparency than their private counterparts, and operate with inferior standards of responsible business conduct. In response, domestic regulators have enacted a series of countermeasures for SOE investment, including requirements that such enterprises must invest on a ‘commercial basis’. However, the regulation of foreign investors does not occur in a regulatory vacuum. States are bound by obligations contained in international investment treaties. This article examines whether regulations targeting the corporate governance of SOEs comply with the substantive investment protections of investment law.

Keywords: nvestment arbitration, state-owned enterprises, Chinese investment, corporate governance, national security, competitive neutrality, bilateral investment treaties