Each Party reaffirms the importance of encouraging enterprises operating within its territory to voluntarily incorporate into their internal policies those internationally recognized standards, guidelines, and principles of corporate social responsibility that have been endorsed or are supported by that Party.
Article 7.19. Investor-State Dispute Settlement
1. This Article shall apply to investment disputes between a Party and an investor of the other Party concerning an alleged breach of Article 7.4, Article 7.5, Article 7.6, Article 7.7, Article 7.9, Article 7.11 and Article 7.12 which causes loss or damage by reason of, or arising out of, that breach to:
(a) the investor in relation to its covered investments; or
(b) the covered investment that has been made by that investor, relating to the management, conduct, operation or sale or other disposition of a covered investment.
2. An investment may not make a claim under this Article.
3. Without prejudice to the scope of any applicable exceptions, non-conforming measures, principles of international law or the disputing Party's ability to rely on such exceptions, non-conforming measures or principles of international law during the proceedings, no claim may be brought under this Article:
(a) in relation to an alleged breach of Most-Favored-Nation treatment as referred to in Article 7.5 on the basis that another international agreement contains more favorable rights or obligations. For greater certainty, this shall not prevent a claim challenging measures of a Party, including measures taken pursuant to another international agreement, on the basis that those measures breach Article 7.5 and have resulted in loss or damage to the disputing investor;
(b) in relation to a measure that is designed and implemented to protect or promote public health; (27)
(c) in relation to an investment that has been established through illegal conduct including fraudulent misrepresentation, concealment or corruption. For greater certainty, this exclusion does not apply to investments established through minor or technical breaches of law;
(d) in relation to investment disputes which have occurred prior to the entry into force of this Agreement;
(e) if the claim is frivolous or manifestly without merit;
(f) by a natural person possessing the nationality or citizenship of a disputing Party.
4. In the event of an investment dispute arising under this Article, the disputing parties shall as far as possible resolve the dispute through consultation and negotiation, a request of which shall be made in writing, with a view towards reaching an amicable settlement.
5. The written request for consultations shall contain information regarding the legal and factual basis for the investment dispute, including the name and address of the disputing investor, the provisions of this Agreement alleged to have been breached, the relief sought and the estimated amount of damages claimed, and evidence establishing that the claimant is an investor of the other Party and that it owns or controls the investments.
6. In the case that consultations take place in accordance with this Article, the consultations shall commence, unless the disputing parties agree to a longer period, within 60 days of the submission of the request for consultations. The place of consultation shall be Seoul where the disputing Party is Korea or Jakarta where the disputing Party is Indonesia.
7. If the dispute cannot be resolved within 180 days from the receipt by the disputing Party of the written request for consultations, the disputing Party may initiate a mediation process, which shall be mandatory for the disputing investor, with a view towards reaching an amicable setilement. Such a mediation process shall be initiated by a written request delivered by the disputing Party to the disputing investor.
8. The mediation process under this Article can only be initiated by a written request delivered by the disputing Party within 180 days from the receipt by the disputing Party of the written request for consultations.
9. Expenses incurred in relation to the mediation process shall be borne equally by the disputing parties. Each disputing party shall bear its own legal expenses.
10. Any such dispute which has not been resolved by consultations in accordance with paragraph 5 and paragraph 6 or by mediation in accordance with paragraph 7 to paragraph 9 may be submitted to the courts or administrative tribunals of the disputing Party provided that such courts or tribunals have jurisdictions over such claims or to arbitration. In the latter event, the investor has the choice among any of the following:
(a) the ICSID Convention and the ICSID Rules of Procedure for Arbitration Proceedings, provided that both the disputing Party and the non-disputing Party are parties to the ICSID Convention;
(b) the ICSID Additional Facility Rules, provided that either the disputing Party or the non-disputing Party, but not both, is a party to the ICSID Convention;
(c) the UNCITRAL Arbitration Rules; or
(d) any other arbitration institution or any other arbitration rules, if the disputing parties so agree.
11. The applicable arbitration rules shall govern the arbitration set forth in paragraph 10 unless they are modified by this Article.
12. Once the investor has submitted the dispute to either the courts or administrative tribunals of the disputing Party or any of the arbitration mechanisms provided for in paragraph 10, the choice of forum shall be final.
13. The submission of a dispute to arbitration under paragraph 10 shall be conditional upon:
(a) the submission of the dispute to such arbitration taking place within three years and six months of the time at which the disputing investor become aware, or should reasonably have become aware, of a breach of an obligation under this Agreement and, of the loss or damage incurred by the disputing investor in relation to its covered investment or by the covered investment;
(b) the disputing investor providing written notice, which shall be delivered at least 90 days before the claim to arbitration is submitted, to the disputing Party of its intent to submit the dispute to such arbitration and which:
(i) states the name and address of the disputing investor and the covered investment;
(ii) nominates one of the fora in paragraph 10(a), (b), (c), or (d) as the forum for dispute settlement;
(iii) waives its right to initiate any proceedings, before any of the other dispute settlement procedures referred to in paragraph 10 in relation to the matter under dispute; and
(iv) briefly summaries the alleged breach of the disputing Party under this Agreement (including the articles alleged to have been breached) and the loss or damage allegedly caused to the investor in relation to its covered investment or caused to the covered investment; or
(c) the disputing parties spending at least 120 days on that process and the disputing investor providing written notice, which shall be delivered at least 60 days before the claim to arbitration is submitted, to the disputing Party of its intent to submit the dispute to such arbitration and which specifies the information referred to paragraph 13(b), should the disputing Party initiate a mediation process in accordance with paragraph 7.
14. Notwithstanding paragraph 13(b), the disputing investor may initiate or continue an action that seeks interim injunctive relief and does not involve the payment of monetary damages or resolution of the substance of the matter in dispute before a court or administrative tribunals of the disputing Party, provided that the action is brought for the sole purpose of preserving the disputing investor's rights and interests during the pendency of the arbitration.
15. An investor of a Party may not initiate or continue a claim under this Article if a claim involving the same measure or measures alleged to constitute a breach under paragraph 1 and arising from the same events or circumstances is initiated or continued pursuant to an agreement between the disputing Party and a non-Party by:
(a) a person of a non-Party that owns or controls, directly or indirectly, the investor of a Party; or
(b) a person of a non-Party that is owned or controlled, directly or indirectly, by the investor of a Party.
16. Each Party consents to the submission of a claim to arbitration under this Article in accordance with this Agreement. The consent and the submission of a claim to arbitration under this Article shall be deemed to satisfy the requirement of:
(a) Chapter II of the ICSID Convention (Jurisdiction of the Centre) and the ICSID Additional Facility Rules for written consent of the parties to the dispute; and
(b) Article II of the New York Convention for an "agreement in writing".
17. The arbitral tribunal established under paragraph 10 shall decide the issues in dispute in accordance with this Agreement, any relevant rules of international law applicable in the relations between the Parties and, if applicable, any relevant domestic law of the disputing Party when it is relevant to the claim as a matter of fact.
18. If issues relating to jurisdiction or admissibility are raised as preliminary objections, the tribunal shall decide the matter before proceeding to the merits. The disputing parties shall be given a reasonable opportunity to present their views and observations to the tribunal. If the tribunal decides that the claim is manifestly without merit, or is otherwise not within the jurisdiction or competence of the tribunal, it shall render an award to that effect.
19. Unless the disputing parties otherwise agree, the arbitral tribunal shall comprise three arbitrators, one arbitrator appointed by cach of the disputing parties and the third, who shall be the presiding arbitrator, appointed by agreement of the disputing parties. If a tribunal has not been constituted within 75 days from the date a claim is submitted to arbitration under this Article, the Appointing Authority (28), at the request of a disputing party, shall appoint, in his or her discretion, the arbitrator or arbitrators not yet appointed. The Appointing Authority shall not appoint a national of cither Party as the presiding arbitrator, unless the disputing parties otherwise agree.
20. Arbitrators shall have expertise or experience in public international law, international trade or international investment rules and be independent of, and not be affiliated with or take instructions from the disputing Party, the non-disputing Party or disputing investor.
21. For purposes of Article 39 of the ICSID Convention and Article 7 of Schedule C to the ICSID Additional Facility Rules, and without prejudice to an objection to an arbitrator on a ground other than nationality:
(a) the disputing Party agrees to the appointment of each individual member of a tribunal established under the ICSID Convention or the ICSID Additional Facility Rules;
(b) the disputing investor may submit a claim to arbitration under this Article, or continue a claim, under the ICSID Convention or the ICSID Additional Facility Rules, only on condition that the disputing investor agrees in writing to the appointment of each individual member of the tribunal.
22. Unless the disputing parties otherwise agree, the tribunal shall determine the place of arbitration in accordance with the applicable arbitration rules, provided that the place shall be in the territory of a State that is a party to the New York Convention.
23. Subject to subparagraphs (a) and (b), the disputing parties shall make publicly available all awards and decisions produced by the tribunal.
(a) Any of the disputing parties that intend to use information designated as confidential information in a hearing shall so advise the tribunal. The tribunal shall make appropriate arrangements to protect the information from disclosure.
(b) Any information specifically designated as confidential that is submitted to the tribunal or the disputing parties shall be protected from disclosure to the public.
24. A disputing party may disclose to persons directly connected with the arbitral proceeding such confidential information as it considers necessary for the preparation of its case, but it shall require such confidential information is protected.
25. The tribunal shall not require a Party to furnish or allow access to information the disclosure of which would impede law enforcement or would be contrary to the Party's law or which it determines to be contrary to its essential security.
26. The non-disputing Party shall be entitled, at its cost, to receive from the disputing Party a copy of the notice of arbitration, no later than 30 days after the date that such document has been delivered to the disputing Party. The disputing Party shall notify the other Party of the receipt of the notice of arbitration within 30 days thereof.
27. The disputing Party may not assert as a defense, counter-claim, right of set-off or for any other reason, that the disputing investor has received or will receive indemnification or other compensation for all or part of the alleged damages pursuant to an insurance or guarantee contract, except with respect to any subrogation as provided for in Article 7.13.
28. If a tribunal makes a final award against cither of the disputing parties, the tribunal may award, separately or in combination only:
(a) monetary damages and any applicable interest; and
(b) restitution of property, in which case the award shall provide that the disputing Party may pay monetary damages and any applicable interest in lieu of restitution.
29, A tribunal may also award costs and attorney's fees in accordance with this Article and the applicable arbitration rules.
30. A Party shall not give diplomatic protection, or bring an international claim, in respect of a dispute which one of its investors and the other Party have submitted to arbitration under this Article, unless the other Party has failed to abide by and comply with the award rendered in such dispute. Diplomatic protection, for purposes of this paragraph, shall not include informal diplomatic exchanges for the sole purpose of facilitating a settlement of the dispute.
31. An award made by a tribunal shall be final and binding upon the disputing parties. An award shall have no binding force except between the disputing parties and in respect of the particular case.
32. Subject to paragraph 33 and the applicable review procedure for an interim award, a disputing party shall abide by and comply with an award without delay.
33. A disputing party shall not seek enforcement of a final award until:
(a) in the case of a final award made under the ICSID Convention,
(i) 120 days have elapsed from the date the award was rendered and no disputing party has requested revision or annulment of the award; or
(ii) revision or annulment proceedings have been completed; or
(b) in the case of a final award under the ICSID Additional Facility Rules, the UNCITRAL Arbitration Rules, or the rules selected pursuant to paragraph 10(d),
(i) 90 days have elapsed from the date the award was rendered and no disputing party has commenced a proceeding to revise, set aside, or annul the award; or
(ii) a court has dismissed or allowed an application to revise, set aside, or annul the award and there is no further appeal.
34. Each Party shall provide for the enforcement of an award in its territory.
Annex 7-A. Customary International Law
The Parties confirm their shared understanding that "customary international law" generally and as specifically referenced in Article 7.6, including in relation to the customary international law minimum standard of treatment, results from a general and consistent practice of States that they follow from a sense of legal obligation.
Annex 7-B. Expropriation
The Parties confirm their shared understanding that:
1. An action or a series of actions by a Party cannot constitute an expropriation unless it interferes with a tangible or intangible property right in an investment.
2. Article 7.12.1 addresses two situations. The first is direct expropriation, where an investment is nationalized or otherwise directly expropriated through formal transfer of title or outright seizure.
3. The second situation addressed by Article 7.12.1 is indirect expropriation, where an action or series of actions by a Party has an effect equivalent to direct expropriation without formal transfer of title or outright seizure.
(a) The determination of whether an action or series of actions by a Party, in a specific fact situation, constitutes an indirect expropriation, requires a case-by-case, fact-based inquiry that considers, among other factors:
(i) the economic impact of the government action, although the fact that an action or series of actions by a Party has an adverse effect on the economic value of an investment, standing alone, does not establish that an indirect expropriation has occurred;
(ii) the extent to which the government action interferes with distinct, reasonable investment-backed expectations (29); and
(iii) the character of the government action, including its objectives, context and whether the action is disproportionate to the public purpose (30).
(b) Non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, the environment, and real estate price stabilization do not constitute indirect expropriations (31).
Annex 7-C. Temporary Safeguard Measures
1. Nothing in this Chapter, Chapter Six (Trade in Services), or Annex 6-A (Financial Services) shall be construed to prevent a Party from adopting or maintaining temporary safeguard measures with regard to transfer, including payment and capital movements, or restrictions on trade in services on which it has undertaken specific commitments:
(a) in the event of serious balance of payments and external financial difficulties or under threat thereof; or
(b) in cases where, in exceptional circumstances, payments and capital movements cause or threaten to cause serious economic or financial disturbance or serious difficulties for the operation of monetary or exchange rate policies in the Party concerned (32).
2. The measures referred to in paragraph 1:
(a) are in effect for a period not to exceed one year, and can be renewed should the conditions in paragraph 1 continue to exist;
(b) are not confiscatory;
(c) do not constitute a dual or multiple exchange rate practice;
(d) shall not be adopted or maintained solely for purpose of affecting investor's ability to earn a market rate of return in the territory of the Party (33),
(e) shall be consistent with the Articles of Agreement of the International Monetary Fund, as may be amended;
(f) avoid unnecessary damage to the commercial, economic and financial interests of the other Party;
(g) avoid unnecessary damage to investors and covered investments of the other Party;
(h) shall not exceed those necessary to deal with the circumstances described in paragraph 1;
(i) are temporary and phased out progressively as the situation specified in paragraph 1 improves;
(j) are applied in a manner consistent with a non-discriminatory basis such that no Party is treated less favorably than a non-Party, and on a national treatment basis; and
(k) shall be promptly notified to the other Party. Nothing in this Chapter, Chapter Six (Trade in Services), or Annex 6-A (Financial Services) shall be regarded as altering the rights enjoyed and obligation undertaken by a Party as a party to the Articles of Agreement of the International Monetary Fund.
Chapter 8. ECONOMIC COOPERATION
Article 8.1. Basic Principles
1. Recognizing the importance of economic cooperation under this Agreement, the Parties shall promote cooperation in areas of mutual interest, taking into account the different levels of development and capacity of the Parties. Special focus should be given to building capacity which will enhance economic complementarities to deepen and expand the Parties' roles in regional and global value chains.
2. To promote and facilitate the implementation of economic cooperation under this Agreement, the Parties shall undertake coordination between their respective governments and, where necessary and appropriate, encourage and facilitate cooperation where one or both sides are entities other than the governments of the Parties. Based on mutual benefits of the Parties towards the cooperative sectors in which the Parties have mutual interests, the Parties will cooperate on appropriate forms of activities.
3. Reaffirming the value of ongoing economic cooperation initiatives between the Parties, the Parties shall respect and continue their existing economic cooperation under frameworks other than this Agreement and shall ensure that there will be no duplication of work or activities.
4. The Parties acknowledge the provisions to encourage and facilitate economic cooperation as provided for in this Agreement in accordance with their respective domestic laws and regulations.
Article 8.2. Sectors for Cooperation
1. The Parties, on the basis of mutual benefits, shall explore and undertake cooperative activities.
2. Sectors related to industry may include:
(a) automotive;
(b) steel and metal;
(c) chemicals;
(d) information and communication technology;
(e) electronics;
(f) machinery;
(g) garment, textiles and apparel;
(h) ships;
(i) aircrafts;
(j) food and beverages; and
(k) other sectors of cooperation as may be agreed by the Parties.
3. Sectors related to agriculture, fishery and forestry may include:
(a) livestock and crop production;
(b) improvement of investment conditions in the fields of fisheries and forestry;
(c) satisfying the needs of investors in fisheries and forestry sectors in accordance with each Party’s relevant domestic laws and regulations;
(d) forest management;
(e) agro-based and food processing; and
(f) other sectors of cooperation as may be agreed by the Parties.
4. Sectors related to rules and procedures for trade may include:
(a) standards, technical regulations and conformity assessment procedures;
(b) sanitary and phytosanitary;
(c) customs procedures;
(d) rules of origin and other aspects of implementation of tariff commitments;
(e) intellectual property; and
(f) other sectors of cooperation as may be agreed by the Parties.
5. Sectors related to movement of natural persons (MNP) may include:
(a) Professionals; and
(b) Trainee.
6. Other areas for cooperation may include:
(a) supporting policy for small and medium-sized enterprises;
(b) statistics;
(c) fair competition;
(d) infrastructure;
(e) investment;
(f) science, technology and innovation;