Zhongshan Fucheng Industrial Investment Co Ltd v The Federal Republic of Nigeria: Special Economic Zones and Investment Treaty Arbitration at Crossroads

Almost four decades after the first ICSID dispute relating to a special economic zone (SEZ) was instituted, scholarly inquiries into the relationship between SEZs and international investment law have remained limited. This may be because, although in the last two decades there has been an exponential increase in the establishment of SEZs as tools for promoting foreign investment, investment treaty arbitration (ITA) awards arising from the operation of SEZs have been few and far between. SEZs can be broadly defined to encompass a wide range of free zones, including export processing zones (EPZs), high-tech industrial development zones, free ports, free trade zones (FTZs) and enterprise zones. Despite these differences in terminology, the definitive feature of SEZs is that they are geographically delimited areas within a State’s territory where special infrastructural and legal regimes like tax exemptions, custom duty exemptions, fiscal subsidies and one-stop-shops operate to attract both domestic and foreign investment. Thus, the larger majority of SEZ ITAs have arisen following the revocation of special incentives and SEZ status by host States. These include disputes arising from the cancellation of SEZ status, seizure of SEZ exports by customs officials, withdrawal of SEZ tax exemptions and legislative changes affecting companies operating within SEZs.