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

(d) payments made under a contract entered into by the investor, or its covered investment, including payments made pursuant to a loan agreement;

(e) earnings and other remuneration of personnel engaged from abroad and working in connection with an investment;

(f) payments made pursuant to Articles X (Compensation for Losses) and X (Expropriation);

(g) payments of damages pursuant to an award issued by a tribunal under Article X XXX (ISDS).

2. Neither Party may require its investors to transfer, or penalise its investors for failing to transfer, the income, earnings, profits or other amounts derived from, or attributable to, their covered investments in the territory of the other Party.

3. Notwithstanding paragraphs 1 and 2, this Article shall not be construed as preventing a Party from applying in an equitable and non-discriminatory manner, and not in a way that would constitute a disguised restriction on trade and investment, its laws and regulations relating to:

(a) bankruptcy, insolvency, bank recovery and resolution, or the protection of the rights of creditors;

(b) issuing, trading, or dealing in financial instruments;

(c) financial reporting or record keeping of transfers where necessary to assist law enforcement or financial regulatory authorities;

(d) criminal or penal offenses, deceptive or fraudulent practices;

(e) ensuring compliance with orders or judgments in administrative or judicial proceedings;

(f) social security, public retirement or compulsory savings schemes.

Commentary:

Article ‘Transfers’ protects investors from certain government measures that limit current and capital account transfers. The rationale of this article is to avoid that the protection afforded by the agreement is not nullified by unjustified limitations to the transfer of funds, which is an essential element for investing abroad.

In Paragraph 1, each Party agrees to permit all transfers relating to a covered investment to be made in a freely convertible currency, without restriction or delay, and at the market rate of exchange prevailing on the date of transfer with regard to the currency to be transferred. ‘Freely convertible currency’ is defined in the definitions section as a currency that can be freely exchanged against currencies that are widely traded in international foreign exchange markets and widely used in international transactions. Paragraph 1 also provides a non exhaustive list of transfers that must be allowed.

Paragraph 2 applies to host-country measures that may force investors of that country, who invest in the territory of the other Party, to transfer the income, earnings, profits or other amounts derived from, or attributable to, their covered investments in the territory of the other Party. Such measures are prohibited.

Paragraph 3 recognises that, notwithstanding the guarantees of paragraphs 1 and 2, a Party may prevent a transfer through the equitable and non-discriminatory application of its laws and regulations relating to specific areas such as bankruptcy, criminal offenses in which such limitations are necessary for public policy reasons. In applying such laws and regulations a Party must ensure that this is not done in a way that would constitute a disguised restriction on trade and investment. Paragraph 3 provides an exhaustive list of the concerned areas.

Article Observance of Written Commitments

Where a Party has entered into any written commitment with investors of the other Party or with their covered investments, that Party shall not breach the said commitment through the exercise of governmental authority.

Commentary:

Article ‘Observance of Written Commitments’ stipulates that a breach of a written commitment that the host country has entered into with investors of the other Party, or their covered investments, would be a violation of the Agreement only when such breach has occurred through the exercise of governmental authority. Accordingly, the clause is activated when the host State has used its sovereign power to breach a written commitment, i.e., powers that lie outside of the contractual relationship (e.g., by passing legislation) and not when acting within the powers of any ordinary commercial actor (e.g., non-payment of invoices, delayed or no delivery of agreed good and services).

Article Article

Subrogation

If a Party, or its designated agency, makes a payment under an indemnity, guarantee or contract of insurance it has entered into in respect of a covered investment:

(a) The other Party shall recognize that the Party or its agency shall be entitled in all circumstances to the same rights under this Agreement as those of the investor in respect of the covered investment, but for the subrogation. Such rights may be exercised by the Party or an agency thereof, or by the investor if the Party or an agency thereof so authorises.

(b) The investor may not pursue these rights to the extent of the subrogation.

Commentary:

Article ‘Subrogation’ provides for the transfer of rights that foreign investors might have visà-vis the host country to the insurance agency of the home State which indemnifies the foreign investor under an investment insurance or guarantee. The host party is obliged to recognise assignment of all the rights and claims to the indemnifying party. The indemnifying party shall receive the same treatment and the same payments due, pursuant to those rights and claims, as the investor was entitled to receive under the Agreement in respect of the investment concerned under all the circumstances. An investor may not pursue these rights and claims to the extent pursued by the indemnifying party.

Article Transparency

1. Each Party shall publish, or otherwise make publicly available, its laws and regulations of general application, as well as international agreements which may affect investors of the other Party and their covered investments in its territory, including any measures aimed at protecting the environment and labour conditions or that may be affecting the protection of the environment or labour conditions, thereby ensuring awareness and providing reasonable opportunities for interested persons and stakeholders to submit views.

2. Nothing in this Article shall require the Party to furnish or allow access to any confidential or proprietary information, including information concerning particular investors or their covered investments, the disclosure of which would impede law enforcement or be contrary to domestic laws protecting confidentiality, or would prejudice legitimate commercial interests of investors and their covered investments.

Commentary:

Paragraph 1 requires that Parties to the Agreement make relevant laws and regulations publicly available, so that investors are aware of the regulatory framework that is in force at any given time and that are given reasonable opportunities to be consulted in the law- or decision-making process.

Paragraph 2 is modelled after Article III bis of the GATS (‘Disclosure of Confidential Information’) and ensures the protection of confidential or proprietary information where the disclosure would impede law enforcement, be contrary to domestic laws protecting confidentiality, or would harm the legitimate commercial interests of investors and their covered investments.

Article Taxation

1. Nothing in this Agreement shall affect the rights and obligations of either Party under any tax convention. In the event of any inconsistency between this Agreement and any such tax convention, the tax convention shall prevail to the extent of the inconsistency.

2. Article [Non-Discriminatory Treatment] and Article [Transfers] shall not apply to an advantage accorded by a Party pursuant to a tax convention.

3. Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, or a disguised restriction on trade and investment, nothing in this Agreement shall be construed to prevent the adoption, maintenance or enforcement by a Party of any measure aimed at ensuring the equitable or effective imposition or collection of direct taxes that:

(a) distinguishes between taxpayers, who are not in the same situation, in particular with regard to their place of residence or with regard to the place where their capital is invested; or

(b) aims at preventing the avoidance or evasion of taxes pursuant to the provisions of any tax convention or domestic fiscal legislation.

4. For the purpose of this Article:

(a) "residence"; means residence for tax purposes;

(b) "tax convention"; means a convention for the avoidance of double taxation or any other international agreement or arrangement relating wholly or mainly to taxation that either Party to this Agreement is party to.

Commentary:

Paragraphs 1 and 2 regulate the relation between the BIA and tax conventions. The definition of tax convention is set out in paragraph 4(b) and refers to conventions for the avoidance of double taxation or any other international agreement or arrangement relating wholly or mainly to taxation. Double taxation treaties are designed primarily to prevent instances of double taxation which is thought to distort investment inflows, but may also play some ancillary roles, such as helping to combat tax evasion. Paragraph 1 provides that, in the event of any inconsistency between the BIA and any tax convention, the tax convention shall prevail to the extent of the inconsistency. Paragraph 2 stipulates that Article ‘Non-Discriminatory Treatment’ and Article ‘Transfers’ shall not apply to an advantage accorded by a Party pursuant to a tax convention.

Paragraph 3 is modelled after Article XIV (d) ‘General Exceptions’ of the GATS which introduces exceptions on taxation. It represents a combined drafting of the chapeau of GATS Article XIV and its element (d), including the relevant parts of footnote 6.

Article Prudential Carve-Out

1. Nothing in this Agreement shall prevent a Party from adopting or maintaining measures for prudential reasons, such as:

(a) the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier;

(b) ensuring the integrity and stability of a Party’s financial system.

2. Where such measures do not conform with this Agreement, they shall not be used as a means of avoiding the Party's obligations under this Agreement.

3. Nothing in this Agreement shall be construed to require a Party to disclose information relating to the affairs and accounts of individual consumers or any confidential or proprietary information in the possession of public entities.

Commentary:

Article ‘Prudential Carve-Out’ is modelled after paragraph 2 of the GATS Annex on Financial Services. Paragraph 1 allows Parties to a BIA to adopt or maintain measures for prudential reasons and provides an indicative list of what such measures may be. Paragraph 2 stipulates that such measures shall not be used as a means of avoiding the Party's obligations under the BIA. Finally, Paragraph 3 establishes the Parties’ right not to disclose information relating to the affairs and accounts of individual consumers or any confidential or proprietary information in the possession of public entities.

Article General Exceptions

Subject to the requirement that such measures are not applied in a manner that would constitute arbitrary or unjustifiable discrimination between investments or between investors, Articles [Non-Discriminatory Treatment] and [Transfers] shall not be construed to prevent a Party from adopting or enforcing measures necessary:

(a) to protect public security or public morals or to maintain public order (4);

(b) to protect human, animal or plant life or health (5);

(c) to ensure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement including those relating to:

(i) the prevention of deceptive and fraudulent practices or to deal with the effects of a default on contracts;

(ii) the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts;

(iii) safety.

Commentary:

Article ‘General Exceptions’ is modelled after Article XIV of the GATS. The underlying rationale is that since mode 3, which is about investment (‘commercial presence’) in services is subject to specific general exceptions under the GATS, there is no reason why disciplines under an investment agreement should be subject to different types of exceptions (or should not be subject to any exceptions whatsoever). This also ensures consistency with the trade and investment agreements concluded at EU level. Since the overlap between investment agreements and the GATS or investment liberalisation chapters under EU FTAs is limited to non-discrimination commitments, it was first deemed that general exceptions should, in principle, only apply to non-discrimination. Following the issuance of CETA Opinion 1/17, the application of general exceptions has been extended to the transfers clause too. The said Opinion highlighted the importance of general exceptions in EU agreements when it comes to the impact of FTAs (and CETA specifically in the context of that Opinion) on the autonomy of the EU legal order. The remaining standards of protection, notably FET and expropriation, which should be read together with the Article on the right to regulate, are not subject to this clause on general exceptions, as they are drafted in such way to ensure that a State’s policy space to enact measures on public policy grounds is not reduced. In this regard, general exceptions are ‘in-built’ in those standards of protection.

Article Security Exceptions

Nothing in this Agreement shall be construed:

(a) to require a Party to furnish or allow access to any information the disclosure of which it considers contrary to its essential security interests;

(b) to prevent a Party from taking an action which it considers necessary for the protection of its essential security interests;

(i) connected to the production of or traffic in arms, ammunition and implements of war and to such traffic and transactions in other goods and materials, services and technology, and to economic activities, carried out directly or indirectly for the purpose of supplying a military establishment;

(ii) relating to fissionable and fusionable materials or the materials from which they are derived; or

(iii) taken in time of war or other emergency in international relations; or

(c) to prevent a Party from taking any action in pursuance of its obligations under the Charter of the United Nations for the maintenance of international peace and security.

Commentary:

Article ‘Security Exceptions’ is modelled after GATS Article XIV bis. It follows the same logic as other exceptions drawn from the WTO rulebook, in that investment encompasses mode 3 of the GATS. This also ensures consistency with the trade and investment agreements concluded at EU level.

Article Temporary Safeguard Measures

1. In exceptional circumstances of serious difficulties for the operation of the Union's economic and monetary union, or threat thereof, the Union may adopt or maintain safeguard measures with regard to transfers for a period not exceeding six months. The measures referred to in this paragraph shall be limited to the extent that is strictly necessary.

2. Where a Party experiences serious balance of payments or external financial difficulties, or threat thereof, it may adopt or maintain restrictive measures with regard to transfers. Such measures shall:

(a) be consistent with other international obligations of the Party, and with the Articles of Agreement of the International Monetary Fund;

(b) not exceed those necessary to deal with the difficulties addressed under this paragraph;

(c) be temporary and phased out progressively;

(d) avoid unnecessary damage to the commercial, economic and financial interests of the other Party;

(e) be non-discriminatory compared to third countries in like situations.

A Party maintaining or having adopted measures referred to in this paragraph shall promptly notify them to the other Party.

Commentary:

Paragraph 1 is modelled after Article 66 TFEU. It allows for restrictions on transfers in exceptional situations of serious difficulties for the operation of the EU’s economic and monetary union, or threat thereof. Such measures cannot exceed 6 months and should be limited to the extent that is strictly necessary. The Court of Justice of the EU has ruled that the absence of a provision on such safeguard measures rendered certain BIAs of Member States incompatible with EU law (C-205/06, C-118/07, C-249/06).

Paragraph 2 is modelled after Article XII of the GATS. It allows a Party to adopt or maintain restrictive measures on transfers when it experiences (or there is a threat of) serious balance of payments or external financial difficulties, or threat thereof. Paragraph 2 further stipulates a list of conditions that such measures need to comply with and creates an obligation of prompt notification of such measures.

Article Denial of Benefits

A Party may deny the benefits of this Agreement to an investor of the other Party or to a covered investment, if the denying Party adopts, implements, maintains or enforces measures related to the maintenance of international peace and security, including the protection of human rights, which:

a. prohibit transactions with investors of the other Party or their covered investments, or

b. would be violated or circumvented, if the benefits of this Agreement were accorded to investors of the other Party or their covered investments, including where the measures prohibit transactions with a natural or juridical person who owns or controls either of them.

For greater certainty, a Party may deny such benefits pursuant to this Article without any prior publicity or other additional formality related to its intention to exercise the right conferred by this Article.

Commentary:

Article ‘Denial of Benefits’ allows a Party to the BIA to deny the benefits of the Agreement in circumstances where it has adopted measures related to the maintenance of international peace and security, including the protection of human rights, when such measures either require the prohibition of transactions with investors or covered investments of the other Party or to avoid the circumvention of such measures. Such measures are, for instance, those prescribed in the EU Global Human Rights Sanction Regime (see Council Regulation (EU) 2020/1998 of 7 December 2020 concerning restrictive measures against serious human rights violations and abuses), which enables the freezing of funds and economic resources belonging to, owed, held or controlled by any natural or legal person, entity, or body that has been found to commit serious human rights violations and abuses, as defined in the Regulation.

It is further clarified that a Party does not need to observe any formality or give prior notice about its intent to deny the rights of the Agreement pursuant to this Article.

Article Corporate Social Responsibility and Responsible Business Conduct

1. The Parties recognise the importance of investors implementing due diligence in order to identify and address adverse impacts, such as on the environment and labour conditions, in their operations, their supply chains and other business relationships, The Parties shall promote the uptake by enterprises and investors of corporate social responsibility or responsible business practices with a view to contributing to sustainable development and responsible investment.

2. The Parties shall support the dissemination and use of relevant internationally agreed instruments that have been endorsed or are supported by the Parties, such as the UN Global Compact, the UN Guiding Principles on Business and Human Rights, the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, and the OECD Guidelines for Multinational Enterprises and related due diligence guidance.

3. The Parties agree to exchange information as well as best practices on issues covered by this article, including on possible ways to facilitate the uptake by enterprises and investors of corporate social responsibility, responsible practices.

Commentary:

Sustainable development provisions overall

The provisions on trade and sustainable development (‘TSD’) are an essential part of EU investment policy. In 2015, the ‘Trade for All’ strategy strongly affirmed the importance of sustainable development, including human rights and labour rights, in the EU’s trade agenda. More recently, the TSD review (2022) further expressed the EU’s strong commitment to fostering sustainable development in all its forms through its trade and investment agreements. Sustainability is one of the key three pillars of the EU trade policy, which is open, sustainable and assertive.

From the specific angle of EU investment policy, TSD provisions not only reinforce the Parties’ existing obligations to effectively implement relevant international agreements, but further seek to ensure that Parties do not weaken or reduce the levels of environmental and labour protection afforded in their laws, or otherwise waive or derogate from relevant legislation, in order to encourage investment.

The EU approach includes provisions on Investment and Environment, Investment and Climate Change, Investment and Labour, and Corporate Social Responsibility.

Specific remarks to Article ‘Corporate social responsibility and responsible business conduct’

Paragraph 1 creates an obligation upon the Parties to the Agreement to promote the uptake by enterprises and investors of corporate social responsibility or responsible business practices with a view to contributing to sustainable development and responsible investment. This follows from a recognition that the actions of business actors have significant impacts on the lives of citizens in the territory of the Party they operate in terms of working conditions, human rights, health, the environment, innovation, education and training; and that States have an important role in supporting and encouraging companies to conduct their business responsibly.

Paragraph 2 provides a non-exhaustive list of internationally agreed instruments that set out corporate social responsibility standards and responsible business practices, whose dissemination and use the Parties to the Agreement incur an obligation to support.

Paragraph 3 addresses the cooperation angle between the Parties, as far as the exchange of information and best practices is concerned, on issues relating to corporate social responsibility and responsible business conduct.

Article Investment and Environment

1. The Parties recognise the right of each Party to determine its sustainable development policies and priorities, to establish the levels of domestic environmental protection it deems appropriate, and to adopt or modify its environmental laws and policies. Such levels, laws and policies shall be consistent with each Party’s commitments to internationally recognised standards and agreements on environmental protection.

2. A Party shall not weaken or reduce the levels of protection afforded in its environmental laws in order to encourage investment.

3. A Party shall not waive or otherwise derogate from, or offer to waive or otherwise derogate from such legislation in order to encourage investment in its territory.

4. Each Party shall effectively implement the multilateral environmental agreements (MEAs), protocols and amendments that it has ratified.

Commentary:

Paragraph 1 recognises that each Party may determine for itself the sustainable development policies and priorities; may establish the levels of domestic environmental protection it deems appropriate and adopt or modify its environmental laws and policies. In doing so, each Party must ensure that such levels, laws and policies are consistent with its commitments to internationally recognised standards and agreements on environmental protection. This requirement introduces a floor on the level of ambition of such policies while reserving a State’s right to be more ambitious.

Paragraphs 2 and 3 introduce non-regression clauses which are intended to secure a level playing field by preventing situations of conscious lowering of environmental standards by a State to increase investment, which could thus result in an unfair competitive advantage. They address weakening of levels of protection as a result of a) weakening laws (paragraph 2) and b) waiver or derogation (paragraph 3).

Paragraph 4 requires that each Party to the Agreement effectively implements the multilateral environments agreements (MEAs) it has ratified. This reflects the position that the interplay between investment and sustainable development must be addressed comprehensively, putting investment policy in the wider context of other tools supporting sustainability. In this comprehensive approach, Member States BIAs, together with EU trade and investment agreements, promote the global governance framework, including by upholding the effective implementation of the MEAs they have ratified.

Article Investment and Climate Change

1. The Parties recognise the importance of taking urgent action to combat climate change and its impacts, and the role of investment in pursuing this objective, consistent with the United Nations Framework Convention on Climate Change (UNFCCC), the purpose and goals of the Paris Agreement adopted by the Conference of the Parties to the UNFCCC at its 21st session (the Paris Agreement), and with other MEAs and multilateral instruments in the area of climate change.

2. Each Party shall:

a. effectively implement the UNFCCC and the Paris Agreement adopted thereunder, including its commitments with regard to its Nationally Determined Contributions;

b. promote investment of relevance for climate change mitigation and adaptation; including investment concerning climate friendly goods and services, such as renewable energy, low-carbon technologies and energy efficient products and services, and by adopting policy frameworks conducive to deployment of climate friendly technologies;

3. The Parties shall work together to strengthen their cooperation on investment-related aspects of climate change policies and measures bilaterally, regionally and in international fora, as appropriate.

Commentary:

Paragraph 1 stresses the importance of urgent action to combat climate change and its impacts against the background of the major instruments that have been pursued at the multilateral level to combat climate change, notably the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement.

Paragraph 2, in the same spirit as the equivalent provisions on environment, requires the effective implementation of the UNFCCC and the Paris Agreement by each Party to the Agreement, as well as the promotion of investment of relevance for climate change mitigation and adaptation.

Paragraph 3 highlights the importance of cooperation in the field of climate change by requiring Parties to a BIA to work together on investment-related aspects of climate change – not only at the bilateral level, but also at the regional and multilateral level.

Article Investment and Labour

1. The Parties recognise the right of each Party to determine its sustainable development policies and priorities, to establish the levels of domestic labour protection it deems appropriate and to adopt or modify its labour laws and policies. Such levels, laws and policies shall be consistent with each Party’s commitments to internationally recognised labour standards and agreements.

2. A Party shall not weaken or reduce the levels of protection afforded in its labour legislation in order to encourage investment.

3 A Party shall not waive or otherwise derogate from, or offer to waive or otherwise derogate from such legislation in order to encourage investment in its territory.

4. In accordance with the ILO Constitution and the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up, as amended in 2022, each Party shall respect, promote and effectively implement throughout its territory the internationally recognised core labour standards as defined in the fundamental ILO Conventions.

5. Each Party shall effectively implement the ILO Conventions it has ratified [and to make sustained efforts towards ratifying, to the extent that it has not yet done so, the fundamental ILO Conventions].

6. Each Party is committed to promote investment policies which further the objectives of the Decent Work Agenda, in accordance with the 2008 ILO Declaration on Social Justice for a Fair Globalisation and the 2019 ILO Centenary Declaration for the Future of Work, including a human-centred approach to the future of work, adequate minimum wages, social protection and safety and health at work.

Commentary:

Article ‘Investment and Labour’ signals the importance of labour in investment-related sustainable development policies. Its structure is largely identical to that of Article ‘Investment and Environment’, in that it replicates the same principles and tenets in the field of labour.

Accordingly, paragraph 1 introduces the right to regulate in the field of labour policies.

Paragraphs 2 and 3 are non-regression clauses modelled upon those in the Article ‘Investment and Environment’.

In paragraph 4, each Party undertakes the obligation to respect, promote and effectively implement throughout its territory the internationally recognised core labour standards as defined in the fundamental ILO Conventions.

In paragraph 5, the obligation upon each Party to effectively implement the ILO Conventions it has ratified further extends to making sustained efforts towards ratifying, to the extent not yet done so, the fundamental ILO Conventions. The fundamental ILO Conventions are considered key for the rights of those working, hence why they benefit from increased commitments.

Finally, paragraph 6 introduces each Party’s commitment to promote investment policies which further the objectives of the Decent Work Agenda, in accordance with the 2008 ILO Declaration on Social Justice for a Fair Globalisation and the 2019 ILO Centenary Declaration for the Future of Work.

Article Dialogue and Cooperation on Investment-related Sustainable Development Issues

The Parties agree to engage in dialogue and cooperate as appropriate on investment-related labour, environmental and climate change issues of mutual interest arising under this Agreement in a manner complementary to the efforts under existing bilateral and multilateral mechanisms.

Commentary:

This is an umbrella provision regarding cooperation on investment-related sustainable development issues that cuts across all aspects of sustainability policies covered under the Agreement. Parties agree to exchange and cooperate on such issues in a manner complementary to any steps taken under existing bilateral and multilateral mechanisms.

ISDS-related provisions

Article Scope

This [section] applies to a dispute between, on the one hand, an investor of a Party and, on the other hand, the other Party arising from an alleged breach of investment protection standards provided in [section X], which allegedly caused loss or damage to the claimant or its locally established enterprise.