EU and China Reach Landmark Agreement in Principle on Investment

On 30 December 2020, the EU and China concluded in principle the negotiations for a wide-ranging investment treaty, the Comprehensive Agreement on Investment ("CAI"), after seven years of discussions.

The CAI is expected to replace the existing bilateral investment treaties ("BITs") between China and EU Member States. It is intended to go far beyond investment protection to also cover market access, investment-related sustainable development, and level playing field issues. Both sides are now working towards finalising the text of the agreement.

Preliminary information indicates that China has committed to a greater level of market access and fair treatment for EU investors. In brief, the CAI is expected to:

  • Strengthen market access for European companies in the manufacturing and automotive sectors, financial services, private healthcare services, cloud and computer services, international maritime transport and air transport-related services, business, environmental and construction services;
  • Eliminate quantitative restrictions, equity caps or joint venture requirements in a number of sectors;
  • Impose transparency obligations on subsidies in the services sectors;
  • Require state-owned enterprises to act in accordance with commercial considerations and not to discriminate in their purchases and sales of goods or services; and
  • Prohibit the forced transfer of technology and enhance the protection of confidential business information;

In addition, China has agreed to effectively implement the Paris Agreement on climate change and to make sustained efforts to ratify the International Labour Organisation ("ILO") fundamental Conventions on forced labour.

Based on preliminary information, Chinese investors can expect the following benefits from the CAI:

  • Greater EU market opportunities for Chinese investors in industries such as electricity, renewable energy, finance, business services and leasing as well as a few other high value-added manufacturing and service industries;
  • More convenient and efficient flows of goods, technology, services, capital and personnel between China and the EU, and closer bilateral ties in trade and investment;
  • Commitment by the parties to the CAI not to introduce certain discriminatory practices impacting investors from the other party; and
  • Continuation of existing rights for Chinese companies in the EU market at a time when the EU is looking to expand its legal arsenal against unfair foreign competition.

The CAI should not impact foreign direct investment screening mechanisms, which are generally being tightened in recent times (see our Jones Day White Paper, "Foreign Direct Investment Screening in Europe and the Middle East").


The CAI will provide for state-to-state dispute settlement and an institutional framework to monitor its implementation.

Investment Protection

The deal also includes a commitment to aim to complete negotiations on investment protection and investment dispute settlement within two years of the signature of the CAI. The EU’s objective is to resolve investment disputes at a Multilateral Investment Court. As the CAI is aimed at replacing the existing BITs with China and its provisions on investment protections are yet to be finalized, European and Chinese investors should monitor future developments in this space and ensure that they have structured their investments in ways that maximise their protections against political risk. Investment treaty planning is often employed by multinational companies in structuring (or restructuring) investments to take advantage of protections afforded by a bilateral or multilateral investment treaty. However, investors should restructure their investments before the disputed government conduct has already occurred.

Insights by Jones Day should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at our discretion. To request permission to reprint or reuse any of our Insights, please use our “Contact Us” form, which can be found on our website at This Insight is not intended to create, and neither publication nor receipt of it constitutes, an attorney-client relationship. The views set forth herein are the personal views of the authors and do not necessarily reflect those of the Firm.