East Asia, Investment, and International Law: Distinctive or Convergent?

Full text

East Asia, Investment, and International Law:
Distinctive or Convergent?
Beth A. Simmons
The Korean Journal of International Studies Vol.13-3 (December 2015), 461-487.
http://dx.doi.org/10.14731/kjis.2015.12.13.3.461
2015 The Korean Association of International Studies
*The author(bsimmons@wcfia.harvard.edu) is Clarence Dillon Professor of International
Relations at Harvard University. She received her PhD from Harvard University, and has taught at
Duke University and the University of California Berkeley as well as at Harvard. Her research inter-
ests include international investment law, international criminal law, international human rights, and
international political economy. The author wishes to thank Boram Lee and Alexander Noonan for
research and other assistance with the manuscript.
International investment agreements (IIAs) are the primary legal instruments
designed to protect and encourage foreign direct investment world-wide. This
article argues that Asian countries have used IIAs just as much as have other
regions of the world to attract foreign direct investment, but that their pattern
of agreement provisions is somewhat distinctive. States in East and Southeast
Asia have tended to enter into agreements that strike a balance somewhat
more favorable to host states than to foreign firms, at least when compared to
the rest of the world. This may be due to high growth in the region, which tends
to strengthen host states’ bargaining power, and the availability of a wider
range of macroeconomic tools available to many governments in the region to
stimulate growth. A better bargaining position leads to less constraining IIAs,
which may in turn help to account for the relative dearth of investment disputes
involving East and Southeast Asian states, since weaker protections give for-
eign investors slimmer grounds to dispute their treatment. There is some evi-
dence, however, that the terms of Asian IIAs are beginning to converge with
investment agreements elsewhere in the world.
Key Words: international investment, international law, bilateral investment
treaties, foreign direct investment
nternational investment agreements (IIAs) are the primary legal instruments
designed to protect and encourage foreign direct investment world-wide.
Global flows of foreign direct investment (FDI) - defined as “an investment made
by a resident of one economy in another economy...of a long term nature or of
‘lasting interest’”(UNCTAD 2009, 35) - are estimated to have reached $1.6 tril-
lion in 2014 and the world-wide stock of FDI in 2013 is estimated at about $25.5
trillion. Asia attracts more foreign investment than anywhere else in the world:
nearly 30 percent of global FDI inflows, according to UNCTAD’s World
Investment Report 2014.1Total inflows to “developing Asia” (excluding West
I

The Korean Journal of International Studies 13-3
462
Asia) amounted to $382 billion in 2013, approximately a quarter of the world’s
total FDI.2Figure 1 illustrates the explosive growth in net FDI inflows for select
Asian economies. In particular, it shows the dips and recoveries in FDI flows asso-
ciated with the Financial Crisis of 1997 and the Great Recession of 2007-2009.
FDI has been critical to the growth and development of Asia as a whole. In the
1990s, some studies suggest foreign investments accounted for as much as 20
percent of GDP growth in five ASEAN states.3A recent report by the Asia
Development Bank estimates that about half of China’s growth in the 2000s was
due to exports and FDI.4Throughout the region, FDI has been critical to supply
chain development, trade intensification, and strong stable growth.
Foreign direct investment flows depend on many factors, but one of the most
important appears to be the quality of governing and regulatory institutions in the
host country.5States world-wide have tried hard to attract foreign capital invest-
1See World Bank (2014). Accessed at http://unctad.org/en/PublicationsLibrary/
wir2014_overview_en.pdf (July 10, 2015).
2See IMF (2014, 21). Accessed at http://www.imf.org/external/pubs/ft/reo/2014/apd/eng/
areo0 414.pdf (July 12, 2015).
3See Fan and Dickie (2003). Accessed at http://www.jstor.org/stable/25773639?seq=1#page_
scan_tab_contents (July 12,2015).
4See Xing and Pradhananga (2013). Accessed at http://www.adb.org/sites/default/files/publi-
cation/156282/adbi-wp427.pdf (July 9, 2015).
Figure 1. FDI Net Inflows, select Asian countries
Source: World Bank, World Development Indicators

East Asia, Investment, and International Law
463
ments by reforming institutions, strengthening the rule of law, and improving the
transparency of their regulatory systems. One of the most observable moves they
can make is to commit to international treaties to encourage and protect foreign
investments within their jurisdiction. The growing popularity of IIAs world-wide
can be understood as a transparent and credible attempt to assure investors that
their investment are safe in the states that sign such agreements. But criticism of
these agreements is on the rise. Some people argue states have given away impor-
tant prerogatives in the interest of protecting investors’ profits (Guzman 1998).
This article is about how Asia - East and Southeast Asia in particular - have
engaged the legal regime for the protection of foreign investment. The geograph-
ic focus is on East and Southeast Asia; it excludes for the most part South Asia as
well as Australia and New Zealand, and deals with Pacific Islands only in passing.
Substantively, the focus is on agreements designed to protect foreign direct
investment, not only by defining investors’ rights but also often by allowing pri-
vate investors to sue their host states via investor-state arbitration (ISA), should
a dispute arise. The focus is on public agreements (usually treaties) between
states, although private investors also often enter into specific contracts with their
hosts and other domestic entities in host countries as well. This legal regime to
protect private investors vis-
｀
a-vis their state hosts grew out of customary interna-
tional law in the nineteenth century. Lately, legal protections have accelerated
through a series of bilateral treaties championed by (largely western) actors using
familiar western forms of law: legally binding treaties, investor-state arbitration,
monetary and other damages for losses stemming from contract violation, etc.
Asia’s relationship with international investment law has been somewhat
ambivalent. On the one hand, the region has grown quite dependent on foreign
investment for its growth and prosperity. There appear to be strong pressures for
states to compete for international capital by adopting global standards and prac-
tices for its establishment and protection. The spread of bilateral investment
treaties (BITs) around the world is perhaps the most dramatic example of global
policy diffusion in this area (Elkins, Guzman and Simmons 2006). Several Asian
states - China, most enthusiastically - have apparently embraced BITs and other
IIAs in recent years. On the other hand, volumes have been written about Asian
states’ distinctive approaches to international law, their reluctance to enter bind-
ing international agreements, and their aversion to formalized dispute settlement
in particular.6The region as a whole still tends to be among the most restrictive
5See IMF (2014), Table 1.4.1. Accessed at http://www.imf.org/external/pubs/ft/
reo/2014/apd/eng/areo0414.pdf (July 10, 2015).
6See the discussion in Kahler (2000).

when it comes to FDI entry (Pekkanen 2012). And even though many states in the
region have negotiated the legal tools to do so, Asian states and firms seem less
interested in settling investment disputes through the “time-honored” practice of
litigation, which has become so common elsewhere in the world.
This article argues that there is something distinctive about the Asian experi-
ence with the international legal regime to protect investments. But it is not a
story of distinctive Asian culture or the incompatibility with Asian values, legal
systems or institutions. Rather, I locate Asia’s experience with the international
investment regime in more proximate constraints and opportunities presented
by the political economy. Most countries in the developing world negotiated IIAs
from a position of economic weakness; Asia’s high growth has placed most states
in the region in a much better bargaining position than states in emerging
Europe, Latin America or Africa have been. Along with the power of China to
demand important protections for state prerogatives in IIAs, this helps to explain
why investment agreements involving Asian states are somewhat less favorable
to private actors vis-
｀
a-vis public ones, compared to the rest of the world. This may
also shed light on the relative dearth of formally disputed cases: weaker agree-
ments give foreign investors slimmer grounds to dispute their treatment. Many
states in the region have been able to drive harder bargains with foreign investors,
which has reduced private litigation pressure and avoided backlash such as has
been experienced in many parts of the world. While I do not claim that this is the
only explanation for distinctive IIA patterns in Asia, it contributes to an under-
standing of how and why the regime operates a bit differently in this part of the
world than elsewhere.
The rest of this article is organized as follows. The first section provides some
background on the international investment regime, characterizing it as a bargain
between states with interests to attract capital on the one hand, but to preserve
their sovereign prerogatives vis-
｀
a-vis capitalists on the other. World-wide, I
argue, states in a weak bargaining position have had to compete fiercely with oth-
ers to attract capital, and have tended to make significant concessions to investors
over the past few decades along the way. The second section discusses the ways
in which the Asian experience may have been different from this global narrative.
States in the region have embraced IIAs, but in general these have not been as lav-
ishly favorable to investors as has been the case elsewhere. One reason may be
that in contrast to the rest of the world, Asian states enter into IIAs during peri-
ods of much higher growth than have other areas of the developing world. The
third section demonstrates that while Asian states and firms have participated in
formal investor-state dispute settlement, they have done so much less than one
would expect compared to the rest of the world. The fourth section considers
The Korean Journal of International Studies 13-3
464

alternative explanations for this distinctive Asian experience. Many factors are
undoubtedly at play, but I conclude that culture is not the only, or even the most
convincing, possibility. Bargaining strength related to economic growth and a
greater range of policy alternatives plays an important role as well.
BACKGROUND: THE INTERNATIONAL INVESTMENT REGIME
The “international investment regime” refers to a welter of rules whose general
purpose is to promote and protect direct investments by nationals of one state
within the jurisdiction of another.7These rules are quite decentralized, even
sometimes incoherent. They grew out of customary international law developed
in the nineteenth century by the major capital-exporting countries, and reflect the
principle that no government is entitled to expropriate private property without
prompt, adequate, and effective compensation.8For decades, these rules
remained in the form of customary law, but by the late 1950s risks of expropria-
tion encouraged some capital-exporting states to develop explicit treaties with
host states to protect their nationals’ investment abroad. Initially, such agree-
ments were bilateral and focused explicitly on investment protection. A few bilat-
eral investment treaties (BITs) were negotiated in the 1960s and 1970s, but these
agreements began to diffuse dramatically in the 1980s and especially the 1990s.
Investment protection provisions began to pop up in trade and regional agree-
ments from the 1990s. In recent years about a third of FTAs reported to the WTO
have some kind of investment provision (Alschner 2014). Once almost complete-
ly bilateral, recently there has been a proliferation of regional investment agree-
ments. For example, the Lisbon Treaty gives the European Union competence
over foreign direct investment issues with foreign entities, and now it into enters
“bilateral” negotiations as a single unit. ASEAN is now said to have achieved a
“comprehensive” approach to investment promotion and protection along the
lines of “best practices” in international law, although it is not completely clear
East Asia, Investment, and International Law
465
7For an explicit application of the regimes concept to international investment law, see
Salacuse(2010).
8The basic premise was reflected in customary international law of the time; no government was
entitled to expropriate private property, for whatever purpose, without providing prompt, adequate,
and effective payment. See then U.S. Secretary of State Cordell Hull’s note to the Mexican Minister of
Foreign Affairs during the 1938 dispute over land expropriations, reprinted in Green H. Hackworth’s
Digest of International Law, vol. 3, sec. 228 (1942). The rule itself predates Hull’s statement, and it
was restated in various decisions from the early part of the twentieth century. See Concerning the
Factory at Chorzow (Ger. v. Pol.), 1926?29 P.C.I.L. (ser. A), Nos. 7, 9, 17, 19; Norwegian Shipowners
Claims Arbitration (U.S. v. Nor.) 1 Rep. Int’l Arb. Awards 307 (1922).

how this “Comprehensive Investment Agreement” accords with existing BIT
obligations.9Similarly, the WTO now recognizes a long list of regional and pref-
erential trade agreements. However, many agreements, including Asian FTAs,
are not yet even reported to the WTO.10
The international rules governing FDI are much more decentralized overall
than those for international trade. There is no WTO for investment. Historically,
capital exporting states have not been able to agree on multilateral treaty provi-
sions among themselves, and certainly not with developing countries. Twice in
modern history (in discussions of the International Trade Organization in 1947
and the Multilateral Agreement on Investment in 1995-98), notable efforts were
made to multilateralize the international investment regime, and both failed.
Even the GATT’s Uruguay Round (1986-94), noted for its sweeping accomplish-
ments codified in fifty major new agreements, touched on investment only in a
relatively minor way.11 By the end of the Uruguay Round, attention to FDI
amounted to little more than a patchwork of international rules (Kurtz 2003,
723). A decade later, global agreement on investment had been virtually removed
from the agenda of WTO negotiations, largely because of the gulf between devel-
oped and major developing countries on multinational firms’ liability for harms
done within the host state (Sornarajah 2010, 26). Global agreement remains elu-
sive.
Despite the lack of a focal international institution or treaty,12 investors’ rights
are well protected in international law. IIAs and especially BITs are all about pro-
tecting investors; they are generally not designed to protect state prerogatives or
to foster development generally. Indeed, today’s IIAs offer a wider array of sub-
stantive protections than did the previous customary rules that prevailed through
the first half of the twentieth century. For example, BITs typically require nation-
al treatment and most-favored-nation (MFN) treatment of foreign investments
in the host country.13 They usually protect contractual rights,14 guarantee the
The Korean Journal of International Studies 13-3
466
9ASEAN Comprehensive Investment Agreement, negotiated 26 February 2009, entered into
force 29 March 2012.
10 See the list of unreported Asian FTAs at http://aric.adb.org/fta-all.
11 Trade Related Investment Measures (TRIMs), whose express purpose it was to facilitate
international investment but which were clearly limited to “investment measures related to goods
only;” TRIMs, article 1 and the General Agreement on Trade in Services (GATS), which introduced
the idea of “commercial presence” - via investment - to the WTO; and Trade Related Intellectual
Property (TRIPs), which protected intellectual property and technology transfers (Dattu 2000).
12 The primary agreement is the Convention on the Settlement of Investment Disputes Between
States and Nationals of Other States - International Centre for Settlement Of Investment Disputes,
Washington 1965, which offers dispute settlement facilities and obligates states parties to enforce
arbitral awards, but does not set out a series of substantive rules for the treatment of FDI.

right to transfer profits in hard currency, and prohibit or restrict the use of per-
formance requirements.15 Perhaps most importantly, most BITs and FTA invest-
ment clauses provide for international arbitration of disputes between the
investor and the host country (investor-state arbitration, or ISA).16 In contrast to
most trade agreements, which are generally enforced by official state actions
through public mechanisms such as sanctions, most BITs and FTA investment
provisions are enforced by firms exercising a private right of action, typically
granted in the treaties themselves, which may result in monetary compensation
for damages.17
This list of concessions to investors may seem extensive, but most states calcu-
late they are worth it. The main reason host states have for entering into such
agreements is the hope to attract higher foreign investment flows. And yet the evi-
dence that investment agreements have improved access to foreign capital is not
overwhelming. A spate of studies have found marginal to no ability of signed BITs
to attract foreign investments, although some studies support to some extent a
rosier conclusion.18 B
¨
uthe and Milner (2014) find in a recent study that BITs have
no effect on FDI flows, but that such flows are influenced by FTAs that include
more stringent investment agreements. They also find, however, that some 2/3
of FTAs have no investment provisions at all and only about 20 percent have
“BIT-like” provisions, so FTAs are hardly perfect substitutes for IIAs. If interna-
tional legal agreements encourage FDI flows, it is probably not only because of
the rights investors have unilaterally to launch cases in arbitral settings, as many
states and firms seem to have assumed.
One explanation for the diffusion of BITs is the competitive scramble for capi-
tal such agreements tend to set off. This was especially the case in the 1990s and
2000s, when developing countries tended to negotiate highly asymmetrical
East Asia, Investment, and International Law
467
13 E.g., the 1994 U.S. Prototype Bilateral Investment Treaty, Office of the Chief Counsel for
International Commerce, U.S. Department of Commerce; Article 2(1), 2(2)(a).
14 E.g., 1994 U.S. Prototype BIT, Article I(d)(ii).
15 E.g., 1994 U.S. Prototype BIT, Article V(1-2).
16 E.g., 1994 U.S. Prototype BIT, Article IX. Regional FTAs with ISA that give investors rights to
sue states include the Energy Charter Treaty (ECT), the North American Free Trade Agreement
(NAFTA), the Central American Free Trade Agreement (CAFTA), and the ASEAN Comprehensive
Investment Agreement (ASEAN CIA), which entered into force in 2012.
17 Historically, by contrast, customary international legal protection for investors was generally
mediated by state-to-state relationships (Schill 2010, 36). Furthermore, friendship, commerce, and
navigation agreements negotiated by many governments to protect investments prior to the rise of
BITs typically did not explicitly contain such a right. See Sykes (2005, 4).
18 Several studies have differing findings and approaches (Banga 2003, Neumayer and Spess
2004, Egger and Merlo 2007, Buthe and Milner 2009, Tobin and Rose-Ackerman 2011, Rosendorff
and Shin 2012, Kerner and Lawrence 2014). See also the essays in Sauvant and Sachs (2009).

The Korean Journal of International Studies 13-3
468
investment agreements in response to their closest competitors (Elkins, Guzman
and Simmons 2006). Moreover, a series of studies have found that BITs were
more likely to be signed in this period when the less powerful state faced eco-
nomic downturns - evidence that states were willing to make more and more
asymmetrical agreements under relatively stressful economic conditions (Allee
and Peinhardt 2014). A damper was put on the enthusiasm for competitive treaty
negotiation, however, when the consequences of legal liability became apparent.
The more BITs a state signed through the 2000s, the more likely they were to be
sued in an ISA forum such as the International Centre for Settlement of
Investment Disputes (ICSID)(Simmons 2014).
Bilateralism and a right of standing for private corporate actors imbues the
international investment regime with a peculiar character that stimulates com-
petition for capital, weakens the bargaining position of states when they are in a
vulnerable economic position, and potentially exposes them to legal liabilities
that they may not have anticipated when they “tied their hands” under these
agreements in the first place. Over the past three decades, the number of cases
registered with the International Center for Settlement of Investment Disputes
(ISCID) has grown much more rapidly than the number of cases registered with
the WTO. True, there are many more firms than there are sovereign states, so we
should expect a gap between total disputes in the two cases. But the rate of change
in disputation is what is especially startling: new disputes registered with the
GATT/WTO grew 96 percent from the 1980s to the 1990s but fell about 16 per-
cent from the 1990s to the 2000s. New investor-state arbitration (ISA) cases reg-
istered with the ICSID grew 153 percent and a whopping 449 percent, respec-
tively, over the same decades.19 Some researchers have argued that governments
in some developing countries scarcely understood the consequences of the con-
cessions they were making to foreign investors until they themselves were
dragged into arbitration (Poulsen and Aisbett 2013).
As a result, the legal regime to protect foreign investment has stirred up a good
deal of controversy. In some states - from Australia to Norway to Ecuador, and
even the United States - there is growing pushback from public actors who increas-
ingly view the investment regime as currently constituted as not in their interest.
As one legal scholar puts it, investor-state arbitration has become “one of the most
dynamic and controversial areas of international law today” (Yackee 2012).
19 Author’s calculations, based on WTO data.

East Asia, Investment, and International Law
469
IS THE ASIAN EXPERIENCE WITH ISAS ‘DIFFERENT’?
East and Southeast Asian states have, with varying degrees of enthusiasm, par-
ticipated the international investment regime. They have negotiated BITs intra-
and extra-regionally, signed FTAs with investment provisions, and have edged
toward the prevailing ISA model in their regional agreements as well. They have
strengthened investor protections along the lines described above, despite the
controversies, and despite a “tradition” of standing aloof from binding interna-
tional legal agreements (Kahler 2000). But there are at least three ways in which
the zeal to contract to protect investment has been a little different from the rest
of the world: in its timing, content, and litigation experience.
TIMING OF ASIA’S IIAS
Common wisdom has it that Asian states are reluctant to commit themselves to
formal legal arrangements of a binding nature because of their potential to
infringe on state sovereignty. While this may be true of other issue areas, it is
hardly the case with respect to agreements designed to facilitate international
economic transactions. An Asian (albeit, South Asian) state was the first ever to
sign a BIT (Pakistan with Germany, in 1959). East and Southeast Asian states
have accounted for about 20 per cent of the world’s BITs since the early 1980s.
Figure 2 illustrates the growing interest internationally in BITs, distinguishing
Asian state participation from the rest of the world. Naturally, most BITs do not
involve an Asian state as a party at all (the green area), but the East and Southeast
Asian share is approximately constant over time. The largest share of these agree-
ments is with states outside of the region (the blue area in Figure 2). A small but
growing slice of BITs (red area) represents agreements between states that are
both from this region. Importantly, the slope of the curve during the 1990s BITs
frenzy is just about the same for Asia as for the rest of the world.
China got a slightly late start on negotiating BITs, but then topped out at about
30 percent of all agreements involving an East or Southeast Asian partner by
1993. Since then, China has been involved in about a quarter of all BITs with an
East/Southeast Asian member. Overall, Asian states, but especially China, had
been just about as (or more) eager as those of Eastern Europe, Latin America and
Africa to sign BITs during the negotiation boom of the 1990s.20
Timing is critical, especially with respect to each contracting state’s business
cycle. The business cycle can be thought of as a rough measure of bargaining
20 Bilateral free trade agreements (FTAs) are on the rise as well in Asia, and many of these have
investment provisions, but they lag behind the sheer number of bilateral investment agreements.

The Korean Journal of International Studies 13-3
470
strength, along with other measures that make an investment destination attrac-
tive. One key difference between Asia and the rest of the world has been that BITs
were negotiated in Asia during a period of robust growth. The same cannot be said
of the rest of the world (Simmons 2014). Figure 3 illustrates the average growth
rates states faced in the years surrounding “BIT sprees” - years in which more
than four BITs were signed.
Figure 3. Average Growth Rates Preceding BIT Sprees (>4 BITs/year)
Figure 2. Asian bilateral investment treaties in global context
Source: UNCTAD

East Asia, Investment, and International Law
471
Year 0 represents any year in which four or more BITs were signed. Growth
rates relate to the rate of growth in the less developed of the two-state pair as mea-
sured by GDP per capita. For most of the developing world, signing a large num-
ber of BITs was preceded by a slump in growth (the green line), which suggests
that many governments in developing countries around the world may have been
motivated to negotiate BITs to stimulate the economy. In fact, three years before
a BIT spree, the rest of the world (outside of East and Southeast Asia and the
Pacific) hovered between none and only 1 percent growth on average. The corre-
sponding rate of growth for a state in East Asia and the Pacific region was over 7
percent (blue line). Meanwhile, there was no particular pattern to growth for
those years in which states signed relatively few BITs, although it is clear that
growth in Asia has been on average more robust than that elsewhere in the world
(4 percent compared to a little over 3 percent). Table 1 presents the same rela-
tionship from a different perspective. Here, the likelihood of entering into a BIT
spree is regressed on growth in the three prior years. While negative growth
makes a BIT signing spree more likely in the rest of the world, positive growth
makes it more likely for a state in the East Asia/Pacific region. A similar relation-
ship holds when the signing of any BIT is substituted for a bit spree.
AGREEMENT CONTENT
Asian governments seem to have participated in the BITs frenzy of the 1990s and
2000s as much as other countries from around the world have done, but on aver-
Table 1: Effect of economic growth on the likelihood of a “BIT Spree”
(more than 4 BITs signed in a year)
VARIABLES (2) Rest of the World(1) East Asia and Pacific
GPD growth (t-1)
GPD growth (t-2)
GPD growth (t-3)
Constant
Observations
R-squared
0.0062***
(0.0021)
0.0033
(0.0022)
0.0038**
(0.0019)
0.00245
(0.0134)
635
0.047
3783
.016
-.0014*
(.0007)
-.0017**
(.0007)
-.003***
(.000)
.0854***
(.005)
Standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1
Note: results are similar substituting “any new BIT” for a “BIT spree,” and using either OLS or a probit model

The Korean Journal of International Studies 13-3
472
age they have negotiated from a position of economic strength; i.e., much
stronger growth rates. Strong growth rates have the dual effects of both making
a given jurisdiction a more attractive place in which to invest, while also reducing
domestic political pressures on governments to adopt policies simply for purpos-
es of stimulating the economy in the short term. BITs are bargains that are sub-
ject to the same kinds of negotiating pressures that characterize a broad range of
international agreements. When growth is strong, governments have incentives
to hold out for investment protection terms they find most attractive. Under such
conditions, they are likely to be less willing to strike a bargain that reduces their
sovereign prerogatives over incoming FDI.
To view BITs as bargains implies that strong growth should have implications
for the contents of Asian BITs, compared to similar agreements elsewhere in the
world. Governments in strong negotiating positions should be able to preserve
many more sovereign prerogatives in their investment agreements compared to
those in weaker economic positions. Once thought of as largely homogeneous,
new data on investment treaty provisions suggest there may in fact be some
important differences across BITs. Of particular concern here are the differences
that provide especially strong protections for investors and limit the rights of gov-
ernments to interfere with the operation and income stream of foreign investors.
Data collected by Chaisse and Bellak(2015) are useful for exploring the depth
and breadth of investor protections in East Asian/Pacific BITs compared to those
negotiated by the rest of the world. Chaisse and Bellak coded ten aspects of IIAs
(both BITs and FTAs) that affect the quality of a treaty commitment to protect
investors: whether the definition of investment is broad and open-ended or
restricted by lists or exclusions; whether the agreement contains a right of estab-
lishment, which gives investors greater certainty regarding the conditions under
which they can invest; whether national treatment clauses guarantee rights for
foreign investors that are as favorable as those provided to domestic firms (nar-
row), or at least as favorable (broad); most favored nation clauses that are essen-
tially unrestricted (broad) versus those that carry restrictions (narrow); whether
or not the treaty contains a fair and equitable treatment provision, the presence
of which gestures toward greater investor protection; whether expropriation
clauses cover not only direct but indirect expropriation as well, which widens
investor protections to a broader range of government takings; whether the treaty
guarantees broadly the outward transfer of funds, or whether transfer is restrict-
ed in some circumstances; whether or not it contains any non-economic obliga-
tions, such as respect for human rights; whether the agreement has an investor-
state dispute settlement clause; whether the agreement contains an umbrella
clause that effectively extends the reach of the agreement; and the existence of

broad temporal scope provisions, which may extend protections to investment
made before the treaty entered into force.21
Are Asian BITs systematically different from others around the world in terms
of the quality of protections extended to investors? Bargaining theory would sug-
gest that governments presiding over high-growth economies (which are more
desirable to investors) would face few pressures to make strong concessions to
attract capital. Table 2 examines whether there are significant differences in
investor protections in Asian BITs compared to the rest of the world. “Liberaliza-
tion” combines the individual indicators for right of establishment, free transfer
of funds, and (lack of) non-economic obligations. The results suggest that BITs
involving an Asian state tend on average to be noticeably less liberal than others
by these criteria. Moreover, agreements involving two states in the region are
about twice as likely to be “less liberal” than agreements involving only states out-
side the region. The results were similar with respect to agreement “breadth”
(based on the breadth of investment definition, temporal scope and the presence
of an umbrella clause). In this case the results are not quite significant for one
partner, but intra-Asian BITs are not as likely on average to have as broad cover-
age as are BITs negotiated elsewhere in the world.
East Asia, Investment, and International Law
473
21 For a detailed discussion of their methodology, see Chaisse and Bellak(2011).
Table 2: Strength of East and Southeast Asian BITs compared to the Rest of the World
VARIABLES
(6)
BIT
strength
(year/region
interaction)
(5)
BIT
strength
(total)
(4)
BIT
dispute
settlement
(3)
BIT
regulatory
constraint
(2)
BIT
breadth
(1)
BIT
liberaliza-
tion
Both partners Asian
Observations
R-squared
-0.395***
(0.101)
-0.273*
(0.155)
-0.0318
(0.0478)
-0.0963
(0.0681)
-0.939***
(0.262)
-156.1***
(33.19)
One partner Asian -0.184**
(0.0708)
-0.150
(0.100)
-2.19e-05
(0.0201)
-0.101
(0.0734)
-0.519**
(0.235)
-0.520**
(0.235)
Date of signature 0.00458
(0.00325)
0.00988*
(0.00517)
0.00785***
(0.00139)
0.00681*
(0.00350)
0.0332***
(0.00691)
0.0314***
(0.00702)
Date of Signature
*both partners Asian
0.0778***
(0.0166)
Constant -4.384
(6.491)
-14.33
(10.35)
-11.72***
(2.786)
-11.83*
(6.986)
-48.95***
(13.79)
-45.32***
(14.02)
1,444
0.050
1,444
0.026
1,444
0.058
1,444
0.026
1,444
0.070
1,444
0.074
Robust standard errors in parentheses
*** p<0.01, ** p<0.05, * p<0.1

The Korean Journal of International Studies 13-3
474
Two measures of investor protection in Asian BITs - regulatory constraint and
dispute settlement - also tend to be somewhat less favorable to investors and
more protective of state sovereignty in BITs involving Asian states compared to
those negotiated between other states. “Regulatory constraints” include Chaisse
and Bellak’s measures of indirect expropriation and also whether or not there is
an explicit statement of fair and equitable investor treatment. “Dispute settle-
ment,” as discussed above, simply indicates whether the agreement contains an
investor-state arbitration (ISA) clause. Asian BITs are slightly, but not statisti-
cally much less likely to have these provisions than are BITs concluded by states
outside of the region. Overall, Table 2 suggests that Asian BITs tend to be less
favorable to investors and more protective of state prerogatives than are those
negotiated by states outside the region.
Since dispute settlement is so central to the investor protection regime, it is
worth taking an even closer look at such clauses. Allee and Peinhardt have coded
a global sample of dispute settlement mechanisms found in BITs. Earlier research
using this data has revealed that some BIT provisions are on average quite sensi-
tive to the business cycle. Consistent with a bargaining hypothesis, the “tilt” in dis-
pute settlement clauses was found to favor international arbitration over local
remedieswhen negotiated during weak GDP growth in a potential host country
(Simmons 2014). The results of this earlier research were quite striking: in almost
every case, the stronger the economic growth in the less developed BIT partner,
the stronger the domestic provisions and the weaker the international provisions
contained in the dispute settlement section of a BIT. (The lone exception was a
provision to use the ICSID for dispute settlement, which was found to have no con-
sistent relationship with the developing country’s business cycle; Simmons 2014).
Interestingly, however, these results do not hold for East Asian and Pacific
states. There is no strong evidence that business cycle conditions have con-
tributed to specific kinds of dispute clauses in the sample of BITs that Allee and
Peinhardt collected and coded. This is not very surprising, since as we have found
above Asian BITs are much more likely to be negotiated from a position of eco-
nomic strength; in effect, the key variance in the regional sample is truncated. But
this does suggest that Asian BITs might differ systematically from those negoti-
ated by developing states elsewhere in the world. Table 3 looks only at agreements
between East Asian and Pacific states with the rest of the world, and distinguish-
es different kinds of dispute settlement clauses. Both ICSID and United Nations
Commission on International Trade Law (UNCITRAL) clauses are classic third
party arbitration, though using ICSID generally implies a more transparent
process. According to Allee and Peinhardt’s data, which codes different kinds of
dispute settlement clauses, ICSID and UNCITRAL provisions trend up strongly

East Asia, Investment, and International Law
475
with time, and a failure to mention either becomes less likely. There are increas-
ing references to the use of local bodies, such as domestic courts, for dispute res-
olution, but a clear trend away from treaties that demand the exhaustion of local
remedies.
Because of the inclusion of an interaction term between year and China, the
above finding is conditional: it applies when China is not one of the treaty part-
ners. Chinese treaty behavior is quite distinct. China overall is much less likely to
agree to an ICSID provision than are other Asian states, and is also much less like-
ly overall to agree to the exhaustion of local remedies. China’s agreements are
trending in the same way as the rest of the region with respect to ICSID clauses;
the interaction term suggests that they almost certainly have been more likely to
agree to an ICSID clause with each passing year. However, China is moving
against the regional trend with respect to clauses requiring the exhaustion of local
remedies. With each passing year, other states are likely to reduce use of such
clauses, while China is increasingly likely to include them. As with ICSID claus-
es, this could be because they “start” with a very low baseline probability of their
inclusion.
Table 3. Dispute Settlement Clauses Contained in Asian BITs
(“Asia”: one or more parties to the BIT is from the East Asia/Pacific region)
Model 5
Exhaust Local
remedies
Model 4
Local Body
Provision
Model 3
Neither ICSID
nor UNCITRAL
Model 2
UNCITRAL
provision
Model 1
ICSID
provision
Difference in
Developmental
level
Joint Democracy
China
Year
China *year
constant
Observations
Pseudo R2
.162
(p=.106)
.149
(p=.207)
-.222*
(p=.054)
-.293**
(p=.017)
-.051
(p=.782)
.034
(p=.844)
-184.217**
(p=.049)
.061***
(p=.000)
.091*
(p=.051)
-120.58***
(p=.000)
-.026
(p=.856)
18.03
(p=.832)
.098***
(p=.000)
-.009
(p=.828)
-195.08***
(p=.000)
.042**
(p=.033)
157.44
(p=.122)
-.087***
(p=.000)
-.078
(p=.127)
171.22***
(p=.000)
.150
(p=.535)
40.75
(p=.712)
.043*
(p=.055)
40.75
(p=.712)
-84.45*
(p=.058)
1.13***
(p=.013)
-280.39**
(p=.013)
-.015***
(p=.004)
.141***
(p=.012)
83.29***
(p=.006)
345
.29
345
.15
345
.39
340
.15
340
.22
Results of a Probit model.
Probabilities of the Null hypothesis of no relationship in parentheses
*** p<0.01, ** p<0.05, * p<0.1
Data source: Allee and Peinhardt.

The Korean Journal of International Studies 13-3
476
In the interest of exploring other observable implications of the BITs as bar-
gains framework, Table 3 also includes other forms of power and asymmetry
between partners. Larger power differentials between BIT partners tend to
strengthen third party arbitral provisions - a nearly statistically significant rela-
tionship in the case of ICSID and UNCITRAL provisions, and a strong negative
relationship for the absence of such a provision. This implies that the more equal
states are - as measured here by their World Bank development category - the less
likely they are to include one or both of these dispute mechanisms in their agree-
ment. Large power differentials are also associated with a reduced tendency to
include provisions for resolution in local courts. There is some evidence that
asymmetries in parties’ developmental level makes third party dispute settlement
options more attractive. Regime asymmetry also seems to play a role. Among
BITs involving Asian states, when “joint democracy” matters, it tends to reduce
third part provisions (mentioning neither ICSID nor UNCITRAL is more likely),
and to increase the use of provisions for the exhaustion of local remedies before
turning to third party arbitration. China’s BITs are distinguishable among Asian
agreements in their reluctance to name ICSID as a preferred forum for dispute
settlement, but this is changing over time, as seems to have been the case with
other Asian states.
Overall, Asian BITs are on average distinguishable from those concluded else-
where. Returning to the more general examination of provisions in Table 2,
Model 5 combines all of the sub-indicators of investor protection into one aggre-
gated measure of “BIT strength.” Here the pattern is clear: BITs with one Asian
signatory are significantly less protective of investors than those without any
Asian partners. When both partners are from the region, the effect is even
stronger, both substantively and statistically. Note that all of the models report-
ed in Table 2 control for the year the agreement was signed, so that the regional
effects cannot be attributed to global changes in BIT contents over time. The pos-
itive coefficient on date of signature indicates that there has been a strong ten-
dency over time for investor protections generally to strengthen. The final model
(column 6) includes an interaction term for region and year. The negative coeffi-
cients for BITs involving Asian states is still negative - BITs in which Asian states
are involved better preserve state prerogatives relative to other BITs - but the pos-
itive coefficient on the interaction term suggests that BITs involving Asian states
have moved toward favoring investors over time. Asian BITs are still distinctive,
but they show evidence of moving toward the ways of the rest of the world. This
is to be expected as states from the region acquireinterests common to net capi-
tal exporters elsewhere.

East Asia, Investment, and International Law
477
LITIGATION EXPERIENCE
Finally, Asian governments (and firms for that matter) behave distinctly with
respect to their dispute settlement practices. World-wide, one of the main conse-
quences of signing BITs has been an increase in litigation: more BITs have on
average been associated with an increase in investor-state arbitration to settle
disputes that arise out of obligations contained in these treaties (Simmons 2014).
With Asian states, however, there are very few cases of investor-state arbitration
in formal settings despite the fact that, as we have seen, Asian states have partic-
ipated in about the same number of international investment agreements.
Asia appears to be an exception to the proposition that BITs lead ineluctably to
states being sued. Asian states and firms simply have not participated in investor-
state arbitration (ISA) to anything like the same degree as Latin American or
Eastern European states. In fact, while East Asian states have been respondents
in the WTO dispute settlement mechanism reasonably frequently (about 17% of
respondents are from this region), they are respondents in investor-state arbi-
trations only rarely (for example, in only about 3% of ICSID cases; which is of
course only a subset of such arbitrations; Figure 4). Within the major Asian
regional forums, there have effectively been no formal trade or investment dis-
putes that have been concluded between state parties to regional agreements.
Asian states have been respondents in ICSID cases only a handful of times. These
cases have been concentrated, with a slight lag, around major financial and eco-
nomic crises of 1997 and 2009 (Figure 5). While the numbers are much smaller
than elsewhere, this fits the general pattern globally over the past couple of
decades: investors are much more likely to dispute their treatment after an eco-
nomic shock than at any other time.
Figure 4. Asia as a Respondent in Trade versus Investment Disputes
Source: WTO

The Korean Journal of International Studies 13-3
478
As Figure 5 shows, Asian states (not to mention firms) have been involved in a
few ISA cases, and there may be more to come - a natural consequence, perhaps,
of the growth in the number of BITs governing investments in and by regional
actors and their tendency to converge toward global norms. China has now been
sued twice using ICSID, first by Ekran Berhad, a Malaysian company, in May 2011
over a land lease in China’s Hainan province22 and in November of 2014 by
Ansung, a Korean property development company over losses related to golf
course and condominium construction in Sheyang-Xian, Jiangsu province.23
Little can be concluded from these cases, however, since the first was discontin-
ued and the second has just begun. A Chinese firm has only lodged one case with
ICSID, resulting in a small award compensating for the Peruvian government’s
unjustified taxation.24 While more ISAs involving Chinese investors are known to
have occurred in confidential proceedings,25 it may be that publicly scrutinized
disputes are perceived as contrary to China’s (and Chinese firms’) interests. The
Republic of Korea displays a similar preference. Sued only twice in ICSID, one
22 EkranBerhad v. PRC (ICSID Case No.ARB/11/15).
23 Ansung Housing Co., Ltd. V. PRC (ICSID Case No.ARB/14/25).
24 Tza Yap Shum v. Republic of Peru (ICSID Case No.ARB/07/6).
25 For example, the Permanent Court of Arbitration is administering a case arising out of the can-
cellation of licenses held by PRC investors in the Tumurtei iron ore mine in 2012 (China Heilongjiang
International Economic & Technical Cooperative Corp. v. Mongolia).
Figure 5. ICSID Respondents by Region, 1990-2014
Source: ICSID

East Asia, Investment, and International Law
479
case was discontinued26 and the other has remained confidential.27 No ISAs
involving Japan could be located.
A little more is known about the experience of the ASEAN states with ISA and
it has not always been happy. The Philippines has been sued by foreign investors
three times, the most monumental of which dates from a 1990 agreement with a
German consulting firm for the expansion of the Manila airport and involves hun-
dreds of millions of dollars, but after an award rejecting jurisdiction, annulment
of that decision and the launch of a new claim, the case is still pending.28 As of
this writing, Indonesia is a respondent in three cases pending at ICSID, and
recently discontinued a fourth (terms unknown). Malaysia has been a respondent
at ICSID three times, but not in almost a decade. Cambodia recently prevailed in
a $300 million claim involving electrical utilities, but the ICSID award is not pub-
licly available.29
Meanwhile, regional forums for handling investment disputes have barely got-
ten off the ground. Presumably in an effort to keep disputes amicable (and pri-
vate) the ASEAN states have moved in recent years to develop regional mecha-
nisms to resolve investor disputes. The ASEAN Agreement for the Promotion and
Protection of Investment (AAPPI, 1987) and the ASEAN Investment Area (AIA;
endorsed in principle by the ASEAN summit in 1995) purport to promote invest-
ment, but have fatal flaws, according to critics, because disputes are essentially
handled politically rather than through neutral third party arbitration (Vergano
2009, Jarvis 2012, 230). Sympathetic observers believe that these mechanisms
have been refined over time (Echandi 2009).
WHY IS ASIA DIFFERENT? BARGAINING POWER IN
INTERSTATE RELATIONS
Why has the Asian experience with IIAs and investor-state arbitration been dif-
ferent from that of states elsewhere in the rest of the world? Most Asian states
have concluded highly legalized agreements to encourage investment, but both
26 Colt Industries Operating Corporation v. Republic of Korea (ICSID Case No. ARB/84/2).
27 LSF-KEB [Lone Star] Holdings SCA and others v. Republic of Korea (ICSID Case
No.ARB/12/37).
28 Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines (ICSID Case
No. ARB/03/25).
29 See http://cambodianlawstudies-siengpikol.blogspot.jp/2013/05/government-wins-plant-
row.html. The award is not posted on the ICSID website.

The Korean Journal of International Studies 13-3
480
the less liberal content and the distinctive distance from investor-state arbitra-
tion calls for an explanation. While no one factor is likely to explain all aspects, I
argue we should look beyond easy cultural arguments and consider the role that
bargaining and interests have played in this area.
“Culture” is a weak explanation for the nature of Asian states’ engagement with
the international investment regime for a number of reasons. For one thing, the
differences documented in Tables 1-3 are statistically significant, but are not
plausibly linked to major differences in cultural orientations across regions.
There is certainly no wholesale rejection of the international investment regime
that bears any resemblance to broader cultural orientations. Second, whether
there are any cultural orientations that can coherently explain attitudes toward
international law in general is highly doubtful (Chimni 2011). Differences in
“mentalities” of patience and conflict avoidance (Hamamoto 2011) hardly mark
relations among states in the region generally. Many scholars and observers have
noted that Asian states are far too heterogeneous, both domestically and certain-
ly across the region as a whole to account for an “Asian approach” to international
law or legalization (Kahler 2000, 560). Kahler is right when he asserts that Asian
states, like all states, are strategic in their engagement with formal legal institu-
tions, engaging them where useful and eschewing them when they do not achieve
a well-defined interest. The contrast between involvement in the WTO’s dispute
settlement mechanism and investor-state dispute settlement does not support
broad claims about avoiding legalistic conflicts. Nor does Japan’s important role
in fostering regional standards and institutions for commercial arbitration.
Domestic governments and legal institutions are often suggested to play a role
in Asian states’ participation in the international investment regime. Perhaps the
historical role of the state in development explains why Asian states are less like-
ly to sacrifice sovereign prerogatives to attract foreign capital. The literature on
the development state, popular in the 1980s for explaining growth in the region,
might plausibly suggest a resistance to international legal rights for foreign
investors that could hamper the ability of states to intervene where and when nec-
essary to guide development and shape other social outcomes. The collusive rela-
tionships between strong states and domestic business interests, especially
prevalent before the Asian financial crisis, might also constitute a strong coalition
against making concessions to foreign capital.
The evidence presented above suggests that there may be important macro-
economic differences in the conditions under which bargains for investment pro-
tection are struck in the first place, so this may be one place to look for explana-
tions for Asia’s distinctive regime engagement to date. Asian states have tended
to negotiate BITs from a position of economic strength, strike bargains that leave

East Asia, Investment, and International Law
481
somewhat wider discretion for states and a slightly narrower set of protections for
foreign investors, and end up in arbitration much less than is the case in other
regions of the world. What underlying conditions might contribute to this out-
come?
High growth rates for the region generally are likely part of the explanation. It
is common-place to argue that East and Southeast Asia have been and will con-
tinue to be for some time among the most dynamic economies in the world and
are therefore among the most attractive in which to invest (Rajan 2013). During
the decades of the most intense BIT negotiations, the 1990s and 2000s, the region
experienced the strongest growth rates in the world. According to the World
Bank, between 1985 and 2005 East Asia and the Pacific region grew an average
of 4.2%, while Latin America grew about 2.8%, North Africa and the Middle East
grew 3.8%, and Africa grew about 2.8%.30 High growth regions naturally attract
capital, and by this criterion East Asia is a prime site for foreign direct investment.
Even when economic growth does slow, the research in this paper suggests that
states in the East Asia and Pacific region have been able to avoid negotiating BITs,
possibly in favor of other policy tools. In East Asia, BITs do not appear to be the
policy tool of choice in difficult economic conditions, at least compared to else-
where in the developing and emerging world. This is not a claim of course that the
East Asian region has not experienced recession, but rather that states in the
region may have a broader range of macroeconomic tools available to combat
growth slumps. In particular, East Asian states seem to be able and willing to con-
duct fiscal policy counter-cyclically. By contrast, in many developing areas of the
world, from Latin America to Africa, governments appear to conduct fiscal poli-
cy pro-cyclically rather than counter-cyclically (Gavin and Perotti 1997). Whether
this is due to a credit squeeze (Kaminsky, Reinhart and V´
egh 2005), aid reduc-
tions (Yackovlev, Lledo and Gadenne 2009) or to agency problems based on a
basic mistrust in government’s ability to commit to responsibly reduce spending
during expansions (Alesina et. al. 2008), one of the basic tools of economic stim-
ulation appear to be unavailable to governments in many regions of the world.
Interestingly, Asia is an exception, at least in contrast to Latin America and Africa
(Alesina, Campante and Tabellini 2008;Woo 2009, 854-55).31 This could imply
that many Asian states have other policy tools for managing economic downturns
without making quite as many concessions to foreign investors as has been the
30 World Development Indicators online.
31 The published version of Alesina et. al. does not make this distinction, but the SSRN version on
which it is based calculates average pro- versus counter-cyclicality by region. Asia resembles the
OECD in its fiscal policy more closely than it does Africa or especially Latin America.

The Korean Journal of International Studies 13-3
482
case in the rest of the world. This is an argument about the availability of policy
instruments in downturns; it comports with the finding above that Asian states
on average have avoiding making treaty commitments during downturns. On
average, they may have better access to countercyclical policies than do most gov-
ernments outside of the OECD. If so, then this could have systematic effect on
bargaining positions, treaty contents, and eventually the course and settlement
of disputes between investors and states.
CONCLUSION
International law governing FDI has been explicitly adopted by a significant
number of states around the world, largely in the form of bilateral agreements
with investor-state dispute resolution clauses. These treaties have given foreign
investors significant rights vis-
｀
a-vis the governments in jurisdictions in which
these investments are made. The results globally have been mixed: such treaties
may have contributed to attracting capital, but they also have exposed states,
especially in Latin America but elsewhere as well, to significant risks of litigation.
The BIT regime has been explained as a result of competition to attract capital
(Elkins, Guzman and Simmons 2006). In particular, research on a global scale
has shown that on average states have been in a weak place in their growth cycles
when they have signed such treaties, which at least partially explains the preva-
lence of significant concessions to foreign investors. This article offers evidence
that Asia does not fit the broad global patterns reported elsewhere (Simmons
2014). As a region, East Asian states have negotiated BITs during periods of rel-
atively robust growth, and as a result Asian governments have retained more flex-
ibility in these agreements than elsewhere in the world. As a whole, Asian BITs
are not as ‘strong’ in their investor protections as are BITs around the world,
although this research also reveals there is some noticeable convergence, in that
BITs negotiated by East Asian states are generally becoming more favorable to
investors over time.32 I argue that robust growth and weaker investor protections
- rather than cultural preferences - at least partially explain the lack of litigation
involving states and firms in this region. East Asian states responded to the 1997
crisis largely by further liberalizing and to some extent harmonizing their nation-
32 Recent research suggests that investor protections offered in Asian trade agreements are just
as if not stronger than elsewhere in the world (Allee and Elsig 2014). Regional changes are likely dri-
ven to a significant degree by changes in China’s preferences for better investment protections, includ-
ing national treatment (Shan, Gallagher and Zhang 2012).

East Asia, Investment, and International Law
483
al rules (Athukorala 2003; Poulsen and Hufbauer 2011). As East Asian states
become ever more important exporters of FDI, their interests in BITs and other
IIAs will continue to grow.
Future research should concentrate on other regional aspects of the political
economy of investment that would also contribute to an understanding of the pat-
tern of treaties and their contents in Asia. One avenue for exploration would be
how the dense linkages between trade, investment and services differ in Asia
compared to other parts of the world (Baldwin 2011), creating incentives to nego-
tiate legal protections but also to settle disputes quickly and quietly. A related
approach would be to compare investments by sector to shed light on how spe-
cific kinds of investments affect time horizons and, in turn, influence how nascent
disputes are settled. For example, Japanese observers attribute a business’s reluc-
tance to initiate investor-state arbitration at the ICSID to the “mentality,” said to
be prevalent among Japanese business, to stay in the host long-term, and there-
fore to work out investment conflicts amicably (Hamamoto 2011). It might prove
more enlightening to recast such arguments in terms of time-to-profitability for
certain kinds of investments, which in turn affects time horizons and could
encourage states and investors to make concessions privately (Hafner-Burton,
Steinert-Threlkeld and Victor 2014).
One thing does seem certain: formal legal agreements are becoming increas-
ingly important to the regulation of FDI among and involving East Asian states.
In addition to the growing number of BITs analyzed here, waves of FTAs with
investment agreements are in various stages of conceptualization, discussion,
provisional acceptance and in force. One source calculates that a high proportion
- perhaps almost a quarter - of bilateral investment relationships is governed by
more than one investment treaty (Alschner 2014). Sometimes these treaties are
acknowledged to operate in parallel,33 but in some cases their relationships are
less clear. The Transpacific Partnership Agreement (TPPA, under discussion) will
be the world’s second largest trade and investment area after the EU, but there is
disagreement between the existing BITs of its members and the TPPA on the pos-
sibility of investor-state arbitration at all (Trakman 2014). Asian states shave
hardly exempted themselves from negotiated a welter of agreements to enhance
trade and investment. The challenge is to understand regional differences in such
agreements in terms that also clarify trends worldwide.
33 The China-Japan-South Korea Trilateral Investment Agreement (2012) Article 25 explicitly
says for example that it does not affect BIT obligations. The 2012 ASEAN CIA refers more generally
to international law. See (Alschner 2014, 22).

The Korean Journal of International Studies 13-3
484
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[Received December 5, 2015; Revised July 1, 2015; Accepted July 16, 2015]