By Simeng Wang¹

Introduction 

In the April 2025 UNCITRAL Working Group III discussions, Draft Article 17 on the denial of benefits (DOB), which aims to address “treaty shopping,” once again became a focal point. Although this provision attempts to enhance legal predictability by establishing an eligibility filter, the current reform approach fails to adequately account for the specificities of nationality planning by natural persons. 

The 2025 decisions of the Swiss Federal Supreme Court concerning Jason Yu Song v. China highlight this issue. This case represents a rare investor-State dispute in which China actively contested​,​ but ultimately failed in its jurisdictional objection. As a typical example of nationality planning by an individual, the case reveals the practical limitations of the DOB clause, which is currently widely regarded as an effective remedy against treaty shopping. By examining the logical relationship between “treaty shopping,” “abuse of process,” and the DOB clause, this post analyses why the DOB mechanism experiences a structural mismatch when applied to natural persons. Furthermore, drawing on the procedural history and evidentiary record of the Song case, it demonstrates how relying solely on objective indicators is insufficient to regulate the subjective abusive conduct of individual investors effectively. 

From Treaty Shopping and Abuse of Process to the Denial of Benefits Clause  

Although treaty shopping is not inherently unlawful, it represents a practice that respond​​​ent​ States increasingly seek to curtail. Because investment treaties typically define “investment” broadly to encompass “every kind of asset,” such as indirectly held shares or shell companies, it is difficult to exclude treaty shoppers based purely on the text of the treaty. The fundamental premise of ISDS is to offer an alternative forum for genuine cross-border investors who assume political and economic risks in a foreign host State. If nationality planning is left unchecked, it allows domestic investors to bypass their own judicial systems and bring high-value international claims against their home State, as seen in cases like Jason Yu Song v. China. This contradicts the original purpose of attracting and protecting genuine foreign investment. 

Consequently, respond​ent​​​ States have increasingly relied on the doctrine of “abuse of process” to challenge the legitimacy of such claims. However, this defence presents exceptionally high evidentiary thresholds in practice. To succeed, a ​​​S​tate must prove that the investor acted with “subjective bad faith” and that the specific dispute was “foreseeable” at the time of the nationality change. To alleviate these heavy evidentiary burdens, UNCITRAL Working Group III’s Draft Article 17 introduces the Denial of Benefits (DOB) clause as a pre-defined, objective filter. This mechanism aims to resolve ​S​​​tates’ concerns about abusive treaty shopping by relying on objective indicators, such as the absence of ​“​Substantial Business Activities​”​ (SBA) or evidence of illegality, such as fraud or corruption. 

Crucially, however, Draft Article 17’s regulatory design stems from historical DOB clauses that were intended to target corporate entities. For instance, older iterations of DOB provisions, including Article 8 of the Iran-Slovakia BIT (2017) and Article 17(2) of the US-Uruguay BIT (2006), focus entirely on the nationality of enterprises controlled by third-country nationals. They do not address the nationality planning of natural persons.  

Therefore, applying the DOB framework to the nationality planning of natural persons reveals a structural mismatch. Because individuals are not subject to “economic substance” requirements, the objective DOB filter becomes ineffective, leaving tribunals with no choice but to revert to the subjective “abuse of process” test. As the public record of the Swiss Federal Supreme Court proceedings in the Song case demonstrates, China’s evidentiary submissions and the court’s scrutiny were ultimately forced to focus on proving the investor’s subjective bad faith and the foreseeability of the dispute. The Song case thus clearly illustrates the regulatory challenges posed by individual nationality planning and the practical limitations of the DOB clause when applied outside its intended corporate context.  

The Procedural History of Jason Yu Song v. China  

The procedural trajectory of the Song case serves as a textbook example of this structural mismatch in practice. In January 2019, Jason Yu Song, a former Chinese national who later acquired British nationality, initiated arbitration proceedings against China under the 1986 China–United Kingdom BIT. The claim, administered by the PCA under the UNCITRAL Arbitration Rules (PCA Case No. 2019-39), concerned the alleged expropriation of land use rights in Shanxi Province. The arbitral proceedings have since been concluded, although the final award has not been made public. Following the final award, China pursued post-award challenges before the Swiss Federal Supreme Court, seeking to set aside the tribunal’s earlier decision rejecting China’s jurisdictional objection. At both the arbitral and post-award stages, the central issue was whether Mr. Song’s change of nationality constituted an abuse of process, in that it was undertaken to circumvent domestic adjudication and to obtain access to international arbitration. 

At the arbitration ​​stage, China argued that ​​ the claimant’s nationality change was undertaken to obtain treaty protection and​,​ therefore​,​ constituted an abuse of process. The tribunal rejected that objection and ​upheld its ​jurisdiction in a ​​December 2021 Decision. China subsequently sought reconsideration of the jurisdictional decision in January 2024, relying on updated evidence it submitted and on the tribunal’s authority to revisit its jurisdiction in exceptional circumstances. In April 2024, the tribunal reaffirmed its jurisdiction. Parallel proceedings were brought before the Swiss Federal Supreme Court, as the court at the seat. China filed a revision application in January 2024 (4A_46/2024) and a further application in October 2024 relying on a domestic criminal judgment (4A_528/2024). The court dismissed these applications in ​​April 2025 and June 2025, thereby leaving the tribunal’s jurisdictional determination intact. The Swiss court’s review focused primarily on whether the newly submitted evidence warranted revisiting the earlier jurisdictional ruling, rather than undertaking a reassessment of the arbitral tribunal’s evaluation of nationality planning. 

Because Mr. Song held a valid British nationality, objective filters were insufficient to exclude his claim. To support its claim of subjective treaty shopping, China submitted four pieces of evidence not available during the original jurisdictional phase: (1) a 2023 witness statement suggesting concealment of illegal share acquisition; (2) a 2012 internal email from Mr. Song to key associates; (3) a contemporaneous undertaking indicating an intent to seek treaty protection through British nationality; and (4) a 2024 Chinese criminal judgment confirming Mr. Song’s misconduct. 

The distinction among these documents is critical. The first and fourth pieces addressed the lawfulness of the investment and alleged criminal activity, not the question of treaty shopping or procedural abuse. Only the second (the email) and third (the undertaking) are directly related to the alleged intent to manipulate nationality for jurisdictional purposes. 

However, these two crucial pieces of evidence were ultimately excluded for procedural reasons. The ​​Swiss Federal Supreme Court found that China failed to meet the 90-day time limit for revision under Article 190a(2) of the Swiss Private International Law Act​​, dismissing the applications in April and June 2025. Crucially, the failure of China’s jurisdictional challenge was not due to a principled rejection of the abuse allegation, but rather to the fact that such abuse could not be established within the procedural and evidentiary limits. This profoundly reflects the structural dilemma of regulating the nationality planning of natural persons: proving subjective intent relies heavily on highly personalised and private evidence. Due to its inherent private nature, acquiring such evidence is significantly more difficult than accessing public corporate records, generally requires considerably more time to uncover, and frequently implicates legal risks regarding privacy infringement. Consequently, by the time a respondent​​​ ​State manages to obtain this elusive evidence, it is far more susceptible to being blocked by rigid procedural rules, such as strict time bars for revision or admissibility challenges, ​​as vividly illustrated by the ​Song​ case (where the delayed discovery of private internal emails led to their procedural exclusion). 

Limits of DOB: Comparing Corporate and Natural Person Nationality Planning  

The evidentiary struggle in the Song case stands in stark contrast to the straightforward application of objective filters in corporate contexts. The effectiveness of draft Article 17 (DOB) is entirely dependent on whether abusive behaviour manifests through externally verifiable characteristics. This dependency produces a sharp divergence in the clause’s practical operation. 

For corporate investors, the “audit-style” approach of the DOB clause is highly effective because it aligns with the nature of corporate entities. A corporation’s legitimacy can be comprehensively audited through public records. If a company lacks physical presence or has a documented history of financial misconduct, these objective facts serve as clear grounds for denying benefits. The recent case of Sauna UK BidCo v. Finland (February 2026) clearly exemplifies this operational efficiency. In Sauna, the tribunal efficiently bifurcated the DOB objection precisely because the application of the clause relied on “undisputed objective facts”, such as verifiable ownership structures and external corporate presence in the UK. In corporate cases, observable evidence effectively dictates the legal conclusion. In the example of Pac Rim v. El Salvador, the Canadian company Pacific Rim Mining Corp changed the nationality of its subsidiary, Pac Rim Cayman, from the Cayman Islands to the United States. The​​ ​C​​​laimant defended the restructuring as part of a cost-saving plan across the broader Pacific Rim group, supported by witness statements and documentary evidence, including the 2007 annual report. This example demonstrates how, in corporate cases, the timing and purpose of nationality changes can often be established through objective and contemporaneous evidence. 

In contrast, when applied to natural persons like ​​​Mr. Song​, the objective DOB framework suffers from a category error due to the fundamental difference between corporate existence and human identity. First, the SBA requirement is rendered functionally obsolete. Unlike corporations, which are legal fictions defined by economic function, an individual’s nationality involves socio-cultural and political ties. Evaluating ​Mr. ​Song’s valid British legal status through an economic substance test or demanding a business office in the UK is conceptually incompatible with the nature of human nationality.  

Second, objective filters fail to address the reality of “mixed motives.” As highlighted by Soloveva’s article, individual nationality planning often entails significant procedural and personal burdens, such as long-term residency or linguistic integration, creating a strong presumption of legitimacy. Unlike a shell company formed overnight, an individual’s nationality change is strictly lawful on the surface and rarely triggers explicit fraud or corruption clauses. An investor may seek ISDS protection alongside legitimate personal goals like global mobility or tax residency.  

For example, in Okuashvili v. Georgia, the investor had moved to the United Kingdom eleven years before the dispute arose. This clearly illustrates how, in natural person claims, even long-standing residence does not easily resolve questions about an individual’s motivation or foreseeability. Tribunals face heightened difficulty in determining whether accessing ISDS was the primary reason for the nationality switch. Consequently, as the ​Song ​case illustrates, respond​​​ent​ States are forced to prove the precise timing of the immigration process and establish that accessing ISDS remedies was the dominant motive—an evidentiary burden that relies on rarely public, informal channels. 

Because the objective indicators of the DOB clause cannot disentangle these intertwined motives or flag a formally lawful nationality as abusive, the objective filter collapses. Tribunals and respondent States are thus forced back into the subjective blind spot of proving bad faith and foreseeability. As the Song case vividly demonstrates, this endeavour is uniquely difficult to substantiate within formal procedural confines. 

Conclusion 

The Jason Yu Song v. China case serves as a stark reminder of the structural and evidentiary limits inherent in policing the nationality planning of natural persons. While treaty-based mechanisms like the Draft Article 17 DOB provision seek to enhance legal certainty through objective eligibility filters, their underlying corporate logic renders them fundamentally ill-suited for individual investors. Because the opaque, personal, and frequently lawful nature of individual nationality switches effortlessly bypasses these objective corporate filters, respondent States are inevitably forced back into the subjective evidentiary struggles of proving abuse of process. 

As UNCITRAL WGIII reform discussions advance, it is crucial to recognise that a one-size-fits-all, “audit-style” approach is insufficient. Meaningful reform must directly address this category error. Rather than relying on mechanisms designed for corporate entities, future treaty drafting must develop tailored safeguards that acknowledge the unique, subjective complexities of natural-person claims. 

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