In recent years, China has entered into ‘new generation’ bilateral investment treaties (BITs) with several countries, allowing foreign investors to bring an arbitration claim directly against the host country for violation of the protection offered by the BITs. This trend of investor-friendly agreements has continued with the China-New Zealand Free Trade Agreement (FTA) signed in April.

The FTA allows a New Zealand investor to bring an arbitration claim directly against China (and vice versa for Chinese investors) for breach of the protection specified in the agreement. Such protection includes losses suffered due to direct or indirect expropriation and treatment that is not fair and equitable. Subject to certain preconditions, the FTA provides for arbitration under either the International Centre for Settlement of Investment Disputes (ICSID) or UNCITRAL arbitration rules.