Russia, China, Update Bilateral Investment Treaty As Belt & Road Initiative Projects Look Set To Increase

Russia and China have updated their Bilateral Investment Treaty (BIT), which was first agreed upon back in 2006. BITs typically provide legal guarantees for reciprocal investments, as well as containing specific preferential agreements on tax rates impacting specific detailed industries and the services sector.

Russian President Vladimir Putin signed the bill that ratifies these updates on October 27 after it was jointly agreed on May 8.

The revised BIT strengthens discrimination against investors while adding damage compensation clauses should expropriation of investments take place and adds dispute resolution mechanisms with reference to international arbitration.

The Russian Economic Development Minister, Maxim Reshetnikov, said that “One of the priority areas for Russian investors in China to work on will be the production of rolled goods using high-tech aluminum alloys. Russian companies also see potential for implementing projects in insurance, infrastructure construction, and metallurgy. The updated agreement will allow our businesses to launch new investment projects on more transparent and straightforward terms, providing investors with long-lasting stability and a predictable legislative environment.”

The reference to infrastructure construction suggests that Chinese participation as part of its Belt & Road Initiative projects and investments into Russia will increase, while a combined insurance system is to be developed to get around the problem of Western insurance sanctions on oil and gas shipping.