Using BITs to Protect Bytes: Promoting Cyber Peace by Safeguarding Trade Secrets Through Bilateral Investment Treaties

• DOI: http://doi.org/10.1111/ablj.12041
• Author: Eric L. Richards,Scott J. Shackelford,Amanda N. Craig,Anjanette H. Raymond
• Date: 01 March 2015
• Published date: 01 March 2015

Using BITs to Protect Bytes:

Promoting Cyber Peace by

Safeguarding Trade Secrets Through

Bilateral Investment Treaties

Scott J. Shackelford,* Eric L. Richards,**

Anjanette H. Raymond,*** and Amanda N. Craig****

INTRODUCTION

In December 2013, the U.K. government decided to expand the authority

of one of its intelligence agencies, the Government Communications

Headquarters (GCHQ), to aid in the screening of incoming telecom prod-

ucts from Huawei, a leading Chinese manufacturer of information and

communications technology.1British policy makers’ fear, which is shared

by the U.S. Congress, as well as other legislative bodies, is that Huawei’s

alleged close ties with the Chinese state could compromise national

security.2Yet Huawei “has become a major player in the UK telecoms

*J.D., Ph.D., Assistant Professor of Business Law and Ethics, Indiana University; Distin-

guished Visiting Fellow, University of Notre Dame Institute for Advanced Study; Senior

Fellow, Indiana University Center for Applied Cybersecurity Research.

**J.D., Professor of Business Law, Indiana University; Chair, East Asian Initiatives.

***J.D., L.L.M., Assistant Professor of Business Law and Ethics, Indiana University; Adjunct

Assistant Professor of Law, Maurer School of Law, Indiana University; Visiting Fellow in

International Commercial Law, Centre for Commercial Law Studies, Queen Mary,University

of London.

****J.D., Indiana University Maurer School of Law; Ms.C., University of Oxford.

1See Huawei to Come Under Increased Scrutiny from GCHQ, BBC NEWS (Dec. 17, 2013, 9:47 AM)

[hereinafter Huawei Under Scrutiny], http://www.bbc.co.uk/news/technology-25417332.

2See id.; Simon Montlake, U.S. Congress Flags China’s Huawei, ZTE as Security Threats,FORBES

(Oct. 8, 2012, 12:37 AM), http://www.forbes.com/sites/simonmontlake/2012/10/08/u-s-

congress-flags-chinas-huawei-zte-as-security-threats/.

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American Business Law Journal

Volume 52, Issue 1, 1–74, Spring 2015

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American Business Law Journal © 2015 Academy of Legal Studies in Business

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sector,”3as it has in developed and emerging markets around the world,4

underscoring the difficulty of promoting open markets while also manag-

ing cyber insecurity.

Cyber attacks constitute a vast, evolving, and controversial class of

incidents. In August 2013 alone, the Syrian Electronic Army allegedly

launched cyber attacks against the New YorkTimes and Twitter among other

outlets, one of the largest cyber attacks in history targeted China, and new

revelations came to light regarding the National Security Agency’s (NSA)

surveillance programs.5Indeed, “cyber weapons” are being developed

around the world without a transparent discussion about the circum-

stances in which they may be used.6But the specter of cyber warfare is far

from the only component of the cyber threat; cybercrime and espionage

are on the rise and pose significant challenges to companies and countries

alike.7The true extent of cybercrime is unknown, but contested estimates

have placed losses at $1 trillion for 2010, prompting U.S. Senator Sheldon

Whitehouse, a Democrat from Rhode Island, to suggest that “we are

suffering what is probably the biggest transfer of wealth through theft and

piracy in the history of mankind.”8In addition, many nations are engaging

3Huawei Under Scrutiny,supra note 1.

4See, e.g., Scott Clavenna, Executive Summary, Remade in China: Huawei and the Future of the

Global Telecom Market (2006), http://www.heavyreading.com/details.asp?sku_id=1160

&skuitem_itemid=939.

5See Dave Lee, New York Times and Twitter Struggle After Syrian Hack, BBC NEWS (Aug. 28,

2013, 7:05 AM), http://www.bbc.co.uk/news/technology-23862105; China Hit by “Biggest Ever”

Cyber-Attack, BBC NEWS (Aug. 27, 2013, 7:53 AM), http://www.bbc.co.uk/news/technology-

23851041; Karen McVeigh, NSA Surveillance Program Violates the Constitution, ACLU Says,

GUARDIAN (Aug. 27, 2013, 3:31 PM), http://www.theguardian.com/world/2013/aug/27/nsa

-surveillance-program-illegal-aclu-lawsuit.

6See THOMAS RID,CYBER WAR WILL NOT TAKE PLACE 37–38 (2013); Paolo Passeri, What Is a Cyber

Weapon?,HACKMAGEDDON.COM (Apr. 22, 2012), http://hackmageddon.com/2012/04/22/what-is-

a-cyber-weapon/ (discussing some of the difficulties involved with defining “cyber weapons”).

7See, e.g., Jonathan B. Wolf,War Games Meets the Internet: Chasing 21st Century Cybercriminals with

Old Laws and Little Money,28A

M.J.CRIM. L. 95, 96 (2000); Debra Wong Yang & Brian M.

Hoffstadt, Essay, Countering the Cyber-Crime Threat,43AM.CRIM.L.REV. 201, 201–02 (2006);

Cybercrime Threat on the Rise, Says PwC Report, BBC NEWS (Mar. 26, 2012, 7:01 PM), http://

www.bbc.co.uk/news/business-17511322.

8Sheldon Whitehouse, U.S. Sen., Sheldon Speaks in Senate on Cyber Threats, Speech Before

the U.S. Senate ( July 27, 2010), available at http://www.whitehouse.senate.gov/news/speeches/

sheldon-speaks-in-senate-on-cyber-threats. But see Peter Maass & Megha Rajagopalan, Does

Cybercrime Really Cost $1 Trillion?,P

ROPUBLICA (Aug. 1, 2012, 12:12 PM), http://

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in cyber espionage, including the theft of trade secrets,9prompting the

consideration of novel strategies to enhance cybersecurity. One such strat-

egy is presented in this article: using international trade law and particu-

larly bilateral investment treaties (BITs) as a vehicle to mitigate cyber

attacks and better protect trade secrets, which according to some estimates

“comprise an average of two-thirds of the value of firms’ information

portfolios.”10

BITs long have been an important component of international

investment law.11 By 2013, there were 2857 BITs involving the vast

majority of countries.12 These agreements cover a huge range of industry

sectors and business activities, and generally include a forum for resolving

disputes in the form of investor–state arbitration.13 At the July 2013 U.S.–

China Strategic and Economic Dialogue, the United States and China

publicized plans to begin negotiating an expansive BIT that will

reportedly include the difficult issue of enhancing bilateral

www.propublica.org/article/does-cybercrime-really-cost-1-trillion (critiquing various esti-

mates of cybercrime-based losses).

9See Clay Wilson, Cyber Crime, in CYBERPOWER AND NATIONAL SECURITY 415, 424–26 (Franklin D.

Kramer et al. eds., 2009); RAMONA R. RANTALA,BUREAU OF JUSTICE STATISTICS, U.S. DEP’TOF

JUSTICE,NO. NCJ 221943, CYBERCRIME AGAINST BUSINESSES, 2005 1, 3 (2008), available at

http://bjs.ojp.usdoj.gov/content/pub/pdf/cb05.pdf.

10KURT CALIA ET AL., ECONOMIC ESPIONAGE AND TRADE SECRET THEFT:ANOVERVIEW OF THE LEGAL

LANDSCAPE AND POLICY RESPONSES,COVINGTON &BURLING LLP 3 (2013), available at http://

www.gwumc.edu/hspi/policy/Economic%20Espionage%20and%20Trade%20Secret%20Theft

%20-%20September%202013.pdf.

11See, e.g.,UNITED NATIONS CONF.ON TRADE &DEV. (UNCTAD), BILATERAL INVESTMENT TREATIES

1995–2006: TRENDS IN INVESTMENT RULEMAKING xi (2007), available at http://unctad.org/en/

Docs/iteiia20065_en.pdf.

12UNCTAD, WORLD INVESTMENT REPORT 2013: GLOBAL VALUE CHAINS:INVESTMENT AND TRADE

FOR DEVELOPMENT 101 (2013), available at http://unctad.org/en/PublicationsLibrary/

wir2013_en.pdf. There were also another 339 trade agreements, bringing the total number

of international investment agreements to 3,196. Id.; see also ICSID Database of Bilateral

Investment Treaties,I

NTERNATIONAL CENTER FOR THE SETTLEMENT OF INVESTMENT DISPUTES (ICSID),

https://icsid.worldbank.org/ICSID/FrontServlet?requestType=ICSIDPublicationsRH

&actionVal=ViewBilateral&reqFrom=Main (last visited Apr. 29, 2014).

13See GUS VAN HARTEN,INVESTMENT TREATY ARBITRATION AND PUBLIC LAW 6 (2007).

2015 / Using BITs to Protect Bytes 3