(a) natural persons who have nationality of either Party in accordance with the laws of that Party;
(b) legal entities, including companies, associations, partnerships and other organizations, incorporated or constituted under the laws and regulations of either Party and have their seats in that Party.
4. The term "return" means the amounts yielded from investments, including profits, dividends, interests, capital gains, royalties, fees and other legitimate income.
Article 47. Promotion and Protection of Investment
1. Each Party shall encourage investors of the other Party to make investments in its territory and admit such investments in accordance with its laws and regulations.
2. Investments of the investors of either Party shall enjoy the constant protection and security in the territory of the other Party.
3. Without prejudice to its laws and regulations, neither Party shall take any unreasonable or discriminatory measures against the management, maintenance, use, enjoyment and disposal of the investments by the investors of the other Party.
4. Subject to its laws and regulations, each Party shall provide assistance and facilities to the other for obtaining visas and work permit to nationals of the other Party engaged in activities associated with investments made in the territory of that Party.
Article 48. Treatment of Investment
1. Investments of investors of each Party shall all the time be accorded fair and equitable treatment in the territory of the other Party.
2. Without prejudice to its laws and regulations, each Party shall accord to investments and activities associated with such investments by the investors of the other Party treatment not less favorable than that accorded to the investments and associated activities by its own investors.
3. Neither Party shall subject investments and activities associated with such investments by the investors of the other Party to treatment less favorable than that accorded to the investments and associated activities by the investors of any third Party.
4. The provisions of Paragraphs 3 of this Article shall not be construed so as to oblige one Party to extend to the investors of the other Party the benefit of any treatment, preference or privilege by virtue of:
(a) any other customs union, free trade zone, economic union and any international agreement resulting in such unions, or similar institutions;
(b) any international agreement or arrangement relating wholly or mainly to taxation;
(c) any arrangements for facilitating small scale trade in border areas.
Article 49. Expropriation
1. Neither Party shall expropriate, nationalize or take other similar measures (hereinafter referred to as "expropriation") against the investments of the investors of the other Party in its territory, unless the following conditions are met:
(a) for the public interests;
(b) under domestic legal procedure;
(c) without discrimination; and
(d) against compensation.
2. The compensation mentioned in Paragraph 1 of this Article shall be equivalent to the value of the expropriated investments immediately before the expropriation or the impending expropriation becomes public knowledge, whichever is earlier. The value shall be determined in accordance with generally recognized principles of valuation. The compensation shall include interest at a normal commercial rate from the date of expropriation until the date of payment. The compensation shall also be made without delay, be effectively realizable and freely transferable.
Article 50. Compensation for Damages and Losses
Investors of one Party whose investments in the territory of the other Party suffer losses owing to war, a state of national emergency, insurrection, riot or other similar events in the territory of the other Party, shall be accorded by the other Party treatment, as regards restitution, indemnification, compensation and other settlements no less favorable than that accorded to the investors of its own or any third Party, whichever is more favorable to the investor concerned.
Article 51. Transfers
1. Each Party shall, subject to its laws and regulations, guarantee to the investors of the other Party transfer of their investments and returns held in its territory, including:
(a) profits, dividends, interests and other legitimate income;
(b) proceeds obtained from the total or partial sale or liquidation of investments;
(c) payments made pursuant to a loan agreement in connection with investments;
(d) royalties in relation to the matters in Paragraph 1 (d) of Article 46;
(e) payments of technical assistance or technical service fee, management fee;
(f) payments in connection with projects;
(g) earnings of nationals of the other Party who work in connection with an investment in its territory.
2. Nothing in Paragraph 1 of this Article shall affect the free transfer of compensation paid under Article 49 and 50 of this Chapter.
3. The transfer mentioned above shall be made in a freely convertible currency, at the prevailing market rate of exchange on the date of transfer in the territory of the Party accepting the investments.
Article 52. Subrogation
If one Party or its designated agency makes a payment to its investors under a guarantee or a contract of insurance against non-commercial risks in respect of an investment made in the territory of the other Party, the latter Party shall recognize:
(a) the assignment, whether under the law or pursuant to a legal transaction in the former Party, of any rights or claims by the investors to the former Party or to its designated agency, as well as,
(b) that the former Party or its designated agency is entitled by virtue of subrogation to exercise the rights and enforce the claims of that investor and assume the obligations related to the investment to the same extent as the investor.
Article 53. Settlement of Disputes between Parties
1. Any dispute between the Parties concerning the interpretation or application of this Chapter shall, as far as possible, be settled by consultation through diplomatic channel.
2. If a dispute cannot be settled through consultations within six months, it shall, upon the request of either Party, be submitted to an ad hoc arbitral tribunal.
3. The tribunal shall comprise of three arbitrators. Within two months of the receipt of the written notice requesting arbitration, each Party shall appoint one arbitrator. The two arbitrators shall, within two months, from the date of their appointment, select a national of a third Party, having diplomatic relations with both Parties, as Chairman of the arbitral tribunal.
4. If the arbitral tribunal has not been constituted within four months from the receipt of the written notice requesting arbitration, either Party may, in the absence of any other agreement, invite the President of the International Court of Justice to make any necessary appointments. If the President is a national of either Party or is otherwise prevented from discharging the said functions, the Member of the International Court of Justice next in seniority who is not a national of either Party or is not otherwise prevented from discharging the said functions shall be invited to make such appointments.
5. The arbitral tribunal shall determine its own procedure. The arbitral tribunal shall reach its award in accordance with the provisions of this Chapter and the principles of international law recognized by both Parties.
6. The arbitral tribunal shall reach its award by a majority of votes. Such award shall be final and binding upon both Parties. The arbitral tribunal shall, upon the request of either Party, explain the reasons of its award.
7. Each Party shall bear the costs of the arbitrator appointed by it and of its representation in the arbitral proceedings. The costs of the Chairman and tribunal shall be borne equally by the Parties. 8. Any dispute between the Parties concerning the interpretation or application of this Chapter shall be exclusively settled according to this Article.
Article 54. Settlement of Disputes between Investors and One Party
1. Any legal dispute between an investor of one Party and the other Party in connection with an investment in the territory of the other Party shall, as far as possible, be settled amicably through negotiations between the parties to the dispute.
2. If the dispute cannot be settled through negotiations within six months from the date, it has been raised by either party to the dispute, it shall be submitted by the choice of the investor:
(a) to the competent court of the Party that is a party to the dispute;
(b) to International Center for Settlement of Investment Disputes (ICSID) under the Convention on the Settlement of Disputes between States and Nationals of Other States, done at Washington on March 18, 1965, provided that the Party involved in the dispute may require the investor concerned to go through the domestic administrative review procedures specified by the laws and regulations of that Party before the submission to the ICSID.
Once the investor has submitted the dispute to the competent court of the Party concerned or to the ICSID, the choice of the forum shall be final.
3. The arbitration award shall be based on the law of the Party to the dispute including its rules on the conflict of laws, the provisions of this Agreement as well as the universally accepted principles of international law.
4. The arbitration award shall be final and binding upon the parties to the dispute. Both Parties shall commit themselves to the enforcement of the award.
Article 55. Other Obligations
1. If the legislation of either Party or international obligations existing at present or established hereafter between the Parties result in a position entitling investments by investors of the other Party to a treatment more favorable than is provided for by the Agreement, such position shall not be affected by this Agreement.
2. Each Party shall observe the commitments it may have entered into with the investors of the other Party as regards to their investments.
Article 56. Consultations
1. The representatives of the Parties shall hold meetings from time to time for the purpose of:
(a) reviewing the implementation of this Chapter;
(b) exchanging legal information and investment opportunities;
(c) resolving disputes arising out of investments;
(d) forwarding proposals on promotion of investment;
(e) studying other issues in connection with investment.
2. Where either Party requests consultation on any matter of Paragraph 1 of this Article, the other Party shall give prompt response and the consultation be held alternatively in Beijing and Islamabad.
Chapter X. Dispute Settlement
Article 57. Cooperation
The Parties shall at all times endeavor to agree on the interpretation and application of this Agreement, and shall make every attempt through cooperation and consultations to arrive at a mutually satisfactory resolution of any matter that might affect its operation.
Article 58. Scope of Application
Except as otherwise provided in this Agreement, the dispute settlement provisions of this Chapter shall apply:
(a) with respect to the avoidance or settlement of all disputes between the Parties regarding the interpretation or application of this Agreement; and
(b) wherever a Party considers that a measure of the other Party is inconsistent with the obligations of this Agreement or that the other Party has failed to carry out its obligations under this Agreement.
Article 59. Consultations
1. Either Party may request in writing consultations with the other Party with respect to any measure that it considers might affect the operation of this Agreement.
2. The requesting Party shall deliver the request to the other Parties and to the Commission (Chapter XI ).
3. Each Party shall accord adequate opportunity for consultations with another Party with respect to any matter affecting the implementation, interpretation or application of this Agreement. Any differences shall as far as possible be settled through consultation between the Parties.
4. The requesting Party shall set out the reasons for the request, including identification of the measure at issue and an indication of the legal basis for the complaint, and shall deliver the request to the other Party.
5. If a request for consultations is made, the Party to which the request is made shall reply to the request in writing within 7 days after the date of its receipt and shall enter into consultations within a period of not more than:
(a) 15 days after the date of receipt of the request for matters concerning perishable goods; or
(b) 30 days after the date of receipt of the request for all other matters.
6. The Parties shall make every attempt to arrive at a mutually satisfactory resolution of any matter through consultations under this Article or other consultative provisions of this Agreement. To this end, the Parties shall:
(a) provide sufficient information to enable a full examination of how the measure might affect the operation and application of this Agreement; and
(b) treat any confidential information exchanged in the course of consultations on the same basis as the Party providing the information.
7. In consultations under this Article, a Party may request the other Party to make available personnel of its government agencies or other regulatory bodies who have expertise in the subject matter of consultations.
8. The consultations shall be confidential and without prejudice to the rights of any Party in any further proceedings.
Article 60. Choice of Forum
1. This section is without prejudice to the rights of the Parties to have recourse to dispute settlement procedures available under other agreements to which they are parties.
2. Where a dispute regarding any matter arises under this Agreement and under another agreement to which the disputing Parties are party, the complaining Party may select the forum in which to settle the dispute.
3. Once the complaining Party has requested a particular forum, the forum selected shall be used to the exclusion of other possible fora.
Article 61. Good Offices, Conciliation, and Mediation
1. The Parties to the dispute may at any time agree to good offices, conciliation or mediation by the Commission. They may begin at any time and be terminated at any time.
2. If the Parties agree, good offices, conciliation or mediation may continue while the dispute proceeds for resolution before an arbitral panel convened under Article 62.
3. The proceedings under this Article and the positions taken by the Parties during these proceedings shall be confidential and are without prejudice to the rights of any Party in any further proceedings.
Article 62. Request for an Arbitral Panel
1. If the Parties fail to resolve a matter within:
(a) 60 days after receipt of the request for consultations under Article 59;
(b) 30 days after receipt of the request for consultations under Article 59 in a matter regarding perishable goods; or
(c) such other period as the Parties agree, either Party may request in writing the establishment of an arbitral panel to consider the matter.
2. The requesting Party shall state in the request the measure complained of and indicate the provisions of this Agreement that it considers relevant, and shall deliver the request to the other Party. An arbitral panel shall be established upon receipt of a request.
Article 63. Composition of an Arbitral Panel
1. An arbitral panel shall comprise three members.
2. The complaining Party and the responding Party shall each appoint one panelist within 30 days from the deliverance of the request made under Article 62.
3. The Parties shall designate by common agreement the appointment of the third panelist within 30 days of the appointment of the second panelist. The panelist thus appointed shall chair the arbitral panel.
4. If one of the Parties does not appoint an panelist within 30 days from the date of deliverance of the request referred to in paragraph 2, at the request of the other Party to the dispute the designation shall be made by the Director-General of the WTO within a further 30 days.
5. If the chairperson of the arbitral panel has not been designated within the period according to paragraph 3, the Director General of the WTO shall at the request of either Party appoint the chairperson of the arbitral panel within 30 days of the request.
6. All panelist shall:
(a) have expertise or experience in law, international trade, other matters covered by this Agreement, or the resolution of disputes arising under international trade agreements;
(b) be chosen strictly on the basis of objectivity, reliability, and sound judgment;
(c) be independent of, and not be affiliated with or take instructions from, any Party; and
(d) comply with the code of conduct in conformity with WTO Understanding on the Rules and Procedures Governing the Settlement of Disputes, and the rules established in the document WT/DSB/RC/1 of the WTO.
7. The chairperson of the arbitral tribunal shall:
(a) not be a national of a Party
(b) not have his or her usual place of residence in the territory of a Party
(c) not have dealt with the matter in any capacity.
8. If a panelist appointed under this Article resigns or becomes unable to act, a successor panelist shall be appointed in the same manner as prescribed for the appointment of the original panelist and the successor shall have all the powers and duties of the original panelist.
Article 64. Functions of Arbitral Panel
1. The function of an arbitral panel is to make an objective assessment of the dispute before it, including an examination of the facts of the case and their applicability and conformity with this Agreement.
2. Unless the Parties otherwise agree within 20 days from the date of receipt of the request for the establishment of the arbitral panel, the terms of reference shall be:
"To examine, in the light of the relevant provisions of this Agreement, the matter referred to in the request for the establishment of an arbitral panel pursuant to Article63 and to make findings of law and fact together with the reasons therefore for the resolution of the dispute."
3. Where an arbitral panel concludes that a measure is inconsistent with this Agreement, it may recommend that the responding Party bring the measure into conformity with this Agreement. In addition to its recommendations the arbitral panel may suggest ways in which the responding Party could implement the recommendations.
4. The arbitral panel, in their findings and recommendations, cannot add to subtract from or alter the rights and obligations provided in this Agreement.
Article 65. Rules of Procedure of an Arbitral Panel
1. Unless the Parties agree otherwise, the arbitral panel proceedings shall be conducted in accordance with the rules or procedure set out in Annex III.
2. The arbitral panel shall, apart from the matters set out in this Article, regulate its own procedures in relation to the rights of the Parties to be heard and its deliberations in consultation with the Parties.
3. The arbitral panel shall endeavor to take its decisions by consensus; provided that where an arbitral panel is unable to reach consensus it may take its decisions by a majority vote.
Article 66. Expenses
1. Unless the Parties otherwise agree, the costs of the arbitral panel and other expenses associated with the conduct of its proceedings shall be borne equally by the Parties.
2. Each Party shall bear its own expenses and legal costs of the arbitral proceedings.
Article 67. Suspension or Termination of Proceedings
1. The Parties may agree that the arbitral panel suspends its work at any time for a period not exceeding 12 months from the date of such agreement. If the work of the arbitral panel has been suspended for more than 12 months, the authority for establishment of the arbitral panel shall lapse unless the Parties agree otherwise.
2. The Parties may agree to terminate the proceedings of an arbitral panel in the event that a mutually satisfactory solution to the dispute has been found.
Article 68. Experts and Technical Advice
1. On request of a disputing Party, or on its own initiative, the panel may seek information and technical advice from any person or body that it deems appropriate, provided that the disputing parties so agree and subject to such terms and conditions as such Parties may agree.
2. Before an arbitral panel seeks information or technical advice, it shall establish appropriate procedures in consultation with the Parties. The arbitral panel shall provide the Parties:
(a) advance notice of, and an opportunity to provide comments to the arbitral panel on, proposed requests for information and technical advice pursuant to paragraph 1; and
(b) a copy of any information or technical advice submitted in response to a request pursuant to paragraph 1 and an opportunity to provide comments.
3. Where the arbitral panel takes the information or technical advice into account in the preparation of its report, it shall also take into account any comments by the Parties on the information or technical advice.
Article 69. Initial Report
1. The arbitral panel shall base its report on the relevant provisions of this Agreement and the submissions and arguments of the Parties and on any information before it pursuant to Article 68.
2. Unless the Parties otherwise agree, the arbitral panel shall:
(a) within 90 days after the last panelist is selected; or
(b) in case of urgency including those relating to perishable goods within 60 days after the last panelist is selected, present to the Parties an initial report.
3. The initial report is to contain:
(a) findings of fact;
(b) its conclusions as to whether the measure at issue has not conformed with the obligations under this Agreement or any other determination if requested in the terms of reference; and
(c) the recommendation, if any, for the resolution of the dispute.
4. In exceptional cases, if the arbitral panel considers it cannot release its initial report within 90 days or within 60 days in cases of urgency, it shall inform the Parties in writing of the reasons for the delay together with an estimate of the period within which it will release its report. Any delay shall not exceed a further period of 30 days unless the Parties otherwise agree.