State Capitalism on the Ascent: Stress, Shock, and Adaptation of the International Law on Foreign Investment

This Article focuses on the rise of state capitalism and its consequences on the international law of foreign investment and transnational arbitration which were both historically designed to regulate foreign private investments. The increasingly free movement of capital and the dominance of multinational corporations in cross-border trade and investment have brought with them increased suspicion about the motives of statecontrolled entities (SCEs) when they invest, allocate scarce resources, procure goods and services, and move goods and services across national borders. When state-owned enterprises (SOEs) and sovereign wealth funds (SWFs) become involved in transnational economic activities, either as the perceived “transgressor” or as the “defender” in the face of rules or administrative actions targeted towards such entities, the debate becomes increasingly tense. The increased suspicion includes concerns by countries about threats to their national security and to the competitive interests of producers and consumers based in their respective territories, among other concerns. This Article revisits the concept of state capitalism as it has developed in three key jurisdictions (China, France and the United States). It then presents the key legal international instruments granting rights to SCEs and obligations upon host States by looking at the litigation forum SCEs can access. By looking at the litigation options available to SCEs, this Article clarifies and evaluates the progressive adaptation of economic rules to State capitalism and demonstrate the gradual inclusion of SCEs in the world economy and its rules.