Forum Shopping, Illegality and State Resistance: Insights from Jason Yu Song V PRC

In Jason Yu Song v People’s Republic of China, investor-state arbitration proceedings took place in Geneva between a UK citizen and an alleged Chinese national and it appears that it is the first example of a Chinese citizen acquiring another nationality in order to seek protection under an international treaty and enter into investor-state proceedings.

This matter is also a rare example of an investor-state dispute which China resisted unsuccessfully: China faces the prospect of paying a substantial Award to the claimant. More importantly, the lessons which can be gleaned about China’s approach to investor-state disputes will be of great interest to the International Arbitration community in Asia and beyond.

Jason Yu Song v People’s Republic of China (PCA Case No. 2019-39) relates to a set of investor-state disputes between a citizen of the United Kingdom of Great Britain and Northern Ireland (UK) and the People’s Republic of China (China) which were administered by the Permanent Court of Arbitration and seated in Geneva.

By decisions dated 17 April and 26 June 2025, the Swiss Federal Supreme Court (Swiss Court) dismissed China’s requests to set aside an interim arbitral Award on jurisdiction under the 1986 China-UK Bilateral Investment Treaty (BIT).

This case is significant for a number of reasons:

• It appears to be the first case in which a Chinese national acquired another nationality to seek protection under BIT and thereafter entered into investor-state proceedings¹.
• The Final Award issued by the Permanent Court of Arbitration in January 2025 ordered China to pay approximately US$26 million to the claimant². When interest and costs are added to that sum, the Final Award is worth over US$60 million.³ This is therefore a significant ruling and appears to be the first investor-state dispute settlement (ISDS) award of this magnitude made against China⁴.
• This is one of a handful of investor-state disputes in which China is the respondent. From the procedural history detailed below, one can see how vehemently China resisted the claim, giving International Arbitration practitioners and claimants alike a valuable insight into China’s attitude and tactics when resisting an investor-state dispute.

China has appealed the Final Award, and as at the date of publication of this article, the appeal was pending before the Swiss Court.

Background

The dispute arose with Yu Song claiming that China unlawfully expropriated land rights held by B Ltd in Shaanxi Province without compensation and in breach of the BIT. The arbitral tribunal was established in 2019. Jurisdiction was under dispute throughout the set of proceedings. The tribunal upheld jurisdiction over the case in the interim Award issued on 30 December 2021. On 23 January 2024, China filed its first appeal on points of law with the Swiss Court against the jurisdictional decision of the tribunal on 30 December 2021, on the basis of newly discovered evidence based on Article 190a(1)(a) of the Swiss Federal Act on Private International Law (PILA) (4A_46/2024). The Swiss Court dismissed the application in its judgment of 17 April 2025. China also made application to the tribunal for reconsideration of its Decision on Jurisdiction. The request was rejected on 12 April 2024. China filed a further request for an appeal on points of law for the Swiss Court to set aside the jurisdictional decision of the tribunal and that the matter be referred back to the tribunal for a new decision on jurisdiction on 4 October 2024 (4A_528/2024). This led to the judgement dated 26 June 2025. The arbitral tribunal rendered its Final Award on 24 January 2025, finding that China violated Art 5 of the BIT and ordered China to pay damages of US$ 26,045,613.90 plus interests. China filed an appeal against the Final Award (4A_100/2025) which is now pending.

Forum Shopping?

In 4A_46/2024, China argued that it had subsequently discovered three crucial pieces of evidence, which it was unable to present during the arbitration, and that their consideration would have led to a different jurisdictional Award⁵. 2 pieces of evidence could allegedly show that Yu Song acquired British citizenship solely to assert claims against China under the BIT⁶. The evidence was found inadmissible due to time bar⁷. The case pattern exposes deeper problems where natural persons or legal entities change nationalities artificially to take advantage of investor-state disputes mechanisms.

While neither forum shopping nor treaty planning per se is regarded as abusive, these activities are limited by the general requirements regarding the jurisdiction of arbitral tribunals and the admissibility of treaty claims⁸. A ground for limiting forum shopping or treaty planning is the temporal rule, where it was said that investors can only claim protection with regards to breaches taking place after they become protected under the international treaties⁹.

Another ground is to refuse treaty protection to investments made in an abusive manner¹⁰. In the context of structuring investments such that protection could be afforded under international treaties, the general position is that if a specific dispute is already foreseeable at the time when restructuring takes place, such corporate restructuring would be an abusive conduct such that jurisdiction may be denied¹¹. In other cases, the standard was expressed as there being a ‘very high probability’¹² or ‘reasonable prospect’¹³ that the host State will adopt incriminated measures.

Phoenix Action Ltd. v. Czech Republic is an example of cases where an investment was found not to have been made in good faith and constituted an abuse of the ICSID system due to forum shopping¹⁴. The case concerned a Czech national who owned 2 Czech companies, one burdened with civil litigation and the other involved with problems with the tax and customs authorities that led to seizure of all its assets. The Czech national fled to Israel and established a new company that acquired all the shares from these two Czech companies from his family members. Further, there was no economic activity in this new company at the time and after the investment. The claim was brought before ICSID by the new company under the Czech–Israeli BIT (1997). The tribunal considered different factors such the timing of the investment, the initial request to ICSID, the timing of the claim, the substance of the transaction in which the investor purchased and transferred its investment, and the nature of the investment’s operations¹⁵ and found that ‘the unique goal of the investment was to transform a pre-existing domestic dispute into an international dispute subject to ICSID arbitration under a bilateral investment treaty.’¹⁶ And this kind of transaction was found not to be bona fide and not protected under the ICSID system.

Going back to the Jason Yu Song case, we have limited information from public sources. As mentioned, the Award is not published. However, if we consider the temporal rule, the rule on prohibition of abuse and factors in Phoenix Action Ltd (though that was an ICSID case), it is arguable that the outcome of jurisdictional Award might have been different if procedural rules had been complied with. This also goes to show the importance of finding reliable local counsel in investor-state disputes to help navigate laws of the domestic court.

Illegality of the investment

Another dramatic turn of events in the Jason Yu Song case is where China, again, requested to set aside the Award on Jurisdiction, citing evidence subsequently discovered in the form of a criminal judgment of the PRC Court (under Article 190a(1)(a) of PILA) and that the arbitral Award was tainted by a felony or misdemeanour (under Article 190a(1)(b) of PILA)¹⁷.

Article 190a(1)(b) of PILA warrants more attention. The rule provides that application for revision of an arbitration decision may be filed if criminal proceedings have shown that the arbitral decision was influenced by a felony or misdemeanour to the detriment of the party concerned¹⁸. This case operates within Swiss law and does not directly deal with the doctrine of investment illegality in international investment law. The Swiss Court found that a conviction by a criminal court is not required¹⁹. Given the satisfaction of procedural safeguards such as compliance with Article 6(2) and (3) of the ECHR and Article 14(2)-(7) of the ICCPR, it is irrelevant that the criminal proceedings were conducted abroad²⁰. What is decisive is the finding of a causal link between the criminal offence and the arbitral decision which the appeal was sought²¹. Specifically, the criminal offence must have had a direct or indirect impact on the award to the detriment of the applicant²². The decision of the criminal court must also show the objective requirements for a felony or misdemeanour to be met²³. Nonetheless, the arbitral tribunal is not bound by the criminal judgment rendered in the context of the same facts²⁴.

In Jason Yu Song, the illegality ground was dismissed with the Swiss Court finding that there is insufficient causal link between the proven criminal offence and the jurisdictional Award²⁵.

Amongst other policy considerations, the illegality ground demonstrates the limits of an international investment agreement’s protection: only investments made in accordance with the laws of the host State will be protected.

Commentary

Of all the investor-state dispute cases made against China, Jason Yu Song is the only claim which proceeded to a Final Award²⁶. The outcome of those other cases and the procedural history in Jason Yu Song makes it clear that China will not easily concede defeat. There is much to be learned from.

Footnotes:

1. 中国政府国际投资争端解决策略——如何应对自然人国籍变更的挑战, published by Allbright on 19 August 2025 (assessed on 19 November 2025).
2. Decision 4A_528/2024, Swiss Federal Supreme Court, 26 June 2025 [E].
3. China suffers first loss in ISDS case, published by Global Arbitration Review on 22 July 2025 (accessed on 19 November 2025).
4. Kevin Warburton and Curtis Pak, ‘China (including the Hong Kong and Macao SARs)’ in Julien Fouret (ed), Enforcement of Investment Treaty Arbitration Awards, (3^rd edn, Global Law and Business 2026) (forthcoming).
5. Decision 4A_46/2024, Swiss Federal Supreme Court, 17 April 2025 [5.2].
6. Ibid.
7. Decision 4A_46/2024, Swiss Federal Supreme Court, 17 April 2025 [5.4].
8. Forum Shopping: Investment Arbitration, published by Oxford Public International Law on (assessed on 19 November 2025).
9. Ibid, citing Gallus, 2009, 8.
10. Forum Shopping: Investment Arbitration, published by Oxford Public International Law on (assessed on 19 November 2025).
11. Ibid, citing Tidewater Inc and others v Venezuela, Decision on Jurisdiction, 8 February 2013, ICSID Case No ARB/10/5 [185].
12. Ibid, citing Philip Morris Asia Ltd v Commonwealth of Australia, Award on Jurisdiction, 17 December 2015, PCA Case No 2012-12 [539] [554].
13. Phoenix Action Ltd v Czech Republic, Award, 15 April 2009, ICSID Case No ARB/06/5.
14. Phoenix Action Ltd v Czech Republic, Award, 15 April 2009, ICSID Case No ARB/06/5 [135]-[144].
15. Phoenix Action Ltd v Czech Republic, Award, 15 April 2009, ICSID Case No ARB/06/5 [135]-[144].
16. Phoenix Action Ltd v Czech Republic, Award, 15 April 2009, ICSID Case No ARB/06/5 [142].
17. Decision 4A_528/2024, Swiss Federal Supreme Court, 26 June 2025 [3].
18. Decision 4A_528/2024, Swiss Federal Supreme Court, 26 June 2025 [5.1].
19. Ibid
20. Ibid
21. Ibid
22. Ibid
23. Ibid
24. Ibid
25. Decision 4A_528/2024, Swiss Federal Supreme Court, 26 June 2025 [5.3].
26. Kevin Warburton and Curtis Pak, ‘China (including the Hong Kong and Macao SARs)’ in Julien Fouret (ed), Enforcement of Investment Treaty Arbitration Awards, (3^rd edn, Global Law and Business 2026) (forthcoming).