Investor-State Arbitration Against China: Nationality, Treaty Protection and State Resistance

When Jason Yu Song lost land-use rights connected to his investment in Shaanxi Province, he pursued a remedy rarely seen in practice: he commenced investor-state arbitration against the People’s Republic of China under the 1986 China–UK Bilateral Investment Treaty.

Mr. Yu Song, originally a Chinese national who later acquired British citizenship, alleged that the relevant government actions amounted to an unlawful expropriation and that no compensation had been paid. China vigorously contested the claim, including by challenging the tribunal’s jurisdiction on multiple occasions and subsequently seeking relief before the Swiss Federal Supreme Court.

Despite those efforts, the arbitration proceeded to a final award. On 24 January 2025, the tribunal reportedly ordered China to pay approximately USD 26 million in damages, with the total exposure rising to over USD 60 million once interest and costs were taken into account. The Swiss court rejected China’s subsequent challenges, including attempts to introduce newly discovered evidence.

The case is notable not only because of the size of the award, but also because it highlights several recurring issues in investment treaty arbitration: the legal consequences of a claimant’s change of nationality, allegations of treaty shopping, and the extent to which a respondent state may resist jurisdiction and enforcement at every stage of the proceedings.

Why it matters:

This dispute offers an important case study in how investment treaty protections may operate where nationality planning is in issue, and how China approaches high-stakes investor-state claims when it is cast as respondent.

Implications for Middle Eastern Businesses

For Middle Eastern investors investing into China, the case underscores the importance of treaty planning, investment structuring and nationality analysis at the outset of a transaction. It also demonstrates that, while claims against a sovereign state remain complex and politically sensitive, treaty-based protections may provide a meaningful remedy where state measures adversely affect foreign investments. For investors from the Gulf and the wider MENA region, early advice on holding structures, treaty coverage and dispute resolution strategy can be critical to preserving rights before a dispute arises.