Title

AGREEMENT ON INVESTMENT UNDER THE FRAMEWORK AGREEMENT ESTABLISHING A FREE TRADE AREA BETWEEN THE REPUBLIC OF KOREA AND THE REPUBLIC OF TURKEY

PREAMBLE

Preamble

The Republic of Korea and the Republic of Turkey (hereinafter referred to as "the Parties" or "Korea" or "Turkey", where appropriate);

RECALLING the Framework Agreement Establishing a Free Trade Area between the Republic of Korea and the Republic of Turkey (hereinafter referred to as the "Framework Agreement") entered into force on the 1 st day of May 2013;

FURTHER RECALLING Articles 1.4 (Relation with Other Agreements) and 1.5 (Liberalization) of the Framework Agreement, which reflect their commitment to establish the Korea-Turkey Free Trade Area covering investment;

NOTING the objectives of the Framework Agreement to enhance economic cooperation and deepen economic integration between Korea and Turkey through liberalization of investment;

STRIVING TO enhance cooperation in investment between Korea and Turkey in order to improve transparency and predictability; and

RECOGNIZING the need to promote and protect bilateral investments, which will be made with the aim of establishing lasting economic relations, contributing to economic development, and fostering the flow of capital and technology between the Parties, and to increase their economic prosperity;

HAVE AGREED as follows:

Body

Section A. Definitions

Article 1.1. DEFINITIONS

1. For purposes of this Agreement:

Covered investment means, with respect to a Party, an investment, as defined in this Article, in its territory, of an investor of the other Party that is in existence as of the date of entry into force of this Agreement or established, acquired or expanded thereafter;

Disputing parties means a disputing investor and a disputing Party;

Disputing Party means a Party against which a claim is made under Article 1.17 (Investor-State Dispute Settlement);

Framework Agreement means the Framework Agreement Establishing a Free Trade Area between the Republic of Korea and the Republic of Turkey;

Freely usable currency means any currency designated as such by the International Monetary Fund (IMF) under its Articles of Agreement and any amendments thereto;

ICSID Additional Facility Rules means the Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the International Centre for Settlement of Investment Disputes;

ICSID Convention means the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965;

Joint Committee means the Joint Committee established under Article 7.1 (Joint Committee) of the Framework Agreement;

Investment means every kind of asset that an investor owns or controls and that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, the assumption of risk, or a certain duration. Forms that an investment may take include:

(a) an enterprise;

(b) shares, stock, and other forms of equity participation in an enterprise;

(c) bonds, debentures, loans, and other debt instruments of an enterprise; (1) 

(d) turnkey, construction, management, production, concession, revenue-sharing, and other similar contracts;

(e) intellectual property rights;

(f) licenses, authorizations, permits, and similar rights conferred pursuant to domestic law; (2) (3) and

(g) other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens, and pledges. (4)

For purposes of this Agreement, a claim to payment that arises solely from the commercial sale of goods and services is not an investment, unless it is a loan that has the characteristics of an investment;

Investor of a non-Party means, with respect to a Party, an investor that attempts to make, is making, or has made an investment in the territory of that Party, that is not an investor of either Party;

Investor of a Party means a Party or state enterprise thereof, or a national or an enterprise of a Party, that attempts to make, is making, or has made an investment in the territory of the other Party; provided, however, that a natural person who is a dual national shall be deemed to be exclusively a national of the State of his or her dominant and effective nationality;

Enterprise means any entity constituted or organized under applicable law, whether or not for profit, and whether privately or governmentally owned or controlled, including any corporation, trust, partnership, sole proprietorship, joint venture, association or other similar organization, and a branch (5) of an enterprise;

Enterprise of a Party means an enterprise constituted or organized under the domestic law of each Party, and a branch located in the territory of a Party and carrying out business activities there;

Non-disputing Party means the Party that is not a party to an investment dispute;

Protected information means confidential business information or information that is privileged or otherwise protected from disclosure under the domestic law of each Party; and

UNCITRAL Arbitration Rules means the arbitration rules of the United Nations Commission on International Trade Law approved by the United Nations General Assembly on December 15, 1976, as revised in 2010;

2. The definitions contained in Article 1.3 (General Definitions) of the Framework Agreement shall apply for the purposes of this Agreement.

Section B. Investment

Article 1.2. SCOPE AND COVERAGE

1. This Agreement shall apply to measures adopted or maintained by a Party relating to:

(a) investors of the other Party;

(b) covered investments; and

(c) with respect to Articles 1.8 (Performance Requirements) and 1.16 (Environmental and Health Measures), all investments in the territory of the Party.

2. This Agreement substitutes and replaces the Agreement between the government of the Republic of Korea and the government of the Republic of Turkey concerning the Reciprocal Promotion and Protection of Investments, signed on May 14, 1991 in Seoul, which will be terminated on the date of entry into force of this Agreement. The disputes submitted to arbitration after the date of the entry into force of this Agreement shall be settled in accordance with the provisions of this Agreement.

3. For greater certainty, this Agreement does not bind either Party in relation to any act or fact that took place or any situation that ceased to exist before the date of entry into force of this Agreement. 4 5

4. For purposes of this Agreement, measures adopted or maintained by a Party means measures adopted or maintained by:

(a) central, regional, or local governments and authorities; and

(b) non-governmental bodies in the exercise of powers delegated by central, regional, or local governments or authorities.

5. This Agreement does not apply to:

(a) government procurement;

(b) subsidies or grants provided by a Party or to any conditions attached to the receipt or continued receipt of such subsidies or grants except for Articles 1.8 (Performance Requirements) and 1.17 (Investor-State Dispute Settlement),

Whether or not such subsidies or grants are offered exclusively to domestic investors and investments; or

(c) measures adopted or maintained by a Party affecting the supply of services by a service supplier of the other Party through commercial presence (6) in its territory pursuant to the Agreement on Trade in Services regardless of whether or not specific services sectors (7) are scheduled in the Party's Schedule of Specific Commitments in Annex D of the Agreement on Trade in Services.

6. Notwithstanding paragraph 5(c), Articles 1.6 (Minimum Standard of Treatment), 1.7 (Compensation for Losses), 1.11 (Transfers), 1.12 (Expropriation and Compensation), 1.13 (Subrogation), 1.17 (Investor-State Dispute Settlement), (8) and 1.21 (Duration) shall apply, mutatis mutandis, to any measure affecting the supply of service by a service supplier of a Party through commercial presence in the territory of the other Party pursuant to the Agreement on Trade in Services, only to the extent that they relate to a covered investment.

Article 1.3. RELATION TO OTHER AGREEMENTS

1. In the event of any inconsistency between this Agreement and another Agreement under the Framework Agreement, the other Agreement shall prevail to the extent of the inconsistency.

2. A requirement by a Party that a service supplier of the other Party post a bond or other form of financial security as a condition of the cross-border supply of a service does not of itself make this Agreement applicable to measures adopted or maintained by the Party relating to such cross-border supply of the service. This Agreement applies to measures adopted or maintained by the Party relating to the posted bond or financial security, to the extent that such bond or financial security is a covered investment.

3. This Agreement shall not apply to measures adopted or maintained by a Party to the extent that they are covered by Annex C (Financial Services) of the Agreement on Trade in Services.

Article 1.4. NATIONAL TREATMENT

1. Each Party shall accord to investors of the other Party, and to covered investments of investors of the other Party, treatment no less favorable than that it accords, in like

6 For the purposes of this Agreement, "services" and "commercial presence" shall have the same meaning as in paragraphs 1 (a) and 1(l) of Article 1.2 (Definitions) of the Agreement on Trade in Services.

7 For the purposes of the relationship between the Agreement on Trade in Services and the Agreement on Investment, the Parties confirm that services encompass any service in any sector including, but not limited to those classified in service sectors, subsectors and activities under the Services Sectoral Classification List of the WTO contained in the document MTN.GNS/W/120, dated July 10, 1991.

8 For greater certainty, Article 1.17 (Investor-State Dispute Settlement) applies to investment disputes, in relation to such covered investments, between a Party and an investor of the other Party concerning an alleged breach of an obligation solely under the Articles referred to in this paragraph except for Article 1.21 (Duration).

Circumstances, to its own investors and investments with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory.

2. The treatment to be accorded by a Party under paragraph 1 means, with respect to a regional level of government, treatment no less favorable than the most favorable treatment accorded, in like circumstances, by that regional level of government to investors, and to investments of investors, of the Party of which it forms a part.

Article 1.5. MOST-FAVORED-NATION TREATMENT (9)

1. Each Party shall accord to investors of the other Party treatment no less favorable than that it accords, in like circumstances, to investors of any non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments in its territory.

2. Each Party shall accord to covered investments treatment no less favorable than that it accords, in like circumstances, to investments in its territory of investors of any non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments.

Article 1.6. Minimum Standard of Treatment (10)

1. Each Party shall accord to covered investments treatment in accordance with customary international law, including fair and equitable treatment and full protection and security.

2. For greater certainty, paragraph 1 prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to covered investments. The concepts of "fair and equitable treatment" and "full protection and security" do not require treatment in addition to or beyond that which is required by that standard, and do not create additional substantive rights. The obligation in paragraph 1 to provide:

(a) "fair and equitable treatment" includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world; and

(b) "full protection and security" requires each Party to provide the level of police protection required under customary international law.

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.

Article 1.7. Compensation for Losses

A Party shall accord to investors of the other Party whose covered investment suffered losses due to war or other armed conflict, state of national emergency, civil strife or other similar events in its territory, treatment no less favorable than that accorded, in like circumstances, to its own investors or investors of a non-Party whichever is more favorable, relating to restitution, indemnification, compensation or any other forms of settlement.

Article 1.8. Performance Requirements

1. Neither Party may, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of an investment in its territory of an investor of a Party or of a non-Party, impose or enforce any requirement or enforce any commitment or undertaking: (11)

(a) to achieve a given level or percentage of domestic content;

(b) to purchase, use, or accord a preference to goods produced in its territory, or to purchase goods from persons in its territory;

(c) to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with such investment;

(d) to restrict sales of goods in its territory that such investment produces by relating such sales in any way to the volume or value of its exports or foreign exchange earnings;

(e) to export a given level or percentage of goods;

(f) to transfer a particular technology, a production process, or other proprietary knowledge to a person in its territory; or

(g) to supply to a specific regional market or to the world market exclusively from its territory, one or more of the goods that such investment produces.

2. Neither Party may condition the receipt or continued receipt of an advantage, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of an investment in its territory of an investor of a Party or of a non-Party, on compliance with any requirement:

(a) to achieve a given level or percentage of domestic content;

(b) to purchase, use, or accord a preference to goods produced in its territory, or to purchase goods from persons in its territory;

(c) to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with such investment; or

(d) to restrict sales of goods in its territory that such investment produces by relating such sales in any way to the volume or value of its exports or foreign exchange earnings.

3. Provided that such measures are not applied in an arbitrary or unjustifiable manner, and provided that such measures do not constitute a disguised restriction on international trade or investment, paragraphs 1(a), (b), and (f), and 2(a) and (b), shall not be construed to prevent a Party from adopting or maintaining measures, including environmental measures:

(a) necessary to secure compliance with laws and regulations that are not inconsistent with this Agreement;

(b) necessary to protect human, animal, or plant life or health; or

(c) related to the conservation of living or non-living exhaustible natural resources.

Article 1.9. Senior Management and Boards of Directors

1. A Party shall not require an enterprise of that Party that is a covered investment to appoint to senior management positions natural persons of any particular nationality.

2. A Party may require that a majority of the board of directors, or any committee thereof, of an enterprise of that Party that is a covered investment, be of a particular nationality, or resident in the territory of the Party, provided that the requirement does not materially impair the ability of the investor to exercise control over its investment.

Article 1.10. Non-conforming Measures

1. Articles 1.4 (National Treatment), (12) 1.5 (Most-Favored-Nation Treatment), 1.8 (Performance Requirements), and 1.9 (Senior Management and Boards of Directors) shall not apply to:

(a) any existing non-conforming measure that is maintained by a Party in its Schedule to Annex I;

(b) the continuation or prompt renewal of any non-conforming measure referred to in subparagraph (a); or

(c) an amendment to any non-conforming measure referred to in subparagraph (a) to the extent that the amendment does not decrease the conformity of the measure, as it existed at the date of the entry into force of this Agreement, with Articles 1.4 (National Treatment), 1.5 (Most-Favored-Nation Treatment), 1.8 (Performance Requirements), and 1.9 (Senior Management and Boards of Directors).

2. Articles 1.4 (National Treatment), 1.5 (Most-Favored-Nation Treatment), 1.8 (Performance Requirements), and 1.9 (Senior Management and Boards of Directors) shall not apply to any measures that a Party adopts or maintains with respect to sectors, sub-sectors or activities, as set out in its Schedule to Annex II.

3. Neither Party may, under any measure adopted after the date of entry into force of this Agreement and covered by its Schedule to Annex II, require an investor of the other Party, by reason of its nationality, to sell or otherwise dispose of an investment existing at the time the measure becomes effective.

4. Nothing in this Agreement shall be construed so as to derogate from rights and obligations under international agreements in respect of protection of intellectual property rights to which the Parties are party, including the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and other treaties concluded under the auspices of the World Intellectual Property Organization (WIPO).

Article 1.11. Transfers (13)

1. Each Party shall permit all transfers relating to a covered investment to be made freely and without delay into and out of its territory. Such transfers shall include:

(a) the initial capital and additional amounts to maintain or increase an investment;

(b) profits, dividends, interest, capital gains, royalty payments, license fees, technical assistance fees, management fees and other current income accruing from any covered investment;

(c) proceeds from the total or partial sale or liquidation of all or any part of the covered investment;

(d) payments made under a contract, including a loan agreement;

(e) payments made pursuant to Articles 1.7 (Compensation for Losses) and 1.12 (Expropriation and Compensation); and

(f) payments arising out of the settlement of a dispute.

2. Each Party shall permit transfers relating to a covered investment to be made in a freely usable currency at the market rate of exchange prevailing at the time of transfer.

3. Each Party shall permit returns in kind relating to a covered investment to be made as authorized or specified in a written agreement between the Party and a covered investment or an investor of the other Party.

4. Notwithstanding paragraphs 1 and 2, a Party may prevent a transfer through the equitable, non-discriminatory, and good faith application of its laws and regulations relating to:

(a) bankruptcy, insolvency, or the protection of the rights of creditors;

(b) issuing, trading, or dealing in securities, futures, options, or derivatives;

(c) criminal or penal offences;

(d) ensuring compliance with the judgments in judicial or administrative proceedings; or

(e) financial reporting or record keeping of transfers when necessary to assist law enforcement or financial regulatory authorities.

Article 1.12. Expropriation and Compensation (14)

1. A Party shall not nationalize or expropriate a covered investment either directly or indirectly through measures equivalent to expropriation or nationalization (hereinafter referred to as "expropriation"), except:

(a) for a public purpose;

(b) in accordance with due process of law and Article 1.6 (Minimum Standard of Treatment);

(c) on a non-discriminatory basis; and

(d) on payment of prompt, adequate and effective compensation.

2. For the purpose of paragraph 1(d), the compensation shall:

(a) be equivalent to the fair market value of the expropriated investment immediately before the expropriation took place (the date of expropriation);

(b) not reflect any change in value occurring because the intended expropriation had become known earlier;

(c) be paid without delay; and

(d) be fully realizable and freely transferable.

3. If the fair market value is denominated in a freely usable currency, the compensation referred to in paragraph 1(d) shall be no less than the fair market value on the date of expropriation, plus interest at an appropriate and reasonable rate for that currency, accrued from the date of expropriation until the date of payment.

4. If the fair market value is denominated in a currency that is not freely usable, the compensation referred to in paragraph 1(d) - converted into the currency of payment at the market rate of exchange prevailing on the date of payment - shall be no less than: