Agreement between the People's Republic of China and the Federal Republic of Germany Concerning the Encouragement and Reciprocal Protection of Investments


The original official languages of this BIT were: Chinese and German.  The Tsinghua Rule of Law Project has produced this unofficial English language version from the original Chinese text.  While the English language version is for the benefit of the website readers, users should rely on official language versions when advising clients or undertaking some legal process.  

The People's Republic of China and the Federal Republic of Germany, desiring to develop economic cooperation between the two countries, and intending to actively create favorable conditions for investments by investors of either Contracting Party in the territory of the other Contracting Party, through the negotiations between the representatives of the two Governments, have agreed as follows;

 

Article 1

For the purpose of this Agreement:

1. The term "investments" means every kind of asset permitted by either Contracting Party in accordance with its laws and regulations including in particular:

(a) movable and immovable property and any other rights in rem, such as mortgages and pledges;

(b) shares of companies and the other forms of interests in such companies;

(c) claims to money that create an economic value or claims to any performance that have an economic value;

(d) copyrights, industrial property rights, technical processes, knowhow, trademarks and trade names, and

(e) concessions including concessions for prospection, exploitation and extraction.

Any alteration of the form in which assets are invested shall not affect their classification as investment.

2. The term "returns" means profits, dividends, interest and other legitimate income yielded by an investment for a definite period.

3. The term "investors" means in respect of the People's Republic of China,

(a) natural persons having the nationality of the People's Republic of China;

(b) companies, enterprises or other economic entities approved, by the Chinese Government, registered and entitled to undertake economic cooperation with foreign countries.

In respect of the Federal Republic of Germany,

(a) Germans domiciled within any area to which this Agreement effectively applies;

(b) Juridical persons and commercial or other companies or associations established in accordance with the law and domiciled in any area to which this Agreement effectively applies, regardless of whether they are in possession of a legal person status or not, or whether their shareholders or participants are of limited liability or not, or whether they are profit-making or not.

 

Article 2

Either Contracting Party shall in its territory promote investment by investors of the other Contracting Party, permit such investments in accordance with its laws and regulations, and accord such investments, at all times, equitable and reasonable treatment.

 

Article 3

1. Neither Contracting Party shall in its territory accord the investments by investors of the other Contracting Party treatment that is less favorable than that accorded to investments by investors of any third country with which the former Contracting Party has concluded a similar agreement.

2. Neither Contracting Party shall in its territory accord the activities associated with investments of investors of the other Contracting Party treatment less favorable than that accorded to the activities associated with investments of the investors of any third country with which the former Contracting Party has concluded a similar agreement.

3. The treatment as mentioned in paragraphs 1 and 2 above shall not apply to

(a) Any advantages accorded to investors of a third country by one Contracting Party based on existing Customs union, free trade area or an economic union;

(b) Any advantages accorded to investors of a third country by one Contracting Party based on an agreement for the avoidance of double taxation or agreements pertaining to taxation;

(c) Any advantages accorded to investors of a third country on the basis of facilitating frontier trade.

4. Either Contracting Party shall guarantee not to take discriminatory measures against the joint ventures and wholly-owned enterprises by the investors of the other Contracting Party without prejudice to the legislation concerning those joint ventures with foreign equity participation and foreign wholly-owned enterprises.

 

Article 4

1. Investments by investors of either Contracting Party shall enjoy protection as well as security in the territory of the other Contracting Party. Expropriation by one Contracting Party of the investments of the investors of the other Contracting Party in its territory can be taken only when such an action is in public interests, undertaken according to the legal procedure and against compensation. The compensation shall be made in a convertible currency, freely transferable and paid without undue delay.

2. In the event investors of one Contracting Party suffer losses in respect of the joint ventures in which they have participated in the territory of the other Contracting Party due to war or other armed conflict or a state of national emergency or other similar incidents, the latter Contracting Party shall not take discriminatory measures, if any.

3. The investors of either Contracting Party shall enjoy the most-favored-nation treatment in the territory of the other Contracting Party in respect of the matters provided in this Article.

 

Article 5

Each Contracting Party shall guarantee to investors of the other Contracting Party free transfer of the following proceeds related to their investments, mainly:

(a) capital or additional funds that are needed to maintain the operation of or to increase the investment itself;

(b) returns;

(c) repayment of loans;

(d) royalties and other fees derived from the rights as defined in section (d), paragraph 1 of Article 1 in this Agreement;

(e) liquidated amounts from the total or partial assignment of the investment.

 

Article 6

If a Contracting Party makes payment to its investors under a guarantee it has accorded in respect of an investment in the territory of the other Contracting Party the latter Contracting Party shall, without prejudice to the rights of the Contracting Party under Article 10, recognize the assignment, under the laws or pursuant to a legal action, of any rights or claims of the investor to the former Contracting Party as well as the subrogation of the former Contracting Party to such rights or claims assigned to it. However, the rights of claims subrogated by the former Contracting Party shall not exceed the original rights or claims of such investor. The latter Contracting Party can make counter-claims to the rights or claims subrogated by the former Contracting Party. As regards the transfer of payments to be made to the former Contracting Party by virtue of such claim assignment provisions of Articles 4 and 5 shall apply respectively.

 

Article 7

1. In the absence of approval given by the competent authority of the Contracting Party accepting the investment to other arrangements between the parties concerned, the transfer mentioned in Articles 4, 5 or 6 of this Agreement shall be made in the currency agreed upon by the parties concerned at the effective rate of exchange prevailing on the date of the transfer and without undue delay.

2. The rate of exchange mentioned above shall correspond to the cross rate obtained from those rates which would be applied by the International Monetary Fund on the date of payment for conversions of the currencies concerned into Special Drawing Rights.

 

Article 8

1. If the legislation of either Contracting Party or obligations undertaken under international law existing at present or established hereafter between the Contracting Parties other than this Agreement contain provisions whether general or specific, entitling investments by investor of the other Contracting Party to a treatment which is more favorable than that provided for in this Agreement, such provisions shall prevail.

2. Each Contracting Party shall observe any other obligation it may have entered into with investors of the other Contracting Party in respect of investments in its territory. However, the rights of either Contracting Party to revise its laws shall not be impaired.

 

Article 9

The Agreement shall also apply to investments made by investors of either Contracting Party in the territory of the other Contracting Party in accordance with its laws and regulations since 1st July, 1979.

 

Article 10

1. Disputes between the Contracting Parties concerning the interpretation or application of this Agreement should, as far as possible, be settled through negotiations between the Contracting Parties.

2. If such a dispute cannot thus be settled within six months it shall, upon the request of either Contracting Party, be submitted to an arbitral tribunal.

3. Such an arbitral tribunal shall be constituted ad hoc as follows; each Contracting Party shall appoint one member, and these two members shall agree upon a national of a third State as the Chairman to be appointed by the Governments of the two Contracting Parties. Such members shall be appointed within two months, and the Chairman within three months from the date on which either Contracting Party has informed the other Contracting Party of its intention to submit the dispute to an arbitral tribunal.

4. If, within the periods specified in paragraph 3 above, appointments have not been made, either Contracting Party may, in the absence of any other arrangement, invite the Secretary-General of the United Nations to make any necessary appointments. If the Secretary-General is a national of either Contracting Party or if he is otherwise prevented from discharging the said function, the most senior Deputy Secretary-General who is not a national of either Contracting Party shall be invited to make the necessary appointments.

5. The arbitral tribunal shall reach its decision on the basis of this Agreement, other agreements concluded between the Contracting Parties and the general principles of international law. Such decision shall be made by a majority vote, be final and binding.

6. Each Contracting Party shall bear the cost of its own member of the tribunal and of its representation in the arbitral proceedings. The cost of the Chairman and the remaining costs shall be borne in equal parts by the Contracting Parties.

7. The arbitral tribunal shall be the one to determine its own procedure.

 

Article 11

This Agreement shall remain in force also in the event of a conflict arising between the Contracting Parties without Prejudice to the right to take such temporary measures as are permitted under the general principles of international law. Such measures shall be repealed not later than on the date of the actual termination of the conflict, irrespective of whether or not diplomatic relations exist.

 

Article 12

This Agreement shall also apply to Berlin (West) under the situation existing.

 

Article 13

1. The present Agreement shall enter into force one month from the date on which the Contracting Parties have informed each other in writing that the necessary procedures required for its implementation are in place in their respective countries. Shall remain in force for a period of ten years and shall continue to be in force in the absence of a written notification by either Contracting Party twelve months before its expiration. After the expiry of the ten-year period, the present Agreement may be terminated at any time by either Contracting Party after one year's notice has been given.

2. In respect of investments made prior to the date of termination of the present Agreement, the provisions of Articles 1 to 12 shall remain effective for a further period of fifteen years from the date of termination of this Agreement.

 

Done in duplicate at Beijing on 7th October, 1983 in the Chinese and German languages, both texts being equally authentic.

 

(Chen Muhua)
For the People's Republic of China

 

(Guenther Schoedel)
(Otto Graf Lambsdorff)
For the FederalRepublic of Germany
(Informal Translation)

 

 

Protocol

On signing the Agreement between the People's Republic of China and the Federal Republic of Germany Concerning the Encouragement and Reciprocal Protection of Investments, the undersigned plenipotentiaries of the two Contracting Parties have agreed on the following provisions which shall be regarded as an integral part of the said Agreement:

1. Ad Article 1

(a) Returns from investment or reinvestment shall enjoy the same protection as the investment.

(b) Any person holding a passport issued by the competent authority of either Contracting Party shall be deemed to be a national of that Party.

 

2. Ad Article 2

Investments made by investors of either Contracting Party in accordance with the laws and regulations of the other Contracting Party within the area of application of the law of the latter Party shall enjoy the full protection of this Agreement.

Investments made by investors of either Contracting Party in accordance with the legislation of the other Contracting Party within the area over which the other Contracting Party exercises sovereignty or jurisdiction shall also enjoy the full protection of this Agreement.

 

3. Ad Article 3

(a) The term "activities" mentioned in Clause 2 of Article 3 in this Agreement means the management, maintenance, use and enjoyment of an investment.

(b) The "treatment less favorable than" and "discriminatory measures" mentioned in Clauses 2 and 4 respectively of Article 3 of this Agreement are taken to mean mainly restricting the procudral of raw or auxiliary materials, of energy or fuel, or of means of production or operation of any kind as well as any other measures that have to be taken by either Contracting Party for the reason of priority in the arrangement of its national economy within a period of time, but that are not directed specially against the investors of the other Contracting Party or the joint ventures participated by the investors of the other Contracting Party and should not be deemed "discriminatory measures".

(c) Measures that have to be taken for reasons of public security and order, public health or morality shall not be deemed "discriminatory measures"

(d) Either Contracting Party shall, within the framework of its national legislation, give sympathetic consideration to applications for the entry and sojourn of persons of the other Contracting Party who wish to enter the territory of the one Contracting Party in connection with the making and undertaking of an investment. The same shall apply to employees of either Cotracting Party who wish to enter the territory of the other Contracting Party and sojourn there for the activities associated with an investment. Applications for work permits shall also be given sympathetic consideration.

(e) Neither Contracting Party is obliged to accord such tax preferences as tax deduction or tax exemption, which only apply to physical persons or companies domiciled or based in its own territory in accordance with its own tax law, to physical persons or companies domiciled or based in the territory of the other Contracting Party.

 

4. Ad Article 4

(a) "Expropriation" mentioned in Clause 1 of Article 4 of this Agreement shall include nationalization and the other measures having an effect equivalent to expropriation or nationalization.

(b) If expropriation mentioned in Clause 1 of Article 4 of this Agreement is considered by the investor to be not in conformity with the legislation of the Contracting Party taking the expropriatory measure, the legality of any such expropriation shall, at the request of the investor, be subject to review by the juridical body having jurisdiction in the Contracting Party taking such expropriatory measures.

(c) "Compensation" mentioned in Clause 1 of Article 4 of this Agreement shall be equivalent to the value of the investment expropriated immediately before the expropriation was announced. The amount compensated shall be fixed through negotiations between the investor and the other Contracting Party.

If the two parties cannot agree upon the amount within six months of the negotiation, the amount shall, at the request of the investor, be submitted for review to the competent court of the Contracting Party taking the expropriation or to an international arbitral tribunal.

(d) The international arbitral tribunal mentioned above shall be constituted ad hoc as follows: each party concerned shall appoint an arbitrator and the two arbitrators shall appoint a Chairman from nationals of a third State which has diplomatic relations with both Contracting Parties. The arbitrators shall be appointed within two months and the Chairman within three months from the date when one Party concerned notifies the other Party of its submission of the dispute to arbitration.

If the necessary appointments are not made within the period specified above, either Party may, in the absence of any other arrangement, request the Chairman of the International Arbitration Institute of the Stockholm Chamber of Commerce to make the necessary appointments.

The arbitral tribunal shall determine its own arbitral procedures guided by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States done on March 18, 1965. The decision shall be made by a majority vote. The decision shall be final and binding and be enforceable in accordance with the domestic laws. The arbitral tribunal shall state the basis of its decision and reasons upon the request of either Party concerned.

Each Party shall bear the cost of its own arbitrator and its representation in the arbitral proceedings. The cost of the Chairman for discharging his function and the remaining costs shall be borne equally by the parties.

(e) The activities associated with investment shall be continued as far as possible under the situation mentioned in Clause 2 of Article 4.

 

5. Ad Article 5

(a) Proceeds mentioned in Section (a) of Article 5 means the amount retrieved from the capital and additional funds to maintain or increase an investment which shall be made according to the stipulations of the contract concluded between the Parties concerned.

(b) "Loans" mentioned in Section (c) of Article 5 means the loans which are provided by the investors and which are similar to shares.

(c) "Each Contracting Party shall guarantee to investors of the other Contracting Party free transfer" of proceeds related to investments as mentioned in Article 5, in respect of the People's Republic of China, means:

The proceeds mentioned in Article 5 shall be transferred from the foreign exchange deposit account of the jointly or wholly-owned enterprises in accordance with the foreign exchange control rules of the People's Republic of China in force when the Agreement is signed.

(d) In case the foreign exchange deposit account of the jointly or wholly-owned enterprises mentioned in Section (c) above has no sufficient foreign exchange for transfer, the Chinese Government shall, under the following conditions, provide the foreign exchange needed for the transfer:

a) payment of amount mentioned in Article 5 (a), (d) and (e) of this Agreement;

b) payment of amount mentioned in Article 5 (c) of this Agreement, which has been guaranteed by the Bank of China;

c) the amount mentioned in Article 5 (b) of this Agreement obtained by the jointly or wholly-owned enterprises which have been authorized by the competent State authority to sell their products in non-convertible currencies.

 

6. Ad Article 7

The term "without undue delay" mentioned in Clause 1 of Article 7 means that the transfer shall be made within a period as is normally required for the completion of transfer formalities. Such period shall commence on the day on which the relevant transfer application has been submitted and shall not exceed three months for the transfer mentioned in Article 5 and six months for the transfer mentioned in Article 4 and 6.

 

7. Each Contracting Party shall neither exclude nor hinder transport enterprises of the other Contracting Party from transport of goods or persons connected with the investment. The investors shall have the right to choose transport enterprises at will.

(a) Goods mentioned above are taken to mean assets which are directly intended for an investment by an enterprise, or purchased in the territory of either Contracting Party or of any third State by or on behalf of such enterprise for an investment within the context of this Agreement.

(b) Persons mentioned above means those travelling in connection with the investment.

 

Done in duplicate at Beijing on 7th October, 1983 in the Chinese and German languages, both texts being equally authentic.

 

(Chen Muhua)
For the People's
Republic of China

(Guenther Schoedel)
(Otto Graf Lambsdorff)
For the Federal
Republic of Germany
(Informal Translation)

 

---

 

Beijing, October, 7, 1983

 

His Excellency
Mr. Guenther Schoedel
Ambassador Extraordinary and
Plenipotentiary of the Federal
Republic of Germany to the
People's Republic of China

 

Your Excellency:

I have the honour to acknowledge receipt of your letter dated October, 7, 1983, which reads as follows:

"On the conclusion of the negotiations on the Agreement between the People's Republic of China and the Federal Republic of Germany concerning the Encouragement and Reciprocal Protection of Investments I have the honour to inform you of the following:

The Contracting Parties have agreed that when the two Contracting Parties become members to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States opened for signature at Washington D. C. on March 18, 1965, the two Parties shall hold negotiations on a supplementary arrangement, if so, as an integral part of the Agreement, concerning what kind of disputes between one Contracting Party and investors of the Other Contracting Party and what forms resorting to the International Centre for the Settlement of Investment Disputes for conciliation or arbitration according to the Convention.

I would very much appreciate it if Your Excellency could confirm the foregoing."

I have the honour to confirm, on behalf of the People's Republic of China, the above content of your letter.

Accept the assurance of my highest consideration.

 

(Chen Muhua)
State Councilor and

Minister for the Foreign Economic Relations and

Trade of the People's Republic of China
(Informal Translation)

 

---

 

Beijing, October 7, 1983

 

His Excellency
Mr. Guenther Schoedel
Ambassador Extraordinary
and Plenipotentiary of the Federal
Republic of Germany to the
People's Republic of China

Your Excellency:

I have the honour to acknowledge receipt of your letter dated October, 7, 1983, which reads as follows:

"On the conclusion of the negotiations on the Agreement between the People's Republic of China and the Federal Republic of Germany concerning the Encouragement and Reciprocal Protection of Investments I have the honour to inform you of the following:

The delegates of the two Parties held the forth round of talks on the Agreement concerning investment protection at Bonn in July 1983, and resumed the talks at Beijing through diplomatic channels on remaining issues, reaching an unanimous agreement on all the provisions. The two Parties shared the following understanding:

The legality of the expropriation will be reviewed by the judicial court of the Contracting Party taking the expropriatory measures which enjoys jurisdiction. However, it shall not rule out the application of procedure of Article 10 in case the Contracting Parties have a dispute arising out of interpretation or application of the Agreement."

Accept the assurance of my highest consideration.

 

(Chen Muhua)
State Councilor and
Minister for the Foreign Economic Relations and
Trade of the People's Republic of China
(Informal Translation)