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Prepared by: USINDOPACOM Joint Operational Law Team (INDOPACOM.J06.OPLAW@pacom.mil) / Pacific Air Forces Counter-Lawfare Cell

Last Updated: 5 February 2024 (all prior versions obsolete)

**This TACAID includes legal opinion and analysis that does not necessarily reflect official U.S. government positions

USINDOPACOM J06/SJA TACAID SERIES

TOPIC: EXPLOITATIVE BELT & ROAD CONTRACTS

 BOTTOM LINE 

 Contracts associated with the People’s Republic of China’s (PRC) Belt and Road Initiative (BRI) contain exploitative 

provisions, including overly-broad, at-will default clauses for “actions adverse to the PRC.”i

 The violation of these clauses trigger remedies for the PRC to seize the borrower-nation’s public infrastructure, 

national resources, territory, and/or Gross Domestic Product (GDP) revenue unrelated to the loan project.

 Customary international law, international norms, and contract codes worldwide recognize the principle that an 

“unconscionable” contract is unenforceable when coercion, exploitation, duress, undue influence, or other 

circumstances result in a contract that overwhelmingly favors one party over the other.

 Article 2(7) of the United Nations (UN) Charter and the principle of “non-intervention” requires nations to refrain 

from interfering in the domestic or internal matters of another nation. 

 BRI contracts typically contain a range of problematic terms and conditions that merit scrutiny for compliance 

with the legal principles of unconscionability and non-intervention. 

 Examples include: 1) prohibitions against disclosing 

debt details to borrower-nation citizens, public 

interest groups, and international organizations; 2) 

prohibitions against seeking debt relief or advisory 

guidance from relief agencies, international 

organizations, or other governments; 3) 

requirements that all disputes be resolved by 

Chinese courts, with a prohibition against involving 

non-Chinese mediators, lawyers, or arbiters and; 4) 

requirements that high percentages of the 

borrower-nation’s GDP be deposited as collateral in 

Chinese-controlled bank accounts, as opposed to 

neutral third-party escrow accounts.

WHY THIS MATTERS 

 As the world’s leading region in trade, a free and open 

Indo-Pacific is vital for global security and economics. 

 Increased scrutiny of BRI contracts helps promote 

transparency and mitigate risk of manipulation or 

influence over sovereign decisions and key 

infrastructure (e.g., ports, railways, and power grids). 

 Unconscionable terms and conditions cause financial 

distress and threaten sovereignty and territorial 

integrity, especially for developing countries.

 The PRC has used BRI terms and conditions to acquire

military access in the Indo-Pacific region and abroad, 

including at Ream Naval Base in Cambodia and 

Hambantota Port in Sri Lanka.ii

Source: Silk 

Road Briefing 

The PRC took control of Hambantota Port in Sri 

Lanka in exchange for debt relief. Source: AP 
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 Reporting indicates that BRI-related debt is used to coerce support from individual political leaders for miliary

installations and logistics hubs that enable the People’s Liberation Army (PLA) to project power and influence.

iii

 

 In December 2023, PLA warships were observed at Ream Naval Base, prompting the U.S. State Department to 

raise “serious concerns” regarding the PRC’s plans to expand exclusive control over parts of the base.iv

 Despite promises to support green and low-carbon energy in developing countries, BRI projects reportedly resort 

to harmful pollutants (e.g., coal-fired power) to cut costs.v

DETAILED DISCUSSION

 BRI-Related Debt. In 2013, President Xi Jinping proclaimed BRI a centerpiece of his foreign policy and a means of 

expanding the PRC’s leadership in global affairs.

vi In October 2023, the PRC hosted a 10-year BRI summit. As of 

August 2023, 155 nations have signed more than 2000 BRI-related debt contracts worth upwards of USD $1.5 

trillion.

vii The PRC is now the world’s largest official creditor, surpassing the World Bank, International Monetary 

Fund (IMF), and Organization for Economic Cooperation and Development (OECD) creditors combined.

viii 50 

developing countries with PRC loans went from owing less than 1% of their GDP in debt in 2005 to more than 15% 

in 2017. A dozen countries owed more than 20% of their GDP and many are at high risk of default.

ix

 

 The PRC claims that contracts are freely entered and mutually agreed upon, but has refused to disclose contract 

terms and conditions for a decade, asserting “the principle of transparency should apply to north-south 

cooperation, but...it should not be seen as a standard for south-south cooperation (referencing the developed 

world as north and the developing world as south).”

x OECD has repeatedly requested BRI-related credit data from 

the PRC without success.xi A majority of BRI-related debt falls on developing and least-developed countries; 

however, there is little transparency or public disclosure of the terms and conditions of BRI loans.xii The PRC 

rejects calls by international organizations and relief agencies for data and demands secrecy from borrowers. 

 Sovereignty and Non-Intervention. Under Article 2(7) of the UN Charter and the principle of non-intervention, 

nations may not intervene in the domestic or internal 

matters of another nation. U.S. law affirms the

principle of non-intervention as an integral part of U.S. 

policy through the ratification of the Charters of the 

United Nations and the Organization of American States 

(OAS), as well as other international agreements that 

expressly incorporate non-intervention as a basis for 

international cooperation.

xiii

 Unconscionability and Customary International Law. 

Under customary international law and contract codes 

worldwide, a contract may be unenforceable when 

terms are so extremely imbalanced that they take 

away any meaningful bargaining power from one of 

the parties. Many modern legal regimes refer to this 

principle as “unconscionability”; however, the same

concept appears throughout legal systems worldwide, including the PRC, under different names (e.g. vitiating 

factors, illegality, validity, etc.xiv). A contract can be “unconscionable” during the course of performance when the 

underlying terms and conditions rise to a level of coercion, duress, undue influence, or circumstances that 

overwhelmingly favor one party over the other.

xv The remedies for unconscionable contracts may include voiding 

the entire contract, voiding the unconscionable terms, modification, or compensation to the affected party. 

 International Organizations and Treatment of Developing Countries. Article X of the World Trade Organization’s 

(WTO) General Agreement on Tariffs and Trade (GATT) addresses transparency and obligates members to open 

and predictable policies and practices to maintain a stable economic environment.xvi The WTO requires members

to grant special and differential treatment to developing and least-developed countries.xvii Consistent with WTO 

obligations, the United States opposes debt-trap diplomacy and exploitative trade contracts.xviii 

 BRI Terms and Conditions. BRI agreements begin with non-binding MOUs that appear transparent and freely 

entered; however, subsequent lending agreements with state-owned, Chinese banks are not disclosed publicly 

Laos railway project. Source: Washington Post 
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and contain terms and conditions that may be inconsistent with the legal principles of unconscionability and nonintervention, as well as WTO obligations. Examples of problematic terms and conditions include those that: 

o Prohibit borrowers from publishing or disclosing contract terms or the existence of debt, including to 

their citizens, advisory groups, or intergovernmental organizations with global transparency oversight;

xix

 

o Bar borrowers from restructuring debt or pursuing debt-relief through the assistance of other nations, 

regional partnerships, or international agencies like the IMF, World Bank, Paris Club, or OECD;

xx

o Prohibit dispute resolution outside the Chinese International Commercial Court (CICC), which forbids any 

non-Chinese lawyer or non-Chinese mediator from participating in arbitration/mediation proceedings;xxi

o Allow PRC creditors to accelerate terms or demand immediate repayment for ill-defined reasons;xxii

o Require borrowers to deposit a percentage of their Government revenue, including revenue entirely 

unrelated to the loan project, into PRC-designated banks, rather than a neutral third-party accountxxiii –

these accounts are then used as collateral debt offsets—at will—with no cause for recourse;xxiv

o Authorize the PRC to declare default at-will on a loan for any action that is “adverse to a PRC entity”;

xxv

o Upon default, authorize the PRC to seize, assume control of, and use territory, public infrastructure, and 

property (e.g., ports, energy, railways, subways) as collateral for default;xxvi

o Terminate diplomatic relations as a result of default.

xxvii

PROPOSED COUNTER-LAWFARE APPROACH

**This section offers suggested language for incorporation into communication strategies**

 BRI contracts are matter of public, international interest if the terms and conditions violate international law

and the borrowing nation’s sovereignty under Article 2(7) of the UN Charter. 

 BRI contracts merit scrutiny for compliance with the legal principles of unconscionability and non-intervention. 

 As a matter of international law, BRI contracts may be unconscionable and therefore unenforceable if terms and 

conditions are so imbalanced that they take away any meaningful bargaining power from the borrowing nation or

leave the borrowing nation with no just remedy during performance on BRI projects.xxviii 

 Contract terms that authorize the creditor to seize and control territory, public infrastructure, and GDP

unreasonably interfere with the internal affairs of the borrowing nation, especially in instances where the 

borrowing nation is a developing country with limited infrastructure and resources. 

 Contracts that allow the lender to terminate, accelerate, or 

change terms at-will or under vague circumstances provide

no protection against acts that violate sovereignty or 

interfere with the internal affairs of sovereign states.

xxix

 Contractual prohibitions on disclosure of public debt to 

citizens removes transparency, interferes with the political 

process, and eliminates informed decisions. xxx

 BRI contracts merit scrutiny for “debt traps” that can be 

used to coerce developing countries; influence political 

decisions; seize assets; acquire military access; or compel

support within international organizations such as the UN. 

 Contracts that prohibit borrowing nations from disclosing 

terms of a debt or consulting with international debt-relief agencies and financial advisory organizations violate 

WTO obligations related to transparency and preferential treatment for developing nations. 

 Third-party involvement in contract disputes is customary to prevent coercion, duress, conflicts of interest or 

undue influence, but BRI contracts typically compel dispute resolution in Chinese courts, by Chinese officials, 

within China, and under the control of the Chinese Government, rather than a neutral third party. 

 Possible remedies for unconscionable contracts include voiding the entire contract, voiding unconscionable 

terms, modifying the contract, or pursuing compensation for damages. 

 USINDOPACOM works alongside the U.S. interagency and with allies and partners to protect sovereignty, 

promote adherence to international law, and uphold the rules-based international order.

BRI borrowing countries by year of joining. Many 

are developing nations in Africa. Source: CFR. 
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i

See Gelporn, Horn, Morris, Parks, and Trebesch, How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments, 

AIDDATA (2021) at 37.

ii

 See Dasgupta, China Using Sri Lanka’s Indebtedness to Show Military Muscle, VOA (2022). See also, Detsch, US Looks to Check 

Chinese Advances at Cambodian Naval Base, Foreign Policy (2022), available at https://foreignpolicy.com/2022/12/05/us-chinacambodia-ream-naval-base/.

iii Id.

iv See Warships Seen at China’s Secretive Overseas Naval Base for the First Time, Newsweek (December 2023), available at 

https://www.newsweek.com/china-cambodia-raem-naval-base-ship-1850406

v

See Written Testimony of Geoffrey R. Pyatt “Assessing U.S. Efforts to Counter China’s Coercive Belt and Road Diplomacy”, U.S. 

Department of State (June, 2023), available at https://www.state.gov/assessing-u-s-efforts-to-counter-chinas-coercive-belt-androad-diplomacy/

vi See Smith, Stephen, China's Major Country Diplomacy, Oxford Academic, Foreign Policy Analysis (2021).

vii Id.

viii See How Much Money Does the World Owe China?, Harvard Business Review (2020), located at https://hbr.org/2020/02/howmuch-money-does-the-world-owe-china.

ix Id. See also China’s Belt and Road Initiative Heightens Debt Risks in Eight Countries, Points to Need for Better Lending Practices, 

Center for Global Development (2018), located at https://www.cgdev.org/article/chinas-belt-and-road-initiative-heightens-debtrisks-eight-countries-points-need-better, claiming that as of 2018, 23 out of 68 participating BRI countries were at risk of “debt 

distress.”

x

Supra note 1 at 11.

xi Id.

xii Id.

xiii See US Army Operational Handbook (2022), Chapter 1, para I(B)(2).

xiv See Onyekachi, Vitiatin Elements of Contract As A Source of Contractual Validity, (2012), located at 

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2156749.

xv See Uniform Commercial Code of the United States, Section 2-302. See also Unconscionable Contract: A Comparative Study, Loyola 

of Los Angeles International and Comparative Law Review, Article 3, Volume 14 (1992), available at 

https://safe.menlosecurity.com/doc/docview/viewer/docNC63536E62D11999f1e25fd13d9fd9a59431e7392c7ed6c78690cc54803e7

3786d0e3a031efbd. 

xvi See Reinsch, Transparency at the WTO, Center for Strategic and International Studies, available at 

https://www.csis.org/analysis/transparency-wto-why-does-transparency-matter-and-are-members-meeting-their-obligations

xvii See WTO Developing Countries Overview, World Trade Organization, available at 

https://www.wto.org/english/thewto_e/whatis_e/tif_e/dev1_e.htm

xviii See US Aims to Counter China’s Influence in Global Institutions, Yellen Says, Reuters (2023), located at 

https://www.reuters.com/world/us-aims-counter-chinas-influence-global-institutions-yellen-says-2023-03-29/.

xix Supra note 1 at 4.

xx Supra note 1.

xxi See Dispute Settlement With Chinese Characterstics: Assessing China’s International Commercial Court, U.S.-China Economic and 

Security Review Commission (2023), located at https://www.uscc.gov/research/dispute-settlement-chinese-characteristicsassessing-chinas-international-commercial-court

xxii See Gelporn, Horn, Morris, Parks, and Trebesch, How China Lends: A Rare Look into 100 Debt Contracts with Foreign 

Governments, AIDDATA (2021).

xxiii Supra note 1 at 6.

xxiv Id.

xxv Id.

xxvi See Zambia’s Spiraling Debt Offers Glimpse into the Future of Chinese Loan Financing in Africa, CNBC (2020), located at 

https://www.cnbc.com/2020/01/14/zambias-spiraling-debt-and-the-future-of-chinese-loan-financing-in-africa.html, detailing 

China’s attempt to secure Zambian mining assets as collateral.

xxvii Supra note 1.

xxviii Id at 4.

xxix Id.

xxx Id at 6.