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*Columbia FDI Perspectives*
Perspectives on topical foreign direct investment issues
Editor-in-Chief: Karl P. Sauvant ([log in to unmask])
Managing Editor: Riccardo Loschi ([log in to unmask])

*The Columbia FDI Perspectives are a forum for public debate. The views
expressed by the authors do not reflect the opinions of CCSI or our
partners and supporters.*

No. 308  June 28, 2021
*China’s foreign investment complaint mechanism: *
*A new beginning of foreign investment governance reform?*
Manjiao Chi and Zongyao Li* <#m_-8370054934400039389__edn1>

Foreign investment complaint mechanisms (FICMs) have been established by
some Chinese local governments since the 1980s, to serve as “bridges”
between investors and relevant authorities. The FICM is similar to the
ombudsperson or home doctor system in some countries. They liaise within
the government, coordinate with the authorities and help organize meetings
or meditations, but do not make binding decisions. To help harmonize and
streamline the FICMs, China’s Ministry of Commerce adopted the Interim
Measures on Work of Complaints from Foreign-invested Enterprises
in 2006. Due to their lack of transparency, the operation and effectiveness
of these FICMs remain unclear and could be unsatisfactory.

The Foreign Investment Law of 2019 established the first national FICM,[1]
<#m_-8370054934400039389__edn2> covering all situations where a foreign
investor “views that the administrative act of an administrative authority
or the staff has infringed upon its lawful rights or interests.”[2]
<#m_-8370054934400039389__edn3>  In 2020, China adopted the Implementation
Rules of the Foreign Investment Law
providing detailed guidance for the FICM’s operation. Accordingly, the
Ministry of Commerce shall establish an inter-ministerial joint conference
to promote the FICM,[3] <#m_-8370054934400039389__edn4> and local
governments should also establish FICMs.[4] <#m_-8370054934400039389__edn5>
According to the Working Rules of the FICM
of 2020, the FICM’s intervention could result in a settlement, coordination
within relevant authorities, recommendations or any other appropriate
measures.[5] <#m_-8370054934400039389__edn6> If a complaint cannot be
processed within one year, the FICM authority shall report to the
government and recommend the measures to be taken.[6]

The Foreign Investment Law and its Implementation Rules are landmark in
China’s FDI governance. They establish the first national FICM and create
the inter-ministerial working mechanism. But the new rules also leave some
pertinent procedural issues to be clarified.[7]
<#m_-8370054934400039389__edn8> Given this legislative vacuum, and as the
FICM is not yet operating, the actual role and impact of the FICM remain
largely unclear.

The FICM could play several different roles, with national and
international impacts:

   - The FICM is not a pre-arbitration requirement, nor does it prejudice
   investors’ right to utilize administrative review or litigation or to take
   recourse to investor-state dispute-settlement (ISDS). It is also
   non-adversarial, and retaliatory measures shall not be taken against
   investors that utilize the FICM.[8] <#m_-8370054934400039389__edn9> Such
   features could make the FICM a welcome ISDS alternative for investors—and
   help realize its objective of “limiting the risk of international
   investment disputes.”[9] <#m_-8370054934400039389__edn10> Thus,
   investors will need to assess the pros and cons of available remedies and
   their interrelations to decide which remedy (or remedies) could best
   address their concerns. Clear reference to the FICM in Chinese investment
   agreements as a pre-arbitration requirement or as one of the local remedies
   could make the FICM more relevant in the context of ISDS.
   - The FICM could be an investment facilitation measure as the Foreign
   Investment Law envisages.[10] <#m_-8370054934400039389__edn11> Aside
   from solving disputes, it also seeks to address other fundamental issues,
   advise the government and improve FDI governance. Issues frequently raised
   by investors through the FICM may be brought to the attention of
   upper-level authorities and will likely be solved effectively through the
   internal reporting system within the government, which could help build an
   investment-friendly business environment in China. Here, greater
   transparency should be helpful in gaining the confidence of investors.
   - The FICM could help advance the reform of China’s FDI regulatory
   framework. Unlike administrative litigation and review, the FICM is not
   primarily adjudicative, but relies on coordination with authorities,
   especially at the ministerial level. Such high-level coordination is only
   available on an issue-specific basis, such as the national security review
   of FDI. The FICM signals improved institutionalization of such coordination
   mechanism. In this regard, top-level participation in such a coordinating
   institution and systematic efforts from all relevant authorities are

The FICM could be a helpful launch pad for improving China’s FDI
governance, if its role is clearly defined and strong. Detailed and
effective working rules at the national and local levels should be put in
place soonest.

* <#m_-8370054934400039389__ednref1> Manjiao Chi ([log in to unmask]) is
Professor at Law School, University of International Business and
Economics, China; Zongyao Li ([log in to unmask]) is Associate at
Shearman & Sterling LLP. The views are solely those of the authors. The
authors wish to thank Julien Chaisse, Marc Proksch and William Zarit for
their helpful peer reviews.
[1] <#m_-8370054934400039389__ednref2> Foreign Investment Law of the
People’s Republic of China
the Ministry of Commerce.
[2] <#m_-8370054934400039389__ednref3> FIL, Art. 26(2).
[3] <#m_-8370054934400039389__ednref4> Regulations for the Implementation
of the Foreign Investment Law of the People's Republic of China, National
Decree No. 723 of 26 December 2019
Art. 29(2).
[4] <#m_-8370054934400039389__ednref5> Implementation Rules, Art. 29(1).
[5] <#m_-8370054934400039389__ednref6> Working Rules of FICM
August 25, 2020, Art. 18.
[6] <#m_-8370054934400039389__ednref7> Working Rules, Art. 21.
[7] <#m_-8370054934400039389__ednref8> Implementation Rules, Art. 29(3).
[8] <#m_-8370054934400039389__ednref9> Implementation Rules, Art. 31(1).
[9] <#m_-8370054934400039389__ednref10> “2018 nationwide meeting of FICM
organizations held in Beijing,” Ministry of Commerce, July 26, 2018
[10] <#m_-8370054934400039389__ednref11> Zheng Yun, “China’s new foreign
investment law: Deeper reform and more trust are needed,” *Columbia FDI
Perspectives*, No. 264, Nov. 4, 2019, pp. 1-2
*The material in this Perspective may be reprinted if accompanied by the
following acknowledgment: “Manjiao Chi and Zongyao Li, ‘China’s foreign
investment complaint mechanism: A new beginning of foreign investment
governance reform?,’ Columbia FDI Perspectives No. 308, June 28, 2021.
Reprinted with permission from the Columbia Center on Sustainable
Investment (***
A copy should kindly be sent to the Columbia Center on Sustainable
Investment at **[log in to unmask]* <[log in to unmask]>*.*

For further information, including information regarding submission to the
*Perspectives*, please contact: Columbia Center on Sustainable Investment,
Riccardo Loschi, [log in to unmask]

*Most recent Columbia FDI Perspectives*

   - No. 307, Karl P. Sauvant and Nancy N. Stephen, ‘Increasing
   transparency in investment facilitation: focused support is needed,’ June
   14, 2021
   - No. 306, Priyanka Kher, Trang Thu Tran, Sarah Hebous, ‘Reducing
   regulatory risk to attract and retain FDI,’ Columbia FDI Perspectives, May
   31, 2021
   - No. 305, Munir Akram, “Mobilizing FDI for sustainable infrastructure
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*All previous FDI Perspectives are available at

*Other relevant CCSI news and announcements*

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   authors of the Guide and stakeholders and practitioners will explore the
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Resident Senior Fellow
Columbia Center on Sustainable Investment
Columbia Law School - Earth Institute
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*Karl P. Sauvant, PhD*

*Resident Senior Fellow*
*Columbia Center on Sustainable Investment*
Columbia Law School - The Earth Institute, Columbia University
435 West 116th St., Rm. JGH 825, New York, NY 10027
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