In-depth analysis of data as a qualified international investment form and China’s structured involvement schemes

Introduction

In view of the increasing interconnectedness of the global economy and the rapid advancement of information technology, data have emerged as a valuable and promising asset for international investment.¹ It is becoming increasingly evident that an expanding number of companies on a global scale are resorting to data-driven decision-making as a means of optimizing their operations and fostering growth. From the generation of accurate market forecasts to the provision of personalized customer service, data can play an instrumental role in enabling companies to enhance their competitive advantage. Consequently, investors are beginning to consider companies and projects that possess a substantial quantity of high-quality data resources.² Concurrently, the advent of technologies such as cloud computing, big data analytics, and artificial intelligence has facilitated the collection, storage, processing, and application of data, thereby further enhancing its investment value.³ The function of data within business operations has undergone a transformation, evolving from a mere by-product to an invaluable asset with the potential to generate direct economic value. Moreover, the acceleration of digital transformation across a range of industries has prompted enterprises to proactively seek external data resources with the objective of optimizing business processes and innovating business models. This has created a broad market space for data-driven investment and trading, which presents a promising opportunity for those looking to make strategic investments in this field.⁴ For instance, in the financial sector, risk assessment models based on big data can assist financial institutions in evaluating credit risks with greater precision, which in turn has prompted significant investments in the development of data collection and analysis platforms.

As investment in the digital sector continues to rise, countries are placing an increasing emphasis on data security, cybersecurity, individual privacy, and data sovereignty.⁵ As a result, a rising number of countries have implemented a variety of data regulatory measures, including data localization mandates, data export restrictions, privacy risk assessments, and mandatory authorizations for organizations to share data with government agencies.⁶ These initiatives inevitably result in restrictions or impediments to cross-border data flows for multinational companies. As of September 2024, there are 2,612 international investment agreements (IIAs) in force worldwide.⁷ Indicating that countries are assuming responsibility for the protection and promotion of investment. In practice, IIAs can be classified into two main categories: bilateral investment treaties (BITs) and treaties with investment provisions (TIPs). In case the host country adopts actions or measures that pose a threat to the legitimate interests of a foreign investor, the investor is empowered to submit the dispute to investment arbitration in accordance with the investor–state dispute settlement (ISDS) mechanism defined in the relevant investment agreement. One of the few multilateral treaties in the field of international investment is the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).⁸ This served as the basis for the establishment of the International Centre for Settlement of Investment Disputes (ICSID), which specializes in investment disputes between host governments and foreign private investors through conciliation and arbitration. Article 25(1) of the ICSID Convention delineates the ICSID’s jurisdiction as encompassing any legal dispute arising directly out of an investment. The resolution of data-driven disputes is contingent upon the tribunal’s interpretation of whether the data in question meet the criteria for classification as a qualifying investment. However, the legal characteristics of data that differentiate it from conventional forms of international direct investment, such as its intangibility, ease of reproduction and low cost, non-consumptive use, difficulty in assessing its value, rapid changes in value, and the fact that it can be shared and used by multiple owners,⁹ pose a challenge to existing international investment law to effectively address the new challenges that have emerged in the digital economy.

China has recognized the strategic importance of the digital economy as an important part of its national development strategy and has made it a strategic national development priority in its Fourteenth Five-Year Plan for the Development of the Digital Economy.¹⁰ In the area of big data, China has extensive opportunities for international collaboration and is seeking to attract high-quality digital economy companies from around the world. It appears that digital economy multinationals place a high value on China’s data-driven investment protection. Should China face challenges in protecting data-driven investments, there is a possibility that it may encounter difficulties in attracting high-quality foreign capital. Against the backdrop of a relatively sluggish global economic landscape and the increasing scrutiny of foreign investment review processes in China, digital economy companies may face significant political and legal challenges in their overseas investment initiatives.¹¹ If data are considered an international form of investment, regulatory initiatives by the Chinese government to regulate data could potentially violate the IIAs' obligation to protect data-driven investments, which could lead to investment disputes.¹² As a result, ensuring robust data protection within the existing IIA framework appears to be a significant challenge that may require further attention.

In China, the possibility of classifying the data as a form of foreign direct investment (FDI) was first explored by domestic scholars. For instance, Cheng Bian indicated that China’s domestic legislation still exhibits shortcomings in safeguarding data-driven investments and discrepancies with the investment protection stipulations set forth in China’s IIAs. Therefore, foreign enterprises continue to confront certain legal hazards when undertaking data-driven investments in China.¹³ Ding Xiaodong offered an insightful analysis of the legal nature of corporate data in China and presented some promising proposals for the legal protection of the rights and interests of data as property.¹⁴ Song Junrong explored the suitability of data as an investment form and whether assets generated from data processing activities carried out outside the host country can fulfil the spatial requirements of a suitable investment.¹⁵ Zeng Jianzhi posited that, according to the definition of investment in IIAs, data and its derivative interests constitute investment assets. Consequently, a transnational digital presence can be regarded as an eligible investment.¹⁶ Zhang Qianwen respectfully suggested that, in the process of reforming IIAs, countries should consider ways to strengthen data protection, such as through the establishment of property rights or the path of intellectual property rights.¹⁷ Zhao Dan and Lou Weiyang proposed that China should undertake a revision and improvement of the definition of investment as outlined in BITs.¹⁸

In the broader non-Chinese literature on the question of whether data can be considered an attribute of ownership and an appropriate form of international investment, Schreuer has put forward the idea that FDI should meet a set of criteria, which he calls the ‘five-factor’ criterion. These include a period of sustained economic activity, regular profits and returns, an element of risk, substantial inputs, and the importance of the investment for the development of the host country.¹⁹ Westin suggested that data could be seen as a type of property.²⁰ In a more recent development, Stepanov indicated that data could be viewed as an intangible asset of a company, which could be a suitable international investment.²¹ Ritter and Mayer have put forward a property rule construct that may provide some insight into the circumstances under which a right to ownership of digital information might arise. They suggest that this right could potentially attach to certain data at the point of creation.²² Victor respectfully suggested that the principle of a default right to personal data in the EU General Data Regulation, the liability of others to dispose of acquired data, and remedies based on property rules may provide a potential pathway to the protection of personal data through property rights.²³ However, Horváth and Klinkmüller have argued that it may not be entirely accurate to conceptualize data for a specific period of time when determining whether it constitutes an eligible form of investment. In addition, they emphasized that the data in question are devoid of any intrinsic ‘risk’, which makes the qualification of an investment form a challenging endeavour.²⁴

In light of the above, this article first examines the apparent lack of a clear definition of investment by ICSID in the context of the existing, somewhat fragmented framework of international investment law. This lack of a clear definition has prompted tribunals to continue examining the issue. Leading to the formulation of a potential four-criteria test, based on the Salini case, to determine the characteristics of a qualifying form of investment. In light of these considerations, the article then examines the asset-based definition of investment as set out in the IIAs concluded by China, with particular reference to models from Europe and the USA. It provides insights into the characteristics of the current definition of investment. Secondly, given that some of China's IIAs use investment characteristics to define the concept of investment, the following section seeks to determine the extent to which China's current data law is consistent with the characteristics of investment outlined in these agreements. This is done in order to draw theoretical conclusions about the potential of data as an investment. Given the central role of the Salini test in shaping the concept of investment, the article undertakes a comprehensive examination of whether data-driven investments meet the essential criteria set out in the Salini test. Finally, acknowledging China's multifaceted role as both a prominent investor and an investment recipient, the article explores potential avenues for reform to enable China to effectively address the significant challenges posed by the treatment of data as a qualifying investment.

Elaboration and development of the definition of investment: a meticulous analysis of China’s path choice

In determining whether something constitutes a qualifying FDI, international arbitral tribunals typically employ a number of approaches.²⁵ First, they frequently cite multilateral investment agreements (MIAs) such as the ICSID Convention. A second area meriting detailed examination is the precise definition of investment and the forms of investment enumerated in the relevant IIAs. For example, if a treaty clearly defines shares, bonds, concessions, etc, as forms of investment, it is more likely that transactions or assets falling within these categories will be recognized as investments. Article 25 of the ICSID Convention refers to investments but does not provide a specific definition. This has, unfortunately, led to many complex and varied disputes over the scope of investment. Where disputes have arisen, tribunals have sought to establish a workable criterion for determining whether an investment meets the required standards.²⁶ After much deliberation, Schreuer was cognizant of the fact that the interpretation of the definition of investment may undergo changes over time and in practice. Nevertheless, a conventional investment is defined by the following five characteristics. First, the investment must have a defined duration. This suggests that the investment is not a transient or isolated occurrence, but rather a sustained and ongoing commitment. Secondly, the objective is to derive the anticipated profits and returns. The rationale behind the investor’s decision to invest is to secure the anticipated economic benefits. Thirdly, both investors and host countries assume certain risks. The investment process is replete with uncertainties, which necessitates that both parties assume the corresponding risks. Fourthly, substantial inputs are required, including those in the form of capital, technology, equipment, and labour. Finally, given the development objective of the Washington Convention, investments are expected to contribute to the development of the host country. It is emphasized that the benefits of such investments should extend beyond the investor to include a constructive impact on the economic, social, and other aspects of the development of the host country.²⁷ The ‘five-factor theory’ serves as a pivotal theoretical foundation for defining investment in IIAs. This position was endorsed in the following two cases, namely Fedax N.V. v The Republic of Venezuela and Consortium RFCC v Royaume du Maroc.²⁸ Expanding on Schreuer’s theoretical framework, Gaillard formulated four essential criteria: substantial investment, long-term duration, risk exposure, and a positive impact on the economic development of the host country.²⁹ These criteria have been embraced by numerous arbitral tribunals, with the Salini v Morocco case standing out as particularly seminal in this regard.³⁰

Defining investment: the arbitral tribunal's construction of a four-pronged test amid vague definitions of investment

In Salini v Morocco,³¹ the tribunal established a definitive four-pronged test for determining whether intangible assets qualify as investments. This test, commonly referred to as the Salini test, requires that an investment must satisfy four criteria: (i) a contribution of money or assets; (ii) a certain duration; (iii) an element of risk; and (iv) a contribution to the economic development of the host state.³² A review of previous awards pertaining to international investment indicates that the initial three dimensions are rooted in concepts of international law that are implicit in older awards. In contrast, the fourth aspect was derived from the preamble to the ICSID Convention, which states that ‘considering the need for international cooperation for economic development and the role of private international investment therein’.³³ This fourth aspect has been included by arbitral tribunals explicitly in recognition of the role played by FDI in the economic development of host countries. It would be erroneous to assume that Salini is automatically considered case law and that the ICSID will not adhere to the principles of prior jurisprudence. However, the outcomes of previous cases can have a significant impact on subsequent cases. In some cases, they may even develop into subsidiary international customary law, general principles of law, or treaties.³⁴

Nevertheless, the Salini test has been the subject of some criticism and questioning. For example, in Biwater Gauff v Tanzania, the tribunal ruled that the Salini test should not be applied in a mechanical or overly strict manner.³⁵ The tribunal adopted an alternative test and has advanced the argument that a more flexible and pragmatic interpretation of investment would be an accurate one. In order to gain a comprehensive understanding of the investment in question, it is essential to consider the numerous elements and indications collectively, as they often depend on the specific circumstances of each case. In addition, a more direct and detailed critique of the Salini test was presented in the case of Malaysian Historical Salvors v Malaysia.³⁶ In the Preliminary Award, the sole arbitrator devoted considerable time to examining the criterion of significant contribution to the economic development of the host country as a prerequisite for identifying eligible investments. While the Committee acknowledges that there is precedent for the application of this factor, it erroneously applies this condition as a criterion for determining jurisdiction. Referring to the opinion of Schreuer,³⁷ the Committee considers that the Salini test, which describes the characteristics of the investment, should not be applied in this case.³⁸

Notwithstanding the non-binding nature of ICSID awards, subsequent ICSID tribunals, such as those in Joy Mining Machinery Limited v Arab Republic of Egypt and Jan de Nul N.V. and the Dredging International N.V. v Arab Republic of Egypt,³⁹ have applied the Salini test to determine the meaning of investment. Moreover, in Phoenix Action, Ltd v The Czech Republic, the tribunal determined that the Salini standard was insufficient and introduced two additional criteria: that the investment must be in accordance with the laws of the host state, and made in good faith.⁴⁰ In light of these considerations, an objective criteria approach has evolved for arbitral tribunals to decide autonomously on the definition of an investment. These criteria reflect the fundamental premise that arbitral tribunals have the autonomy to assess their own jurisdiction on the basis of certain objective criteria. This provides a benchmark for reference in situations where investment activities are becoming increasingly complex and difficult to assess. It also provides some ideas on the predictability and stability of the definition of an investment. In the context of growing complexity and difficulty in evaluating investment activities, this approach provides a standard of reference, offering insights into the predictability and stability of the definition of investment.

Convergence in defining investment through the ‘Asset’ model and features of the investment definition clauses under the Chinese IIAs

Over the past decade, multilateral negotiations within the World Trade Organisation (WTO) system have faced difficulties.⁴¹ In January 2019, 76 WTO members issued the WTO Joint Statement Initiative on E-commerce, which sets out the members’ intention to begin negotiations on digital trade-related issues.⁴² As of 20 December 2023, participants have substantially completed negotiations on 13 provisions, including those pertaining to open government data, cybersecurity, open Internet access, and personal data protection.⁴³ But the possibility of data as a form of investment is not addressed in the above discussion. Besides, WTO members have remained highly active in negotiating new regional trade and investment agreements.⁴⁴ Due to differences in countries’ levels of economic development, legal systems, and policy objectives, there are significant differences in the definition and understanding of investment. This introduces a degree of uncertainty and risk in the coordination and consistency of the definition of investment in IIAs.

Contemporary IIAs tend to offer broad and open-ended definitions of investment, along with a non-exhaustive list of specific types of investment serving as indicators rather than definite criteria.⁴⁵ The form and content of these definitions vary considerably from one treaty to another. For instance, the 2012 US Model Bilateral Investment Treaty adopts definitions for both ‘covered investments’ and ‘investments’. ‘Covered investments’ include investments made by investors from the other contracting party that exist at the time the treaty takes effect, or those established, acquired, or expanded thereafter within the territory of the contracting party. The term ‘investment’ refers to assets that are directly, or indirectly, owned or controlled by an investor and that have the characteristics of an investment. These characteristics include the infusion of capital or other resources, the expectation of returns or profits, and the assumption of risk. Additionally, the treaty outlines eight specific types of investment forms.⁴⁶ The investment chapter of the United States–Mexico–Canada Agreement takes a similar approach by defining investment.⁴⁷ Furthermore, by comparing the investment chapters of the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada,⁴⁸ the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP),⁴⁹ and the Regional Comprehensive Economic Partnership (RCEP),⁵⁰ the article finds that they all follow a similar model. Combining an ‘asset-based definition of investment’ with an outline of investment characteristics, a list of specific forms of investment, and clarification of what does not qualify as an investment. These agreements generally maintain consistency in the types of investment covered. The definition of investment in these treaties focuses primarily on the characteristics of the assets and the relationship between the investor and the assets. The lists of forms of investment may vary in length but generally include the following categories: enterprises; participation in enterprises through stocks, shares, and other means; various forms of debt instruments, such as corporate bonds, unsecured bonds, and loans; derivatives, such as futures and options; rights under contracts, including turnkey, construction, management, production, franchise, revenue-sharing, or similar contracts; intellectual property and goodwill; permits and similar rights granted under host country laws or contracts; and tangible and intangible property, whether movable or immovable, along with related property rights, such as rights of lease, mortgages, liens, and pledges.

As of August 2024, China has developed an extensive network of IIAs, including 124 BITs and 30 TIPs. Making it the second largest network worldwide.⁵¹ It is noteworthy that the signing of the China–Canada BIT represents a significant shift in China’s approach, moving towards the more intricate American model. This model is distinguished by its detailed provisions, broader scope, and greater enforceability. However, despite this transition, many of China’s agreements still retain features of the earlier European model, which is simpler and focuses primarily on post-establishment investment protection.⁵² In the practice of treaty-making, the definition model based on ‘property’ is more frequently adopted by China and other countries. This model defines investment as ‘various types of property’ invested by an investor of one party in the territory of the other party, and enumerates the types of property involved as comprehensively as possible in the manner of ‘including but not limited to’. Given the considerable number and range of IIAs, the lack of comprehensive multilateral investment rules, the pronounced fragmentation of BITs, and the strictness and delay of China’s domestic investment legislation, China’s conceptualization of international investment is similarly fragmented.⁵³ When analysing the IIAs that have entered into force in China, certain features are noticeable in the investment definition clauses.⁵⁴

First, most IIAs merge the definitions of ‘investment’ and ‘covered investment’ into a single provision. However, several IIAs distinguish between these terms by defining them separately.⁵⁵ For example, Article 1.4 of the China–Canada Bilateral Investment Agreement (2012) defines ‘covered investment’ as an investment made by an investor from the other Contracting Party that exists in its territory on the date the Agreement enters into force, or an investment made thereafter by an investor admitted under the host country’s laws and regulations. This definition requires the commitment of capital or other resources, an expectation of gain or profit, or the assumption of risk. In contrast, the definition clause of investment in the agreement simply enumerates various forms, including an enterprise; shares, stocks, and other equity interests in an enterprise; bonds, debentures, and other debt instruments issued by an enterprise; and loans to an enterprise, among others. Additionally, the Agreement clarifies that ‘investment’ does not cover claims to money arising solely from: (i) commercial contracts for the sale of goods or services, or the extension of credit related to commercial transactions such as trade financing or (ii) any other claims to money.

Secondly, the definition of investment in the majority of IIAs typically comprises two components: a general description and an enumeration of investment forms. Using the definition of ‘investment’ under Article 10.1 of the Regional Comprehensive Economic Partnership (RCEP) as an example, the general part stipulates: ‘investment refers to every kind of asset that an investor possesses or controls, directly or indirectly, and which possesses the characteristics of an investment, including such features as the commitment of capital or other resources, the anticipation of gains or profits, or the assumption of risk.’ In addition, the forms that an investment may take include: (i) shares, stocks, and other forms of equity interest in a legal entity, and rights derived therefrom; (ii) bonds, debentures, loans, and other debt instruments of a legal entity, and rights derived therefrom; (iii) rights under contracts, including turnkey, construction, management, production, or revenue-sharing contracts; (iv) intellectual property rights and goodwill, recognized in accordance with the laws and regulations of the host country; (v) rights to money or to the use of money or to the transfer of assets, recognized in accordance with the laws and regulations of the host country; (vi) rights granted under the laws and regulations of the host country or under contracts, such as concessions, licences, permits, and authorizations, including those for the exploration and exploitation of natural resources; and (vii) movable and immovable property and other property rights, such as leases, mortgages, liens, or pledges. However, the notion of investment does not include an order or judgment in a judicial or administrative proceeding or in an arbitration proceeding. It is also important to note that five IIAs recognize companies as a valid investment category,⁵⁶ which in theory does not implicitly exclude data as assets of foreign investors. The forms of investment in most IIAs are presented in an open-ended manner, using phrases such as ‘including but not limited to’, ‘in particular but not limited to’, and ‘mainly including’.

Thirdly, drawing from the investment criteria proposed by the aforementioned scholars and the Salini test used by investment arbitration tribunals,⁵⁷ some IIAs explicitly state that an investment must exhibit certain characteristics. These include the commitment of capital or other resources, the expectation of gain or profit, and the assumption of risk. In addition, the majority of ‘covered investment’ provisions in IIAs stipulate that investments must adhere to the laws and regulations of the host country. This prompts the question of whether data can be regarded as a form of investment if they fail to comply with the host country’s domestic legislation. In such instances, investors may encounter difficulties in seeking protection for their data assets in accordance with the relevant IIA provisions.⁵⁸ Based on the requirement of legality, some IIAs also require investors to obtain the consent, authorization, or approval of the host country before making an investment.⁵⁹ For example, Article 10.1 of the RCEP stipulates that ‘where a notification or approval process is required for making an investment, an investor that “seeks to make” an investment refers to an investor that has initiated such notification or approval process’. Furthermore, while the majority of investment clauses in IIAs mandate that a qualifying investment must be made within the host country’s territory, there are five IIAs that do not impose this requirement.⁶⁰

Evaluating the eligibility of data as an investment within China’s fragmented investment framework

Just as the connotation of assets expands and deepens with the evolution of social production methods, the forms of FDI also evolve and diversify with economic development. Industrial property rights, such as patents and trademarks, have emerged as new forms of investment in the intellectual property economy.⁶¹ For example, in Einarsson v Canada, the tribunal ruled that the Canadian authorities had infringed Einarsson’s copyright and trade secrets relating to seismic data in which he owned and invested.⁶² However, in the case of data that do not enjoy the protection of intellectual property rights, it is less clear whether they fall under the protection of IIAs.⁶³  Salini served to elucidate and codify the concept of investment, which had previously been the subject of considerable international controversy. This standard has become a significant reference point for tribunals in addressing analogous cases in the future and has facilitated a more precise delineation of the characteristics that define a protected investment in the context of international investment arbitration. The test offers relatively clear guidance for determining whether an economic act constitutes an investment in the sense of international investment law, thereby making the definition and scope of international investment clearer and more operational. This plays an important role in protecting the legitimate rights and interests of investors, regulating the relationship between host countries and investors, and promoting the stability and predictability of international investment.⁶⁴ In essence, the Salini test has achieved broader acceptance beyond ICSID, impacting various arbitral forums, including those governed by the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules. The case of Romak S.A. v The Republic of Uzbekistan serves as evidence of this wider application.⁶⁵ This wider acceptance underscores the importance of the test in assessing the nature and extent of investments in international arbitration. In the context of China, it would be prudent to first address two critical elements of Chinese IIAs before assessing whether data investments meet the standards set by Salini. These elements are as follows: (i) the territorial connection between the data-related investments and the host states and (ii) the congruence of the data-related investments with the host state’s legal framework. Once these basic concepts are established, an accurate assessment of whether data can be considered a qualifying form of investment in China under the Salini test will be possible.

Data-driven investment: a preliminary examination of location within the host country and regulatory compliance

Up to now, it is conceivable that, even in the absence of explicit territorial stipulations in an IIA, an arbitral tribunal could infer that a qualified investment necessitates a territorial connection with the host country.⁶⁶ Therefore, it seems reasonable to suggest that the territorial nexus between a data-driven investment and the host state could emerge as a pivotal criterion for assessing the qualification of investments in data assets.⁶⁷ Data-related investments can occur in a multitude of settings. First, a foreign investor may choose to establish a company in China that specializes in data-related activities, with the aim of carrying out key functions such as collecting, storing, processing, and selling data. In the second scenario, a foreign company provides online services to users in China via the Internet, oversees the management and processing of data in China, and also maintains traditional investments in the country that are closely related to these online services. For example, a foreign company operates a widely used social media platform that targets Chinese users. To comply with Chinese data regulations, the enterprise stores and processes user data within China using local data centres. In addition, the enterprise has made traditional investments in China by establishing a local office and partnering with Chinese advertising companies to manage and sell advertising space on its platform. In this case, the company’s online social media services are integrated with its traditional investments, such as the local office and advertising partnerships, which are directly related to its online operations. The third scenario concerns a foreign company that has exclusive ownership or control of data within China. For example, a foreign company may provide distance learning services to Chinese customers, storing and processing user data through a cloud storage service provider in China, while also engaging in unrelated export processing activities in China. Given that the data in question are located within the territory of China, it seems reasonable to argue that an arbitral tribunal might be inclined to find a territorial connection between the data-related investment and the host state. At this point, it appears that tribunals may be inclined to consider a broader interpretation of government actions that could potentially harm investors’ interests, particularly given that many multinational companies operating in the digital space often have additional assets within China’s jurisdiction. If the data regulatory measures imposed by the Chinese government prove to be an unjustified impediment to their data-driven operations, the initiation of arbitration proceedings could be considered a valid investment claim.⁶⁸

The issue of overseas data storage is complex and presents a number of significant challenges. The first scenario involves foreign nationals or companies that do not own or control traditional investments in China, but provide online services that collect data stored overseas. For example, a foreign company may operate a cloud storage service for Chinese users through data centres located in its home country, while at the same time engaging in infrastructure development projects in China. Despite the separation of these activities and the lack of a direct link between them, the foreign company’s data processing must still comply with Chinese data laws and regulations, as the data being managed originate from Chinese users. The second scenario involves a foreign-owned company that maintains or controls traditional investments while storing some or all of the data generated in China in locations outside the country. For example, a foreign automotive company operates in China, manufacturing and selling vehicles in the Chinese market. In addition to its manufacturing activities, the company generates a significant amount of customer data through the use of on-board systems and the maintenance of service interactions within China. In order to efficiently manage these data in accordance with the company’s global data policy, the company has chosen to store the data on servers located outside of China.

In lieu of establishing a physical presence in the host country, data-related entities may opt to operate through the establishment of representative or liaison offices, or even virtual entities.⁶⁹ This indicates that data-driven investment is more flexible and convenient in form, reducing the dependence on large-scale physical facilities and branches in traditional investment. In the case of SGS v Philippines, the tribunal’s decision provides an important point of reference for future cases. If the function of the representative office established in the territory of the host country is assessed in the context of the overall business structure, it can be considered an investment.⁷⁰ This indicates that the recognition of such forms of investment does not depend solely on their physical existence, but also on a comprehensive assessment of their actual role within the business structure. Moreover, in the event that data are determined to be a qualified form of investment, offices or liaison offices established in the host country may also be recognized as legal investments, provided that they constitute an essential and indispensable part of the business operations. This underscores that, in assessing the legality of investments centred on data-related assets, it is the actual value and importance of these institutions or facilities to the business operations, and not merely their physical form, that are of central importance.⁷¹

As noted above, selected China-based IIAs require that investments comply with the country’s domestic legal, regulatory, and policy framework. In general, there are no significant legal impediments to considering data as a form of qualified FDI. Unless China explicitly excludes data from being considered as property rights. However, the inclusion of the ‘investment in accordance with the laws of the host country’ provision in ICSID proceedings has led to a complex set of issues.⁷² Recently, ICSID has established the fundamental position that the host country’s law should not be applied to the definition of ‘investment’. In cases such as Fraport v Philippines, the host country presented sufficient evidence indicating that the investment in question violated its domestic legislation, thereby failing to meet the criteria for classification as an investment as defined in the BIT. The arbitral tribunal concluded that the definition of investment should be determined by the BIT, which represents the mutual consent of the contracting parties, rather than the hasty application of the host country’s national law.⁷³ In the current era, Chinese academics have put forth the proposition that particular investments, even if they do not entirely align with the criteria established by the domestic legislation of the host country, should not be immediately dismissed as prospective investments. This would entail a consideration of the specific factual context and the precise wording of the relevant IIA, in alignment with the trends and tendencies observed in the global digital economy.⁷⁴ Furthermore, Chinese IIAs stipulate that the returns generated by investments should be afforded the same level of protection as the investments themselves, as already mentioned in the China–Congo BIT. Notwithstanding the above criteria for qualifying investments, data may be protected as a return under the treaty framework.⁷⁵ For example, if a company uses data generated from its day-to-day operations for internal purposes, it may be entitled to protection as a return under the applicable IIA even though it does not meet the criteria for a proper investment.

Analysis of the theoretical feasibility of data as eligible FDI under the four-pronged test

Given the lack of clarity in the legal framework regarding data as an investment under the Washington Convention and the various IIAs to which China is a party, it appears that the investment definitions in the aforementioned Chinese IIAs are broadly consistent with the four criteria established by the Salini test. In light of the above, the following analysis attempts to synthesize the four criteria established by Salini with the investment definitions found in Chinese IIAs. This approach is intended to provide a comprehensive assessment of the data’s eligibility as a qualifying investment, taking into account the theoretical feasibility within the current legal and regulatory framework.

The requirement for a contribution of money or asset

While the characteristics of data as an asset may not be entirely consistent with the traditional definition of an asset, it is undeniable that data have evolved as an asset supported by robust theoretical and practical underpinnings. In the 1970s, US scholar Westin introduced the concept of treating data as property which has had a significant impact on the way data protection is viewed in the US.⁷⁶ He noted that the prevailing methodologies for protecting personal data are primarily concerned with preserving privacy, ensuring confidentiality, and deterring unauthorized access. In contrast, by recognizing data as a valuable asset that can be collected, stored, analysed, and traded, this approach not only ensures the protection of personal data, but also creates economic opportunities for both individuals and businesses.⁷⁷ In the contemporary digital era, this perspective remains relevant, offering valuable insights into the protection of personal data while facilitating the growth of the data economy. In the twentieth century, US scholar Lessig theorized that traditional data protection strategies could lead to the creation of disparate data ‘islands’ that could potentially impede the flow of data. Treating data as property encourages its optimal use and the creation of economic value. This approach provides a novel framework for the rational use of data, thereby facilitating the advancement of the data economy and the development of legal systems.⁷⁸ This represents a significant departure from the conventional notion of property, which is typically confined to tangible assets and a restricted array of intangible assets.⁷⁹ However, the process of data propertyization also presents a number of new challenges, including the definition of data property rights, the protection of data privacy, and the prevention of data monopolies. These issues require ongoing exploration and resolution in practice.

China currently lacks comprehensive legislation that explicitly targets data as an asset. Nevertheless, pertinent legislation does encompass stipulations and investigations pertaining to data. These are reflected in the following aspects. First, the Civil Code of the People's Republic of China provides that data and network virtual property are explicitly included in the scope of legal protection, thereby establishing a fundamental legal basis for the protection of data. However, the stipulations pertaining to the delineation of specific rights, pricing, and trading of data remain relatively abstract, necessitating further refinement and enhancement of the pertinent regulations.⁸⁰ Secondly, the Data Security Law of the People's Republic of China is primarily concerned with data security. Although it is not a legislative measure explicitly aimed at data-related assets, it provides indispensable legal support for the protection and security of data.⁸¹ Furthermore, the Law of the People's Republic of China on the Protection of Personal Information deals with the protection of the rights and interests of personal information and the regulation of personal information processing activities. With regard to data, the processing and use of data containing personal information must comply with the provisions of this law, thereby ensuring the security and lawful use of personal information.⁸² This is of considerable significance in terms of clarifying the rights and obligations pertaining to data involving personal information. In July 2022, the Supreme People’s Court, in the Opinions on Providing Judicial Services and Safeguards for Accelerating the Construction of a Unified National Market, emphasized the importance of protecting the property rights of data products developed and invested in by market entities through lawful data collection and self-generation.⁸³

It is also noteworthy that certain cities in China have sought to implement data-related legislation. For example, the Shanghai Data Regulations,⁸⁴ and the Shenzhen Special Economic Zone Data Regulations,⁸⁵ represent such efforts. These local regulations have explored and provided for the protection of data rights and interests, data transactions, data asset registration, and other related matters. In light of the accelerated development of the digital economy, it would be advantageous to consider methods to further expedite the legislative process, clarify pivotal issues such as ownership, pricing, trading, and the protection of data, and promote the flourishing and orderly development of the data factor market. Based on the above practices, Chinese scholars have put forth innovative theoretical frameworks concerning data property rights. These include the view that ownership rights should be set on the data,⁸⁶ or the view that operators should be equipped with data operation rights and asset rights,⁸⁷ and operators’ data holding rights,⁸⁸ or the proposal of a binary structure of data property rights. One perspective suggests that the source of the data is the owner of the rights to it, while the processor is the holder of the right of usufruct.⁸⁹ Another perspective is that intellectual property rights, such as copyright, should be granted for the protection of data.⁹⁰

Accordingly, it can be posited that if data are legally recognized as assets, then investments made with data assets should not be excluded from the definition of investment, as they involve inputs of capital or other resources. Besides, enterprises that own or control data need to invest capital and various resources, including human, material, and technological resources, in the collection, processing, and storage of data. Recent judicial practice has recognized data as a competitive property right of enterprises and a means of obtaining commercial benefits. The case of Shanghai Beta Electronic Information Technology Co., Ltd v Shanghai Dazzle Sports Co. represents a prototypical instance of the protection of data rights and interests. As the official data service provider of the Chinese Basketball Association (CBA), Shanghai Beta Electronic Information Technology Co., Ltd invested a considerable amount of resources to obtain real-time data from the CBA. The Shanghai Dazzling Body Company utilized web crawler technology to replicate CBA league data and subsequently disseminated these data to consumers via its official website and mobile application. The court ruled that Dazzling Sports had engaged in unfair competition and was thus obliged to provide compensation.⁹¹ It seems that this case also indirectly recognizes the possibility of investing data as property.

The requirement for a certain duration

In general, FDI must be sustained over a defined period in order to meet the criteria for classification as an investment. A short investment period may suggest a lack of commitment or speculative behaviour on the part of the investor, which could result in a determination that the investment does not meet the necessary criteria.⁹² For example, in the case of data analytics companies, if they only provide one-off data analytics services to the host country, it is likely to be considered a purely commercial transaction. In such cases, it is not uncommon for customer data assets accumulated in China to be deemed ineligible for investment protection. Conversely, investments that are sustained over time are more likely to be viewed as indicative of a long-term strategic plan and confidence in the investment destination. The nature of transactions involving data can vary considerably and may not always conform to the conventional concept of a sale. To illustrate, the value of data can go beyond immediate financial returns. For example, a US company may regularly share its proprietary customer data with a Chinese business partner for targeted advertising. Instead of a one-off payment, the partner might pay regular dividends. In such cases, the transaction may be viewed as an investment rather than a simple sale, especially if it meets the criteria of being long term. The stability of the investment is of great importance and it is essential to establish whether the investor has retained control and management of the investment throughout the specified period. In transactions involving data-based assets, value is often attributed not only to the specific content and value of the data at the time of the transaction, but also to the ability of the data controller to collect and process the data on an ongoing basis.⁹³

As evidenced by the aforementioned Chinese IIAs, there is a required duration for investments. It is important to recognize that there is no universally accepted standard for the duration of international investments. Instead, the appropriate duration must be assessed on a case-by-case basis.⁹⁴ The exact duration may vary depending on a number of factors, including the nature, size, and industry of the investment in question. The Salini tribunal ruled that a qualified FDI typically requires a duration of at least 2 to 5 years.⁹⁵ Nevertheless, in certain subsequent cases, a duration of less than 2 years has also been acknowledged as a valid investment duration.⁹⁶ There are notable discrepancies in the demand for, and assessment of, the value of data across different industries. For instance, in the science and technology industry, data are frequently updated and the investment period may be relatively brief. In contrast, in industries such as healthcare and finance, the stability and long-term value of data are high, and the investment period may be relatively extended. As a result, it is difficult to make a general statement about the duration of investment in data, as this must be assessed on a case-by-case basis, taking into account the specific circumstances of the investment.⁹⁷ In the event that the value of data declines at a rate that is more rapid than anticipated following an investment has been made, or in the case of significant alterations to the market environment, such as intensified competition for data and the emergence of novel data sources, the value of existing data may decline even more rapidly. Consequently, investors may be forced to liquidate their investments prematurely. Concurrently, government policy support or restrictions on data in particular industries can also influence the outlook for data investments. If the government actively encourages the utilization and advancement of data within a specific sector, the lifespan of data investments within that sector may be extended. Conversely, if the government implements stringent regulations or restrictions on data within a particular sector, the duration of investment may be curtailed.⁹⁸ Although the aforementioned investments will undoubtedly be of a shorter duration than those in traditional industries, a 2-year period, as determined by the Salini test, to define whether an investment is qualified or not will hinder the further development of the data investment sector.

The requirement for assumption of risk

While overseas investment in data presents a multitude of opportunities, it is also associated with a number of inherent risks. Such risks include those pertaining to data security, the market and business, geopolitics, and legal compliance. First, the complexity and uncertainty of the network environment render the invested data susceptible to attack. Potential threats include hacker attacks, malware infection, and data theft. In the event of a data breach, the resulting economic losses are frequently challenging to recuperate.⁹⁹ For example, in May 2023, the Shanghai Putuo Branch Net Security Detachment received a report from a company providing navigation services indicating that an individual had utilized technical means to illicitly obtain the company's national navigation map information data and subsequently sell it on online forums. This resulted in a direct economic loss of approximately 210,000 yuan for the company.¹⁰⁰ In addition, there are risks associated with data storage and processing. The security of data stored in data centres or cloud service platforms outside China may be breached, altered, or misplaced due to inadequate security measures or vulnerabilities in the providers’ infrastructure. Differences in data storage and processing standards between countries add complexity to the security management process. As data travel, they pass through numerous network nodes and channels, and any link failure can result in interruption, delay, or data corruption.

Secondly, it would be prudent to consider the potential market and business risks associated with using data for overseas investment. It is important to recognize that different countries have different market environments, consumer needs, and competitive dynamics. In the absence of adequate market research, companies may be exposed to the risk of insufficient market demand for relevant data products or unacceptable performance for data products. It should also be noted that the market for data assets is highly competitive and the emergence of new competitors or technological innovations may potentially affect the competitive advantage of an investor’s data assets.¹⁰¹ The accuracy, consistency, and reliability of data are critical factors in determining the value of data assets. If an investing digital business is unable to demonstrate robust data collection capabilities, resulting in data quality that is not as accurate as it could be, there is a possibility that the business may not be able to fully realize the expected business benefits, which could potentially lead to financial losses. It is also important to recognize the potential risks associated with working with a host country partner. These risks may include the possibility that the partner does not meet its obligations, operates sub-optimally, or has a poor reputation.¹⁰²

Thirdly, geopolitical risks have significant implications beyond the immediate context. If the political situation in the target country of the investment is unstable, with frequent changes of government and high levels of political uncertainty, the digital investment project may be subject to policy adjustments, regulatory changes, and difficulties in fulfilling contracts, or even be unable to continue, potentially resulting in significant losses for the company.¹⁰³ At the same time, trade disputes and sanctions may directly or indirectly affect cross-border investment in data. Trade disputes may lead affected countries to restrict cross-border data flows for certain industries or companies in certain countries, or to impose sanctions on foreign digital investment by affected companies.¹⁰⁴ As an illustration, in the context of the accelerated growth of foreign investment in the digital economy, the US, India, and the EU have enacted legislation that effectively prohibits the operation of the Chinese-owned social media platform, TikTok.¹⁰⁵

Fourthly, in recent years, a growing number of countries have enacted comprehensive reviews and stringent restrictions on cross-border investments in specific data, based on considerations pertaining to national security, public interest, and other factors. In particular, data in critical areas may be subject to complex approval processes or even prohibited from being transferred across borders.¹⁰⁶ To date, concerns about China’s highly restrictive data and cybersecurity regime remain a significant point of contention.¹⁰⁷ Recently, there has been an increase in the number of legal provisions governing the cross-border transmission of data. Article 37 of China’s Cybersecurity Law requires operators of critical information infrastructure to store personal information and important data collected and generated within China. Where such information and data are transferred outside China for business purposes, security assessments must be conducted in accordance with the methods formulated by the Cyberspace Administration of China and relevant departments of the State Council. Similarly, Article 36 of the Data Security Law prohibits organizations and individuals in China from providing data stored in China to foreign judicial or law enforcement authorities without the approval of the relevant Chinese authorities.¹⁰⁸ On 7 July 2022, the Cyberspace Administration of China issued the Measures for Security Assessment of Cross-Border Data Transfer. Article 4 states that if a data processor provides data to an entity outside of China and meets the conditions, it should apply to its provincial cyberspace administration for a security assessment of cross-border data transfer.¹⁰⁹ In November 2022, China submitted an application to join the Digital Economy Partnership Agreement (DEPA),¹¹⁰ an initiative that aims to reinforce digital trade.¹¹¹ This application is in line with China’s aim to strengthen digital economic cooperation with other countries. The above regulations are intended to mandate data sharing with the Chinese government. The Digital Economy Partnership Agreement (DEPA), on the other hand, is designed to facilitate cross-border data sharing, thereby enhancing the digital economy. There is a significant difference between domestic and international legislation. As a result, there is an inherent risk in investing in data-related assets that cannot be controlled at this time.

The requirement for a contribution to the economic development of host countries

In the Salini case, the tribunal exhibited an unwavering conviction that the road industry in question was serving the public interest and contributing to the economic development of the host country.¹¹² Nevertheless, the critique of the Salini test is predominantly centred on its purported impact on economic growth, with the underlying reasons for this assessment exhibiting considerable diversity. In the case of Victor Pey Casado and President Allende Foundation v The Republic of Chile, while the tribunal acknowledged the promotion of economic development mentioned in the Preamble to the Convention, it considered that economic development is the desired outcome of the investment, rather than an element that constitutes the investment itself.¹¹³ Similarly, in Quiborax v Bolivia, the tribunal employed a rationale that was analogous to that previously described.¹¹⁴ Notwithstanding the aforementioned cases, whether or not the standard is endorsed by a larger number of arbitral tribunals, it is of considerable importance to determine whether investment in data has a beneficial effect on the host state’s economy.

The risks inherent to cross-border data flows are pervasive throughout the entire lifecycle of data, largely due to factors such as technological gaps, deficiencies in management, and incomplete policies and regulations. The transfer, storage, and application of data present three principal avenues through which cross-border data flows may be susceptible to exploitation.¹¹⁵ However, if the aforementioned risks are not effectively mitigated, they may infringe upon the right to privacy of individuals, harm the legitimate interests of enterprises, violate the data sovereignty of various countries, and be detrimental to the stable construction of national societies and the sustainable growth of various economies. In contrast, within the context of the Chinese digital economy, data represents a crucial production factor, as it constitutes a fundamental input in the generation of value. As time has progressed, cross-border data flows have become an increasingly significant aspect of the global economy, encompassing domains such as international trade and commerce, cloud computing, and the nascent technologies of the Fourth Industrial Revolution.¹¹⁶ To legally and efficiently access data in host countries, digital economy companies may utilize blockchain technology to enhance the host country’s data technology capabilities.¹¹⁷ Furthermore, they may offer data analytics services directly, thereby improving the efficiency of decision-making processes within the host government. Such contributions may be regarded as a means of fostering economic growth in the host country.¹¹⁸ Moreover, a report highlighted the considerable influence of data outflows and inflows on industrial advancement. Even in the absence of a national strategy to foster the production of digital content or platforms, a country may still derive benefits from cross-border data flows.¹¹⁹ As previously mentioned, the role of data as a factor of investment in the economic development of host countries was the subject of considerable debate, with participants discussing the relevant characteristics and quantitative criteria for data as an asset. Nevertheless, the complexity of measurement should not be interpreted as an indication of a lack of developmental contribution or the insignificance of data-driven investments.¹²⁰ It is notable that few countries have implemented restrictions on the inflow of data assets, and that the transfer of data assets generally adheres to the legal standards of the countries in which they are hosted. An analysis of data assets using the Salini test reveals a clear alignment between their flow and the national interests of the host country. This alignment demonstrates the fulfilment of the imperative to contribute to the economic progress of the host country.

Enhanced structured schemes for China’s involvement in the legal construction of data as an international investment form

As previously indicated, the extant framework of Chinese IIAs continues to exhibit deficiencies in effectively addressing the definition of investment. These deficiencies are evident in the lack of clarity surrounding the classification of data as a form of investment, which serves to highlight the inadequacy of the investment provisions. It is evident that the concept of investment protection is undergoing a continuous process of evolution, as illustrated by the gradual recognition of intangible assets such as intellectual property and financial derivatives. It may be possible to safeguard original data, such as that meticulously organized into databases, through the protection of intellectual property rights as compilations.¹²¹ Additionally, it may be possible to protect original data, such as that meticulously organized in databases, by protecting intellectual property rights as compilations. In addition, it may be feasible to consider protecting the trade secrets of data that are not original but have been subject to confidentiality measures through intellectual property protection. These can be protected by IIAs as a form of IP contribution.¹²² The legal status and conceptual understanding of data are becoming more clearly delineated within national borders and in the context of international investment law. This is demonstrated by the reinforcement of data regulatory frameworks in emerging markets and the increasing commoditization of data. It is therefore imperative that international investment law and China’s data-related laws evolve and harmonize with the development of the global digital economy. It is of paramount importance to ensure the sustainable growth and prosperity of the digital economy for host countries while exercising prudent regulatory sovereignty to avoid placing undue burdens on the economy through digital investment.

In order for data-related investments to be included within the scope of protection under IIAs, two approaches can be relied upon. The first is the construction of a domestic data property rights regime in China, which would clarify the property attributes of data. The second is the clarification of data as a form of investment in IIAs.¹²³ In accordance with the stipulations set forth in the Washington Convention, the arbitral tribunal is bound to apply the law of the Contracting State that is a party to the dispute, including its conflict of laws rules.¹²⁴ Additionally, the tribunal may consider such rules of international law as may be applicable in the absence of agreed-upon rules of law by both parties, provided that such rules are relevant to the case at hand. Accordingly, the construction of a host country’s data property rights regime—that is, the clarification of the property attributes of data under China’s domestic law—can readily be regarded as a qualifying form of investment. It can be reasonably concluded, therefore, that the construction of a domestic data property rights regime represents a crucial step in ensuring the seamless implementation of this approach. Currently, China’s legal framework for the protection of personal data rights is still in its infancy. In the near future, it will be challenging to implement reforms to China’s domestic legislation.

In the absence of improvements to domestic legislation regarding the property rights regime for data, host countries may recognize forms of data that have the attributes of investment property in IIAs. For instance, when defining the term investment, they can include forms of data that meet their needs directly in the relevant IIAs. In order to achieve this goal, China could rely on the following options. First, with regard to IIAs currently under negotiation by China, or with the intention of joining in the future, such as the bilateral investment agreement between China and the EU and the CPTPP, which China has announced its intention to join, it is recommended that the Chinese government adopt an active role in the negotiations and advocate for reforms to the definition of investment. This would ensure the effective protection of data-related investments.¹²⁵ Secondly, with regard to the IIAs that China has already signed, in the event of a future dispute concerning the eligibility of data as an investment, the Chinese government should utilize either the joint interpretation mechanism of the IIAs or the unilateral interpretation mechanism of the non-disputing party to clarify China’s intention to include data within the scope of investment protection.¹²⁶ By articulating China’s position on data as a qualified form of investment to the arbitral tribunal, the tribunal is encouraged to discuss and analyse this important issue. While arbitral awards are not binding, they can provide academics and practitioners with insights into China’s reform path on this issue. In the event that countries are unable to reach a consensus on the classification of data as a qualifying form of investment, it is suggested that a broader definition of investment be adopted to potentially include forms of investment in data.¹²⁷ Conversely, a narrow definition of investment may result in the exclusion of data from the scope of protection under IIAs, which would in turn discourage digital companies from investing in China. In response, this article proposes that China adopt a broad definition of investment during the revision or updating of IIAs. It is also noteworthy that the majority of IIAs signed by China define investment in a variety of ways, such as an ‘asset’, ‘property’, ‘property or asset’, or ‘property values and rights’.¹²⁸ As previously stated, there appears to be an emerging recognition in China of data as a form of property within the extant legal framework. In light of this, it may be advantageous for the Chinese government to contemplate explicitly establishing the intrinsic relationship between data, assets, and property in future IIAs, should it be prudent to do so.

It is conceivable that transnational data investments could have an impact on national security, public interests, and the legitimate rights and interests of individuals and organizations in the host country. It may be advisable for China to consider protecting its legitimate right to regulate the digital economy through the public policy objective of regulatory exception clauses in IIAs. In this regard, it would be prudent to carefully delineate the negative list of incompatible measures in accordance with the development needs of China’s digital economy and the public policy objectives to be protected. This could facilitate the exclusion of investment in certain digital industries from the scope of treaty obligations while maintaining consistency with China’s existing Catalogue of Industries for Encouraging Foreign Investment and the Negative List of Special Administrative Measures for Foreign Investment Entry.¹²⁹ It would also be advantageous to contemplate the likelihood that a notable proportion of China’s IIAs may lack explicit delineation of the defining characteristics of investment. Currently, China is engaged in the process of developing a data classification and grading system with the objective of facilitating effective management.¹³⁰ Data are classified into three categories: general data, important data, and core data. The categorization is based on an assessment of the impact and importance of the data on matters of national security, public interests, or the legitimate rights and interests of individuals and organizations. It would be beneficial for the Chinese Government to consider imposing restrictions on the attributes of investments in IIAs in accordance with the characteristics of the data. Such a strategy could facilitate the effective introduction of advanced digital technologies, leverage the contributions of FDI to China's development, and prevent the unrestrained expansion of data under foreign investment protection.¹³¹ In addition to the three fundamental investment characteristics—the commitment of capital or other resources, the expectation of gain or profit, and the assumption of risk—it may be beneficial for the Chinese Government to consider including additional investment characteristics that are consistent with the requirements of the data classification and grading system. This approach could potentially contribute to a more precise definition of investment, exclude speculative activities by overseas entities, and mitigate risks related to litigation or arbitration.

In the event that an investor seeks data protection and initiates investment arbitration, the host state may present a defence based on the absence of sufficient safeguards or provisions within its domestic legislation. In light of the ICSID’s well-established position that host state law should not be applied in defining investment, it seems probable that such a defence will receive limited support from the arbitral tribunal. In the context of globalization, with international investment law at a crossroads, consideration of the significance of legal predictability and stability is warranted.¹³² In light of the observation that recurring issues of international investment law must be resolved by the same or identical rules, it would be beneficial for arbitral tribunals to recognize that the overarching objective of international investment law is to foster a more conducive environment for investment flows between states. This requires the creation of a stable and predictable legal framework. Given the importance of defining investment in international investment arbitration, it is crucial for tribunals to strive for stability and sustainability, thereby ensuring the certainty of this definition and, in turn, promoting investment for the ultimate goal of economic development. However, in light of the above factors, it would be beneficial for China’s IIAs to adopt an inclusive approach to data-driven investment. To ensure the sustainability of IIAs, it is crucial that future agreements prioritize the legality of such investments in the host country while preserving the host country’s right to regulate them.¹³³ It would also be advisable for China to undertake a comprehensive assessment of the existing shortcomings and gaps in its domestic data regulatory framework. It would be prudent for China to explicitly stipulate in IIAs that investments must comply with Chinese law. Such provisions would make it easier to prevent investors from using investment arbitration or arbitral awards in a manner inconsistent with Chinese data-related laws. Although some IIAs currently require compliance with Chinese laws and regulations, there is a lack of clarity on the legality and procedural requirements for these investments. It would therefore be beneficial for China to consider developing in future IIAs a precise methodology for accepting, approving, or authorizing data investments that clearly outlines the circumstances under which data investments must be registered or approved by the Chinese Government.¹³⁴

Conclusion

In conjunction with the accelerated advancement of information technology, data have emerged as a highly valuable resource. The rapid ascendance of big data, artificial intelligence, and other technologies has rendered the collection, analysis, and utilization of data a pivotal component for enterprises seeking to gain a competitive advantage. In the context of cross-border economic activities, the scale and value of data continue to increase, and its role in the domain of cross-border investment is also receiving heightened attention. Multinational corporations have initiated global expansion strategies with the objective of securing access to more valuable data resources. Conversely, states have also recognized the inherent complexities associated with cross-border data flows, which involve a number of sensitive issues relating to national sovereignty, privacy, security, and other considerations. In light of these concerns, a number of countries have adopted data-related investment policies and regulations. However, the fragmentation of international investment law has created significant uncertainty regarding cross-border direct investment in data. Scholars hold divergent views on the construction of a unified framework for the governance and protection of international data-related investment, and on how to reconcile the free flow of data with national interests. The ICSID, which has accepted the vast majority of investment dispute cases, will undoubtedly become an important platform for resolving data-driven investment disputes in the future. In assessing the eligibility of data investments, arbitral tribunals will need to conduct a comprehensive analysis of the investment definitions set forth in the IIAs, as well as the investment definition test developed in ICSID arbitral practice. The existing provisions of the Washington Convention and the IIAs concluded by China give rise to ambiguities and uncertainties in the law relating to data as a form of ‘investment’. This article examines the Salini standard and the requirement that investments should have property attributes and concludes that it is a theoretically feasible approach. It acknowledges that the legal status of data has been a subject of controversy. This article further explores the potential for the Chinese Government to establish a clear legal basis for the investment and protection of data by defining data as a form of property. This will significantly enhance the robustness of the data market by facilitating the rational flow, effective use, and comprehensive protection of data. In addition, the establishment of the data property rights framework can serve as a model for the international community, facilitating the development of global digital investment norms towards greater standardization and maturity. As the influence of the digital economy continues to expand globally, the formulation of digital investment rules will have a profound impact on the economic development and international competitiveness of all countries. China will be well-positioned to influence the international discourse on digital investment rules if it takes a leadership role at this crucial juncture. This can be achieved by actively participating in the formulation of these rules, in particular by accelerating the exploration of the theoretical viability of data as a qualified form of investment. This will not only facilitate the expansion of China’s digital economy companies into overseas markets but also strengthen China’s voice and influence in global digital economy governance.¹³⁵

Footnotes