2.1 BRI Primary Agreements

The categorization of BRI primary agreements is critical due to the large volume of agreements and their complexity. Table 1 provides a taxonomy of these agreements along the parameters of type, parties, form, and issue areas. For types and parties, there are bilateral and plurilateral agreements, depending on the number of other parties that conclude an agreement with China. A consideration of the primary agreements reveals several points. First, bilateral MOUs with other governments are the most common agreements, reflecting China's preference for informal bilateralism.Footnote ⁷ Second, primary agreements demonstrate China's increasing interactions with the UN. China has concluded BRI agreements with around 20 UN agencies,Footnote ⁸ including the UNECE-NDRC MOU as the first China–UN MOU.

Table 1.

BRI primary agreements

¹ The issue area has been identified based on the publicly available text (or, where the text is not available, the title) of the agreements in the examples at the time of writing. Where the text is not available, and the issue area cannot be determined from the title, this section has been left blank.

² Memorandum of Understanding between the Government of the State of Victoria of Australia and the National Development and Reform Commission of the People's Republic of China on Cooperation within the Framework of the Silk Road Economic Belt and the 21st Century Maritime Silk Road Initiative (2018), www.vic.gov.au/victorias-china-strategy (Victorian Government–NDRC MOU).

³ Framework Agreement between the Government of the State of Victoria of Australia and the National Development and Reform Commission of the People's Republic of China on Jointly Promoting the Silk Road Economic Belt and the 21st Century Maritime Silk Road (2019), www.vic.gov.au/bri-framework (Victorian Government–NDRC Framework Agreement).

⁴ Memorandum of Understanding between the Government of the Italian Republic and the Government of the People's Republic of China on Cooperation within the Framework of the Silk Road Economic Belt and the 21st Century Maritime Silk Road Initiative (2019) (Italy–China MOU).

⁵ Memorandum of Understanding between the Government of the Republic of the Philippines and the Government of the People's Republic of China on Cooperation on the Belt and Road Initiative (2018) (Philippines–China MOU).

⁶ Memorandum of Arrangement on Strengthening Cooperation on the Belt and Road Initiative between the Government of the People's Republic of China and the Government of New Zealand (2017) (China–New Zealand MOA).

⁷ This Agreement does not refer directly to the BRI, but is listed as a deliverable of the BRI Forum. China.org.cn, Full Text: List of Deliverables of the Belt and Road Forum for International Cooperation (2017), www.china.org.cn/chinese/2017-06/07/content_40983146.htm.

⁸ China.org.cn, Full Text: List of Deliverables of the Belt and Road Forum for International Cooperation (2017), www.china.org.cn/chinese/2017-06/07/content_40983146.htm.

⁹ Memorandum of Understanding between the United Nations Economic Commission for Europe and the National Development and Reform Commission of China (2017) (UNECE-NDRC MOU).

¹⁰ Memorandum of Understanding between the United Nations Economic and Social Commission for Asia and the Pacific and the Ministry of Foreign Affairs of the People's Republic of China on the Belt and Road Initiative for the 2030 Agenda for Sustainable Development (2019) (ESCAP-MFA MOU).

¹¹ Letter of Intent between the United Nations Economic and Social Commission for Asia and the Pacific and the Ministry of Foreign Affairs, People's Republic of China on Promoting Regional Connectivity and the Belt and Road Initiative (2016) (ESCAP-MFA Letter of Intent).

¹² Joint Communique of the Leaders Roundtable of the Belt and Road Forum for International Cooperation (2017); Joint Communique of the Leaders’ Roundtable of the 2nd Belt and Road Forum for International Cooperation (2019).

¹³ ASEAN–China Joint Statement on Synergising the Master Plan on ASEAN Connectivity (MPAC) 2025 and the Belt and Road Initiative (BRI) (2019).

¹⁴ Declaration of Action on China–Arab States Cooperation under the Belt and Road Initiative (2018) (China–Arab States Declaration of Action).

¹⁵ Memorandum of Understanding on Collaboration on Matters of Common Interest Under the Belt and Road Initiative (2017), www.ndb.int/wp-content/uploads/2018/09/MOU-on-BRI-signed.pdf; Memoranda of Understanding on Collaboration on Matters to Establish the Multilateral Cooperation Center for Development Finance (2019), www.aiib.org/en/about-aiib/who-we-are/partnership/_download/collaboration-on-matters.pdf.

¹⁶ Guiding Principles on Financing the Development of the Belt and Road (2017), www.mof.gov.cn/zhengwuxinxi/caizhengxinwen/202007/t20200724_3555773.htm.

¹⁷ Suzhou Consensus of the Conference of Presidents of Supreme Courts of China and Central and Eastern European Countries (2017), www.sohu.com/a/73518080_117927 (Suzhou Consensus).

¹⁸ ‘The Belt and Road’ Digital Economy International Cooperation Initiative (2017), http://finance.jrj.com.cn/tech/2017/12/04073823734129.shtml.

¹⁹ Nanning Statement of the 2nd China–ASEAN Justice Forum (2017), www.chinajusticeobserver.com/p/nanning-statement-of-the-2nd-china-asean-justice-forum.

²⁰ Wuzhen Statement (2019), www.chinatax.gov.cn/eng/n4260859/c5112273/5112273/files/a6466929ab654fbf842d982b0906442e.pdf.

²¹ Joint Declaration between the People's Republic of China and the French Republic (2018), para. 15 (‘the Joint Declaration between China and France on the partnerships in third-party markets of June 2015’), https://eng.yidaiyilu.gov.cn/zchj/sbwj/43581.htm.

²² Zheng, ‘The Significance, Practices and Prospect of China's Third-Market Cooperation’, 78.

Regarding form, agreements include MOUs, the Memorandum of Arrangement (MOA), (framework) agreements, joint communiques and statements, guiding principles, and consensuses. One form of an agreement may be used to deepen the engagement initiated under another form. For instance, the Chinese Ministry of Foreign Affairs (MFA) first signed a three-year Letter of Intent with the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP),Footnote ⁹ followed by a MOU which China has suggested further deepens the engagement.Footnote ¹⁰

Concerning coverage, primary agreements address highly diverse subject matters, including ‘joint transportation infrastructure development, joint set-up of industrial parks, establishment of sister-city networks, trade and investment promotion, financial cooperation (such as strategic cooperation with the Asia Infrastructure and Investment Bank, Asian Infrastructure Investment Bank (AIIB)) or the joint collaboration in regional initiatives’,Footnote ¹¹ and the digital economy. Some forms, such as framework agreements and MOAs, tend to cover general issues and work to develop a general framework.Footnote ¹² Other forms, including intergovernmental agreements and guiding principles, address issues that are more specific. These issues, including energy, finance, and dispute settlement, are often those prioritized by China or reflect the focus area of the international organization party to the agreement (e.g., intellectual property in the China–World Intellectual Property Organization (WIPO) AgreementFootnote ¹³). The distinction between general and specific coverage is not, however, absolute. MOUs, for example, have been used to address both general and specific issues.

Notably, third-party market cooperation agreements, which are usually concluded between China and advanced economies, are often considered as BRI agreements.Footnote ¹⁴ Dongchao Zheng argues that third-party market cooperation arrangements are concerned with using China's production capacity and developed countries’ advanced technology to explore the markets of developing countries (the third-party market).Footnote ¹⁵ At the time of writing, China has signed third-party market cooperation documents with 14 states.Footnote ¹⁶

Overall, primary agreements are heterogenous and address wide-ranging domains. They cross different spheres of international law, including trade, finance, investment, environment, and labor.

2.2 BRI Secondary Agreements

Secondary agreements are agreements to implement BRI projects, and sit under top-level primary agreements. Secondary agreements are often hard law agreements. Patrick M. Norton has identified that ‘[m]ost BRI projects will be initiated by, and conducted under the auspices of, inter-governmental agreements between the Chinese and host country governments’.Footnote ¹⁷ One primary agreement also explicitly provides for the ‘[e]xecution of a separate legal instrument between the parties to define and implement any subsequent activities, projects and programmes’.Footnote ¹⁸ Primary agreements are thus likely to have substantial effects on secondary agreements, and in this way contribute to the final output of binding agreements. It is not easy to identify all secondary agreements, since the parameters for ‘BRI projects’ are often unclear,Footnote ¹⁹ and these agreements are usually not publicly available and less visible.

Secondary agreements consist of at least two categories of agreements, and may involve multiple contracts between the various bodies involved in a project.Footnote ²⁰ One category is performance agreements, including performance guarantees, economic stabilization contracts, land usage contracts,Footnote ²¹ and concessions agreements that may involve exclusive concession rights (e.g., a build-own-operate-transfer concession).Footnote ²² The other category is finance agreements, including loan agreements and grant agreements.Footnote ²³ They could involve China's banks and MDBs. Secondary agreements can be subject to domestic and international commercial legal scrutiny (such as in arbitration or adjudication). Many secondary agreements could be government-to-government directly or indirectly, business-to-business, or government-to-business. Various state-owned enterprises are involved in secondary agreements.

Secondary agreements are complex. They often have a long duration and several contract layers, and involve multiple parties from multiple jurisdictions, due to the nature of infrastructural projects.Footnote ²⁴ Secondary agreements often involve large infrastructure projects ranging from portsFootnote ²⁵ to railways,Footnote ²⁶ which carry long-term distributive effects. They may be used to address many issues such as legal risks in investment ranging from political unrest, project delays, and cost overruns due to project abandonment.Footnote ²⁷

Governments play an important role in secondary agreements, with the exact nature of this role often determined by the type of infrastructure involved. Differing from traditional international commercial contracts (e.g., sales contract), secondary agreements are often based on the direct or indirect support of the governments (host country, home country, or both) in funding, concession, and other aspects like dispute settlement. For instance, China's Vice Foreign Minister Le Yucheng has stated that ‘[t]he BRI cooperation agreements we have signed with various countries include provisions that the host countries will take up the security responsibility’.Footnote ²⁸ Host governments could be a party to secondary agreements (such as ‘collateral government agreements’, which include performance guarantees, and agreements on economic stabilization and land usage), and the ‘highly political context of many BRI projects’ means that their disputes are likely to be submitted to ‘informal government-to-government discussion’.Footnote ²⁹

Secondary agreements should be considered alongside primary agreements in understanding the complex structure of the BRI holistically. Primary agreements not only have legal implications but could also send political signals to domestic actors that the BRI is acceptable in host states, and thus advance a ‘hardening’ of the arrangements through secondary agreements. The coordination with other parties through primary agreements also helps to address complex issues arising in secondary agreements, including project-specific issues (e.g., energy-related) and general issues (e.g., funding, dispute settlement).

3.1 Legalization: Minimal Legalization

Legalization is a useful way of assessing the soft or hard legal character of instruments, and it can be defined along three dimensions: obligation (states or others constrained by norms or commitments with their behavior subject to scrutiny), rule precision (clearly defined rules on state behavior), and delegation (third parties authorized to implement, interpret, apply, and even develop norms, including dispute resolution).Footnote ⁵³

Compared with existing soft law in these dimensions, most primary agreements are minimally legalized (aspirational, not precise, with weak institutionalization).Footnote ⁵⁴ Primary agreements are weak across all three of these dimensions, while existing soft law is generally stronger in respect of one or more dimensions. Primary agreements feature softer legalization and a higher level of generality (e.g., heavy reliance on general statements).

First, primary agreements have low degrees of obligation and weak obligatory force. BRI primary agreements often explicitly indicate that they are not binding,Footnote ⁵⁵ and their provisions are usually hortatory (e.g., ‘endeavour to’Footnote ⁵⁶). The lowest level of obligation is to ‘explicitly negate any intent to create legal obligations’, such as ‘Non-Legally Binding Authoritative Statement of Principles for a Global Consensus’ and the 1975 Helsinki Final Act that indicated it was not an ‘agreement … governed by international law’.Footnote ⁵⁷ Notably, the Italy–China MOU indicates that it ‘does not constitute an international agreement which may lead to rights and obligations under international law’, and none of its provisions ‘is to be understood and performed as a legal or financial obligation or commitment of the parties’.Footnote ⁵⁸

The low level of obligation is also reflected in the forms of primary agreements. Their forms range from statements to guidelines that are usually ‘intended not to create legally binding obligations’.Footnote ⁵⁹

However, a small number of primary agreements that develop new plurilateral mechanisms (e.g., the Multilateral Cooperation Center for Development Finance (MCDF) and the Belt and Road Initiative Tax Administration Cooperation Mechanism (BRITACOM)) reflect a higher degree of obligation. China's 2017 MOU with six MDBs is observed to reveal ‘a serious level of commitment’ (including the plan to develop the MCDF),Footnote ⁶⁰ followed by another MOU to establish the MCDF. These MOUs on the MCDF and BRITACOM use the term ‘shall’ regarding certain obligations,Footnote ⁶¹ contrasting with other primary agreements that use the word ‘should’.Footnote ⁶² Moreover, the termination of certain BRI primary agreements requires ‘joint agreement,’Footnote ⁶³ arguably introducing some constraints.

Second, primary agreements usually do not delegate legal authority, unlike some, although not all, existing soft law instruments. Primary agreements do not have ‘the characteristic forms of legal delegation’, involving third-party adjudication to interpret and apply rules as per established international law doctrines.Footnote ⁶⁴ Neither do they designate third parties (e.g., international organizations, courtsFootnote ⁶⁵) to implement the agreements (such as general principles in the agreements). Primary agreements prefer diplomacy. For instance, the Italy–China Government Committee will ‘monitor progress’ of the Italy–China MOU and the differences in the MOU interpretation will be settled amicably through consultations.Footnote ⁶⁶ China appears to prefer avoiding treaties with measurable compliance requirements in favor of less formal but more flexible arrangements.Footnote ⁶⁷ Essentially, primary agreements are not linked to an institutional framework with independent authority.

Third, primary agreements generally have a lower level of precision than existing soft law, and this echoes China's preference of ‘broadness is better than concreteness’ in legislation.Footnote ⁶⁸ Although soft law often features imprecise rules,Footnote ⁶⁹ many soft law instruments (e.g., the Rio Declaration on Environment and Development and Agenda 21) are ‘remarkably precise and dense’, which ‘enhance[s] their normative and political value’ from the perspective of proponents.Footnote ⁷⁰ Primary agreements adopt general principles and sometimes standards, rather than the prescriptive terms and technocratic characteristics often found in existing soft law (e.g., international financial law instruments that spell out best practicesFootnote ⁷¹). For primary agreements, their principles are observed to be ‘laissez fair’ and ‘minimal … which is descriptive more of the parameters within which the arrangement is to proceed and be cemented, as opposed to articulating a positive vision of a development strategy as such’.Footnote ⁷² Moreover, primary agreements lack specific procedures on further negotiations. Many primary agreements do not provide for concrete measures and instead contain ‘pronouncements more along the lines of ideal outcomes’.Footnote ⁷³ It is observed that primary agreements are a ‘vague’ form of governance.Footnote ⁷⁴

Certain rules of a small number of primary agreements are, however, precise, which mainly involve the roadmap and steps to promote projects. The Victorian Government–NDRC Framework Agreement, signed in October 2019, provides that the draft work plan will be formulated by the end of March 2020 and both parties ‘agree to work towards having an agreed Cooperation Road Map on key areas by first half of 2020, with a view to having the joint chairs to sign’.Footnote ⁷⁵ The China–New Zealand MOA provides for ‘a more detailed work plan’ to be formulated within 18 months of the MOA entering into force.Footnote ⁷⁶ The Victorian Government–NDRC Framework Agreement provides for detailed rules on their working mechanisms (Working Group with a Secretariat), which is more developed than those under China's free trade agreements (FTAs) that usually do not have a secretariat.Footnote ⁷⁷ It also provides for detailed rules on the steps on how to promote infrastructure projects (such as possibly ‘a joint Infrastructure Accelerator’).Footnote ⁷⁸

The degree of legalization of primary agreements however varies particularly according to the parties and purposes of the agreements. Concerning parties, primary agreements with developed countries (like the Italy–China MOU) and international organizations appear to slowly integrate more legalized provisions relative to those with developing countries. Concerning purposes, agreements that create plurilateral mechanisms appear to be of a higher level of legalization than other primary agreements, likely due to operational needs. As a typical example, the BRITACOM MOU contains 36 articles over 20 pages, and its rules are much more detailed than other primary agreements.

3.2 Substantive Content: Coordinated and Project-Based Nature

Substantive content is a characteristic distinct from legalization.Footnote ⁷⁹ While existing soft law often establishes international regulatory standards,Footnote ⁸⁰ BRI primary agreements feature a more project-based focus. Further, although this project-based focus can be seen elsewhere in international law (e.g., soft law in the context of the international space projectFootnote ⁸¹), they are neither as coordinated nor of the same scale and extent as the BRI primary agreements. BRI primary agreements combine a project-based nature with coordination not seen in existing soft law (e.g., a large number of primary agreements, and BRI MOU template drafted by ChinaFootnote ⁸²). In this way, primary agreements adopt many of the features of soft law, but direct these towards supporting BRI projects rather than rule development.

3.3 Structure: Hub-and-Spoke Network

Primary agreements are special in forming a hub-and-spoke network with China as the hub. They create a centralized network that consists of multi-layer agreements (primary and secondary agreements). To illustrate, a number of bilateral agreements could be concluded between China and another state. The Italy–China MOU is complemented by 19 other agreements on specific issue areas ranging from culture, sport, energy, to finance and infrastructure.Footnote ¹⁰⁸ As another example, over 51 MOUs have been signed between China and Pakistan,Footnote ¹⁰⁹ which may include secondary agreements.

Primary agreements are all signed with China and usually focus on the BRI. BRI primary agreements ‘set the stage’ for a new extra-regional governance on selected issues (e.g., infrastructure, finance, and internet) in which China plays the leading role.Footnote ¹¹⁰ It is observed that the China emphasizes negotiating and signing general cooperation agreements with developing states along the BRI's trade routes.Footnote ¹¹¹

China drafts the BRI MOU template, and establishes the framework for future negotiations and for new international governance.Footnote ¹¹² BRI primary agreements sometimes use a kind of ‘boilerplate language’ (e.g., ‘similar standardized terms’), which is to some extent similar to the coordination under early BITs that excluded investor–state dispute settlement.Footnote ¹¹³ For instance, BRI bilateral MOUs usually provide for the parties’ ‘understanding’ of five priorities (i.e., policy coordination, facilities connectivity, unimpeded trade, financial integration, people-to-people bonds).Footnote ¹¹⁴ The prioritized areas under the Italy–China MOU also largely respond to the priorities in the BRI vision issued by China.Footnote ¹¹⁵ China aims to enhance the ‘“soft connectivity” of the Belt and Road regulations and standards’,Footnote ¹¹⁶ with laws, regulations, and policies all identified as part of this ‘software connectivity’.Footnote ¹¹⁷ This could involve the alignment of laws and policies in areas like transport facilitation and paperless trade, and the harmonization of select technical standards, shipping documents and rules.Footnote ¹¹⁸ Relatedly, the UNECE–NDRC MOU also aims to assist BRI states to ‘[e]stablish a sound PPP legal, regulatory and governance framework to attract investment in infrastructure projects’.Footnote ¹¹⁹

Taken as a whole, both the volume of primary agreements and China's leading role across the agreements differentiate them from existing soft law China has been involved in (like China's MOUs with the EU and US on antitrust cooperationFootnote ¹²⁰). Various primary agreements appear to promote China-preferred ‘software’ (e.g., China-led mechanisms, China's standards and experienceFootnote ¹²¹ through projects), and ‘hardware’ (e.g., strengthening the synergy between other countries’ infrastructure and the BRIFootnote ¹²²). Primary agreements also differ from soft law approaches in international financial law that relies on ‘a network of international organizations (i.e. such “transnational regulatory networks” as the Bank of International Settlement and Financial Stability Board)’.Footnote ¹²³

3.4 Summary

While many prior observations on soft law are relevant in analyzing primary agreements, their different attributes need to be considered. For instance, the precision of primary agreements centers on project-related aspects and mechanism development to promote projects. This contrasts with rule development under existing soft law and broadly much of international law that is ‘quite precise’.Footnote ¹²⁴

It is useful to understand primary agreements as sitting on the legal-political continuum instead of under a rigid dichotomy between legalization and politics. As observed by Kal Raustiala, ‘[t]hat many nonbinding commitments ultimately influence state behavior illustrates the complexity of world politics, not the legal character of those commitment’.Footnote ¹²⁵ It is observed that ‘law is a continuation of political intercourse, with the addition of other means’.Footnote ¹²⁶ The full text of many primary agreements is not publicly available, and huge varieties among BRI primary agreement exist in terms of their form, context, and content. Specific primary agreements and their implementation need to be analyzed on a case-by-case basis.

4.1 Reduced Contracting Costs

It is much easier to conclude primary agreements compared with, for example, concluding a treaty. BRI primary agreements are thus similar to soft law in that they work to reduce contracting costs (including the large number of parties, domestic ratification process, and sensitive issues,Footnote ¹²⁸ possibly reducing ‘the transactions costs of continual bargaining’Footnote ¹²⁹) and therefore can be concluded quickly.Footnote ¹³⁰ A number of short primary agreements could be concluded with other parties, as a series of shorter instruments ‘avoid … the bargaining costs associated with a single, long agreement’.Footnote ¹³¹ China may not wish to introduce detailed rules into primary agreements as this could delay the initiation of the BRI.Footnote ¹³² The BRI is project-oriented and starts with MOUs, which correspond with China's tradition of ‘[h]e who wants to accomplish a big and difficult undertaking should start with easier things first’.Footnote ¹³³

Primary agreements take advantage of the elements of soft law instruments to address sensitive issues, since the BRI often involves national interests and sensitivity. Soft law can be used to address the situation when ‘norms are contested and concerns for sovereign autonomy are strong, making higher levels of obligation, precision, or delegation unacceptable’.Footnote ¹³⁴ For sensitive issues, soft law imposes lower ‘sovereignty costs’, and also permits the parties to be more ambitious and conduct ‘deeper’ cooperation than they would if they had to be concerned about enforcement.Footnote ¹³⁵ Soft law arguably represents ‘a somewhat less serious pledge of a state's reputational capital’.Footnote ¹³⁶ BRI primary agreements are highly vague and not subject to enforcement. The parties to the MOU could theoretically ‘moderate and modulate their level of commitment’ through soft law, limiting their obligation via the designation of their undertakings as non-binding, ‘hortatory language, exceptions, reservations and the like’.Footnote ¹³⁷

4.2 Flexibility

Primary agreements allow for maximized flexibility, which is a key characteristic underpinning China's BRI approach.Footnote ¹³⁸ Maximized flexibility arises from minimal legalization in terms of obligation, precision, and delegation. For instance, China retains more latitude through primary agreements with conditional language. For powerful states, ‘loosening their own constraints is often more important than having others tightly constrained’, and this brings ‘greater latitude in application’.Footnote ¹³⁹ It is observed that powerful states often do not want to be obligated and have ‘less need for legalization’.Footnote ¹⁴⁰

First, flexibility is desirable since China has not fully determined what is in its best interests in respect of many issues (particularly in new areas like digital trade). To illustrate, data localization requirements may not necessarily work for the benefits of Chinese businesses operating overseas as they would increase costs.Footnote ¹⁴¹ More broadly, the BRI is an unprecedented extra-regional initiative. It is also affected by geopolitical and other dynamics (e.g., COVID-19 outbreakFootnote ¹⁴²). Views and policies regarding the BRI are, to a certain extent, in flux. As with soft law, primary agreements will often be preferable if states’ interests are less clear.Footnote ¹⁴³ The recourse to soft law occurs when states are not sure the norms they adopt will be desirable in the future.Footnote ¹⁴⁴ If the focuses and priorities of the BRI change, primary agreements may change. It is much easier to change soft law instruments than hard law, in part due to the imprecise terms.Footnote ¹⁴⁵ Such flexibility allows time for China to ascertain its interests, and accordingly promote the BRI projects step by step.

Second, primary agreements enable China to learn by practice and allow trial-and-error in the BRI design and implementation. China is comparatively less experienced in addressing global affairs than major Western states (particularly the US), and needs to learn in the international arena.Footnote ¹⁴⁶ Primary agreements benefit from the advantages of soft law in terms of flexibility in responding to political dynamics and informality.Footnote ¹⁴⁷ Primary agreements also increase the elasticity of China in addressing the difficulty of building BRI projects.Footnote ¹⁴⁸

Third, primary agreements provide flexibility to China in securing broad participation in the BRI and initiating BRI projects. Differing forms of primary agreements are adopted to meet various needs, including different governments and international organizations (e.g., the China–New Zealand MOA, and UNECE–NDRC MOU), areas and sectors (e.g., the MOU in the Field of Water Resources with the Government of Malaysia), and projects (e.g., the Protocol on Establishment of Joint Ocean Observation Station with the Ministry of Environment of Cambodia).Footnote ¹⁴⁹ Applying the discussion of soft law by Shaffer and Pollack, China selects regimes (primary instruments) based on characteristics including their membership (e.g., bilateral and plurilateral), parties involved (national and sub-national governments, international organizations such as the UN), institutional characteristics (e.g., the absence of strict dispute settlement procedures), substantive focus (e.g., dispute settlement, trade facilitation, infrastructure finance, digital economy, and infrastructure standards), and predominant functional representation (e.g., by trade or finance ministries).Footnote ¹⁵⁰ Relatedly, the network of primary agreements could enjoy the benefit of a network in terms of the ‘ability to add new members quickly and at low cost’.Footnote ¹⁵¹

4.3 Legitimacy

Primary agreements may increase the domestic and international legitimacy of the BRI, thereby helping to promote BRI projects. For domestic legitimacy in China, primary agreements help to show international support for the BRI,Footnote ¹⁵² including the third-party market cooperation agreements with advanced economies. As another example, the BRF Joint Communiques indicate the support of the BRI by the participants.

In respect of international legitimacy, primary agreements may be similar to soft law in that they may be used in justifying a state's actions.Footnote ¹⁵³ Many of China's primary agreements link to existing international institutions and refer to international standards or rules (e.g., the adherence to ‘international good practice’,Footnote ¹⁵⁴ and the compliance with ‘the purposes and principles of the UN Charter’, and the 2030 Agenda for sustainable development and the Paris Accord on climate changeFootnote ¹⁵⁵). This may help to show the consistency of primary agreements with the normative status quo, and lend MOUs ‘more ability to claim legitimacy’.Footnote ¹⁵⁶ That said, the effects of BRI primary agreements remain to be seen as the reshaping of the existing international order require wide support from the world community.

4.4 Summary

Crucially, BRI primary agreements help to promote BRI projects with reduced contracting costs and flexibility. From China's perspective, they may help establish the legitimacy of the BRI (e.g., by demonstrating the support of other parties to primary agreements). There is also likely to be a range of additional reasons behind the use of primary agreements. For instance, China appears to adopt a constructivist approach by taking advantage of ‘the communicative and constitutive impact’ of soft law.Footnote ¹⁵⁷ Other reasons may include the various advantages of soft law, such as incrementalism,Footnote ¹⁵⁸ and the response to ‘uncertainty by designing arrangements that are less formalized than full legalization’.Footnote ¹⁵⁹ All these considerations behind primary instruments appear to be closely related to China's efforts to promote the BRI projects.

5.1 Substantive Rules

Major challenges in substantive rules include rule inconsistency, ambiguity and vacuum, the balance between different considerations, a possible gap between the law-in-the-books and the law-in-action, and the relationship between primary agreements and other rules. These factors may lead to considerable issues in respect of the certainty and credibility of commitments.

First, primary agreements may face rule inconsistency, ambiguity, and vacuum. It is observed that ‘Western trade and investment projects would require the application of a uniform set of rules at the three levels of international/bilateral cooperation, domestic regulation, and private transactions.’Footnote ¹⁶¹ China appears to adopt a ‘One Country, One Approach’ to the BRI.Footnote ¹⁶² It is challenging in developing ‘“one legal framework” to find a single, common ground.’Footnote ¹⁶³ Given the tremendous variation between the parties involved, primary agreements differ substantially, although they often share a similar basic structure. Additionally, the low level of precision results in a lack of elaborate rules (e.g., concrete required or disfavored behavior) and makes it more difficult to ensure the provisions are related to each other in a consistent manner.Footnote ¹⁶⁴ The relationship among myriad forms of primary agreements is unclear and there is no central repository for BRI agreements. Even for BRI agreements concluded with one state, it is not easy to ensure their consistency (e.g., 51 MOUs concluded between China and Pakistan).Footnote ¹⁶⁵

Rule ambiguity or vacuum could exist regarding various issues. The BRI projects invest largely in jurisdictions where other states and international financial institutions have been reluctant to invest,Footnote ¹⁶⁶ and few of these countries are ‘noted for the rule of law’.Footnote ¹⁶⁷ The BRI also expands to infrastructure and other new areas (e.g., data flow in Digital Silk Road). Many BRI legal issues fall outside the scope of WTO rules, FTAs, and BITs. All of these factors call for rules under the BRI and particularly international rules. However, primary agreements seldom address many of these issues. For instance, they rarely address wider social issues (e.g., labor issues and environment) and the robust monitoring of these issues, which affect the BRI's relationships with civil society and local communities.Footnote ¹⁶⁸ Labor issues are generally untouched by primary agreements. The China–New Zealand MOA incorporates one ‘short and relatively weak’Footnote ¹⁶⁹ clause that mentions environmental matters, calling for ‘push[ing] forward coordinated economic, social, environmental and cultural development and common progress’.Footnote ¹⁷⁰ The Italy–China MOU provides a more detailed, although still general, provision on environment, including the participation in the International Coalition for Green Development on the Belt and Road.Footnote ¹⁷¹ This is partially explained by China's pragmatic project-based approach and social issues not being the major focus of China (e.g., China's FTAs and BITs lacking systematic rules on social issues). It is yet to be seen whether and how a regulatory system and governance standards in various BRI states would be put in place to properly address BRI related legal issues (e.g., long-term due diligence and financing, and social issues).Footnote ¹⁷²

Second, it remains an open question as to how the balance is to be struck between different roles and considerations, and a gap could exist between the law-in-the-books and the law-in-action. A government may be an economic actor and a regulator, and there is tension behind these roles (e.g., economic and social considerations).Footnote ¹⁷³ It is unclear how to best balance economic security (the right to regulate) with the constraints of economic sovereignty, which is a particular issue given the majority of BRI states are developing countries.Footnote ¹⁷⁴

Free market principles are recognized in various primary agreements.Footnote ¹⁷⁵ Due to the minimal legalization of primary agreements, time will tell whether and how these principles will apply in the practice. For instance, it is yet to be seen how the possible preferential treatment of Chinese products and services (given the source of the investment) will be balanced with market principles based on competition (like non-discrimination treatment provided in treaties).Footnote ¹⁷⁶

Third, the relationship between primary agreements and other rules is not always clear. The obligations in primary agreements have legal implications for the signatories and even non-parties. To illustrate, the China–Pakistan Economic Corridor Memoranda may have multilateral effects on relationships other than between China and Pakistan (e.g. China–Russia, China–India and Pakistan–India relationships), and both states’ rights and obligations under international organizations to which they are members (like the WTO, World Customs Organization, the IMF, the World Bank, and the Asian Development Bank).Footnote ¹⁷⁷

5.2 Enforcement

Challenges in enforcement may arise due to various factors, ranging from the minimal legalization of primary agreements to the actors’ negotiation positions. Primary agreements encounter enforcement issues as with existing soft law that ‘avoids judicialization’.Footnote ¹⁷⁸ Minimal legalization of primary agreements (weak obligations, rule imprecision, and low delegation) makes enforcement more difficult. Flexibility could give rise to opportunistic behavior whenever ‘economic, political, or other pressures make compliance inconvenient’.Footnote ¹⁷⁹ With weak legalization, ‘imprecise norms are, in practice, most often interpreted and applied by the very actors whose conduct they are intended to govern’.Footnote ¹⁸⁰

For obligations and precision, the efficient operation of the BRI will probably require a certain level of legal harmonizationFootnote ¹⁸¹ that could bring reduced regulatory differences. However, primary agreements have a low level of obligation and precision. As observed by Kenneth W. Abbott and Duncan Snidal, ‘compliance issues are largely moot’ if soft law instruments have ‘little content.’Footnote ¹⁸² Primary agreements are insufficient to address possible problems like local protectionism or judicial corruption in the BRI practice.Footnote ¹⁸³ Ambiguity would also ‘deflect …accountability’.Footnote ¹⁸⁴ A low level of precision allows for wide discretion, in turn making it difficult to assess compliance.Footnote ¹⁸⁵

For delegation, primary agreements are usually subject to consultation rather than a panel process.Footnote ¹⁸⁶ In some exceptional circumstances, primary agreements provide for conciliation under UNCITRAL Conciliation Rules,Footnote ¹⁸⁷ arbitration,Footnote ¹⁸⁸ or lack a dispute settlement provision entirely.Footnote ¹⁸⁹ Disputes over the interpretation of BRI agreements may arise, especially due to their general language, which cannot be fully addressed within the existing dispute settlement system.Footnote ¹⁹⁰ Primary agreements do not bring a BRI-wide dispute settlement and monitory arrangement that will help enforcement, and it is unlikely that such an arrangement will be created anytime soon.

Consultations can hardly provide sufficient predictability for public and private actors, and may struggle to search for ad hoc solutions. Such difficulties may arise in practice including the calls for debt relief on BRI projects after the COVID-19 outbreak.Footnote ¹⁹¹ If consultations fail, the parties may only be able to rely on direct sanctions or on reputational sanctions which do not compensate the breached-against actors.Footnote ¹⁹² Soft law ‘often garners widespread participation, but it creates few concrete incentives for states to improve behavior’.Footnote ¹⁹³ The lack of compliance review mechanism like third party enforcement may eventually lead to high transaction costs of interstate interaction to address disputes.

Many issues remain open. Soft law could be under-enforced if it turns out to be economically or politically more costly than the parties originally expected, and a party cherry picks certain aspects of soft law instruments.Footnote ¹⁹⁴ For instance, it may be questioned whether enforcement is even a goal of primary agreements, when considered against the need for flexibility and preference for avoiding the tough decisions required for enforceable agreements. Will current primary agreements provide an efficient level of compliance? If a party to a primary agreement violates any obligation therein, will the other party halt its own compliance in retaliation? Is the ending of compliance by other parties a credible way to deter violations? All these are case-specific and depend on many aspects, including the issues and focuses of primary agreements, and actors involved. Factors beyond the agreements themselves, like domestic interest, will play a role. Essentially, there is a complex trade-off between compliance benefits and violation costs.

5.3 Broader Challenges

There are broader issues faced by the parties to primary agreements, which exist in both substantive rules and enforcement. An exhaustive list of all challenges cannot be developed here. However, several major areas deserve attention as they may make parties re-evaluate their expectations and also affect the views of outsiders towards the initiative.

Foremost, primary agreements impose challenges for BRI states regarding their negotiation capacity. This is particularly the case for small developing economies. BRI states may need to negotiate various issues as there is a lack of BRI-wide rules. Neither is there a central institution (e.g., an international organization) for formal rule-making under the BRI. Many BRI issues (e.g., infrastructure finance, technical standards, and e-commerce) are new or more complex than traditional issues (e.g., tariff reduction). The negotiations require the understanding of distributive consequences arising from rules (such as on trade, finance and investment) for different actors.Footnote ¹⁹⁵ It is not easy to foresee the future ramifications of measures in fast changing circumstances.Footnote ¹⁹⁶ Essentially, the negotiations involve the underlying issue of equity.

Second, there are challenges regarding various interests behind primary agreements. Primary agreements face the fact that actors have different interests, values, and degrees of power.Footnote ¹⁹⁷ There are legal, political, economic, and social differences among a large number of BRI states. The BRI involves complicated issues areas, ranging from infrastructure to internet governance. For instance, infrastructure may ‘severely affect national interests’.Footnote ¹⁹⁸ There could be gaps in a number of aspects: ‘(a) divergence in interests (who gains, who losses, who gains more); (b) conflicting ideational stakes (conflicting positions in preserving sovereignty, autonomy and identity); and (c) conflicting positions over alignment preferences (a big power wanting smaller states to side with or align more closely with it, while smaller states insist on retaining their external space for manoeuvre)’.Footnote ¹⁹⁹ It is observed that ‘[t]he absence of common cultures, legal systems, and geopolitical interests among the BRI participants also forms significant political obstacles to the emergence of common legal practices or institutions across the BRI's extraordinary geographic scope’.Footnote ²⁰⁰ There is not always congruity between China and other parties in these aspects.

Third, uncertainties exist regarding the effects of primary agreements. There could be concerns that soft law may bring distorting effects on competition, which are linked with distributive imbalances and power asymmetries.Footnote ²⁰¹ Soft law is often viewed as ‘a power or a persuasive force in its own right’.Footnote ²⁰² To illustrate, Hanim Hamzah posits that ‘it is common for sponsors to provide legal terms in their favour’, which may affect the competitiveness of domestic industries of BRI states, and that an across-the-board ‘centrally coordinated’ approach could be problematic.Footnote ²⁰³ The BRI practice also faces concerns like transparency,Footnote ²⁰⁴ environment, labor, and debt sustainability.Footnote ²⁰⁵ In a broader sense, there could be challenges regarding legitimacy. Precision enhances the legitimacy of rules and their normative ‘compliance pull’,Footnote ²⁰⁶ while primary agreements have low level of precision. Soft law (e.g., international financial law) may be deemed to protect the interests of ‘key players’ and be vulnerable to power relations, and cause concerns over representativeness (e.g., more finite universe of interests), transparency, and accountability.Footnote ²⁰⁷ It is observed that standard-setting on a bilateral or regional basis ‘allow[s] for stronger influence by important actors’.Footnote ²⁰⁸ The challenges include how to address possible distributive implications of primary agreements as they often involve long-term projects (e.g. infrastructure), how to understand and address national interests in various states (e.g. Malaysia's East-Coast Rail Link project that was suspended on national interests and then restarted),Footnote ²⁰⁹ and how to address possible power asymmetries (e.g. reciprocal market access rights).Footnote ²¹⁰

Finally, other challenges include that the perception of BRI agreements may differ between China and other parties. It is observed that ‘[w]hat one state believes it is signalling is not necessarily what another states[sic] hears’.Footnote ²¹¹ This issue may arise due to the sensitivity of many issues involved (e.g. infrastructure) and the minimal legalization of primary agreements, which often leave terms open to multiple interpretations.