On 19 June 2009, the tribunal issued a decision on jurisdiction. In that decision, the tribunal rejected most of Peru's objections to jurisdiction, but also agreed that many of Mr. Tza's claims were beyond the scope of the Peru-China BIT's dispute settlement provisions, and thus had to be dismissed. However, the tribunal found that it had jurisdiction over the expropriation claim, which it allowed to proceed to the merits.

The tribunal's rejection of several of Peru's objections was unexceptional. First, Peru had argued that Mr. Tza had not provided a birth certificate as documentary evidence of his Chinese nationality, and that the absence of such a document amounted to a failure to establish such nationality, which was required in order for him to qualify as an "investor" covered by the BIT. Peru also asserted that because Mr. Tza was resident in Hong Kong, he was excluded from the BIT’s definition of "investor." The tribunal found that the documentation Mr. Tza had submitted, which included his Chinese passport, was sufficient to demonstrate that, as a matter of Chinese law, he held Chinese nationality. Further, the tribunal found that nothing in the BIT provided that Chinese nationals resident in Hong Kong were excluded from the scope of the BIT. Accordingly, the tribunal dismissed Peru's objections regarding nationality.

Second, Peru argued that Mr. Tza had not made the relevant investment at the time the dispute between the parties arose. According to Peru, the "dispute" between the parties arose in late 2004, when SUNAT issued a report regarding the findings of its tax audit of TSG, and notified the company of its tax debt, and when TSG filed its challenge to SUNAT's findings. Further, Peru argued, Mr. Tza did not directly acquire shares in TSG until early 2005. Peru asserted that Mr. Tza's earlier, indirect ownership of TSG (through an offshore intermediary company) was irrelevant for BIT purposes. Thus, Peru claimed, the claims fell outside the scope of the BIT's dispute settlement article and the tribunal's jurisdiction.

Again, the tribunal disagreed. In the tribunal's view, Mr. Tza's indirect shareholding in TSG, which he had acquired as early as 2001 (well before the point at which the dispute arose), qualified him as an investor with a covered investment. Thus, the tribunal rejected this objection as well.

Third, Peru argued that, with regard to the claim of expropriation, Mr. Tza had failed to make out a prima facie case. That is, Peru asserted that even if Mr. Tza's factual allegations were assumed to be true, those facts would not establish the necessary elements of expropriation under international law and settled jurisprudence. More specifically, Peru noted that Mr. Tza did not assert that TSG had gone bankrupt or entirely ceased business operations, and indeed that the record demonstrated that TSG continued to export certain quantities of its product.

Once again, the tribunal disagreed. The tribunal accepted Peru's premise that a claimant must make out a prima facie claim on the merits in order to survive a challenge to jurisdiction. The tribunal, however, found that SUNAT's tax lien on TSG's bank account had effectively prevented TSG from continuing its manufacturing operations, and that the exports to which Peru pointed merely consisted of sales of existing inventory. In the tribunal's view, the preclusion of further production activity could have an expropriatory effect on Mr. Tza's investment in TSG. Accordingly, the tribunal rejected that jurisdictional objection as well.

The Tza Yap Shum tribunal reached particularly notable conclusions regarding two jurisdictional objections that Peru raised concerning the scope of the dispute settlement clause. The first of these objections concerned the tribunal's jurisdiction over Mr. Tza's claims other than those concerning expropriation, including those regarding fair and equitable treatment and full protection and security. Like many of China's older BITs, the Peru-China BIT permits investors to seek arbitration of only claims regarding the amount of compensation due in the event of expropriation. Thus, for example, the BIT does not expressly provide for arbitration of claims for denial of fair and equitable treatment. Mr. Tza argued that this apparent limitation could be overcome by operation of the BIT's most-favored nation (MFN) clause, which requires the host state (for example, Peru) to extend to the investor treatment no less favorable than that extended to investors from third-party states. In this case, Mr. Tza pointed to the Peru-Colombia BIT, which does allow for arbitration of claims submitted by Colombian nationals that do not concern expropriation. According to Mr. Tza, Peru was required under the MFN clause of the Peru-China BIT to extend to claimant the right to arbitrate such claims.

The tribunal, however, rejected this argument. As the tribunal noted, the BIT's dispute settlement article contained a provision explicitly permitting arbitration of claims other than expropriation claims only in accordance with a separate agreement by the parties (which had not been reached in the case at issue). The tribunal found that this specific language overrode any more general application of the MFN clause. Accordingly, the tribunal dismissed Mr. Tza's claims (other than his expropriation claim) for lack of jurisdiction.

The second of Peru's objections related specifically to Mr. Tza's expropriation claims. As noted above, the BIT's dispute settlement provision allowed for arbitration of claims "involving the amount of compensation for expropriation." Peru noted that this language did not specifically refer to arbitration of claims over liability for expropriation – that is, over the question of whether expropriation had occurred at all. According to Peru, this meant that the tribunal could only act once the occurrence of expropriation had been determined through other means (for example, by Peruvian courts), in which case the tribunal was limited to determining the amount of compensation due to the investor. Peru argued that the BIT language did not allow the tribunal to determine whether SUNAT's actions constituted expropriation of Mr. Tza's investment in TSG.

The tribunal disagreed with Peru's reading of the dispute settlement clause. The tribunal agreed that the BIT's wording reflected a degree of "distrust" of private investment on China's part, and that such wording was apparently designed to "seek certain limitations" on investment protection. However, in the tribunal's view, the word "involving" could be read more broadly, to permit arbitration of claims concerning all aspects of expropriation, including the question of whether expropriation had occurred. Further, the tribunal noted that the BIT's dispute settlement article also contained a so-called "fork-in-the-road" clause that required an investor to make a final and binding choice between submitting claims to domestic courts and submitting them to arbitration. Under the tribunal's reasoning, to force an investor to first submit a claim regarding the occurrence of expropriation to a domestic court would trigger the "fork-in-the-road" clause, thus effectively precluding any recourse to arbitration in any case. The tribunal found that such a result would not accord with the object and purpose of the BIT.