Huawei Strikes Back: Challenging National Security Decisions before Investment Arbitral Tribunals

Abstract

As a direct reaction to rising investment from China amid the transformation of the geopolitical context in which China has emerged as a great power, Western countries, including the United States, have introduced new or reinforced existing national security screening mechanisms. Confronting weaponized national security reviews in host countries, Chinese investors have recently begun to challenge national security decisions before international investment arbitral tribunals, claiming that such decisions have breached host countries’ obligations under international investment treaties. Chinese telecoms giant Huawei’s investment treaty claim against the Government of Sweden before the International Centre for Settlement of Investment Disputes (ICSID) over its exclusion from the rollout of 5G network in January 2022 is one of the most prominent examples. This article takes stock of the whole body of arbitral awards rendered on national security decisions in investment arbitration and applies it to the ongoing Huawei’s complaint against the Government of Sweden. As the first critical analysis of whether the ban on Huawei from supplying 5G infrastructure on national security grounds violated the Government of Sweden’s investment treaty obligations, this article argues that Huawei is likely to fight an uphill battle in persuading the arbitral tribunal that the Swedish national security decision is inconsistent with the China-Sweden bilateral investment treaty. The analytical framework provided in this article is useful to analyze all future investment disputes initiated by foreign investors regarding host countries’ national security decisions. Moreover, this article argues that Huawei’s challenge of the national security decision of the Government of Sweden is not an isolated incident, but an outgrowth of a long-brewing tension between China’ state capitalism and the liberal international economic order. Whether the investment arbitral tribunal may handle the Huawei dispute adroitly is a litmus test of the resiliency of international investment norms to accommodate systemic friction between heterogeneous political-economic models and rising strategic distrust in the era of geoeconomics.