ISSUES IN ASEAN INVESTMENT LAW · A Brief History of ASEAN • All were colonies (with the exception of Thailand) • Independence after WW II (most in the 1950-60s) • 1963-1966

ISSUES IN ASEAN INVESTMENT LAW

Singapore International Arbitration Academy 2012 10 December 2012

Associate Prof Michael Ewing-Chow, WTO Chair and Head, Trade/Investment Law and Policy

1

The Map is Not the Terrain

2

A Brief History of ASEAN

• All were colonies (with the exception of Thailand)

• Independence after WW II (most in the 1950-60s)

• 1963-1966 – Konfrantasi: Indonesia against Malaysia/Singapore

• 1967 – Founding of ASEAN after coup by Gen Suharto overthrowing President Sukarno of Indonesia (confidence building measure)

• 1962-75 – Vietnam War

• 1975-78 – Cambodian Genocide

• 1978 – Invasion of Cambodia by Vietnam

• Early 1990s – Beginning of Economic Integration

• Late 1990s – Expansion to the CLMV members

• 2007 – ASEAN Charter: Legal Focus?

3

Chronology of ASEAN Integration

4

• ASEAN Vision 2020 (1997) ASEAN shall have, by the year 2020, established a peaceful and stable Southeast Asia... a

stable, prosperous and highly competitive ASEAN Economic Region... and open ASEAN societies consistent with their respective national identities...

• Bali Concord II (2003) ASEAN Community shall be established comprising three pillars, namely political and security

cooperation, economic cooperation, and socio-cultural cooperation... for the purpose of ensuring durable peace, stability and shared prosperity in the region

• ASEAN Charter (2007) The ASEAN Charter serves as a firm foundation in achieving the ASEAN Community by

providing legal status and institutional framework for ASEAN. (ASEAN Secretariat)

5 Source: ASEAN Community in Figures 2011

Economic Divide

• The total GDP of ASEAN is about US$2 trillion compared to the EU’s US$16 trillion

• The EU: the ratio between the highest GDP per capita (PPP), Luxembourg, and that of its lowest, Bulgaria, is approximately 7:1 in 2011

• ASEAN: the ratio between the highest GDP per capita, Singapore, and the lowest GDP per capita, Myanmar, is approximately 63:1

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7

Source: ASEAN Community in Figures 2011


9


ASEAN & Trade

• In 2010, trade accounts for 110% of the GDP of ASEAN

• ASEAN economies are very trade dependent

• However, intra-ASEAN trade is only about 25% and is not growing significantly as compared to intra-EC trade which comprised nearly half of members’ trading activity from 1958-1972

• Market Integration is therefore not a major driver of ASEAN Integration

10

What is Traded in ASEAN?


12



Trade in Goods

• Mainly components and raw materials

• Electronics and auto parts

• Palm oil, petrol and rubber

• Tariffs are lowering for most items

• However, agricultural products tend to be still on the Sensitive Lists

• A Single Market but not a Customs Union!

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15


16


17


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ASEAN FDI & Growth

• Low Capital Endowments

• Significant Poverty Rates

• FDI needed for growth and political stability

• Singapore receives about 46% of the FDI (partially can be explained as a hub economy)

• Intra-ASEAN FDI accounts for only about 16% (slowly growing from 7% a decade ago but difficulty unpacking round-tripping and hubbing additions)

• Challenge from China (and to a lesser extent, India) for extra-ASEAN FDI

19

The Legal Divide

The governance systems of ASEAN are very different:

• Active democracies: Indonesia & the Philippines

• One party-dominated democracies: Malaysia & Singapore

• A military dominated presidential republic: Myanmar

• Socialist states: Vietnam & Laos

• Constitutional monarchies: Cambodia & Thailand

• A traditional monarchy: Brunei

20

Transparency International’s Corruption Perception Index (CPI)

21

SCORES OF ASEAN COUNTRIES

Ranking

in

ASEAN

Country Country Ranking CPI Score

2010

(178 countries)

2011

(183 countries)2010 2011

1 Singapore 1 5 9.3 9.2

2 Brunei Darussalam 38 44 5.5 5.2

3 Malaysia 56 60 4.4 4.3

4 Thailand 78 80 3.5 3.4

5 Indonesia 110 100 2.8 3.0

6 Vietnam 116 112 2.7 2.9

7 Philippines 134 129 2.4 2.6

8 Laos 154 154 2.1 2.2

8 Cambodia 154 164 2.1 2.1

9 Myanmar 176 180 1.4 1.5

ASEAN Integration: Is it Integration?

22

Made in the World

23

Source: Meng and Miroudot, based on Xing and Detert (2010)

Production Integration not Market Integration

24

ASEAN IPN for Automobiles

25

Asian not just ASEAN

• Regional Production Networks have since the 1980s been centered around a hub-spoke model.

• In the 1980s it was Japan that was the hub because of its vast MNC network.

• By 2000s, the gravity had shifted to China as the final assembly operation.

26 Source: IDE Jetro

But if “Factory Asia” already exists, why bother with ASEAN Integration? • Theory 1:

• The bicycle theory of trade:

• Activity just to keep things going to avoid falling back to protectionism

27

Life is like a bicycle, to keep your balance you must keep moving – Albert

Einstein

Theory 2: Legalization

• Dieter: “without the creation of a single regulatory sphere [in the EC], the integration processes could not have taken place.”

• Baldwin: East Asian regionalism is “a mess” in that while there is a high level of regional division of labour in the production process, there has been limited legalisation of the process.

• This has resulted in a business environment which is less transparent and less certain than that of Europe but one which is no less productive.

• However, Dieter suggests that the production of automobiles and electronics in East Asia is relatively integrated in practice but is faces protectionism and inconsistent governmental policies.

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Value of Legalization for IPNs

• Less use of “non-transparent discretion” by governments

• Less need to “pick and choose” industries by governments – Porter suggests that they are not suited to make such choices

• AEC Blueprint: free movement of goods, services, skilled labour, and freer movement of capital

• Liberal macro economic policies with some regulatory carve outs

• More attractive environment for FDI and therefore growth and political stability

29

Elements of Legalization

Goldstein, Kahler, Keohane, and Slaughter:

1. Obligation refers to international actors being legally bound by legal rules and procedures, whether international or domestic.

2. Precision means that these rules and procedures define rights and obligations in unambiguous ways.

3. Delegation relates to the grant of authority to third parties, such as courts, arbitrators, and administrative bodies, to interpret and apply rules during dispute settlement.

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When Elephants Fight, the Mouse is Trampled

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• The rise of China and India attracts away FDI from ASEAN

• The Economic Crises – Asian (1998-2000) and now Western

• ASEAN is very dependent on extra-ASEAN trade

• Legalization to create a competitive advantage?

• What institutions? Intergovernmental or Supranational?

Malaysian Historical Salvors v Malaysia (Annulment) (2009)

• Judge Mohamed Shahabuddeen (Dissenting Opinion) • Para 2 - The question which separates me from them is whether a

contribution to the economic development of the host State is a condition of an ICSID “investment.”

• Para 62 - Was the jurisdiction of ICSID meant to be solely dependent on the will of the parties? Or, was it meant to be dependent on the will of the parties subject to conformity with the overriding objectives of ICSID as a body concerned with the economic development of the host State?

• The former may be referred to as the ‘subjectivist’ view, the latter as the ‘objectivist’ view.

• The cleavage marks a titanic struggle between ideas, and correspondingly between capital exporting countries and capital importing ones.

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Increase in Capital Imports and Exports in Selected Countries (USD millions)

Region/

Country

Capital Import Capital Export

2005 2010 Increase 2005 2010 Increase

ASEAN 404,044 938,059 232% 151,458 431,531 285%

Brazil 181,344 472,579 261% 79,259 180,949 228%

China 272,094 578,818 213% 57,206 297,600 520%

India 43,202 197,939 458% 9,741 92,407 949%

Mexico 226,740 327,249 144% 29,641 66,152 223%

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Intra ASEAN IIAs

• 1987 Agreement for the Promotion and Protection of Investments (IGA)

• 1996 Protocol to Amend the 1987 Agreement

• 1997 Accession Agreements of Laos & Myanmar

• 1998 Framework Agreement on the AIA (no ISD)

• 1999 Accession Agreement of Cambodia

• 2009 ASEAN Comprehensive Investment Agreement

– 1987 and 1998 superceded by 2009 ACIA

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ASEAN 1987 Agreement

• Article 1 3. The term "investment" shall mean every kind of asset and in particular

shall include, though not exclusively: a) movable and immovable property and any other proper rights such as

mortages, liens and pledges; b) shares, stocks and debentures of companies or interests in the property of

such companies; c) claims to money or to any performed under contract having a financial value; d) intellectual property rights and goodwill; e) business concessions conferred by law or under contract, including

concessions to search for, cultivative, extract, or exploit natural resources.

• Article X 1. “Any legal dispute arising directly out of an investment between any

Contracting Party and a national or company of any of the other Contracting Parties...”

ASEAN Investment Area Framework Agreement

• Article 2 • This Agreement shall cover all direct investments other than – • (a) portfolio investments; and • (b) matters relating to investments covered by other ASEAN

Agreements, such as the ASEAN Framework Agreement on Services. • Article 12 • 1. Member States affirm their existing rights and obligations under

the 1987 ASEAN Agreement for the Promotion and Protection of Investments and its 1996 Protocol. In the event that this Agreement provides for better or enhanced provisions over the said Agreement and its Protocol, then such provisions of this Agreement shall prevail.

Yaung Chi Oo Trading v Myanmar (Notice of Arbitration – 2000)

1. Who was the “investor”?

2. What was the “investment”?

3. What was the alleged “expropriation”?

4. Which ASEAN Agreement applied to the “investment”?

5. Would the new ASEAN Comprehensive Investment Agreement have changed the decision?

Expropriation?

• Armed seizure between 17 Dec 1997 and 12 January 1998.

• Bank accounts frozen.

• Winding up order of JV company.

• No Board of Directors meetings because Claimant refused to attend meetings.

• Claimant also requested the appointment of a third party to administer JV company.

1987 Agreement

• Article IV(1) - Each Contracting Party shall, within its territory ensure full protection of the investments made in accordance with its legislation by investors of the other Contracting Parties and shall not impair by unjustified or discriminatory measures the management, maintenance, use, enjoyment, extension, disposition or liquidation of such investments.

• Article VI(1) - Investments of nationals or companies of any Contracting Party shall not be subject to expropriation nationalisation or any measure equivalent thereto (in the article referred to as "expropriation"), except for public use, or public purpose, or in the public interest, and-under due process of law, on a non-discriminatory basis and upon payment of adequate compensation. Such compensation shall amount to the market value of the investments affected, immediately before the measure of dispossession became public knowledge and it shall be freely transferable in freely-usable currencies from the host country. The compensation shall be settled and paid without unreasonable delay.

Was there an “investor”?

• YCO Pte Ltd was incorporated in Singapore

• Mdm Win Win Nu was the MD and principal shareholder.

• “Round-trip”?

• “Effective management”?

• But… was there an “investment”?

1987 Agreement Article I

• The term "company" of a Contracting Party shall mean a corporation, partnership or other business association, incorporated or constituted under the laws in force in the territory of any Contracting Party wherein the place of effective management is situated.

Article II 1987 Agreement

1. This Agreement shall apply only to investments brought into, derived from or directly connected with investments brought into the territory of any Contracting Party by nationals or companies of any other Contracting Party and which are specifically approved in writing and registered by the host country and upon such conditions as it deems fit for the purposes of this Agreement.

3. This Agreement shall also apply to investments made prior to its

entry into force, provided such investments are specifically approved in writing and registered by the host country and upon such-conditions as it deems fit for purpose of this Agreement subsequent in its entry into force.

Question: What was the process for approval and registration in

Myanmar for investments?

Art 1 AIA

• “ASEAN investor” means –

• (i) a national of a Member State; or

• (ii) any juridical person of a Member State,

• Making an investment in another Member State, the effective ASEAN equity of which taken cumulatively with all other ASEAN equities fulfills at least the minimum percentage required to meet the national equity requirement and other equity requirements of domestic law and published national policies, if any, of the host country in respect of that investment.

• For the purpose of this definition, equity of nationals or juridical persons of any Member State shall be deemed to be the equity of nationals or juridical persons of the host country.

• “juridical person” means any legal entity duly constituted or otherwise organised under applicable law of a Member State, whether for profit or otherwise and whether privately-owned or governmentally owned, including any corporation, trust, partnership, joint venture, sole proprietorship or association.

Article 8 AIA - MFN

• 1. Subject to Articles 7 and 9 of this Agreement, each Member State shall accord immediately and unconditionally to investors and investments of another Member State, treatment no less favourable than it accords to investors and investments of any other Member State with respect to all measures affecting investment including but not limited to the admission, establishment, acquisition, expansion, management, operation and disposition of investments.

ACIA Article 4

• (c) “investment” [fn.2] means every kind of asset, owned or controlled, by an investor, including but not limited to the following:

• (i) movable and immovable property and other property rights such as mortgages, liens or pledges;

• (ii) shares, stocks, bonds and debentures and any other forms of participation in a juridical person and rights or interest derived therefrom;

• (iii) intellectual property rights which are conferred pursuant to the laws and regulations of each Member State;

• (iv) claims to money or to any contractual performance related to a business and having financial value [fn. 3] ;

• (v) rights under contracts, including turnkey, construction, management, production or revenue-sharing contracts; and

• (vi) business concessions required to conduct economic activities and having financial value conferred by law or under a contract, including any concessions to search, cultivate, extract or exploit natural resources.

• The term “investment” also includes amounts yielded by investments, in particular, profits, interest, capital gains, dividend, royalties and fees. Any alteration of the form in which assets are invested or reinvested shall not affect their classification as investment;

ACIA Article 4

• Fn. 2 Where an asset lacks the characteristics of an investment, that asset is not an investment regardless of the form it may take. The characteristics of an investment include the commitment of capital, the expectation of gain or profit, or the assumption of risk.

• Fn. 3 For greater certainty, investment does not mean claims to money that arise solely from:

• (a) commercial contracts for sale of goods or services; or

• (b) the extension of credit in connection with such commercial contracts.

ACIA Article 4

• (d) “investor” means a natural person of a Member State or a juridical person of a Member State that is making, or has made an investment in the territory of any other Member State;

• (e) “juridical person” means any legal entity duly constituted or otherwise organised under the applicable law of a Member State, whether for profit or otherwise, and whether privately-owned or governmentally-owned, including any enterprise, corporation, trust, partnership, joint venture, sole proprietorship, association, or organisation;

• (g) “natural person” means any natural person possessing the nationality or citizenship of, or right of permanent residence in the Member State in accordance with its laws, regulations and national policies;

ASEAN IIAs

• In 2009, ASEAN countries entered into 4 successive IIAs:

1. ASEAN Comprehensive Investment Agreement (ACIA)

2. ASEAN-AUS-NZ FTA with an Investment Chapter (AANZFTA)

3. ASEAN-China Investment Agreement (ACHIA)

4. ASEAN-Korea Investment Agreement (AKIA)

• These ASEAN IIAs could suggest a convergence towards a rule of law system while recognizing the limitations of their developing administrative processes (in particular):

1. Transparency for Approval in Writing

2. Use of General Exceptions

3. Regulatory Measures not amounting to an Indirect Expropriation.

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2009 ACIA • ARTICLE 47 TRANSITIONAL ARRANGEMENTS RELATING TO THE ASEAN IGA

AND THE AIA AGREEMENT

• 1. Upon the entry into force of this Agreement, the ASEAN IGA and the AIA Agreement shall be terminated.

• 2. Notwithstanding the termination of the AIA Agreement, the Temporary Exclusion List and the Sensitive List to the AIA Agreement shall apply to the liberalisation provisions of the ACIA, mutatis mutandis, until such time that the Reservation List of ACIA comes into force.

• 3. With respect to investments falling within the ambit of this Agreement as well as under the ASEAN IGA, or within the ambit of this Agreement and the AIA Agreement, investors of these investments may choose to apply the provisions, but only in its entirety, of either this Agreement or the ASEAN IGA or the AIA Agreement, as the case may be, for a period of 3 years after the date of termination of the ASEAN IGA and the AIA Agreement.

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TRANSPARENCY FOR APPROVAL IN WRITING

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Article II 1987 ASEAN IIA

1. This Agreement shall apply only to investments brought into, derived from or directly connected with investments brought into the territory of any Contracting Party by nationals or companies of any other Contracting Party and which are specifically approved in writing and registered by the host country and upon such conditions as it deems fit for the purposes of this Agreement.

3. This Agreement shall also apply to investments made prior to its entry into force, provided such investments are specifically approved in writing and registered by the host country and upon such-conditions as it deems fit for purpose of this Agreement subsequent in its entry into force.

• Yaung Chi Oo Trading v Myanmar (2003) • Armed seizure between 17 Dec 1997 and 12 January 1998. • Bank accounts frozen. Winding up order of JV company. • No specific approval in writing given to the investment.

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ASEAN Comprehensive Investment Agreement (ACIA) (2009)

• Article 4 • For the purpose of this Agreement: • (a) “covered investment” means, with respect to a Member State, an

investment in its territory of an investor of any other Member State in existence as of the date of entry into force of this Agreement or established, acquired or expanded thereafter, and has been admitted according to its laws, regulations, and national policies, and where applicable, specifically approved in writing [fn.1] by the competent authority of a Member State;

• Fn 1. For the purpose of protection, the procedures relating to specific approval in writing shall be as specified in Annex 1 (Approval in Writing).

• Note: Mirrored by the AKIA, ACHIA for Thailand to some extent (the only country with the writing requirement). AANZFTA - not reflected for Thailand and Vietnam (the only two countries with the writing requirement).

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ACIA Annex 1: Approval in Writing

• Where specific approval in writing is required for covered investments by a Member State’s domestic laws, regulations and national policies, that Member State shall:

• (a) inform all the other Member States through the ASEAN Secretariat of the contact details of its competent authority responsible for granting such approval;

• (b) in the case of an incomplete application, identify and notify the applicant in writing within 1 month from the date of receipt of such application of all the additional information that is required;

• (c) inform the applicant in writing that the investment has been specifically approved or denied within 4 months from the date of receipt of complete application by the competent authority; and

• (d) in the case an application is denied, inform the applicant in writing of the reasons for such denial. The applicant shall have the opportunity of submitting, at that applicant’s discretion, a new application.

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REGULATORY MEASURES & INDIRECT EXPROPRIATION

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Methanex v US (2005) Part IV Chapter D

• Para 7: But as a matter of general international law, a non-discriminatory

regulation for a public purpose, which is enacted in accordance with due process and, which affects, inter alios, a foreign investor or investment is not deemed expropriatory and compensable unless specific commitments had been given by the regulating government to the then putative foreign investor contemplating investment that the government would refrain from such regulation.

• Para 9: Methanex entered a political economy in which it was widely known, if not notorious, that governmental environmental and health protection institutions at the federal and state level, operating under the vigilant eyes of the media, interested corporations, non-governmental organizations and a politically active electorate, continuously monitored the use and impact of chemical compounds and commonly prohibited or restricted the use of some of those compounds for environmental and/or health reasons.

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Methanex

• Para 10: Methanex entered the United States market aware of and actively participating in this process. It did not enter the United States market because of special representations made to it.

• Hence this case is not like Revere, where specific commitments respecting restraints on certain future regulatory actions were made to induce investors to enter a market and then those commitments were not honoured.

• Para 15: For reasons elaborated here and earlier in this Award, the Tribunal concludes that the California ban was made for a public purpose, was non-discriminatory and was accomplished with due process.

• Hence, Methanex’s central claim under Article 1110(1) of expropriation under one of the three forms of action in that provision fails.

• From the standpoint of international law, the California ban was a lawful regulation and not an expropriation.

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2004 U.S. Model BIT and ACIA on Indirect Expropriation

• Economic impact of measure (US & ACIA).

• Interference with reasonable investment-backed expectation (US) cf. Breach of Government prior binding written commitment to investor (ACIA).

• Character of measure (US & ACIA), including its objective and whether it’s disproportionate to the public purpose referred to previously (only ACIA).

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Article 14 ACIA

• Expropriation and Compensation [fn.9] • 1. A Member State shall not expropriate or nationalise a covered

investment either directly or through measures equivalent to expropriation or nationalisation (“expropriation”), except:10

• (a) for a public purpose • (b) in a non-discriminatory manner; • (c) on payment of prompt, adequate, and effective compensation; and • (d) in accordance with due process of law. • Fn.9 This Article shall be read with Annex 2 (Expropriation and

Compensation)

• Note: The ACIA and AANZFTA both include an Expropriation Annex that further elaborates on certain expropriation principles. The Parties to the AKIA agreed to enter into discussion on an Expropriation Annex within five years of the date of entry into force unless the Parties agreed otherwise.

• ACHIA does not have an Annex but replaces “due process of law” with “applicable domestic laws including legal procedures” 58

ACIA Annex 2: Expropriation and Compensation

• 1. An action or a series of related actions by a Member State cannot

constitute an expropriation unless it interferes with a tangible or intangible property right or property interest in a covered investment.

• 2. Article 14(1) addresses two situations:

• (a) the first situation is where an investment is nationalised or otherwise directly expropriated through formal transfer of title or outright seizure; and

• (b) the second situation is where an action or series of related actions by a Member State has an effect equivalent to direct expropriation without formal transfer of title or outright seizure.

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ACIA Annex 2

• 3. The determination of whether an action or series of actions by a Member State, in a specific fact situation, constitutes an expropriation of the type referred to in sub-paragraph 2(b), requires a case-by-case, fact-based inquiry that considers, among other factors:

• (a) the economic impact of the government action, although the fact that an action or series of actions by a Member State has an adverse effect on the economic value of an investment, standing alone, does not establish that such an expropriation has occurred;

• (b) whether the government action breaches the government’s prior binding written commitment to the investor whether by contract, licence or other legal document; and

• (c) the character of the government action, including, its objective and whether the action is disproportionate to the public purpose referred to in Article 14(1).

• 4. Non-discriminatory measures of a Member State that are designed and applied to protect legitimate public welfare objectives, such as public health, safety and the environment, do not constitute an expropriation of the type referred to in sub-paragraph 2(b).

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ASEAN Comprehensive Investment Agreement

• Article 11 Treatment of Investment

1. Each Member State shall accord to covered investments of investors of any other Member State, fair and equitable treatment and full protection and security.

2. For greater certainty

(a) fair and equitable treatment requires each Member State not to deny justice in any legal or administrative proceedings in accordance with the principle of due process; and

(b) Full protection and security requires each Member State to take such measures as may be reasonably necessary to ensure the protection and security of the covered investments.

3. A determination that there has been a breach of another provision of this Agreement, or of a separate international agreement, does not establish that there has been a breach of this Article.

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USE OF GENERAL EXCEPTIONS

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US Argentina BIT (signed 1991, entry into force 1994)

• ARTICLE XI

• This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the Protection of its own essential security interests.

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Recent Argentinean Cases on Interpretation of Exception Clauses • CMS, Sempra & Enron – A.XI of the US-Argentina BIT “necessary”

means the customary international law standard of “necessity” being the “only way” for the State to safeguard an essential interest

• CMS, Sempra & Enron (annulments) – “only way” requires factual findings of the measure’s “reasonableness”

• LG&E – Argentina could invoke A.XI – while there were different ways to draft the economic recovery plan, there were no other ways to respond to the crisis (factual finding)

• Continental – WTO GATT A.XX (GATS A.XIV?) test of necessity applied - balancing test of whether there were reasonable alternatives less in conflict with the obligations that could achieve the reasonable objective

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1987 and 1998 ASEAN IIA

1987 IGA

• ARTICLE V EXCEPTION

• The Provision of this Agreement shall not apply to matters of taxation in the territory of the Contracting Parties. Such matters shall be governed by Avoidance of Double Taxation between Contracting Parties and the domestic laws of each Contracting Party.

1998 AIA

• ARTICLE 13 GENERAL EXCEPTIONS (similar to WTO GATT Art XX)

• ARTICLE 14 EMERGENCY SAFEGUARD MEASURES

• ARTICLE 15 MEASURES TO SAFEGUARD THE BALANCE OF PAYMENTS

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Article 17 ACIA General Exceptions

• 1. Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between Member States or their investors where like conditions prevail, or a disguised restriction on investors of any other Member State and their investments, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member State of measures:

• (a) necessary to protect public morals or to maintain public order; [fn.12]

• (b) necessary to protect human, animal or plant life or health; • Fn.12 The public order exception may be invoked by a Member State only where a

genuine and sufficiently serious threat is posed to one of the fundamental interests of society.

• Note: All ASEAN IIAs except the AANZFTA have included this General Exception

Clause.

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WTO Exceptions and ACIA

• General Exceptions “public order” (GATS Art XIV) (replicated in ACIA A.7)

• IMF Fund Request (GATS Art XI:2) (replicated in ACIA A.13)

• Safeguard BoP (GATS Art XII) (replicated in ACIA A. 16)

• For Financial Services in GATS Financial Services Annex (incorporated in ACIA by reference):

– “measures for prudential reasons… to ensure the integrity and stability of the financial system”

– Note the absence of a “necessary” requirement like that found in GATS Art XIV.

– (Q: Self-judging? Good faith? Reasonable?)

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DISPUTE SETTLEMENT

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Elements ASEAN Agreement for the Promotion

and Protection of Investments (ASEAN

IGA) (1987)

Framework Agreement on ASEAN

Investment Area (AIA) (1998)

ASEAN Comprehensive Investment

Agreement (ACIA) (2009)

Entry into force 1989 1999 March 2012

Dispute settlement between the

Contracting Parties

Covered by the ASEAN Protocol on

Enhanced Dispute Settlement

Mechanism (Annex I APEDSM)

Directly refers to the Protocol on

Dispute Settlement Mechanism for

ASEAN as amended by the ASEAN

Protocol on Enhanced Dispute

Settlement Mechanism (Article 17(1)

AIA and Annex I APEDSM)

Refers to APEDSM (Article 27 ACIA and

Annex I of APEDSM)

1. Scope of Dispute Covered Any dispute concerning the

interpretation or application of this

Agreement (Article 9 ASEAN IGA)

Dispute arising from, or any differences

between Member States concerning

the interpretation or application of this

Agreement or any arrangement arising

therefrom (Article 17 (1) AIA)

Interpretation or application of the

Agreement (Article 27 ACIA)

2. Method of Settlement 1. Consultation must be done to

reach amicable settlement.

2. Where consultation fails to settle

the dispute, the matter maybe

raised to Senior Economic

Officials Meeting (SEOM) if the

complaining party wishes to

request for a panel. An appeal to

the panel’s decision can be made

to the Appellate Body which shall

be established by the ASEAN

Economic Ministers (“AEM”)

Good offices, conciliation or mediation

may be done at any stage of the

dispute until when the panel

process proceeds (Article 4

APEDSM)

APEDSM

APEDSM

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Elements ASEAN Agreement for the Promotion and Protection of

Investments (ASEAN IGA) (1987)

ASEAN Comprehensive Investment Agreement

(ACIA) (2009)

Dispute Settlement between a Contracting

Party and a national or company of any of

other Contracting Parties

1. Scope of Dispute Covered Any legal dispute arising directly out of an investment

(Article IX).

An investment dispute between a Member State and

an investor of another Member State that has

incurred loss or damage by reason of an alleged

breach of any rights conferred by this Agreement

with respect to the investment of that investor

(Article 29(1) ACIA), namely either the following

articles: 5 (NT), 6 (MFN Treatment), 8 (SMBD), 11

(Treatment of Investment), 12 (Compensation in

Cases of Strife), 13 (Transfers), and 14 (Expropriation

and compensation, and that there has been loss or

damage incurred to the covered investment due to

that breach.

Carved out claims arising from events which

occurred, or claims which have been raised prior to

the entry into force of the Agreement (Article 29 (3)

ACIA).

2. Method of Settlement Amicable settlement. If not settled. 1. Disputing parties must initially seek to resolve

the dispute through consultation and

negotiation. The investor must submit a

written request for consultations to the

Member State (Article 31 ACIA).

2. Conciliation is allowed at any time (Article 30

ACIA).

3. Cooling-off period 6 months of its being raised 180 days of the receipt by a dispute Member State

of a request for consultations (Article 32 ACIA).

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Elements ASEAN Agreement for the Promotion and

Protection of Investments (ASEAN IGA) (1987)

ASEAN Comprehensive Investment

Agreement (ACIA) (2009)

Dispute Settlement between a

Contracting Party and a national or

company of any of other Contracting

Parties

4. Choice of Submission of Claim

where amicable settlement

does not work.

Either party can select to submit the dispute

for conciliation or arbitration and such election

shall be binding on the other party.

Choice of the investor (provided that resort

to any arbitration rules or fora […] shall

exclude resort to the other) Either:

1.The courts or administrative tribunals of

the disputing Member State, provided that

such courts or tribunals have jurisdiction

over such claims; or

2.ICSID, provided that both the host state

and the home state are parties to the ICSID

Convention; or

3.ICSID Additional Facility Rules, provided

that either the host state or the home state

is a part to the ICSID Convention; or

4.UNCITRAL Arbitration Rules; or

5.Regional Centre for Arbitration in Kuala

Lumpur or any other regional centre for

arbitration in ASEAN; or

6.any other arbitration institution as agreed

by the parties to the dispute.

5. Choice of Arbitration Forum 1) ICSID,

2) Ad hoc following the rule of UNCITRAL,

3) Regional Center of Arbitration in KL, or

4) any other arbitration center or bodies

which the parties mutually agree to

appoint.

71

Conclusion

• ASEAN IIAs seem to be creating a “lex mercatoria” for investments in Asia because of the ASEAN hub.

• These provisions guard the sovereign’s right to regulate while circumscribing the parameters within which the host State may regulate.

• They attempt to balance the interests of the investors with the interest of states with limited administrative capacity.

• Rule of Law or Rule by Law?

72

Investor Centric Process

• Concierge?

• EDB

• Reform?

• Committees

• One Stop?

• EDB

• Feedback?

• Online

HOW

to amend regulations?

WHO

does the Investor

Approach?

WHAT

help can be offered to Investors?

WHY

are some regulations

in place?

73

Attract Regulate

Respond

Explain

Documents

ISSUES IN ASEAN INVESTMENT LAW · A Brief History of ASEAN • All were colonies (with the exception of Thailand) • Independence after WW II (most in the 1950-60s) • 1963-1966