China’s OBOR Initiative charts a path for trade and investment cooperation between China and States along the OBOR. Indirect expropriation stands as a crucial issue for the successful implementation of the OBOR initiative. This mainly owes to the large size of investment projects and investment funds, scant regulation of indirect expropriation in the IIAs signed between China and OBOR States, and the diverse political and economic environments of these many States. This article examines the definition and identification standards of indirect expropriation under OBOR IIAs. It will also reveal that indirect expropriation is poorly defined and insufficiently identified in most agreements. It is argued that OBOR IIAs should be revised to regulate indirect expropriation in such three aspects as preambular declaration of host State regulatory freedom, definitional clarity of indirect expropriation, and guidance for its identification. This approach would facilitate a more stable investment environment and contribute to the success of the OBOR initiative.

Although China has been an active ‘treaty-maker’ in the realm of international investment arbitration as evidenced by its more than 120 bilateral investment treaties, the utility of these BITs has been very limited. Substantive standards such as expropriation and compensation have never been comprehensively tested with respect to these BITs. This article scrutinizes the concept of expropriation by reference to Chinese investment treaty jurisprudence, in particular, the final award of Tza Yap Shum v. The Republic of Peru and China’s free trade agreement with Peru, the only Chinese BIT-related ICSID case. This article critically examines, in a comparative context, the treaty interpretation methodologies employed by the tribunal in interpreting expropriation under the China-Peru BIT, which is one of the earlier Chinese BITs. A thorough study of this subject is of great significance to interpreting the terms of indirect expropriation and compensation in Chinese BITs, thereby offering more concrete foreign investment protections based on investment treaties.