ABSTRACT

Foreign investment national security review (“FINSR” or “NSR”) is an important regime in which each nation regulates its foreign investments matters, and is a measure that a country takes to restrict or forbid foreign investments in order to balance the positive and negative effectiveness by the capitals flowing-in and for the fundamental security interests of the country. To some extents, the NSR reflects the basic policies and attitude to the foreign capitals.

This paper will mainly analyse the relationship between NSR and investor remedy and quotes the US and EU-state as examples, comparing the different legislation and legal practice on the question of foreign investor relieving rights, aims at providing any advice on how to select a proper legal remedy of foreign investors under the management mode of foreign investment on this stage.

This paper includes four parts. The first part mainly analysis the main features of NSR and the negative effects on the investors’ interests caused by NSR, and definitude the significance of the existence of the legal remedy for investors and the various valuation considered by different nations when selecting such remedy system. The inherent politicized tendency in NSR leaves authority-abuse a space, which leads the decrease of investors’ interest and increase the burden of an unforeseeable risk for investors. The investor remedy subject to the value orientation adopted by the host nation, it is certainly that a nation which allows a legal remedy for investor must stand for the spirit of facilitating the liberalization of investment. On the other side, if a nation, after considering its own national conditions, decides to prohibit the right of remedy of investors, it is necessary to build a complete and well-running inner-control mechanism to guarantee the appropriateness of NSR, such mechanism will also indirectly protect the interests of investors the other way round.

The second part takes EU as an example to introduce the legislation and practice where recognize the justiciability of NSR, and then find the reason why the nation entitles foreign investors the right of remedy to the most extent and the practicalness of such remedy, combing with the specific domestic and interstate relationship and free investment environment under the EU-system. Once NSR becomes justiciability, it means investors could directly exercise the right of remedy, which indicates the value orientation of free investment on the foreign investment management policy taken by the host nation, so as the EU-nation. Each EU-nation has always been purposing the principle of promoting the free flowing of capitals with the least possible limits on the foreign investment. Under such circumstances, EU-nations prefer seeing the NSR as a normal administrative action but not making it into specific or political issue so that NSR should be reviewed by justice as a generally principle in the laws of EU-nation. The EU case happens to reinforce the conclusion that the prerequisite of selection of entitling investors the right of remedy is a highly free and open investment market and environment built and maintained by the host nation.

The third part takes US as an example to introduce the legislation and practice where prohibit the justiciability of NSR. This part mainly quotes the Sanyi case to explore the interventionist role of US government behind the unjusticiability of NSR under US laws, and how to balance the national interests and investors’ interests in the international investment relationship under the condition of no remedy right or very limited remedy method hold by investors. Under the current US NSR laws, the administrative power behaves a strong intervention and control volition, which can be confirmed by the certain article stipulated in the FINSA which precludes the NSR from the jurisdiction of judicial review. Even though the US law prohibits investors from pursuing remedy against NSR, but one thing cannot be ignored that the NSR system in US, from the perspective of the framework of the NSR, has set a mechanism to restrain and supervise the review conducts and decisions made by authorities. Such mechanism may avoid improper and inappropriate review to some extent and indirectly functions as a protection to investors’ interests.

The fourth part combines the EU and US legislation and legal practice aforesaid, through teasing the evolution of China’s current FINSR and the problems and issues therein. China’s current FINSR only governs the area of foreign investments in M & A, with the defects such as a low level in legislation hierarchy, obscure in the subject of review, non-transparent procedure, and ambiguity right of relieving for foreign investors. Before the reform of foreign investments regulation mode from fully examination and approval to limited approval and file register mode in 2014, the FINSR had the mere formality but not practicable. But accompanied by the reform of foreign investments regulation regime and the issuance of draft Foreign Investment Law, the NSR is pushed to the frontline of foreign investment management system and will be play a substantial and significant role. Under this trend, considering the domestic economic and society development and ability to accommodate and manage the foreign investment and capital, the author suggest that China need to take the US mode as a reference which leads to determine the unjusticiability of NSR and then modify and supplement the restriction mechanism on the review procedures and power so that building up a friendly investment environment and a balance between the foreign investment and national security.

[Keywords] Foreign Investment; National Security; National Security Review; Legal Remedy for Investors

CHAPTER ONE: GENERAL OVERVIEW

1-1. Main Features of National Security Review

There are three main features of NSR which are justified purpose, political inclination and policy-oriented. These main features guide and influence the establishment and development of every country’s NSR regime. There will be a better understanding of each NSR’s background and system because of these main features.

1-1-1. Justified Purpose

• Motivation to national security review

Foreign investment national security review refers to the measures taken by the host country to safeguard its national security from negative foreign investment. FINSR will judge whether a foreign investment can be implemented further through the case analysis of possibility that foreign investment may harm the host country interest.

Being a capital importing country stimulates the development of a FINSR regime. Taking US as an example, the importance of NSR couldn’t be noticed before the 1970s because US had been a major exporter of capital since the scale of its overseas investment was much larger than the foreign investment carried on in US. Promoted by economic globalization, foreign investment has increased dramatically arousing “Nationalism” in American society. The Exon–Florio Amendment was released due to this situation which sets up the basic system of FINSR’s regime in US.

National security covers all aspects of survival, independence and development referring to politics, military, economics, culture, energy, health and technology without harm or threatens, meaning the nation has the ability to resist risk and damage not only from domestic side but also from international side.

From the prospective of host country, damage to national security can be reflected in many aspects: foreign investment may cause a strike on domestic enterprises resulting in domestic economics dependent on foreign investment too much; foreign investment may disrupt the normal order of market competition affecting host country’s macro-control ability; foreign investment may trigger financial risks and financial crisis; foreign investment may cause cultural and ideological intrusion; foreign investment involving in sensitive, confidential and hi-tech industries may pose a risk to national defense and military security; foreign government forces may be hidden behind foreign investment, etc.

Therefore, the notion of national security inherently requires the State to take necessary measures to counteract and confront insecure factors of foreign investment, including FINSR.

• NSR is the exercise of sovereignty

Sovereignty is the ultimate power that a State can administer its own affairs free of any external influence.[1]  The supreme power of sovereignty allows the State to decide and administer domestic economic, political, cultural and military fields without any interference or restriction by external forces through various means such as legislation, justice and administrations. Under the background of economic globalization, resources and production elements redeploy in the aspects of investment, finance and trade in the global scope. The large-scale flow and integration of capital across the countries bring great challenges to the State’s sovereignty, and the ideological trend of weakening sovereignty and transferring sovereignty comes one after another.[2]

Sovereignty is the essential factor supporting the development and survival of the State. The exercise of national sovereignty is also the way to achieve and maintain such as national political independence, economic autonomy, cultural characteristics, military and information security and other national interests. National security is an important connotation of national interests, and it is also a fundamental element of national sovereignty. There is no doubt that a State can develop and implement FINSR based on legislative and judicial sovereignty, which is seen as a host-country’s policy belonging to law category.

In addition, FINSR is also recognized as national sovereignty by international law, such as the Article 2, Charter of Economic Rights and Duties of States, clearly providing that host-countries can administer and supervise foreign investment within jurisdiction;[3] GATT also provides “Security Exception” allowing the State party to take some measures to protect national security under specific circumstances.[4]

1-1-2 Political Inclination

NSR, which is often criticized as a political weapon under the rule of law, makes it easier for host-countries to achieve their political aspirations since it is the way to protect national security. But, no matter how NSR is designed to operate, it is still related to political issues, resulting in a NSR with political tendency following these two aspects:

• The Primary Politics of “ National Security”

The term” National Security” comes from the United States, which was initially used only as a political term in international relations originated before the end of the World War II.[5] Harold Brown, in his book” Thinking about National Security “states “National security is the ability that a State can maintain national unity and territorial integrity, keeping itself connected with world economics on a reasonable condition and preventing external forces of the erosion.”[6] With the establishment of a new international economic order, economic security has gradually attracted the attention of each country and the connotation of national security has been expanded after the Cold War. The Japanese government firstly used the concept of “economic security” in 1980 “National Comprehensive Security Report”. The United States government published National Security Strategy of the New Century in 1999, defining economic security as one of the three core objectives of the national security strategy.[7] In recent years, the connotation of national security has been further developed, including many new security concepts such as: culture, ecology, health, energy, science and technology.

Therefore, “national security” itself has a strong attribute as the most critical concept in the FINSR. The concept of “national security” inherent political connotation cannot be avoided when we try to explain the value of it.

• The Broad Discretion

It is difficult for FINSR to be predictable and transparent as the general legal system due to sensitive issues of national security.

In particular, firstly, FINSR’s standard cannot be defined easily. There are only a few countries being able to define or clarify “national security” correctly. The definition of “national security” is only limited to explaining legal order and legal relation abstractly, macroscopically and essentially. Besides, the risk assessment elements related to national security are lack of detailed explanations only including some abstract concepts. Therefore, in the most circumstances, the host country may judge foreign countries investment security case by case.

Secondly, NSR has a low transparency. The host country may not publish review standards, conclusions and keep review procedure confidential in the name of state secrets. Foreign investors as being reviewed have finite right to know. It’s difficult for foreign investors to obtain sufficient information which is vital to legitimacy of investment. Causal link between investment and national security is also not accessible.

In conclusion, somehow the fuzziness of NSR is reasonable for protecting confidential and sensitive information but it will cause a broad discretion. Foreign investors cannot predict legitimacy of investment and make investment decisions properly.

1-1-3 Policy-oriented

NSR system expresses the orientation of foreign capital policy. It changes with foreign capital policy at the same time. Easy NSR system reflects investment liberalization while strict NSR system reflects investment protectionism.

Developed country is the first one who creates and promotes investment liberalization aiming at eliminating discrimination investment policy including decrease limitation from NSR. Nowadays more and more developing countries realize the importance of investment liberalization and support it. The investment liberalization becomes a mainstream trend around the world.

The policy of investment liberalization doesn’t mean that host countries open their capital market without limitations but it emphasizes the acceptance of foreign capital. In the international relationships, interests and conflicts coexist. Firstly, each country liberalizes investment differently. Secondly, there is no absolute investment liberalization. The host country would set trade barriers while promoting investment liberalization at the same time. Thirdly, side effect of foreign investment may cause investment liberalization stagnating. Therefore, the current situation is very much different from the ideal liberalization. Investment protection still exists.

NSR system is a protective measure to protect national security from foreign investment threating and influences external evaluation of investment environment. The looser system is, the more attractive investment environment will be.

1-2. the Influence of National Security Review to Investors’ Rights

1-2-1 NSR Increases the Risk and Cost of the Investment

Generally speaking, it takes risks for foreign capital to get into one country embodying mainly “legal risks” and “commercial risks” such as: investment access conditions, enterprise operation, asset operation, property right and interests, ownership structure, labor security and other regulatory requirements. These risks are objective but foreign investors can defuse risks by preliminary investigations.

NSR can be seen as an administrative risk which is quite different from the risks mentioned above giving an extra burden to the investment behavior.

First of all, NSR is an act of state power. The competent authorities who are in charge of NSR are the committees, conferences and other subjects are set up according to the host countries law and regulations. They are administrative organs such as: Department of Foreign Investment Administration in China, Committee on Foreign Investment in the United States, using administrative power to investigate foreign investment.

Secondly, this administrative risk is unpredictable. Legal and commercial risks can be avoided by the preliminary investigations while administrative risks cannot be predicted. Administrative risks are arisen by administrative behaviors with the hindsight. The two sides already reached a consensus on the investment and the transaction is in progress. However, the investment has to suspend because of the administrative judgment in the name of “national security”. The Exon–Florio is a typical case of this situation. These unpredictable risks may cost a great loss for investors.

1-2-2 the Abuse of NSR

As a matter of fact, NSR is the act of host country power with legitimate base. NSR can be abused since the conception and standard of NSR are vague and NSR is depended on authority’s discretion. The abuse of NSR includes two situations: (1) authority may exceed power entrusted by the law and regulations; (2) authority abuses discretion and makes an unfair, unreasonable adjudication. The abuse of NSR can be embodied in the two aspects: substantiality and procedure.

The abuse of NSR in procedure is intuitive and can be noticed easily such as authority doesn’t inform investors of investigation progress in time or doesn’t give investors a chance to defend.

It’s very difficult to define the abuse of NSR in substantiality. On one hand, NSR is based on an assumption that foreign capital may do harm to the host country’s security. On another hand, NSR is the prevention that protects host country from actual damage. It’s uncertain whether foreign capital will harm the national security or not. In conclusion, the entire NSR is based on a prediction that would cause authority’s wanton interpretations and affect investors’ rights.

1-3. Investors’ Remedy

1-3-1 the Value of Investors’ Remedy

The abuse of NSR actually is authority’s defective or improper behavior such as: lack of evidence, procedure is not in accordance with the law and regulations. These defective or improper behaviors will do harm to investors’ rights and bring about irretrievable loss. Whether investors have remedy or not and how to protect investors’ remedy, are questions which are worth discussing.

In the view of investment liberalization, investors’ remedy embodies reducing limitation on foreign capital and market-opening. Investors’ remedy is an important sign of improving investment environment.

It’s very dangerous that the behaviors of administrative judgment are not fully reviewed. Investors should have rights to make an appeal otherwise investors’ remedy would mean nothing at all.[8] OECD used to publish “the Investment Policy Guidelines of Recipient Countries on National Security” pointing that there should be some restrictions on a good NSR system following these four principles: (1) non-discriminatory treatment; (2) regulatory balance; (3) predictability; and (4) accountability. According to the principle of accountability, the host country should have some mechanisms for limiting power, such as: government supervision, parliamentary, judicial oversight and so on.[9]

1-3-2 the Choices of Investors’ Remedy Mechanism

So far there are two kinds of investors’ remedy mechanisms: actionable and non-actionable. The actionable NSR means not only procedure is actionable but also substantive is actionable. Investors may sue for the administrative actions to the court in the light of review conclusion, evidence.[10]

Judicial oversight is the most effective way for investors’ remedy and is affected by the foreign capital policies. Whether choosing judicial oversight as investors’ remedy is also influenced by the host country preferring investment liberalization or investment protectionism. Actually, the host country can create a perfect supervision system for limiting administrative power to protect foreign investors’ rights.

This thesis takes EU as an example to introduce the legislation and practice where recognize the justiciability of NSR while takes US as an example to introduce the legislation and practice where prohibit the justiciability of NSR, combing the EU and US legislation and legal practice aforesaid, through teasing the evolution of China’s current FINSR and the problems and issues therein.

CHAPTER TWO: THE DIRECT REMEDY OF INVESTORS UNDER THE ACTIONABLE NATIONAL SECURITY REVIEW – TAKING EU AS AN EXAMPLE

Represented by France, Germany, European countries take the actionable NSR as the legislative model. The judiciary authority will have an overall judicial review of NSR agencies’ decisions. If foreign investors are dissatisfied with review agencies’ decisions, they can bring suits in the courts and courts have power to overturn all decisions from NSR agencies. Meanwhile, the European Commission also can bring a suit in EU Court regarding to the principle of facilitating capital flows when member countries take judicial reviews of foreign capitals, protecting investors’ rights indirectly.

2-1. National Security Review System in EU

2-1-1 Features of National Security Review in EU System

• NSR is supervised and restricted by EU’s purposes and treaties

EU member countries make their unique NSR systems according to their own politics, economics, culture and laws. The NSR systems also can be seen as products of the interrelationships between EU’s purpose and EU’s basic treaties. Therefore, I need to consider not only NSR system itself but also EU’s basic treaties, allocations of right and obligations among EU member countries when I study EU member countries’ NSR systems. All factors affecting NSR systems should be considered. The scope of NSR, procedure and actionable problems design of each member country needs to correspond to general requirements for legislation, law enforcement and judicature according to EU’s basic treaties. EU commission and other member countries would supervise one member’s NSR system including informal interaction between EU commission and members, litigation in accordance with obligation treaties and so on.

• Generalized concept of “National Security”

EU member countries usually emphasize expressions of broader interests such as: “Public Morality”, “Public Policy”, “Public Security” instead of being particular concerned with “National Security” when they review foreign investments. In 2000, The EU Court held that “public policy and public security may be relied on only if there is a genuine and sufficiently serious threat to a fundamental interest of society […] those derogations [to the principle of free movement of capital] must not be misapplied so as, in fact, to serve purely economic ends.”[11] Member countries will initiate relevant review approval procedure accordingly when the foreign investment is related to public security and public policy. Treaty on the Functioning of the European Union Article 65 provides that members may take restriction measures on free flows of capital out of public policy or public security. In the view of review standard, the industries and fields that each member country wants to protect for foreign investment are closely related to national security issues.

2-1-2 Regulating in EU on National Security Review Regime of Members

The federal government has exclusive jurisdiction over military affairs, diplomacy, foreign trades and immigration under the separation of the three powers of the United States. Despite of that, each member country only alienates their jurisdictions over foreign trades under the legal framework of European Community. Every member country enjoys jurisdictions over “National Security” but abide by the principle rules of EU treaties. At the same time, all cases will be analyzed and determined individually.

Treaty on the Functioning of the European Union and Treaty on European Union have an equal legal status, abided by all member countries. On the basis of general provisions of free flow of capital, Treaty on the Functioning of the European Union Article 65 provides that each member country may take restrictive measures on free movement of capital in the view of public policy or public security but the restrictive measures above should not be excuses to discriminate.

Member countries should not take any restrictive measures on foreign investment at their will, even though Treaty on the Functioning of the European Union doesn’t have a clear statement of “Public Policy” or “Public Security”. EU court makes it clear in the precedents that any exception from basic principles should be explained and applied strictly, all restrictive measures need to meet the requirements of appropriate principle, transparency and principle of proportion and reviewed by judicial authorities, European Commission holds so. Besides, member countries should explain “Public Policy” and “Public Security” conditions and be supervised by EU.[12]

In the view of protecting foreign investors’ legal rights. European Commission in November 2015 released a regulation on protecting foreign investors and stipulating concerned aspects in details, which reforms investor-state dispute settlement (ISDS) in the following several flaws:[13]

(1) European Commission creates a new court system named investment court system[14] which still cannot replace investor-state dispute settlement in the view of European Commission’ proposals because the new investment court system is only a re-branding exercise for investor-state dispute settlement.[15]

(2) European Commission tries to expand foreign investor protection system to those countries’ legal systems are independent. The conditions in Europe require a stronger justification in the name of public interest.[16]

(3) It does need a better balance between foreign investors and domestic investors because of the serious discrimination. European Commission should make sure that investor-state dispute settlement could provide a more effective remedy.[17] So European Commission is ought to permit host countries or involving third parties having right to sue against foreign investors in order to set up actionable responsibilities for foreign investors.[18]

(4) It is European Commission’s proposal that stipulate rights articles in the EU-US Transatlantic Trade and Investment Partnership agreement[19] but failed in some ways: extremely strict rules,[20] a huge gap between the concerns investor-state dispute settlement and regulated rights,[21] no limited states’ rights, no compensation orders applied to investor-state dispute settlement tribunals.[22]

(5) European Commission offers foreign investors advantages while the domestic investors or citizens need to seek for democratic help.[23]

(6) European Commission is using the concept of international investment court to over cover the concept of investor-state dispute settlement which will cause exceeding expansion.

2-1-3 National Security Review Regime on Members in EU

Not every EU countries has a formal NSR regime, comparatively, the NSR regimes of France and Germany are more complete and have reference values.

• National Security Review Regime in France

1. Basic Content of National Security Review in France

The previous foreign investment management system was quite loose. Some government officials used to criticize that the management system was too loose and inefficient compared to other countries especially the United States.[24] There is an important series of foreign M&A cases including American investment found Texas Pacific Group took over SIM card leading manufacturer French company Gemplus’ shareholdings in 2000, a European investment found purchased Alcatel company’s shareholdings in 2004, which prompts a debate about real results of NSR regime in France whether it could protect national security or not. France government and commission started to review and amend FINSR’s standard and make foreign investment policy tenser.

The current NSR regime in France is the administrative decree published in 2005 after revolution on foreign investment legal system in 2004.[25] In order to safeguard domestic public policy, public security and interests of national defense, Decree No 2005-1739 lists eleven limited or restrictive strategic business sectors. In 2012, France government published a second administrative decree directed against FINSR making concepts of foreign investors and investments more clear and adjusting the scope of strategic business sectors. Meanwhile, in terms of foreign exchange, there are no limitations on foreign exchange transactions in principle[26] except for foreign exchange transactions related to national security. France government may investigate foreign investment by the prior administrative approval if the government thinks this investment will do harm to French public policy, public security and interests of national defenses.

NSR regime in France divides foreign investors into three categories: EU investors, which register in EU Member States or EEA Member States, non-EU investor, which register not in EU Member States or EEA Member States and the third one is both categories mentioned above, complied with different review standards. For EU investors, the standard is looser.[27]

Chart: Comparison between EU Investors and Non-EU Investors

 

EU Investors	Non-EU Investors
Casinos, involving in money laundering[28].	Casinos, involving in gambling industry.
Private security services[29]related to: “(i) provide private security services to public or private-sector entities operating critical facilities or infrastructures, the unavailability of which could materially jeopardize France’s military or economic potential, its security or its capacity to survive as a nation,[30](ii) provide airport and harbor security services,[31]or (iii) intervene in restricted sectors privy to classified information.”[32]	Private security services.
Public health, related to: “(i) certain pathogens or other toxic substances,”[33]and (ii) terrorism in the chemical way.	Public health, prohibiting abusage of pathogens or toxic substances.
Wiretapping and mail interception equipment restricting terrorism and criminal activities.	Wiretapping and mail interception equipment.[34]
Security of its information technology systems and products only restricting significant terrorism and criminal activities.	Security of information technology systems and products.[35]
Security of the information systems of public or private-sector companies only restricting significant defense area.	Security of the information systems of public or private-sector companies.[36]
Dual-use items and technology related to national defense.	Dual-use items and technology[37]

Since 2014, the scope of industries to be reviewed is historically expanded by the “Montebourg decree”. In other words, the industries mentioned “Montebourg decree” shall get the prior approvals from the French Ministry of the Economy.[38] And recently, industries related to information technology and the telecommunications considered by NSR are increased in a visible way not like industries concerned defense as before.[39]

2. Review Procedure

Ministry of Economy is the main organ responsible for NSR. Ministry of Economy can require other departments like: Defense Department, Finance Department, and Labor Department to help with review or state their opinions. NSR system in France is a preliminary review which means any foreign investor should submit an application for review otherwise they may face civil or criminal fines. Foreign investors can consult Ministry of Economy first if they are not sure their investments need to be reviewed or not. The Ministry of Economy should give definite answers within two months but overdue answers cannot be the reasons why foreign investments get immunity from NSR.

Ministry of Economy sets two months as review periods from the date of receiving applications. The review period may be extended for supplementing application materials. If Ministry of Economy doesn’t give an answer after expiration date, it means the Ministry approves this request that this foreign investment is practicable.[40]

During the period of review, review authority will maintain an open dialogue with foreign investors for a full understanding of foreign investment being reviewed. Meanwhile, review authority also may hold informal consultations with foreign investors. Foreign investors can amend investment program for an easy approval during informal consultations.[41] The review authority even can decide whether foreign investors should add one or more conditions in the view of national security. The relevant competent departments can require foreign investors submitting annual report of additional conditions performances and have right to supervise investment activities.

All the regulations mentioned above, especially the “Montebourg decree” should not be seen as the tools for French government to block foreign investment. They are the means for French government to protect its national interests in some particular cases by the consultations and negotiations.[42] Besides, the scope of all regulations including “Montebourg decree” is too broad which cannot be applied to the specific cases properly in the view of the principle of free movement of capitals, the freedom of trade and industry and the principles of legal certainty and proportionality.[43]

• National Security Review Regime in Germany

1. Basic Content of National Security Review in Germany

NSR in Germany is quite loose so that foreign investors will not get excessive discriminations or limitations. This policy origins from Germany’s special national conditions that Germany recovered its economy dependent on other countries after World War II. Under early foreign capital management regulations, there are no limitations on investment area even no prohibition on defense industry and foreign investors could hold nearly 100% shares among all kinds of industries, causing Germany economy was highly dependent on foreign investments and transactions.[44] Foreign investments have more and more negative effects on national security with foreign capitals pouring into Germany. Starting from one American private offering fund merged German submarine manufacturer in 2003,[45] German government began to rethink profoundly that whether foreign capital law could protect national security and interests or not. German government amended “Außenwirtschaftsverordnung” (“AWV”) in the following year providing that government has right to set up some limitations on flows of foreign capitals in the view of national security and interests.[46]

Article 6 and Article 7 of AWV provide valid German NSR system. Article 7 stipulates that foreign investment should be limited for the sake of German essential security interests, avoiding damages to the peaceful relationship between Germany and other countries or German diplomatic relations.

According to AWV in 2004, BMWi makes a list of industries which should be reviewed including: national defense industry, military industry, cryptography and other industries. Any trade between foreign investment and German companies related to produce military equipment, cryptography system should also be reviewed by NSR system.[47] German government enlarged the range and kinds of industry limitations through amendment to related law and regulations, for example, German bank legislation requires every trade that foreign investors merges and gets acquisitions of German banks must be reviewed by NSR system.[48]

2. Review Procedure

Federal Ministry of Economics and Technology is mainly responsible for national security review on foreign investment. The department of national defense and ministry of foreign affairs would provide help and professional advices when it is necessary. Review authority has power to prohibit one investment trade once finding it will do harm to German national security and interests.[49]

Foreign enterprises or foreign investors should be reviewed if they hold over 25% voting rights within limited industries or they share over 25% stock holdings in German companies. Foreign investors meeting conditions above should declare trades to Ministry of Economics and Technology by themselves and provide all necessary materials.[50] It is compulsory that foreign investors must declare their trades otherwise they may get fined or undertake certain criminal responsibilities. In practice, foreign investors usually consult Ministry of Economics and Technology before formal declaration to estimate investment behaviors can be approved by national security review or not. Review authority should make a decision within one month since authority receives review declaration. It can be seen as approving foreign investment if authority doesn’t make a decision exceeding the time limitation.

It is noteworthy that review authority shouldn’t set additional conditions under German NSR system. However, review authority will communicate and negotiate with foreign investors about some essential problems during the period of security review. Investors can modify regarding trade arrangements for a quicker approval by consensus.[51]

With the foreign investment booming up, there are more and more disputes between foreign investors and authority in the view of national security review. The national security council is a necessity in Germany like what happened in the United Kingdoms. It will help Germany make the concept of “national security” clearer and draw a better map about national risks against national interest. It is very necessary to have such an authority guiding and supervising national security review manners.[52]

2-2. Investors’ Remedy Mechanism in EU System

2-2-1 Remedy Approaches in Member States

American national security review doesn’t accept judicial review, by the contrast, French and German national security review accept comprehensive judicial review of procedure and decisions on foreign investment. It means that foreign investors have ample remedial rights of national security review.

Under French NSR system, foreign investors have right to appeal to French administrative court when Ministry of Economy and other review authorities disapprove investors’ trades. French administrative court will do the comprehensive judicial review on review authority’s decision(“recours de plein contentieux”).[53] The court can even overturn review decisions or new additional conditions and judge review authority should compensate for investors’ losses due to inappropriate review behavior if foreign investors can prove that review authority violates French Monetary and Financial Code, besides, the judgment has finalities. Similar to France, foreign investors also can appeal to German administrative court for judicial remedy under German NSR system.[54]

NSR is actionable in France and Germany because of loosen foreign capitals policies and investment liberalization. As mentioned before, FINSR is a measure limiting capital flows to make sure that foreign investment will never damage national security and interests. EU stipulates an effective supervisory mechanism, judicial review also included.

But in practice, there are no examples that foreign investors appeal to court in France or Germany yet due to proper review decisions under effective NSR system. The reasons why France and Germany don’t refuse or prohibit foreign investment are: (1). there are not many foreign investment cases; (2). most investors will negotiate with review authorities about additional conditions by consensus.

2-2-2 Remedy Approaches in EU System

According to Article 263 of TFEU, EU court has jurisdictions over the lawsuits when member countries violate EU agreements or regulations, and the abuse of power is also included. Natural and legal persons can find a bill separately in EU court if they disagree with review decisions not only about themselves but also about others.[55]

Therefore, theoretically speaking, foreign investors may go to EU court for judicial help when they get negative conclusion by member countries if they can prove that review behavior and decisions are contrary to free flow of capitals according to EU fundamental treaties or exceeding reasonable range of public interests.

There used to be a case that foreign investors appealed to EU court on the basis of improper limitation from a host country and it was successful. In 2000, EU court gave a verdict on one London investment fund sued French government. EU court held that French government’s review decision was contrary to free flows of capitals provided by EU fundamental treaties, which prohibited one London investment fund investing The French Church of Scientology damaging French public interests.[56] French government enforced each foreign investment may doing harm to French national security should declare beforehand and get reviewed under French NSR system at that time. EU Court held: firstly, “national security” should be explained and applied strictly. It can be applied only when foreign investments damage fundamental interests of society substantially. Secondly, EU fundamental treaties take it as an exception of free flows of capitals principle which agrees member countries take proper measures to limit foreign capitals out of national security. It doesn’t mean member countries can enforce any foreign investors to declare beforehand which composes unjust limitations. French government and commission modify foreign investment management law and publish 2005 Decree explaining clear contents of foreign investments and limited industries due to EU court’s verdict.

It should be pointed out that impact of remedial rights is limited. It is based on NSR system violating fundamental principles. It will not be easy with the better cooperation between European Law and National Laws of Member States for foreign investors to ask for judicial help.

2-3. Brief Summary

It is the most effective way to restraint authority that investors have direct litigious right comparing to other supervision systems limiting review powers within national authority systems. During the process of NSR, the relationship between national interests and investors interest is in antagonism in the view of NSR’s proper purpose. Foreign investors have chances to appeal and question NSR in a legal way which means national interests give way to investors’ interests, even though “NSR” represents state’s will of compulsory obedience. According to the analysis of national review system in EU system above, investors’ remedy through judicial review has features as following:

2-3-1 Actionable National Security Review Takes the Value Orientation of Investment Liberalization as Prerequisite

Apparently, the actionable national security review is based on host countries’ open foreign capital policies and loosen foreign investment environment. For investors, actionable national security review provides them with remedial right to strengthen up their initiative in national security review. For host countries, actionable national security review gives investors a signal that host country has a good investment environment in order to encourage and attract foreign investment.

It requires transparency and investors protection highly that each member country sticks to an open investment policy and minimum limitation on capital flow to attract foreign investment in investors remedy system. Every member country provides investors with legal support for judicial remedy that each country sees national security review as the normal administrative action instead of specializing or politicizing it. More importantly, all member countries get influenced by investment liberalization unity and keep amending any policies and regulations contrary to investment liberalization under EU’s supervision except for legislature independence, for guaranteeing a sustainable investors remedy system.

2-3-2 Practicality of Actionable National Security Review is to Be Tested

As stated earlier, there are no cases about investors remedy in EU yet. In fact, it is just the first step to solve right of jurisdiction problems that judicial review on NSR is permitted but there are no examples how judicial authority applies to and explains all standards, regulations of NSR in practice. The actionable NSR system plays a role in the words instead of practice at present. There are two main reasons why the phenomenon happens:

Firstly, it is because of sufficient investment liberalization. There are fewer limitations on foreign investment which causes fewer transactions contrary to national security in the free investment environment. Meanwhile, foreign investment review doesn’t equal to negative review results. Foreign investors would not appeal to the judicial authority if there are no impairments of interests by NSR.

Secondly, the cost on jurisdiction is very high including time, money and energy. Investors don’t have strong wills to protect their rights in the way of judicial actions actually. Foreign investors prefer consultation, negotiation to solve problems especially being up against government offices and supervision departments. Besides, national security is a sensitive problem to both parties. That’s why investors may give up lawsuit in the view of interests in the long term.

It doesn’t mean that actionable NSR system is meaningless even there is less experience of it in practice right now. To some extent, existing right itself represents justice no matter people will exercise right or not. Offering investors remedial right is one part of NSR system in host countries cooperating with other corresponding regulations in NSR system.

CHAPTER THREE: THE BALANCE OF INVESTORS’ RIGHTS AND INTERESTS UNDER UNACTIONABLE NATIONAL SECURITY REVIEW – TAKING AMERCIA AS AN EXAMPLE

America, is a typical representative of NSR unactionable legislation mode. Its “foreign investment and national security law” in 2007 provided for regulations regarding NSR procedures and contents of foreign capital merger in America, and also clarified that the decision made by US president whether a foreign capital merger threatens national security of the country or other measures adopted are beyond judicial review.[57] Even though, it seems the following debatable case, ‘3•1 Co. vs US Government’, justified the proper procedures of judicial review over president decision, the customary effect of this case, together with the emphasized procedure remedy principle has only limited function and impact in limiting discretion of US NSR authorities[58] and protecting foreign investors’ legal benefits.

3-1. National Security Review Regime in the US

3-1-1 Evolutions of the Regime

• Executive Order 11858 in 1975[59]

In 1975, American president Ford enacted Executive order 11858 to constitute US Committee of Foreign Investment.[60] According to this order, CFIUS, as a discuss official and coordinating institute, consisting of prime minister, financial minister, national defense minister, business minister, president of American trade representative office, president of economic consultation committee, judicial minister and president of management and budget office, is responsible for monitoring adverse effect brought by foreign investments and administrative responsibility to coordinate apply of America foreign capital policy.[61] CFIUS, during this period, even though already had the power and responsibility to review those important investments which had gross influence to American national benefits, it was limited within investigation and, only when it is necessary, submission of the reports and relating suggestions to president, as to which itself did not have the power to directly make any prohibitive and limiting decisions to foreign investment.[62] The most significant meaning of Executive order 11858 is the birth of an independent and specific national security review institution.

• Exon-florio Amendment in 1988

In contrast to French NSR regulations, Exon-florio Amendment doesn’t list all restrictive factors but only defines related factors case-by-case.[63]

CFIUS was not active at the beginning and it did not have a substantial effect in prohibiting adverse investment.[64] Gradually, there were some critical voices. Some critical people thought CFIUS ‘just focus on the side effect to America politics, but not America economic, which was brought by foreign investment’[65]‘hesitate while judging the effect of foreign investment on America politics and economic’[66]Meanwhile, since CFIUS couldn’t apply limitations on foreign investments, it could only through ‘conversation’, an informal and illegal way to realize the coordination function and achieve the voluntary renouncement of foreign investments. Especially through the Fujitsu case, people began to realize that the weakness of CFIUS can not maintain national security as a complex mission when facing foreign investments. Senator Akerson and congressman Florio proposed a bill regarding potential side effects upon national security involved in foreign capital merger. The first one, regarding the basic commercial and economical welfare as CFIUS standards, asserted president should have the discretion as to prohibiting or limiting foreign capital merger and should grant an administration or department the power to initiate the investigation procedures; the follower held the opinion that the present scope of CFIUS should be widened from the military arrangement to economic arrangement, and also as to the above, legislative regulations should be carried out.[67] Through various debates and negotiations, congress finally past and government agreed to modified Akerson and Florio Bill, and eventually published Akerson and Florio Amendment,[68] supplementary to Article 721 of National Security Production Law in 1959.

Akerson and Florio Amendment is the first legal document in US history, which specially focuses on national security review over foreign capital.[69] It set out the frame work of national security review over foreign capital, and later got through several modifications and improvements.[70]

According to the regulation of Akerson and Florio Amendment 1988, president or delegated person by president, is entitled to finial decisive power over NSR.[71] At that time, American president Regan, enacted 12661 order to delegate the power of review to CFIUS and made some rearrangement to its constitution and review procedures.[72] Even if the president still withheld the very final right, since then, CFIUS became much more active and powerful when reviewing NSR. Regan, basing upon Akerson and Florio Amendment, also authorized president of CFIUS － financial minister to draft and regulate regulations relating to merger, purshase and taking over by foreigners《Regulations relating foreigners’ merger, purchase and taking over》as more detailed codes to Akerson and Florio Amendment, through reviewing, to specify the definition, jurisdiction, procedures and limitations adopted by NSR when facing foreign merger which has been considered adverse to US national security.[73]

• FINSA 2007

After 9•11 event, US government became aware that threatens to national security do not just come from other state parties, but also from non-state subjects and persons.[74] Its realization to national security also shifted from main military security to role of economic activities in national security. Meantime, in the China National Offshore Oil Co. bidding US Uocal case[75] and Dubai Port World merging London Peninsular and Oriental Steam Navigation Co[76], two of which are typical in foreign merger activities. Most senators in congress, under the harmful and protective circumstance of foreign capital merger, were dissatisfied with CFIUS and president in the similar foreign capital merger NSR cases, and held the current NSR system was not enough to secure the national security from foreign investments, further demanded to modify Akerson and Florio Amendment. Within such context, FINSA was enacted basing upon the Akerson and Florio Amendment, detailed codes and so on.

FINSA authorized CFIUS to carry out NSR rights according to FINSA,[77] not from president, and improved the review procedures, mechanism and measurements during every review section. Most importantly, FINSA excluded the president from CFIUS to the most extent. Even if the president withheld the final power, comparing to former national security system, the FINSA, while putting more emphasis on on congress’ monitoring over CFIUS and requiring CFIUS to submit relevant reports and documents to congress on time, highlighted the intervention role of congress in NSR of foreign countries, thus to some extent achieve the effect of balance and affecting president’s final decision.[78] After FINSA came out, president used remaining legislative power to authorize financial minister making a new detailed code to FINSA, modifying and amending “Regulations relating foreigners’ merger, purchase and taking over”.[79]

3-1-2 Contents, Procedures and Results of the Review

• Review Contents

According to FINSA, president could authorize CFIUS to review certain covered transaction to judge its impact over US national security.[80] The so-called covered transaction, points to those initiated or participated by foreigners and are merged, purchased or taken over in America, and these merger, purchasing or taking-over of which may lead to the foreign country taking control of related characters involved in trans-states transactions.[81]

From this fact, firstly, the subjects of US NSR is mainly the foreign capital merger; Next, FINSA doesn’t define the meaning of national security clearly. Legislators seem to be intentional to deal with national security ambiguously and try to expand the review scope and elements as much as possible, enable the review authority to use discretion freely and clearly.[82] But as to the investors, such review system is more unpredictable, neither could the possibility of being considered undermining national security be avoided, nor could the review standards and rules of the review authority be concluded from the limited and disclosed information. It even isn’t sure whether the so-called threatening national security just comes from some officials’ assumption.

• Review Procedures

1. The initiation of review procedure

There are two ways to initiate the review mechanism: one is the foreign investors volunteer to be reviewed by NSR; another is sector members of CFIUS report to CFIUS that relating foreign investors should be reviewed under NSR, no matter which it is, before the final step of NSR－president decision, both the applicants or reporters can withdraw NSR, if so, NSR procedure will suspend, and the investment also suspend temporarily.

2. CFIUS review

CFIUS will first review covered-transaction, in a duration of 30 days, within which CFIUS, will review the impact of the relevant investment upon US national security basing upon 11elements related set down by FINSA.[83] During this time, if the CFIUS hold the opinion that the covered-transaction has adverse effect to US national security and the adverse effect isn’t mitigated, CFIUS should‘enter into the investigation period as to the the effect of the certain transaction upon US national security immediately’.[84] This period can not exceed 45 days. After this time, CFIUS think covered transaction does have adverse effect but it is mitigated, it is of no necessity to prohibit it, CFIUS can terminate the proceedings and submit the final investigation report to congress;[85] if CFIUS think the covered- transaction should be suspended or prohibited, CFIUS should submit the report relating to impact of that transaction and its conclusion how to deal with that transaction, the final decision will be made by president.[86]

3. President decision

Within 15 days after the reception of CFIUS report, if president think the covered transaction will do harm to US economic, proper action should be adopted to suspend or prohibit that covered transaction.[87] Of course, the exertion of the power should base upon its finding, that is‘the existence of persuasive evidences that the foreign capital will harm US national security; meanwhile, except the exertion of the power according to regulations of FINSA, no other legal document, international emergency economic rights law could provide the president with adequate and proper power over covered transaction to secure national security.’[88]

• Review results

Under the US NSR system, there four results for the foreign investment receiving the review:

(1). Relevant subjects withdraw its application for NSR during the review or investigation duration, the proceeding suspend and the foreign capital merger suspend.

(2). CFIUS or president think the foreign capitals constitute no threaten to US national security and authorize its implement, therefore the NSR system suspends. In this case, except the time cost increased by review, the foreign investment could finally carry out and apply. From the result, NSR does not influence the foreign investment too much.

(3). After the review and investigation, CFIUS holds the certain foreign investment may threaten US national security potentially but reaches an agreement with another party containing the unanimous modifications, amendments of the original merger plan, basing upon that, CFIUS permits the implement of foreign investments conditionally. Under such circumstance, even the implement of foreign capital merger is conditioned, those conditions are reached by parties and review authorities beyond the NSR framework voluntarily, it is a middle point of respective business interests and national benefits, not oppression and coercion of administrative power.

4. President thinks the foreign investment does harm US national security and compulsorily suspend or prohibit the foreign investment. This kind of decision counts a lot to foreign investment, meaning total exclusion and no turning back, and it is also a decision made through a complete NSR procedure. Especially in the postmortem events, if the already done investment is regarded as threaten to US national security, imposing by the national security consideration, the foreign investors may face the destiny of being expelled.

But there are seldom the forth situation in reality, from the chart following we can see, from 2009 to 2014, among all the 627 foreign investment transaction initiating the NSR, only one was prohibited by president.[89] In most cases, the foreign investments being reviewed or investigated would be considered no harm to US national security, of course, CFIUS deems the foreign investment non-harmful to national security with some preconditions. Just from the results, it seems US NSR shows a friendly attitude towards foreign investment merger, and makes almost no negative judgment to the foreign investments in threatening national security.

Chart: Summary of US NSR Cases from 2009 to 2014[90]

Year	Initiation	Cases Withdrew during CFIUS Review	Cases involved Investigation	Cases withdrew during Investigation	President decision
2009	65	5	25	2	0
2010	93	6	35	6	0
2011	111	1	40	5	0
2012	114	2	45	20	1
2013	97	3	48	5	0
2014	147	3	51	9	0
In total	627	20	244	47	1

Nevertheless, personally speaking, the above results are not friendly signals from US NSR authorities, but reveals the real deterrence and aggressiveness of NSR system.

From the respect of social effect and market reaction, once a foreign investment involve in NSR, voluntary or compelled, no matter how is the result, will lead to instability of stock of parties involved, unsteadiness of various operation management, including relationship among investors, and concerns about the failure or entanglement of NSR, such instability and concern right come from the deterrence and aggressiveness of NSR[91]－ since the negative effect brought by NSR to foreign investment merger is gross and subversive. Meantime, in the whole system of NSR, the review authority, basing upon legislation, defending with national security, has the absolute overwhelming advantage, on the other side, the parties of foreign investment is passive and insignificant. Thus, parties of foreign capital merger would withdraw the application or make a deal with CFIUS as to the security of foreign capital merger, rather than face directly and receive deeper investigation by review authority.[92] The former means the renouncement of parties involved referring to the transaction, the later means compromise of the parties.

The deterrence and aggressiveness of NSR derive from the absence of remedy to the investors’ rights. In the review aiming to insure national security, foreign investors are absolute obligators and followers. To them, the result of NSR is final and irreversible, there is no way can the foreign investors seek administrative and judicial remedy. Therefore, mostly, before the investment comes right before the president, once the CFIUS shows unfavorable attitude, foreign investors have to re-considerate whether the business value of investment transaction can suffer the loss caused by modification of national public power, then decide to get out voluntarily or accept the amendment. Once it is denied by president, except for the plenty of time, labor and material cost, the foreign investors can make no substantive remedy to the review decision.

3-2. Investors’ Remedy Mechanism

3-2-1. Understanding of Non-judicial Review－3•1 Co. vs American Government case

America is the one of the main capital output countries in the world, its strict and rigorous attitude to foreign investors is not strange, especially the Chinese investors, including 3•1 Co., Lenovo, Huawei, CNOOC, ShuangHui and other Chinese corporations, which suffered a lot from US NSR while investing in US territory. 3•1 Co. vs US government case is the first case of which the subject of review sued the censor to NSR, the transaction involved is the first and the only one which was submitted to president to decide and ended up with threatening US national security after the publication of FINSA in 2009, the case is also the first time the US judicial authority made a breakthrough while explaining issues regarded to ‘ president decision lies beyond the judicial review ’ during the US NSR.[93] However, to what extent this case provides the investors with the remedy offense in challenging US NSR, what kind of hint and precedent function it offers to protection of investors in America, are both needed to analyze basing upon the appeal judgment of the case as following.

• Facts and back-information

Ralls Corporation (Ralls for short), is an affiliated company of 3•1 Co. located in Delaware State, US. In March, 2012, Ralls purchased four subject corporations in Ohioan, which separately built wind power plant in the northern part of Ohioan. Generally speaking, there would be no problem in purchasing the wind power plants, but the problems come from the location of the four plants－which locates within the air control area regulated by US navy.

On June 28th, 2012, Ralls submit the application of NSR referring to the above four wind power plants. After the review of CFIUS, it was concluded that the transaction by Ralls would undermine national security of US and Order Establishing Interim Mitigation Measures was adopted, requiring Ralls to stop all construction, operation relating to wind power plants and get out of all goods and materials, and further no entry into the ares of plants. After the CFIUS enter into the investigation proceedings, it modified the above order, requiring Ralls to comply the former order, and it also prohibited Ralls from depositing the four companies or any property before the cleaning-up of devices and construction, including the concrete. On September, 13th, 2012, after the investigation, CFIUS submit the the investigation report and its review suggestion to president.

On September 28th, 2012, US president publicized the ‘administrative order relating to purchasing the US former wind power plants by Ralls’, asserting the existence of credible evidence to persuade president that Ralls would adopt some measurements harmful to US national security, and as to this case, only FINSA, other than other laws can provide president with adequate and proper power to protect national security.

About two weeks after the publication of president order, Ralls sued the CFIUS to local court, claiming the invalidity of CFIUS order, the pleas are: 1 CFIUS public the CFIUS order beyond its power arbitrarily, thus violating Administrative Procedure Act, APA;[94] CFIUS order deprived the property rights of Ralls guaranteed by US constitution, in violation of procedures articles in fifth amendments of US constitution. After the publication of president order, Ralls added president as defendant and amended its pleas: 1 CFIUS violated APA; 2 CFIUS and president had inappropriate behaviors; 3 CFIUS order and president order violated the proper procedure and equal protection clause in Amendment to fifth chapter of US constitution.

The local court held that, first, CFIUS order had already been replaced by president order, thus became unactionable; then, FINSA already clarified the prohibition of judicial review upon president decision, and president decision is unactionable; at last, as to the proper procedure, local court thought since Ralls volunteered to purchase relevant property with the knowledge of the risk being denied by president and the cancellation of transaction, plus the giving-up of applying for NSR before the purchase transaction, even though Ralls has the property right guaranteed by constitution, CFIUS and president didn’t not violate the proper procedure, but to the contrary, gave the Ralls the opportunity to submit the evidence in accordance with the law.[95]

Ralls disagreed with the local court’s judgment, and appealed to Columbia Circuit appeal court, asking for judgment that CFIUS order is actionable and CFIUS and president both violated requirements of proper procedures. Before the judgment whether the president order violated the proper procedure and violated Ralls ‘ property rights, two questions have been debated by appeal court: (1). president order is actionable or not; (2). Ralls has the property right or not.[96]

• Question whether the president order is actionable or not

The appellant set out two defenses the first, FINSA already regulated clearly president order lies beyond the judicial review, thus the appeal court doesn’t have the jurisdiction over the present case. Second, NSR belongs to political issue substantially, and the political issue is unactionable, and it should be taken over by administrative authority, not judicial authority.[97]

1. President order is unactionable

As to the question what is the beyond the judicial review and the scope of beyond judicial review, appeal court held, as indicated by supreme court long-term customary cases, unless there are clear and convincing evidences, materials proving congress legislators’ intention to exclude the pleas which violate the civilians’ constituent rights, behaviors regulated by original law and lying beyond the judicial review still needs to get through the judicial review about the constituent rights, including the proper procedures, and so-called clear and convincing evidences and materials should be considered from two respects, the rule itself and legislative continuance.[98]

Understanding from the rule literally, FINSA ‘s regulation that president order lies beyond judicial review has two aspects: the first is the action adopted by president to properly suspend or prohibit a foreign investment basing upon its conclusion that the foreign investment constitute threaten to US national security is out of the scope of judicial review; the second is president’s finding that foreign investment is harmful to US national security is also out of the scope of judicial review. The subjects of the regulation laying out of judicial review refers only to final action and finding, and just related to the substantial question of discretion, the rule itself does not prohibit the judicial review of proper procedures involved in adopting action and making the decision.[99]

From the continuance of the legislation, the appeal court held, even though from the continuance of legislation, we can’t conclude the exclusion of constituent rights out of judicial review scope, we can still know it from the present limitation, regulated by FINSA, to president decision imposed by congress. In the current US NSR system, congress’s monitoring over president include the review of the decision made and measurements adopted relating to foreign investment NSR by president during the last year. The appeal court conclude appropriately, it will not deprive the congress of the traditional monitoring responsibility over government procedural activities which aiming to strengthen and apply constitution, under the circumstance that the power of congress to monitor the president is so limited. Meanwhile, the court didn’t find any clear and convincing evidence to prove congress legislators’ intention to include the constituent rights plea involved during the NSR legislation into the extent of judicial review.

Therefore, the appeal court held that, in this case the party being reviewed in the transaction  claimed its proper procedure rights were violated to the court, which substantially relates to the violation of constitution during the president decision proceeding, thus in this way does the court have the jurisdiction, without the so-called limitation which prohibits the judicial review on NSR.[100]

2. As to the political question doctrine

The appellee thought what the Ralls’ suit about the proper procedure of president decision tried to solve is a political question, of which, the dealing principle says it’s unactionable. Political question doctrine is a common defense when US court applies judicial review. Actually it reflects the function division in division of power, it is also an indication of judicial conservationism, that is to say the judicial review would not intervene the controversy of value determination and policy choice belonging to congress or administration required by constitution.[101] Therefore, if the administration determined some administrative activity involving policy choice and value determination, judicial authority should not get in, and the activity is unactionable, for example the diplomatic policy and national security issue are the most common policy choice and value determination.[102]

In the present case, the appeal court held Ralls’ suit about proper procedures of president decision doesn’t belong to political question. What Ralls requested is not whether the transaction of purchasing of the wind power plants threatens the US national security or not, neither it is whether the conclusion and the finding of president during the NSR over the transaction violate the constitution or not, it is whether the Ralls has the right to access the information and evidence materials upon which was greatly relied by president, and whether it has the right to make defense before the approaching of final unactionable measurements and decisions. The court held Ralls’ suit about proper procedures of president decision doesn’t belong to the scope of political question, the court had jurisdiction over it. Moreover, explaining the constitution rule is an power of judicial authorities delegated by legislators.

• Whether the Ralls has property rights

Whether the Ralls has property rights is the precondition of whether the right was violated by finding of president which itself violated proper procedures, the appeal court upheld that Ralls has the properties protected by constitution.[103] First of all, the local court and the appeal court both agree that the the property of Ralls through purchasing the targeted corporation and its asset constitutes legal property under Ohioan law, deserving the protection provided by proper procedures set down in fifth amendments of constituent;[104] next, under the current legislation system, the definition of property belongs to each state’s legislative power, the federal state law can limit the implementation of civil property rights, even deprive it, but the federal law could not interfere the definition of the property within each state legislation, neither could it deny the existence of the property accepted by each member state. Finally, the appeal court thought the failure of applying to CFIUS to initiate the NSR before its purchase transaction doesn’t constitute a waiver of its above property rights, since under the condition that NSR system itself allows the party to apply for review and there is no deadline point, whether the parties submit the review application before or after the transaction does not constitute a waiver of its property.[105]

• Whether the finding of president is contrary to proper procedures

After the settling-down of whether the president decision is actionable or not and the assurance that the Ralls hold the protective and potentially violated by proper procedures-contrary decision of president, the appeal court analyzed whether the president decision violated the proper procedure principle.

As to the question whether the president decision violated proper procedure principle, the court had already set down many proper procedure standards relating NSR through plenty of cases, including the information in time, permission of accessing to non-confidential materials and evidences, opportunities to defend and rebut as to the materials and evidences.[106]

Since the judgment whether the president decision violated proper procedure principles belongs to individual case decision, and basing upon the precondition of admission to procedural remedy of foreign investors, goes too far beyond the remedy discussed in this passage, there will be no more discussion about it. After the reviewing, the appeal court held the decision of president didn’t meet the above standards, which obviously violated the requirements of fifth amendments of US constitution.

3-2-2 Limited Remedy Space

• A breakthrough of remedy to investors: proper procedure remedy and supplementary property rights

The most positive meaning of 3•1 corporation vs American government case is it set down the suitability of procedural issue involved in US NSR, enhances the procedural transparency of US NSR,[107] and provides the foreign investors with judicial support to their implement of right seeking for information. The foreign investors can ask for procedural remedy and require the CFIUS and president to disclose the non-confidential materials and evidences which are greatly based upon by CFIUS and president to itself and defend itself and argue.

At the same time, more importantly, 3•1 corporation vs American government also admitted the legal property of foreign investors resulting from the investment, that is to say, basing upon the legal attainment from its foreign investment, the investors could ask CFIUS and president for relating supplementary property remedy in the condition of imposing activities.[108] This comes from the fifth amendment of US constitution which not only sets down the proper procedure principle that property of US civilians can’t be deprived without proper procedures, but also requires the government to compensate the imposition of civilian’s legal property. This means, under the situation that right after the transaction, the NSR is initiated, even the transaction is considered as threaten to US national security by review authority, the legal property of foreign investors coming from the former investment transaction will not lose its property status just because of the potential of undermining the national security, the foreign investor could apply relevant supplementary property right.

Actually, as pointed out by appeal court, according to the long-term case precedents, as to the “ president decision is beyond judicial review’’[109] legal practice, unless explicitly stated by legal limitations, the exclusion of judicial review doesn’t contain the judicial review over constituent right. Therefore, theoretically speaking, every applicable constituent right, including but not limited to procedural rights, could be regarded as the bed-stone rights and comfort of investors remedy, and then challenge the suitability of NSR from other aspects.

• Limitations of investors remedy

Even 3•1 corporation vs US government provides possibility for procedural remedy of foreign investors, but only upon this hardly cold the investors receive actual and substantial remedy from US NSR.

Firstly, the substantial issue of NSR is still out of judicial review.[110] In the 3•1 corporation vs US government case, the local court and appeal court both emphasize and agree that the president decision itself is not bound by judicial review, there is no way the foreign investors could abolish or change the president decision. If the scope of judicial review and political choice principle which are used by the court in analyzing the suitability of of proper procedural rights, the conclusion reached will be totally different. Meanwhile, the court avoided to talk about the substantial review of president decision, the definition and mode of national security and threaten which constitute core conceptions in NSR.[111] Therefore, the function of the proper procedure remedy in helping the foreign investors to reverse the negative NSR result is limited, the only way foreign investors could reverse or change president decision is the endeavor in examination and response proceedings during which CFIUS aims to remedy the procedural defaults of president decision.

Next, even in examination and response proceedings during which aims to remedy the procedural defaults, foreign investors may also not access the total evidence materials which were greatly based upon by review authority. On the one hand, in the 3•1 vs America government case, the appeal court held the only responsibility of CFIUS is to disclose the non-confidential evidence materials to Ralls, therefore, foreign investors can not get the confidential evidence materials even if those materials are the decisive information for the review authority’s decision; on the other hand, even though the materials are non-confidential, the president can also exercise the administrative privilege and refuse to provide to investors, CFIUS can relate the relevant evidence materials within the communication to president, thus include them into the jurisdiction of administrative privilege and refuse to publicize. To some extent, proper procedure remedy is just like a reputation remedy, as comfort to the deadly-harmed investors.

In the last, the legal property coming form investment by foreign investors may not be compensated while being deprived by president decision.[112] The protection mechanism provided by fifth amendment of US constitution regulating without proper procedures,[113] personal property can’t be imposed to public usage, should be satisfied with three conditions: (1). the property is personal and legal; (2). the legal property is imposed 3 the purpose of the imposing is for public usage.[114] As for my opinion, if the national security can be included into public usage constrainedly, the attempt to approve the deprivation of president decision belongs to impose would be much painful.under US law, the provement follows imposing regulation, the investors should demolish the reasonable exception of president, that is to say, there is reasonable ground for the investors to believe that the related investment will not incur the negative judgment of NSR. But the reality is, under the situation that the behaviors of NSR authority enjoy great discretion and show political complexion, the same situation also involve carious value judgment element, the equal protection is hardly reached and the investors will suffer much to convince the judicial authority to conclude the reasonable exception from other individual cases.

To sum up, under the current US NSR system, the space and opportunity for investors to remedy is very limited. Even the are more initiative and core information which count a lot in later proceedings can be accessed by foreign investors during the NSR through proper procedures, the procedural remedy really contribute sparsely to the reversal of subjective consumption of review authority and attainment the substantial remedy and reasonable examination rights. The sacrifice of foreign investors implied by US NSR system reflects US political intentions, it is nothing more than a fiction of procedural justice to conceal the NSR.

3-3. Brief Summary

3-3-1. The Role of the Intervene of Government Under the Unactionable National Security Review

As for the countries which adopt the unactionable NSR,[115] the government has the absolute and authoritative right to control and explain over national security.[116] As the defense appeared in 3•1 corporation vs US government case, the reason of the high sensitivity and emphasis of government when it comes to foreign investment, is that the government regarded the threatens or hidden dangers embodied in foreign investment as a political issue and considered the related investment as a concealed, not a common transaction from the hostile original country or other cankered political community. Therefore, the so-called benefits of the individual involved in the investment threatening national security is illegal, with the purpose to harm host country, it is not within the protection of law and there is no space for its remedy.

Notably, under NSR unactionable mode,[117] such as US, even though to some extent, US government does intervene the foreign investment market and leave irreversible impact, this kind of intervene is still at low level, which means only the national security line guarded by NSR is crossed by the investment, the government will come up. In the practice, US government doesn’t adopt an extremely travail policy and it encourages and guide the parties to apply voluntarily,[118] so to most common investment, the free market power is still the most powerful element to determine whether the investment will succeed or not.

Totally speaking, even using the political principle to solve the national security problem in foreign investment and thus depriving the defense opportunity of investors, is the most efficient way to prevent and exclude the national security threatens, but it omits the possibility that the administrative authority may abuse the power. The implication underlying the adoption of NSR unactionable mode is an assumption that the review authority will review and judge the issues relating national security fairly and correctly. In fact, because of the width of the discretion of review authority, review authority take advantage of the power in the name of national benefits, and depress some regional investment arbitrarily and casually. Therefore, in order to prevent those cases, on the condition of insistence of abandoning investors remedy, what needs to be considered is strengthening the constrain of review authority, in order to mitigating the abuse and power-seeking, and finally decrease the adverse effect of NSR unactionable mode.

3-3-2 Improve and Strengthen Internal Supervision Mechanism to Balance the Right and Interest of Investors

The adoption of NSR unactionable mode of host country of investment, equal to exclude the judicial review under protective judicial mechanism of investor’ benefits.[119] Unless the total abolition of investment protectionism, in case the overbalance of national benefits and investors benefits would lead to the deduction of foreign capital,[120] NSR system at least should make some improvement and strengthen domestic legislative supervision mechanism and the down to up error-correcting system.

Reviewing back to the history of US NSR, one of the features is the intensive internal supervision upon NSR, for example, after the appliance of FINSA, the monitoring of CFIUS by congress became periodical, and CFIUS was required to submit the information and report in accordance with the different phases. If CFIUS, after the review and investigation, holds there is no threaten of the investment being reviewed, it should submit written report to congress which should state details of content of the related transaction and commits that the transaction being reviewed or investigated constitutes no threatens to national security, all the above in the written report will be signed by the financial minister and certain principal who will be responsible. CFIUS periodical reports to congress insure the congress to track the whole process of the investigation, thus enable congress to give suggestion and question it. Except the specific written report submitted

Over the individual case, FINSA also requires the CFIUS annually to submit the detailed report, summarize the related information about the transaction suffered the review or investigation, including outward direct investment, core technology and analysis of investment from certain countries. Meanwhile, the simplified version of annual report should be publicized to society.

Therefore, even US NSR system does not grant the investors the remedy rights, or the remedy is limited, that is not to say the US NSR is insignificant. It does scarify the external rights seeking for remedy of investors, but it calls for the internal monitoring consolidation and constrains to power as a supplement, aiming to avoid power abuse by administrative authority or the political formation of investment issue, thus to some extent, ensures that the review proceeding would be proper and compliant, and finally leads to the comparative balance between investors benefits and national security interests.

CHAPTER FOUR: THE INVESTORS’ REMEDY MECHANISM IN CHINESE NATIONAL SECURITY REVIEW

With keeping reform and open to the outside world, China’s economy is developing fast day by day. As a developing country, China is the most attractive country for foreign investment. In the view of foreign capital inflow, China is ranking the first among the developing countries and the third around the world.[121] Its foreign capital inflow also ranks the first among all developing countries.[122]

However, the legislation concerned foreign investment in China is not updated with the speed of economics development.

4-1. Evolution and Development of National Security Review in China

Some scholars think, Chinese national security review is obviously path-dependent reforming from the early anti-monopoly review into an independent review system.[123]

4-1-1 National Security in Industrial Policy Review

China in the initial stage of opening up implemented foreign investment instruction policy.[124] The State Council noticed the negative influence on national security from foreign investment since publishing the Interim Provisions on Guiding the Orientation of Attracting Foreign Investment prohibiting foreign investments related to national security or harm to national economy and society development. Chinese foreign investment instruction regulation is set up by publishing the Catalogue of Industries for Guiding Foreign Investment in 1995 and the Provisions on Foreign Investment Orientation in 2002. According to Article 7 of the Provisions on Foreign Investment Orientation, any foreign investment project is prohibited which is harm to national security or public interests, military equipment security and effectiveness.[125] China doesn’t have a special NSR system during this time only regulating limitations on industries without concrete review standard and procedure.

4-1-2 National Security in Anti-monopoly Review

• Coca Cola Corporation attempted to Acquire Huiyuan Fruit Juice Company

It is a significant case since new Anti-monopoly Law comes into the effect. Huiyuan Fruit Juice Company ( Huiyuan ) takes the largest place of pure fruit juice market controlling around 42% in China.[126] While Coca Cola is the most successful foreign carbonated beverage company taking almost 50% place of carbonated beverage market in China.[127]

On September 3, 2008, Huiyuan announced that Coca Cola would offer $ 2.3 billion U.S. dollars to acquire Huiyuan’s all entity interest.[128] This acquisition could be the largest acquisition in Chinese beverage history.[129] Unfortunately, the Ministry of Commerce prohibited this acquisition in accordance with the Anti-monopoly Law on March 18, 2009 after two-stage merger review.[130] The Ministry of Commerce explained the reason in the following ways: “1) resulting dominant market position; 2) concerns that brand recognition would place the potential merged entity at a significant advantage; and 3) increased barriers for competitors to enter the market.”[131]

This case would help other companies predict how the Ministry of Commerce reviews the future applications according to the Anti-monopoly Law. But Ministry of Commerce’s decision did not provide enough information for other applications not detailing examination procedures. For example, Ministry of Commerce did not explain the exact standard of recognizing M&As scale and how Ministry of Commerce analyzes all collected data.[132] Besides, Ministry of Commerce holds that “the more recognizable the brand, the more market influence a firm could yield.”[133] The acquisition that Coca Cola mergers to Huiyuan would give other minimum-sized companies a great challenge and cause Chines food and beverage market losing its vitality.[134]

• The development of Anti-monopoly Law

Ministries of the State Council published Provisions on Foreign Investors Merge Domestic Enterprises in 2006 on the basis of the Provisional Regulations on the Merger with and Acquisition of Domestic Enterprises by Foreign Investors in 2003, which provided interested parties should declare to Ministry of Commerce and get reviewed if the trade is related to national economics safety, establishing separate foreign investment M&As review.[135] However, this provision doesn’t provide concrete review standard and procedure and it provides economics safety only referring to unfair competitions. It doesn’t belong to the kind of FINSR.

Article 33 of Anti-monopoly in 2008 provides that national security review should be carried out if one foreign investment is related to national security.[136] This provision formally provides a requirement of NSR on foreign capital merger and acquisition in the form of law. But it still has a lot of obstacles in the view of NSR such as it doesn’t have concrete review rules. The Anti-monopoly Law only functionally safeguards the market competition order.

Without doubt, the Anti-monopoly Law gives us an impression that China is setting up a barrier for foreign investments nowadays. However, China should consider foreign investment not only a threat but also a chance to improve domestic industries.[137]

4-1-3 Establishment of National Security Review Regime in Foreign M&A

General Office of the State Council and the Ministry of Commerce published the Notice of the Establishment of Foreign M& A National Security Review System and the Interim Provisions on the Relevant Matters concerning the Implementation of Foreign M&A of Domestic Enterprises in 2011 which stipulate detailed regulations on review range, mechanism and procedure. The educational circle thinks these two documents are the basic constructions of current foreign M&A security review system. But there exist some imperfections, such as: uncertain review authority, no transparency and flexibility and so on.[138]

In addition, the review objects of current Chinese FINSR system are only related to foreign M&A not including other industries or competition orders. As to foreign indirect investment, Taking portfolio investment as an example, Chinese stock market is not totally open up yet. Nowadays, foreign investors only can invest Chinese stock market in the form of QFII and RQFII. Competent department like China Securities Regulatory Commission (“CSRC”) will rule and supervise qualified subjects, investment proportions and ranges but it will not manage other forms of NSR.

4-2. Problems on Investors’ Remedy Mechanism in Nowadays China

4-2-1 National Security Review Exists in Name Only

It is difficult to balance the relationship between using foreign capitals and national security for the time being. Foreign M&As attack Chinese strategical industries and markets from time to time. It is also a great challenge that foreign capitals merged Chinese leading enterprises and national enterprises arousing a heated discussion about threatens to national security from foreign investments.[139] At the same time, the amount of global direct investments grows slowly after economic crisis in 2007. Even though every country tries to promote investment liberalization, every country still wants to protect domestic economics from impacts of foreign capitals. That’s why each country uses some public policies as protection measures such as: NSR. Chinese enterprises also meet a lot of difficulties in foreign merging from host countries, especially in U.S.A and Australia.

In this background, China creates and publishes two normative documents as mentioned above somehow making up the lack of FINSR system in China.[140] These two normative documents still have some problems damaging image of law society and producing some misunderstandings that China tightens up foreign capitals policies. The current documents are lack of transparency and clear review subjects and objects. An unclear jurisdiction is also a big problem.

From the perspective of system contents, there are many similarities between Chinese FINSR system and American FINSR system.[141] However, Chinese FINSR system seems like a reaction to other countries’ policies which cannot be applied to Chinese reality very well. In the early establishment of Chinese FINSR system, many foreign enterprises worried that Chinese government’s attitude to foreign investments changes or they will have more problems due to national security.[142] The fact proves that these worries are unnecessary. There are no cases related to national security until now.

In the long term, Chinese laws have every detailed management regulations on foreign investments. Chinese government examines investment projects one by one from economic security, public interests, admission to market with so many trivial administrative approvals. Chinese current FINSR system doesn’t have immunity treaties about regular foreign capitals input like other countries (such as: Australia only examines foreign investment projects by non-state investors exceeding 220 million Australian dollars beforehand). In conclusion, there is no point in special NSR system when regular administrative examine and approve behaviors play a role in eliminating threatens to national security.

4-2-2 Investors’ Remedy Mechanism is Undefined

There are no clear regulations on the existence of investors’ remedy mechanism in Chinese current FINSR system.

Firstly, it’s about the nature of review behavior. According to Article 3, 4 of the Notice of the General Office of the State Council on the Establishment of a Security Review System for Foreign M&As of Domestic Enterprises, the review authority is joint conference composed of National Development and Reform Commission and Ministry of Commerce. If the joint conference differs in the view of decision, the State of Council will make a final decision and Ministry of Commerce will inform investors in a written form. On these grounds, joint conference and the State of Council have the power of review and decision-making authority. Their review and decision-making behaviors are all administrative behaviors meaning justifiability of them is about administrative jurisdiction.

Secondly, it’s about whether review behavior can get immunity from suits. According to Article 12 of Chinese Law of Executive Accusation, citizens, legal persons and other organizations can appeal to courts if they think administrative behaviors violate their lawful right and interests. Meanwhile, Article 12 also provides the ranges out of judicial review.[143] Under Chinese FINSR system, review authority has power to terminate transactions and dispose assets after confirming that foreign investment projects are against national security. Those administrative behaviors will cause loses to investors’ interests and are not included into several conditions mentioned in Article 12.

Theoretically speaking, foreign investors have right to appeal to courts having jurisdiction if they are not satisfied with review behaviors or decisions. Considering legal operation, there is another problem to be solved that defendant in administrative litigation is hard to ascertain. As has been said above, joint conference or the State of Council is the review authority but Ministry of Commerce is the third part in initiating review and making review decisions. The relationship between Ministry of Commerce and foreign investors is closer than the relationship between review authority and foreign investors, making it possible that investors will sue Ministry of Commerce as defendant. Therefore, it may result in decision-makers (joint conference or State of Council) and responsibility undertakers (Ministry of Commerce) are different parties.[144]

It should be pointed out that there is no certain investors’ remedy mechanism in Chinese FINSR system. For one hand, these two normative documents have low legal effects. Normative documents cannot rule out judicial review without certain legal regulations. For another hand, Chinese current NSR system has no actual effects because regulations on foreign capitals cover all functions of NSR. Chinese FINSR system is designed for legal frameworks not for actual needs. Not to mention the investors’ remedy system aimed at unnecessary FINSR system, remedy system doesn’t have reasons to exist.

4-3. Choice on Investors’ Remedy Mechanism under Innovation of Foreign Capital Management Pattern

4-3-1 Influence on Investors’ Remedy Mechanism by Innovation of Foreign Capital Management Pattern

With the continuous opening of foreign capital market in China, the foreign capital management mode is deepening in the direction of simplifying and narrowing the examination and approval authority. The function of the national security censorship system in the foreign capital management system is adjusted accordingly, and thus affect the select of investor relief mechanism.

According to what the CPC Central Committee’s Decision on the Comprehensively Deepening Reform of a Number of Major Issues puts forward “to make the market play a decisive role in the allocation of resources and let the government play a better role”, the National Development and Reform Commission issued Foreign Capital Project Approval And Filing Management Approach (National Development and Reform Commission Decree No. 12) issued by the National Development and Reform Commission was formally implemented on June 17, 2014, which means that “Interim Measures For The Approval Of Foreign Capital Projects” formulated at the beginning of the accession to the WTO had come to an end after ten years of operation. China promised to lower trade and investment barriers, domestic economy reformation, and other ways of trade freedom[145] provided on the agreement between the WTO and China.[146] Joining in the WTO brings a lot of changes to China not only economy but also legislation system: China should carry out all of WTO’s obligations as a matter of international law.[147] Legal changes can be seen in these four aspects:

(1) China changes its detailed examination and approval system[148] for the entry of foreign investment. As mentioned above, China makes a list that some industries are prohibited. However, the prohibited industries from the latest catalogue decreased from 112 to 75.[149] In addition, China reduced the entry requirements to auto-industry for foreign investment.[150]

(2) According to the Agreement on Trade-Related Investment Measures (TRIMs), China promises not to set up additional regulations to limit the approval of foreign investments on “performance requirements of any kind”.[151]

(3) China expands the scope of national treatment for foreign investments. Previously, China only provided national treatment to particular countries according to bilateral agreements.[152]

(4) There is a trend of protectionism in recent China now. Taking 2006’s five-year plan as an example, the Ministry of Commerce provided the new regulations to prohibit any M&As related to national security benefits.[153]

China’s management of foreign investment entered a new phase, that is, change from universal approval system to the combination of partly approval and universal filing. It is noteworthy that Article 7 of the Measures for the Administration and Approval of Foreign Capital Projects incorporates the national security censorship into the foreign capital management system clearly and requires to combine of the relevant management systems.[154]

In conjunction with the reform model, in the context of Sino-US bilateral investment protection agreement negotiations made substantial progress and the experience of the Shanghai Free Trade Area gradually promoted, the Ministry of Commerce announced the “People’s Republic of China Foreign Investment Law (Draft for suggestion) (hereinafter referred to as the Draft) and the relevant drafting instructions on January 19, 2015. Draft for the negative list management model, to abolish the original case-by-case examination and approval system, the implementation of the national treatment and access to the negative list management model to adapt to the foreign capital management system. In order to prevent foreign investment from causing harm to the national security, the Draft provides a special system for foreign investment in the national security review system, base on the current effective foreign mergers and acquisitions national security review system, further improve the review factors, review procedures, clear the elimination of national security risks can take measures and so on the national security review.

In general, China’s current foreign mergers acquisitions national security review system is an additional layer of government control measures on the layers of approval. Because of its overlapping scope of application with other approval system, it cannot match with other approval system and the content is rough and fuzzy. So from the applicability and function point of view, China’s current foreign mergers and acquisitions national security review system is not a real national security review system. On this barren soil, to explore its infringement of investor rights and investor relief mechanism can be described as tree of no wood, water of no source. However, after the reform of the foreign-funded management model, especially in the framework of the “draft”, the national security review will become the primary barrier for the government to implement foreign investment management, and its importance and applicability will be greatly improved, not only the national security review system but also the choice of investor relief mechanism should also be in accordance with the reform of the foreign investment management environment and the corresponding reference to the national security review system in the power distribution and restraint mechanisms.

4-3-2 Choice on Investor Relief Mechanism

In the context of the national security review and the reform of foreign investment management system bear the responsibility of active management, whether to give investors the relief rights, Draft gives a reference answer. Article 73 of Draft expressly states: “No administrative reconsideration and administrative litigation shall be instituted for the determination of the national security review made in accordance with this Chapter.” Accordingly, under the framework of the Draft, the national security review of foreign investment decided not to be subject to administrative review and judicial review, foreign investors do not enjoy relief rights. As mentioned above, the right to give or deprive investors of the relief right is a country’s domestic legislation and judicial sovereignty. This is beyond reproach. But because of its highly relevancy of the value orientation for foreign investment, especially under the policy that in favor of open investment, if the purpose is to make the investment legal system good and appropriate, the choice of investor relief mechanism should be able to reflect the value orientation of these policies. But the political, economic, rule of law, culture and other aspects of development should also be considered meanwhile, and match with the entity and the program design of national security review system.

From my point of view that it’s an “arbitrary” choice that what Draft established that the national security review is not subject to administrative review, the principle of judicial review. The foreign investment management system under the “Exposure Draft” is actually a new legal rule formulated under the trend of further opening up the foreign investment market in China, which reflects the weakening of the control power of foreign investment in China’s national public power. The transparency of the exercise of public power and the enhancement of accountability. However, the contents of the national security censorship system established by the “solicitation of opinions”, which, in the absence of any power restraint mechanism, blindly block the way of investor relief, and it is necessary to reflect the change of government supervision function , To reduce the foreign interests of the original intention of departure, it is necessary to further scrutiny and amendment. In the choice of investor relief mechanism, the aforementioned EU and the United States represent two different models, the respective national security review of the various factors and interests of the measurement and coordination of China’s foreign investment management model in the case of reform Determine the appropriate investor relief mechanism to provide a comparison and reference path.

• whether the national security review could be actionable

The EU embodies the spirit of investment liberalization on the issue of the prosecution of national security reviews, and maximizes the relief of investors in the national security review. Although China’s current foreign investment management reform is in some ways to gradually liberalize the performance of foreign investment restrictions, and in the future for a long period of time our country will maintain an open treatment of foreign policy, but this is advocated by the EU and the implementation of investment liberalization is quite different.

The EU countries because of its highly integrated regional development and dependence of coexistence, the root of the liberalization of investment there is a good foundation and starting point, while the EU level to promote the principle of free movement of capital is also constantly monitoring and amendment of member countries on foreign investment Of the restrictions, so the issue of investor relief and not too tangled. However, for our country, in the foreign management from the comprehensive approval system to the national security review as the main active management approach to the limited approval system, not only the market needs to face changes in regulatory policy and the subsequent competitiveness of foreign capital The functions and roles of the government as a subject of market intervention are also changing. China is still developing countries, economic development, technical experience, management level and the developed countries still have a certain gap, coupled with regional development is not balanced, the industrial structure is not mature enough to accommodate and accept foreign capital capacity is limited, This is inherently required for any foreign investment and foreign investment management model reform cannot be achieved overnight.

Therefore, in the national security review on whether the issue can be prosecuted, we should not be too much interpretation of China’s current policy to reduce foreign investment restrictions, not simply copy and apply the EU model. In the reform of foreign investment, we still have a long way to go, China’s current relatively weak national economic and industrial structure is not enough to bear the investor relief for the highest standards of investment liberalization of the impact of foreign capital, it is necessary So that the government from the bottom line on the appropriate intervention in the market, so that the state government agencies can not interfere with the macro to control and guard the national security of the country’s fundamental interests of the connotation and boundaries of the functions. On the other hand, the large number of decentralization rights represented by the reform of foreign investment management model also put forward higher requirements for the smooth transition between government control and market autonomy. In the national security review as a new law and mission System, its effectiveness has yet to be practical test and run the case, a short period of time in China should not be released on the issue of investor relief.

• Coordination of investor relief with the national security review system

In fact, the national security review does not appeal does not necessarily mean that the investment host in the treatment of foreign capital on the guard, nor does it necessarily lead to the loss of foreign capital. In the same country, the foreign investment management model is generally free and free, and its foreign capital inflow volume is still among the best in the world. It can be seen that the national security review cannot be voted on for its own country. Of the foreign capital to bring a devastating blow. While national investments are complaining at the US national security review and complaining about the apparent political motivations of the US national security review, the national security review does not appeal because of the disruptive negative impact of the US foreign market The security censorship system itself focuses on content and procedures to restrict and check the exercise of public power by the examining authorities. In the case of judicial review exemption, it has fully exercised the full supervision of the legislative and administrative review of the review, and thus largely avoids improper The occurrence of the review.

At this point, it is clear that China’s “draft” in the clear national security review can not be sued in the case did not take into account the power of the supervision system, so as to leave the space for the power of arbitrary, and China to develop “draft” To follow the purpose of the open and well-targeted foreign policy. Therefore, at the present stage, it is necessary to draw lessons from the national security review system in the country to adopt the national security review system. In order to protect the investors from undue review, we should establish a good power supervision and control mechanism, The exercise of the decision-making body itself should be clear, and the supervision and decision-making body to form a supervision, so as to protect the national security review system and foreign investment legal system norms and balance. Specifically, the first, according to the “draft” provisions, foreign investment in national security review of the main body of the review is a joint meeting, which basically followed the foreign mergers and acquisitions national security review of the provisions of the review, but “draft “And did not go farther. Not only the composition of the joint meeting is unknown, the convenor of the convenor and other members of the joint meeting of the division of authority is not clear, in general, “draft” on the review of the main provisions of the principle of more abstract, simple and difficult to achieve national security review The clarity, transparency and predictability of the mechanism. In this regard, should further clarify the joint meeting of the institutional settings, the right to configure and conference decision-making mechanism. Second, the “draft” provides that the competent department of foreign investment should prepare and publish the annual safety review report, but did not clear the publication of such reports and published object, is not conducive to the realization of the report itself for foreign investors to provide countries involved Safety investment guidelines and the value of the right to know and supervise the public in relation to the review body and its conduct. Third, the “draft” only identified the main body of the review and decision-making, but did not indicate what kind of authority to supervise the decision-making and decision-making power, it is difficult to avoid the outside world for the review of the power of the authorities to exercise unfair, and even abuse of the right to review The violation of the legitimate rights and interests of investors. In this regard, you can in the “draft” clearly to the NPC Standing Committee or other review and decision-making organs at the same level of the Standing Committee as the supervisory organ, to perform the appropriate supervision duties, such as receiving notice, question report, and even further consideration Whether or not it gives its final veto to a particular case.[155]

CHAPTER FIVE: CONCLUSION

Foreign investment national security review (“FINSR” or “NSR”) is an important regime in which each nation regulates its foreign investments matters, and is a measure that a country takes to restrict or forbid foreign investments in order to balance the positive and negative effectiveness by the capitals flowing-in and for the fundamental security interests of the country.

As to the host-country, FINSR is a way of utilizing of sovereign right, and owning the legality of protecting the national security. Meanwhile, since the concept of national security is obscure and sensitive and the NSR procedure is confidential, the so-called FINSR is easily viewed as an excuse of host-country’s political needs. For the foreign investor, FINSR among the others is a major uncontrollable factor during its investment, low extent of foreseeability together with its mandatory NSR decision.

In the atmosphere of promoting investment liberalism and encouraging foreign investments policies, FINSR should be given the propriety to avoid its deterioration to a political means and excuse. In respect of the designing of the system, the FINSR shall be foreseeable and accountable, where the key point is whether the foreign investor owns the right of relief.

According to the worldwide legislation, for each nation, the tropism appears explicitly when choosing on the remedy system for foreign investors. Investor-state either excludes the conduct of NSR from the jurisdiction of judicial review, or redeems the conduct of NSR as a normal administrative action which could apply the general principal of the laws of Investor-state and allow the foreign investor to have the right of relief. To some extent, the value embodied and the interest protected by the remedy system and the NSR are conflicting. Throughout the whole proceeding of the NSR, the confrontation always exist between the national interests or political benefit group interests which originates from the purpose of safeguarding the national security and the investors’ interests in the investment. However, the most inevitable situation in front of the NSR is that it may be politicized and abused, which will be bound to impair the lawful interests and reasonable expectation of the foreign investors. Blindly enlarge the discretion of authorities and meanwhile block off the remedy approach against investors will just cause the severe unbalance of investors’ interests and runoff the inflows of foreign capital.

Although the Chinese government is trying to regulate the area of foreign investment, China’s current FINSR only governs the area of foreign investments in M & As. Through comparison with EU and American legislations, China’s FINSR still has several problems: lack of transparency, uncertainty of review subject, and ambiguity right of foreign investors’ remedies. It remains my hope that China’s FINSR will be more practicable if the government and legislature combine domestic situation with EU and American FINSR systems’ advantages. We should attach importance to the role of FINSR since China is becoming a highly attractive host country to foreign investment nowadays. There is no doubt that Chinese national security or national interest will be challenged by foreign investments, however, we can see those challenges as chances to improve Chinese economy and domestic capitals.

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[1] H Steinberger, ‘Sovereignty’, in Max Planck Institute for Comparative Public Law and International Law, Encyclopedia for Public International Law, vol 10 (North Holland, 1987) 414.

[2] Xianshu WANG, Hongwei WANG, Jing Ji Quan Qiu Hua Shi Dai De Guo Jia Zhu Quan, Fa Shang Yan Jiu ( Zhong Nan Zheng Fa Xue Yuan Xue Bao ), vol 1, 2002.

[3] Charter of Economic Rights and Duties of States, Article 2, GA Res. 3281 (XXIX), 29 Sess., UN. Doc. A/RES/29/3281 (12 December 1974).

[4] GATT, Article 21, 1994.

[5] Xianzhong NIU, Er Shi Yi Shi Ji Zhan Lve Qian Zhan, Tai Bei Mai Tian Press, 1999, P.272.

[6] Harold Brown, Thinking about National Security, Westview Press, 1983, P.4.

[7] Rongxiang CAO, Jing Ji’ An Quan – Fa Zhan Zhong Guo Jia De Kai Fang Yu Feng Xian, Social Sciences Academic Press, 2006, P.46-47.

[8] Dazhi YAO, Procedure Justice – In the View of Rawls ‘Theory of Justice, Jianghaiacademic Journal, Vol , 2010.

[9] The Investment Policy Guidelines of Recipient Countries on National Security, OECD, 2009.

[10] Shaozhe WANG, Comparative Study on National Security Review System of Transnational Merger and Acquisition, Master Thesis of Peking University, 2007.

[11] CJEC, Association Eglise de Scientologie de Paris, Scientology International Reserves Trust, 14 March 2000, C-54/99.

[12] See European Commission, The Relevant Treaty Provisions on the Free Movement of Capital and Third Countries, available at: http://ec.europa.eu/finance/capital/third-countries/treaty_provisons/index_en.htm.

[13] European Union, Transatlantic Trade and Investment Partnership – Trade in Services, Investment and E-Commerce (Chapter II – Investment), Draft document tabled for discussion with the U.S. (released 12 November 2015), available at: http://trade.ec.europa.eu/doclib/docs/2015/november/tradoc_153955.pdf .

[14] European Commission, “Commission proposes new Investment Court System for TTIP and other EU trade and investment negotiations”, Press release (16 September 2015).

[15] Gus Van Harten, Key flaws in the European Commission’s proposals for foreign investor protection in TTIP, Osgoode Hall Law School, Osgoode Legal Studies Research Paper No. 16, Vol. 12, Issue. 4, 2016, P. 1.

[16] G Van Harten, “Comments on the European Commission’s Approach to Investor-State Arbitration in TTIP and CETA”, Osgoode Legal Studies Research Paper No 59/2014, 3 July, 2014, online: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2466688 .

[17] In its proposals, the EC has questioning the effectiveness of domestic institutions in all countries to protect foreign investors. Yet, if we accept the EC’s concern about domestic institutions, it follows that domestic institutions may fail to enforce foreign investors’ responsibilities too. There is a basic imbalance in establishing powerful and highly-enforceable rights, but not responsibilities, for foreign investors.

[18] Gus Van Harten, Key flaws in the European Commission’s proposals for foreign investor protection in TTIP, Osgoode Hall Law School, Osgoode Legal Studies Research Paper No. 16, Vol. 12, Issue. 4, 2016, P. 3.

[19] Transatlantic Trade and Investment Partnership- Trade in Services, Investment and E-commerce, Chapter II, Section 2, Article 2.(1), “The provisions of this section shall not affect the right of the Parties to regulate within their territories through measures necessary to achieve legitimate policy objectives, such as the protection of public health, safety, environment or public morals, social or consumer protection or promotion and protection of cultural diversity”.

[20] G Van Harten, Sovereign Choices and Sovereign Constraints, Oxford: OUP, 2013, PP. 66-68.

[21] G Van Harten, Sold Down the Yangtze: Canada’s Lopsided Investment Deal with China, Toronto: Lorimer, 2015, PP. 96-100.

[22] Transatlantic Trade and Investment Partnership- Trade in Services, Investment and E-commerce, Section 3, Article 28.(1), Commission draft text TTIP – investment, 14 July, 2016.

[23] Gus Van Harten, Key flaws in the European Commission’s proposals for foreign investor protection in TTIP, Osgoode Hall Law School, Osgoode Legal Studies Research Paper, No. 16, Vol. 12, Issue. 4, 2016, P. 6.

[24] Bernard Carayon, Information Report No. 1664, French National Assembly, June 9, 2004.

[25] Decree No 2005-1739, French Monetary and Financial Code, No R153-1, December 30, 2005.

[26] No L.151-1, French Monetary and Financial Code.

[27] Isabelle MacElhone, Bertrand Baheu-Derras, Foreign Investments in France Subject to the Prior Authorisation of the French Government, September, 2014.

[28] Within the meaning of the Law of June 15, 1907 regulating gambling activities in casinos located in seaside, thermal or health resorts.

[29] Within the meaning of Law No 83-629 of July 12, 1983 regulating private security services.

[30] Article L. 1332-1 of the Defense Code.

[31] Article L. 282-8 of the Civil Aviation Code and Article L. 324-5 of Seaside Harbors Code.

[32] Article L. 1332-1 of the Defense Code.

[33] As enumerated under paragraphs 1C351 and 1C352a.2 of Annex I of Council Regulation (EC) No 1334/2000 of 22 June 2000 setting up a Community regime for the control of exports of dual-use items and technology.

[34] See Article L. 226-3 of the Criminal Code.

[35] See Decree No 2002-535 of April 18, 2002.

[36] Within the meaning of Articles L. 4332-1 through L. 1332-7 of the Defense Code.

[37] Defined as “items, including software and technology, which can be used for both civil and military purposes” under Council Regulation (EC) No 1334/2000 of 22 June 2000 setting up a Community regime for the control of exports of dual-use items and technology.

[38] Decree No. 2014-479 of 14 May, 2014.

[39] Jeanne Archibald, Conference on Foreign Investments and National Security held on October 10, 2005 in Paris.

[40] Article R. 153-8 of the French Regulation.

[41] GAO, FOREIGN INVESTMENT: Law and Policies Regulating Foreign Investment in 10 Countries, GAO-08-320(February 2008), pp.53-59, available at: http://www.gao.gov/new.items/d08320.pdf .

[42] Isabelle MacElhone, Bertrand Baheu-Derras, Foreign Investments in France Subject to the Prior Authorisation of the French Government, September, 2014, P. 5.

[43] In 2006, the European Commission already raised concerns about the Villepin Decree of 2005 (which enacted the first list of sectors before the Montebourg Decree extended it in 2014) (reasoned opinion from the European Commission, 12 Oct. 2006, IP/06/1353). In 2000, the Court of Justice of the European Communities had held that European law precluded “a system of prior authorisation for direct foreign investments which confines itself to defining in general terms the affected investments […] with the result that the persons concerned are unable to ascertain the specific circumstances in which prior authorization is required” (CJEC, 14 March 2000, C-54/99, Association Eglise de Scientologie de Paris, Scientology International Reserves Trust). The same year, further to this judgment of the Court, the French Council of State held that the Decree of 1989 (which regulated foreign investments in France at that time) was non-compliant with European law (CE, 8 Dec. 2000, No. 181533).

[44] BMWi, Foreign Trade Policy, available at: http://www.bmwi.de/English/Navigation/foreign-trade-policy,did=76806,render=renderPrint.html .

[45] This M&A case may lead to the disclosure of German high and new technology. However, German government could do nothing according to the current law at that time. German government put pressure on American company from other ways and American company was forced to decrease holdings of stock under 50% in the end.

[46] GAO, FOREIGN INVESTMENT: Foreign Laws and Policies Addressing National Security Concerns, GAO/NSIAD-96-61(April 1996), pp.33-37, available at: http://www.gao.gov/archive/1996/ns96061.pdf .

[47] Shaozhe WANG, Comparative Study on National Security Review System of Transnational Merger and Acquisition, Master Thesis of Peking University, 2007.

[48] GAO. FOREIGN INVESMENT: Laws and Policies Regulating Foreign Investment in 10 Countries, GAO-08-320(February 2008), pp.60-64, available at: http://www.gao.gov/new.items/d08320.pdf .

[49] Ibid.

[50] GAO. FOREIGN INVESMENT: Laws and Policies Regulating Foreign Investment in 10 Countries, GAO-08-320(February 2008), pp.60-64, available at: http://www.gao.gov/new.items/d08320.pdf .

[51] Ibid.

[52] Maxim Worcester, Does Germany need a National Security Council?, Institute for Strategic, Political, Security and Economic Consultancy Berlin, Germany, July 4, 2013.

[53] Article L. 151-3, III of the French Monetary and Financial Code.

[54] GAO. FOREIGN INVESMENT: Laws and Policies Regulating Foreign Investment in 10 Countries, GAO-08-320(February 2008), pp.60-64, available at: http://www.gao.gov/new.items/d08320.pdf .

[55] Xiju ZHAO, Judicial Review in EU: Study on Article 230 EC Treaty, Peking University Law Review, Vol 2, 2005.

[56] Association Eglise de scientologie de Paris and Scientology International Reserves Trust v The Prime Minister, European Court of Justice, Case C-54/99, dated March 14, 2000.

[57] FOREIGN INVESTMENT AND NATIONAL SECURITY ACT OF 2007，PL 110–49, 121 Stat 246，July 26, 2007.

[58] NSA，https://www.nsa.gov/about/mission-strategy/ （The National Security Agency/Central Security Service (NSA/CSS) leads the U.S. Government in cryptology that encompasses both Signals Intelligence (SIGINT) and Information Assurance (IA) products and services, and enables Computer Network Operations (CNO) in order to gain a decision advantage for the Nation and our allies under all circumstances.）

[59] Executive Order 11858, May 7, 1975, 40F.R. 20263.

[60] Executive order 11858,sec III,40 FR 20263, 3 CFR, 1971-1975 Comp., p. 990，May 7, 1975.（as amended by executive order13456, available at: https://www.treasury.gov/resource-center/international/foreign-investment/Documents/EO-11858-Amended.pdf ）

[61] Id,sec VI.

[62] James K. Jackson,The Committee on Foreign Investment in the United States (CFIUS),at 35 ,available at: https://fas.org/sgp/crs/natsec/RL33388.pdf. April 6, 2017.

[63] In particular, they must consider: (1) domestic production needed for projected national defense requirements; (2) the capability and capacity of domestic industries to meet national defense requirements, including the availability of human resources, products, technology, materials, and other supplies and services; (3) the control of domestic industries and commercial activity by foreign citizens as it affects the capability and capacity of the United States to meet national security requirements; (4) the potential effects of the proposed or pending transaction on sales of military goods, equipment, or technology to any country identified under applicable law as (a) supporting terrorism or (b) a country of concern for missile proliferation or the proliferation of chemical and biological weapons; (5) the potential effects of the proposed or pending transaction on U.S. international technological leadership in areas affecting national security.

[64] Alan P. Larson,David M. Marchick ,The Bernard and Irene Schwartz Series on American Competitiveness ,Foreign Investment and National Security-Getting the Balance Right ,PP. 9 -11.(available at: https://www.cov.com/-/media/files/corporate/publications/2006/07/oid24946.pdf ,CSR NO. 18, JULY 2006 COUNCIL ON FOREIGN RELATIONS )

[65] U.S. Congress. House. Committee on Government Operation. Subcommittee on Commerce, Consumer, and Monetary Affairs, The operation of Federal Agencies in Monitoring, Reporting on , and Analyzing Foreign Investments in the United States, Hearings. 96th Cong.,1st sess., Part 3, July 30,1979,Washington, U.S. Govt. Print. Off., 1979, PP. 334-335.

[66] U.S. Congress. House. Committee on Government Operation. The Adequacy of the Federal Response to Foreign Investments in the United States, Report by Committee on Government Operation. H.Report.96-1216, 96th Cong.,2nd sess., Washington, U.S. Govt. Print. Off., 1980, PP. 166-184.

[67] Weiyu XU, Comparative Research of Security Review of Foreign Capital Merge, Doctor Academic Dissertation, 2010.

[68] Institute for international economics,the Exon-Florio Amendment,PP. 34-35, available at: https://piie.com/publications/chapters_preview/3918/02iie3918.pdf .

[69] Ibid.

[70] Id, PP. 46-50.

[71] Id, PP. 58-59.

[72] Testimony of Patrick A. Mulloy before the Committee on Banking, Housing, & Urban Affairs Hearing on the Implementation of the Exon-Florio Amendment and the Committee on Foreign Investment in the United States, PP. 8-9, available at: https://www.uscc.gov/sites/default/files/05_10_20_testi_mulloy.pdf October 20, 2005.

[73] 31 C.F.R. § 800.(1991)

[74] Overview of US export control system,U.S. Export Control Legislation and Authorities, available at: https://www.state.gov/strategictrade/overview/ .

[75] CRS Report for Congress, China and the CNOOC Bid for Unocal: Issues fro Congress, Updated February 27, 2006, p.1.

[76] London Peninsular&Oriental Stream Navigation Co. has port operation right in six US cities: Baltimore, Miami, New Jersey, New Orleans, Now York and Philadelphia.

[77] CFIUS Reform: The Foreign Investment & National Security Act of 2007 (FINSA), available at: https://www.treasury.gov/resource-center/international/foreign-investment/Documents/Summary-FINSA.pdf. (FINSA maintains the narrow scope and efficient timeline of CFIUS’s review process）

[78] Ibid.

[79] 31 C. F. R. § 800. (2008)

[80] CFIUS Reform: The Foreign Investment & National Security Act of 2007 (FINSA), available at: https://www.treasury.gov/resource-center/international/foreign-investment/Documents/Summary-FINSA.pdf. (FINSA maintains the narrow scope and efficient timeline of CFIUS’s review process）

[81] 50 U. S. C. app. §2170(b)(1)(A)

[82] Conference Report for Pub. L. 100-418, H. Rep. 100-576, 100th Cong. 2d Sess. (1988), PP. 924-928.

[83] 50 U. S. C. app. §2170(f).

[84] 50 U. S. C. App. §2170(b)(2)(A), (B).

[85] 50 U. S. C. app. §2170(b)(3)(B).

[86] 31 C. F. R. app. § 800.506 (b) (c).

[87] 50 U. S. C. app. §2170 (d) (1), (2).

[88] 50 U. S. C. app. §2170(d) (4).

[89] The foreign merger transaction refers to the case Ralls Corporation relating to 3•1 Co. Was denied by president’ exercise of veto power to purchase the wind power plant in Ohio, US.

[90] CFIUS: Annual Report to Congress, Report Period: CY 2014, Public/Unclassified Version.

[91] Malcolm Baker and Jeffrey Wurgler ,Investor Sentiment in the Stock Market,pp131-132,Journal of Economic Perspectives, Vol. 21, No. 2, Spring, 2007, PP. 129–151. Available at: http://www.people.hbs.edu/mbaker/cv/papers/InvestorSentiment.pdf .

[92] Kenneth J. Nunnenkamp and Giovanna M. Cinelli, United States: Recent Activity in Chinese Transactions Subject to CFIUS Review: Does the Equation Change for Chinese Investors? March 15, 2016. ( available at: http://www.mondaq.com/unitedstates/x/474702/Inward+Foreign+Investment/Recent+Activity+in+Chinese+Transactions+Subject+to+CFIUS+Review+Does+the+Equation+Change+for+Chinese+Investors )

[93] Ralls Corporation v. Committee on Foreign Investment in the United States, et al., 758 Federal Reporter, 3rd Series, 2014, P. 296.

[94] 5 U. S. C. § § 551 et seq.

[95] RALLS CORP. v. COMMITTEE ON FOREIGN INVEST. IN US, Cite as 987 F.Supp.2d 18 (D.D.C. 2013), P.19.

[96] Ralls Corporation v. Committee on Foreign Investment in the United States, et al., 758 Federal Reporter, 3d Series, 2014, P.307.

[97] Ibid.

[98] Ralls Corporation v. Committee on Foreign Investment in the United States, et al., 758 Federal Reporter, 3d Series, 2014, PP.308-312.

[99] Ralls Corporation v. Committee on Foreign Investment in the United States, et al., 758 Federal Reporter, 3d Series, 2014, PP.312-314.

[100] Ralls Corporation v. Committee on Foreign Investment in the United States, et al., 758 Federal Reporter, 3d Series, 2014, P.296.

[101] El-Shifa Pharm. Indus. Co. V. United States, 607 F. 3d 836, 840(D. C. Cir. 2012).

[102] Haile ZHAO, Weiyu XU, The absence of the protection for investors during Foreign investment merger– 3•1 Co. V. Obam, Publicized by Modern Law, 4th period of 37 edition.

[103] Ralls Corporation v. Committee on Foreign Investment in the United States, et al., 758 Federal Reporter, 3d Series, 2014, PP. 296-302.

[104] Ralls Corp. v. CFIUS: A New Look at Foreign Direct Investments to the US,PP. 39-42,COLUM. J. TRANSNAT’L L. BULLETIN, available at: http://jtl.columbia.edu/wp-content/uploads/sites/4/2016/06/Wang_54-CJTL-30.pdf .

[105] Ralls Corporation v. Committee on Foreign Investment in the United States, et al., 758 Federal Reporter, 3d Series, 2014, PP.315-317.

[106] Such as People’s Mojahedin Org. Of Iran v. Department of State, 613 F. 3d 220 (2010), Chai v. Department of State, 446 F. 3d 125(D. C. Cir. 2006).

[107] Marc Grossman,Two Visions, One Collaboration? Part of a Future for US-China Relations? Available at: http://apjjf.org/2017/02/Grossman.html .

[108] CFIUS and the New Trump Administration: Your Top Ten Questions Answered, What are the current trends in CFIUS enforcement? Available at: http://www.natlawreview.com/article/cfius-and-new-trump-administration-your-top-ten-questions-answered ,April 23, 2017.

[109] U.S. Supreme Court,C. & S. Air Lines, Inc. v. Waterman S.S. Corp., 333 U.S. 103, 1948, available at: https://supreme.justia.com/cases/federal/us/333/103/case.html .

[110] Code of Federal Regulations, Title 40, Protection of Environment, Pt. 1-49 (revised asof July 1, 2012. Available at:  https://books.google.co.kr/books?id=y725btY-SjoC&pg=PA783&lpg=PA783&dq=issue+of+NSR+is+still+out+of+judicial+review&source=bl&ots=Ax0cciMBr4&sig=-H7xYhd2iL7tXQU4kbZRbLiIL6w&hl=zh-CN&sa=X&ved=0ahUKEwj-98uj0LrTAhWDkZQKHZ-sBGcQ6AEIPjAE#v=onepage&q=issue%20of%20NSR%20is%20still%20out%20of%20judicial%20review&f=false )

[111] Willy,Qstreng,National Security and International Environmental Cooperation in the Arctic -the case of northern sea route,ISBN978-94-010-6000-4,at 254.( available at: https://books.google.co.kr/books?id=4vaPBAAAQBAJ&pg=PA254&lpg=PA254&dq=the+definition++of+national+security+in+NSR&source=bl&ots=mbe1JH4Veo&sig=rW8668fK5E01oRIWR9S6tHkJDvc&hl=zh-CN&sa=X&ved=0ahUKEwj2puuG07rTAhVDJJQKHQRjAEQQ6AEITzAH#v=onepage&q=the%20definition%20%20of%20national%20security%20in%20NSR&f=false )

[112] Ralls Corporation v. Committee on Foreign Investment in the United States, et al., 758 Federal Reporter, 3d Series, 2014, PP.333-336.

[113] FIFTH AMENDMENT of US Constitution: RIGHTS OF PERSON, PP.1354-1356. Available at: https://www.gpo.gov/fdsys/pkg/GPO-CONAN-1992/pdf/GPO-CONAN-1992-10-6.pdf .

[114] Id, PP. 1359-1360.

[115] The National Security Strategy of the United States of America, available at: http://www.informationclearinghouse.info/article2320.htm .

[116] Ibid.

[117] Jonathan Masters, Foreign Investment and U.S. National Security, available at: http://www.cfr.org/foreign-direct-investment/foreign-investment-us-national-security/p31477 .

[118] THE WHITE HOUSE WASHINGTON,NATIONAL SECURITY STRATEGY, PP. 15-17.( available at: http://nssarchive.us/wp-content/uploads/2015/02/2015.pdf )

[119] Ralls Corporation v. Committee on Foreign Investment in the United States, et al., 758 Federal Reporter, 3d Series, 2014, PP.333-336.

[120] Institution for the international economics, National security issues related to investments from China, PP. 110-113.( available at: https://piie.com/publications/chapters_preview/3918/04iie3918.pdf )

[121] UNCTAD: World Investment Report 2016, P. 5.

[122] UNCTAD: World Investment Report 2016, P. 6.

[123] Nanshen SUN, Di HU, Legislation Improvement and Advice on Foreign Investment National Security Review – in the View of “Foreign Investment Law”, Journal of Shanghai University of Finance and Economics, Vol. 4.

[124] Jun LI, The History of Foreign Investment National Security Review and Chinese Regarding Policies, Journal of Yunnan University Law Edition, Vol.6.

[125] The basic structure is set out in Provisions Guiding Foreign Investment Direction (People’s Republic of China), State Council, Decree No 346, 11 February 2002, although the Foreign Investment Industry Catalogue — which lists encouraged, restricted, and prohibited industries — has been revised and reissued on a number of occasions. The current catalogue was issued in 2011: Catalogue for the Guidance of Foreign Investment Industries (People’s Republic of China) National Development and Reform Commission, Ministry of Commerce, 2011, effective 30 January 2012.

[126] Lei TU, Minute Maid Trying to Unseat Uni-President, CHINA DAILY, Feb. 23, 2009, available at: http://chinadaily.chinadaily.com.cn/bizchina/2009-02/23/content_ 7502227.htm

[127] Qingfen DING, Coca-Cola on a Rosy Perch in China as Sales Soar, CHINA DAILY, July 23, 2009, available at: http://www.chinadaily.com.cn/bizchina/2009-07/23/content_8963285.htm

[128] Sherry Y. Gong et al., MOFCOM Bars Coca Cola’s Proposed Acquisition of Huiyuan, CHINA ANTITRUST UPDATE, Hogan & Hartson LLP, Mar. 19, 2009.

[129] Sun JIN, The Implementation of China’s Anti-Monopoly Law: A Case Study on Coca-Cola’s Abortive Acquisition of Huiyuan Juice, CHINALAWINFO.COM, Summer, 2009, available at: http://article.chinalawinfo.com/Article_Detail.asp?ArticleID=48398 .

[130] Sherry Y. Gong et al., MOFCOM Bars Coca Cola’s Proposed Acquisition of Huiyuan, CHINA ANTITRUST UPDATE, Hogan & Hartson LLP, Mar. 19, 2009.

[131] Announcement No. 22 of 2009 of the Ministry of Commerce of the People’s Republic of China, effective March. 18, 2009.

[132] Eric Ng, Jasmine WANG, & Martin ZHOU, Rejection Sets Legal Precedent for Future Mergers, S. China Morning Post, Mar. 19, 2009.

[133] Wei JUN et al., MOFCOM Discloses Details Concerning Rejection of Coca-Cola/Huiyuan Transaction, ANTITRUST UPDATE, Hogan & Hartson LLP, Mar. 27, 2009.

[134] Eva Choi, Seeking Stones in the Red River: the Inevitable Evolution of China’s Anti Monopoly Law, Journal of Law, Economics & Policy, Fall, 2010, PP. 5-7.

[135] Article 12 of Provisions on Foreign Investors Merge Domestic Enterprises:” In case a foreign investor merges or acquires a domestic enterprise and obtains the actual right to control it, and in case it involves major industry, has or may have the influence on the state security or cause the transfer of the actual right of the domestic enterprise owning famous trademark or having a name of long history, the person concerned shall submit a report thereof to the Ministry of Commerce. If a person concerned fails to submit a report, and its merger or acquisition does cause or may cause serious influence on the state economic security, the Ministry of Commerce may, together with relevant departments, ask the person concerned to stop the deal or transfer corresponding stock ownership, assets or take other effective measures to eliminate the influence of the merger or acquisition on state security.”

[136] Article 31 of Anti-monopoly:” Where a foreign investor participates in the concentration of undertakings by merging and acquiring a domestic enterprise or by any other means, which involves national security, the matter shall be subject to review on national security as is required by the relevant State regulations, in addition to the review on the concentration of undertakings in accordance with the provisions of this Law.”

[137] Eva Choi, Seeking Stones in the Red River: the Inevitable Evolution of China’s Anti Monopoly Law, Journal of Law, Economics & Policy, Fall, 2010, PP. 15-17.

[138] Changyong YANG, Inspirations from American Foreign Investment National Security Review and Chinese Strategies, Macroeconomics, Vol.12, 2014, P. 39.

[139] Jun YE, Zhi BAO, Legal Analysis on Foreign M&A of Domestic Enterprises, Law Press, 2008, PP.153-154.

[140] Tong QI, Some Important Problems in Legislation of Foreign Investment National Security Review, China Law Review, Vol.1, 2015.

[141] Changyong YANG, Inspirations from American Foreign Investment National Security Review and Chinese Strategies, Macroeconomics, Vol.12, 2014.

[142] Jingzhou TAO, Discomforting “National Security Review”, CAIXIN Weekly, Vol.8, 2011.

[143] Article 12 of Law of Executive Accusation:” The people’s courts shall not accept suits brought by citizens, legal persons or other organizations against any of the following matters: (1) acts of the state in areas like national defense and foreign affairs; (2) administrative rules and regulations, regulations, or decisions and orders with general binding force formulated and announced by administrative organs; (3) decisions of an administrative organ on awards or punishments for its personnel or on the appointment or relief of duties of its personnel; and (4) specific administrative acts that shall, as provided for by law, be finally decided by an administrative organ.

[144] Nanshen SUN, Di HU, Legislation Improvement and Advice on Foreign Investment National Security Review – in the View of “Foreign Investment Law”, Journal of Shanghai University of Finance and Economics, Vol. 4.

[145] Agreement Establishing the World Trade Organization, 15 April 1994, and its annexes, which contain agreements on trade in goods, trade in services, trade-related intellectual property rights, dispute settlement and trade policy review mechanism, available at http://www.wto.org .

[146] Protocol on the Accession of the People’s Republic of China, WT/L/432, 10 November 2001 (the Protocol), which incorporates by reference selected paragraphs of Report of the Working Party on the Accession of China, WT/MIN(01)/3, 10 November 2001 (WPR), available at http://www.wto.org .

[147] Julia Ya Qin, The Impact of WTO Accession on China’s Legal System: Trade, Investment and Beyond, P. 6, Wayne State University Law School Legal Studies Research Paper Series, No. 07-15, May 9, 2007, also available at: http://www.ssrn.com/link/Wayne-State-U_LEG.html .

[148] Pitman B. Potter, Foreign Investment Law in the People’s Republic of China: Dilemmas of State Control, The China Quarterly, No. 141, 1994, PP. 155-185,.

[149] No commitment was made in health related and social services; recreational, cultural and sporting services; or other services not included elsewhere. Trade Policy Review Report, P. 53, fn. 96.

[150] Eric Harwit, The Impact of WTO Membership on the Automobile Industry in China, The China Quarterly, No. 167 , 2001, PP. 655-670.

[151] Protocol, Section 7(3).

[152] Wei WANG, Historical Evolution of National Treatment in China, Int’l Lawyer, Vol. 39, No. 3, Fall 2005, PP.759.

[153] Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, Article. 12, 8 August 2006, effective 6 September 2006.

[154] Measures for the Administration of Overseas Investment, People’s Republic of China, Article 7, 2009.

[155] Tong QI, Some Important Problems in Legislation of Foreign Investment National Security Review, China Law Review, Vol.1, 2015.