The Belt and Road Initiative (BRI) is an extensive outbound investment strategy launched by the Chinese government in 2013 as an official policy to stimulate economic development along an overland “Silk Road Economic Belt” and a maritime “21st Century Maritime Silk Road”. The Initiative seeks to develop integrated trade corridors across Asia, the Middle East, Africa and Europe, covering more than 65 countries which together host over 60% of the world’s population. An estimated US$5trillion will be invested in, primarily, large-scale construction and infrastructure projects.
Funding for BRI projects will come from various sources. In December 2014, the Chinese government established the US$40billion Silk Road Fund to provide direct support to the BRI. The Asian Infrastructure Investment Bank, a multilateral investment bank led by China with 80 members to date, was established in October 2014 and will also contribute to financing BRI projects. The Asian Development Bank, of which China is a member, will also cooperate in funding BRI projects. In addition, considerable funding will be provided by China’s State-Owned Enterprises and policy banks.
The Hong Kong Trade Development Council (HKTDC) has prepared a series of short infographic videos to explain some of the basics associated with the BRI, which can be accessed below.
How big is the Belt and Road?
What does Belt and Road mean?
What are the 5 links for the Belt and Road?
Opportunities arising from the BRI
The BRI will generate significant commercial and investment opportunities in many countries and across numerous sectors including transportation, logistics, maritime, financing, telecommunications and information technology. BRI projects will bind together as contractual parties Chinese investors, often as project financers, public and private entities of host States, and other third-country participants including multinational corporations.
Risks involved in the BRI
With the significant opportunities generated by the BRI will come significant risks.
Many of the BRI projects will be complex, high-value, high-public interest, long-term, capital intensive, multi-party, multi-contract, cross-border transactions. They will involve entities from countries at different stages of development and with widely variant legal, political and economic systems. Many of the host states rank high for operational risk (including as regards security, political stability, government effectiveness, the legal and regulatory environment, macroeconomic risks, foreign trade and payments issues, labour markets, financial risks, tax policy and the standard of local infrastructure) and credit risk (including sovereign debt issues, currency devaluation, banking sector risk).
It is unavoidable that there will be a multitude of legal disputes emanating from BRI projects. Selecting effective dispute resolution mechanisms is therefore critical to proper risk-management planning. International arbitration is the most effective and most widely-used dispute resolution mechanism for cross-border disputes and is thus the most relevant to BRI projects.
Selecting a reputable arbitral institution and seat in the dispute resolution clause of BRI contracts is an important aspect of effective risk mitigation. Please click here to learn why you should choose HKIAC for Belt and Road Disputes.