Hela Schwarz GmbH v. People's Republic of China
ICSID · Investment (ICSID and treaty) · China · 10 Dec 2025
Why it matters
This is the first known ICSID award against China on the merits, addressing key issues such as denial of justice, the scope of pre-arbitration administrative review requirements, and the relationship between direct and indirect expropriation claims. The Tribunal's detailed analysis of China's expropriation procedures and its rejection of the investor's claims provides important guidance on the application of the Germany-China BIT and the standard of protection for foreign investors in China.
Summary
The case concerns a claim by Hela Schwarz GmbH, a German company, against the People's Republic of China under the 2003 Germany-China BIT. The dispute arose from the expropriation of land and buildings owned by Hela Schwarz's Chinese subsidiary, Jinan Hela Schwarz Food Co., Ltd. (JHSF), as part of a municipal redevelopment project in Jinan. The Claimant alleged that the expropriation was unlawful and that the compensation was inadequate, asserting breaches of the BIT's provisions on expropriation (Article 4), fair and equitable treatment (Article 3), and the dispute settlement clause (Article 9). The Respondent raised several jurisdictional objections, including that the claim did not arise directly out of the Claimant's investment (since the property was held by JHSF, a Chinese company), that the Claimant failed to comply with pre-arbitration amicable settlement and administrative review requirements, and that the Claimant had abused process by pursuing domestic remedies. The Tribunal dismissed most of these objections but upheld the objection regarding the failure to exhaust administrative review for the cancellation of JHSF's food production licence. On the merits, the Tribunal rejected the Claimant's denial of justice claim, finding that the Chinese courts had provided a fair and reasonable process. It also dismissed the indirect expropriation and FET claims, concluding that the expropriation was lawful under the BIT because it was for a public purpose, non-discriminatory, and accompanied by adequate compensation. The Tribunal emphasized that the compensation awarded by Chinese authorities met the standard of 'just compensation' under the BIT. The award is significant as the first ICSID merits award against China, clarifying the scope of investor protections under the Germany-China BIT and the importance of complying with domestic procedural requirements.
The detail
Parties: Hela Schwarz GmbH v. People's Republic of China
Case number: ICSID Case No. ARB/17/19
Outcome: The Tribunal dismissed all of the Claimant's claims, including denial of justice, indirect expropriation, and FET claims, and upheld the Respondent's objection under Ad Article 9(c) of the Protocol. The Respondent's other jurisdictional and admissibility objections were dismissed.
Applicable law: Agreement between the Federal Republic of Germany and the People's Republic of China on the Encouragement and Reciprocal Protection of Investments (2003), ICSID Convention, and Chinese law
Issues in play: The case involved the interplay between the BIT's expropriation and fair and equitable treatment provisions and Chinese domestic expropriation procedures, particularly regarding the adequacy of compensation and due process in administrative and judicial review.
Read the full decision at italaw ↗
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