Hong Kong, the Trans-Pacific Partnership and Foreign Investment Protection

The Trans-Pacific Partnership Agreement (“TPP”), which was signed in November 2015 by the United States, Canada, Mexico, Peru, Chile, Japan, Brunei, Malaysia, Singapore, Australia, New Zealand and Vietnam, has increased public awareness of the technocratic and often obscure world of international trade and investment deals.

But whereas the TPP’s political and strategic implications in Asia and the Pacific are being widely debated in the newspapers, less consideration has been given to how the TPP would (if and when it comes into force) become part of a growing network of investment protection treaties in the region.

Regional Impact

The expansion of the region’s investment treaty network is a significant development for Hong Kong permanent residents and companies, who are well placed to benefit from the robust legal protections and remedies these treaties grant to foreign investors against governments that unlawfully cause damage to an investment.

Like the more-than-three thousand bilateral investment treaties (“BITs”) and free trade agreements (“FTAs”) worldwide, the TPP would empower an investor (either an individual or corporation) from one of the signatory countries to sue the government of another TPP country for expropriation, unfair treatment or other breaches of international law affecting its investment.

Investor-State disputes are typically heard by an international arbitration tribunal, as opposed to domestic courts. The creation of a neutral forum for the settlement of disputes between investors and States is a key feature of the modern system of international investment protection.

It is a potent mechanism: to date, several tribunals have awarded investors over a billion US dollars in compensation against States for treaty violations. And the risks of arbitration proceedings are increasingly being shared by third party funders, so that investors are not denied access to justice on grounds of cost.

Impact on Hong Kong Investors

Hong Kong is not a party to the TPP, and the HKSAR Government has indicated that it has no immediate intention of signing up. Nevertheless, Hong Kong investors may be able to directly protect their investments through other BITs and FTAs signed by Hong Kong.

With careful planning, Hong Kong investors may also be able to indirectly benefit from treaties to which Hong Kong is not a party, including the TPP (once in force), by making their investment through a subsidiary in a jurisdiction which does have an investment protection treaty with the country in which they are investing.

The structuring of investments to gain access to treaty protection is, however, subject to certain limits. For example, a treaty may deny the benefit of investment protection to a subsidiary that does not conduct substantial business activity in the country in which it is incorporated.

The challenge for investors is to navigate the different treaties and the standards of protection and carve outs they contain.

Most treaties define protected investments broadly, from shares in a factory to intellectual property rights to complex financial instruments, and can thus cover a broad range of commercial activities and industries.

But these treaties are not insurance policies against bad business decisions. Moreover, newer agreements often expressly provide that the host State retains the right to regulate in the public interest.


The TPP demonstrates the continued importance placed on foreign investment protection in promoting economic growth and integration in the Asia-Pacific region. It is also a reminder that Hong Kong investors should manage their risk by carefully considering treaty protections prior to making investments abroad. Indeed, with ultimate recourse to international arbitration, protected investors have greater leverage to encourage good governance, and to amicably resolve disputes if their investment is affected by wrongful State conduct.

Whatever the future holds for the TPP, Hong Kong will remain an important stakeholder in the international investment protection system.


Assistant Professor of Law, City University of Hong Kong

Barrister, Doughty Street Chambers