Title

AGREEMENT ON INVESTMENT OF THE FRAMEWORK AGREEMENT ON COMPREHENSIVE ECONOMIC COOPERATION BETWEEN THE PEOPLE’S REPUBLIC OF CHINA AND THE ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Preamble

The Government of the People’s Republic of China (“China”) and the Governments of Brunei Darussalam, the Kingdom of Cambodia (“Cambodia”), the Republic of Indonesia (“Indonesia”), the Lao People’s Democratic Republic (“Lao PDR”), Malaysia, the Union of Myanmar (“Myanmar”), the Republic of the Philippines (“Philippines”), the Republic of  Singapore, the Kingdom of Thailand (“Thailand”) and the Socialist Republic of Viet Nam (“Viet Nam”), Member States of the Association of Southeast Asian Nations (collectively, “ASEAN” or “ASEAN Member States”, or individually, “ASEAN Member State”);

RECALLING the Framework Agreement on Comprehensive Economic Co-operation (“the Framework Agreement”) between China and ASEAN (collectively, “the Parties”, or individually referring to China or to an ASEAN Member State  as a “Party”) signed by the Heads of Government/State of China and ASEAN Member States in Phnom Penh, Cambodia on the 4th day of November 2002;

RECALLING further Article 5 and Article 8 of the Framework Agreement, where in order to establish a China-ASEAN Free Trade Area and to promote investments and create a liberal, facilitative, transparent and competitive investment regime, the Parties agreed to negotiate and conclude as expeditiously as possible an investment agreement in order to progressively liberalise the investment regime, strengthen co-operation in investment, facilitate investment and improve transparency of investment rules and regulations, and provide for the protection of investments;

NOTING that the Framework Agreement recognised the different stages and pace of development among the Parties and the need for special and differential treatment and flexibility for the newer ASEAN Member States of Cambodia, Lao PDR, Myanmar and Viet Nam;

REAFFIRMING the Parties’ commitment to establish the China-ASEAN Free Trade Area within the specified timeframes, while allowing flexibility to the Parties to address their sensitive areas as provided in the Framework Agreement, in the realisation of the sustainable economic growth and development goals on the basis of equality and mutual benefits so as to achieve a win-win outcome;

REAFFIRMING further the rights, obligations and undertakings of each Party under the World Trade Organization (“WTO”), and other multilateral, regional and bilateral agreements and arrangements,

HAVE AGREED AS FOLLOWS:

Article 1. Definitions

1. For the purpose of this Agreement:

(a) “AEM” means ASEAN Economic Ministers;

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

(c) “GATS” means the General Agreement on Trade in Services in Annex 1B to the WTO Agreement 

(d) “investment” means every kind of asset invested by the investors of a Party in accordance with the relevant laws, regulations and policies (1) of another Party in the territory of the latter including, but not limited to, the following:

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

(ii) shares, stocks and debentures of juridical persons or interests in the property of such juridical persons;

(iii) intellectual property rights, including rights with respect to copyrights, patents and utility models, industrial designs, trademarks and service marks, geographical indications, layout designs of integrated circuits, trade names, trade secrets, technical processes, know-how and goodwill;

(iv) business concessions (2) conferred by law, or under contract, including concessions to search for, cultivate, extract, or exploit natural resources; and

(v) claims to money or to any performance having financial value. For the purpose of the definition of investment in

this Sub-paragraph, returns that are invested should be treated as investments and any alteration of the form in which assets are invested or reinvested shall not affect their character as investments;

(e) “investor of a Party” means a natural person of a Party or a juridical person of a Party that is making (3) or has made an investment in the territories of the other Parties;

(f) “juridical person of a Party” means any legal entity duly constituted or otherwise organised under the applicable law of a Party, whether for profit or otherwise, and whether privately-owned or governmentally-owned, and engaged in substantive business operations in the territory of that Party, including any corporation, trust, partnership, joint venture, sole proprietorship or association;

(g) “measure” means any law, regulation, rule, procedure, or decision or administrative action of general application, affecting investors and/or investments, taken by a Party including its:

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

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

(h) “MOFCOM” means Ministry of Commerce of the People’s Republic of China; 

(i) “natural person of a Party” means any natural person possessing the nationality or citizenship of, or right of permanent residence in the Party in accordance with its laws and regulations;4

(j) “returns” mean amounts yielded by or derived from an investment particularly, though not exclusively, profits, interests, capital gains, dividends, royalties or fees;

(k) “SEOM” means ASEAN Senior Economic Officials Meetings;

(l) “WTO Agreement” means the Marrakesh Agreement Establishing the World Trade Organization, done at Marrakesh, Morocco on the 15th of April 1994, as may be amended.

2. The definitions of each of the above terms shall apply unless the context otherwise requires, or where a Party has specifically defined any of the above terms for application to its commitments or reservations. 

3. In this Agreement, all words used in the singular shall include the plural, and all words in the plural shall include the singular, unless the context otherwise requires.

Article 2. Objectives

The objectives of this Agreement are to promote investment flows and to create a liberal, facilitative, transparent and  competitive investment regime in China and ASEAN through the following:

(a) progressively liberalising the investment regimes of China and ASEAN;

(b) creating favourable conditions for the investment by the investor of a Party in the territory of another Party;

(c) promoting the cooperation between a Party and the investor who has investment in the territory of that Party on a mutually beneficial basis;

(d) encouraging and promoting the flow of investment among the Parties and cooperation among the Parties on investment-related matters;

(e) improving the transparency of investment rules conducive to increased investment flows among the Parties; and

(f) providing for the protection of investments in China and ASEAN.

Article 3. Scope of Application

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

(a) investors of another Party; and

(b) investments of investors of another Party in its territory, which shall be:

(i) in respect of China, the entire customs territory according to the WTO definition at the time of her accession to the WTO on the 11th day of December 2001. For this purpose, for China, “territory” in this Agreement refers to the customs territory of China; and

(ii) in respect of ASEAN Member States, their respective territories.

2. Unless otherwise provided in this Agreement, this Agreement shall apply to all investments made by investors of a Party in the territory of another Party, whether made before or after the entry into force of this Agreement. For greater certainty, the provisions of this Agreement do not bind any 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.

3. In the case of Thailand, this Agreement shall apply only in cases where the investment by an investor of another Party in the territory of Thailand has been admitted, and specifically approved in writing for protection by its competent authorities, (5) in accordance with its domestic laws, regulations and policies.

4. This Agreement shall not apply to:

(a) any taxation measure. This Sub-paragraph shall not undermine the Parties’ rights and obligations with respect to taxation measures:

(i) where corresponding rights or obligations are also granted or imposed under the WTO Agreement;

(ii) under Article 8 (Expropriation) and Article 10 (Transfers and Repatriation of Profits);

(iii) under Article 14 (Investment Disputes between a Party and an Investor), only when the dispute arises from Article 8 (Expropriation); and

(iv) under any tax convention relating to the avoidance of double taxation;

(b) laws, regulations, policies or procedures of general application governing the procurement by government agencies of goods and services purchased for governmental purposes (government procurement) and not with a view to commercial resale or with a view to use in the production of goods or the supply of services for commercial sale;

(c) subsidies or grants provided by a Party or to any conditions attached to the receipt or the continued receipt of such subsidies or grants, whether or not such subsidies or grants are offered exclusively to domestic investors and investments;

(d) services supplied in the exercise of governmental authority by the relevant body or authority of a Party. For the purposes of this Agreement, a service supplied in the exercise of governmental authority means any service which is supplied neither on a commercial basis nor in competition with one or more service suppliers; and

(e) measures adopted or maintained by a Party affecting trade in services.

5. Notwithstanding Sub-paragraph 4(e), Article 7 (Treatment of Investment), Article 8 (Expropriation), Article 9 (Compensation for Losses), Article 10 (Transfers and Repatriation of Profits), Article 12 (Subrogation) and Article 14 (Investment Disputes between a Party and an Investor) shall apply, mutatis mutandis, to any measure affecting the supply of a service by a service supplier of a Party through commercial presence in the territory of another Party, but only to the extent that they relate to an investment and an obligation under this Agreement, regardless of whether or not such a service sector is scheduled in the Party’s Schedule of Specific Commitments made under the Agreement on Trade in Services of the Framework Agreement on Comprehensive Economic Co-operation between the People’s Republic of China and the Association of Southeast Asian Nations signed in Cebu, Philippines on the 14th day of January 2007.

Article 4. National Treatment

Each Party shall, in its territory, accord to investors of another Party and their investments treatment no less favourable than it accords, in like circumstances, to its own investors and their investments with respect to management, conduct, operation, maintenance, use, sale, liquidation, or other forms of disposal of such investments. 

Article 5. Most-Favoured-Nation Treatment

1. Each Party shall accord to investors of another Party and their investments treatment no less favourable than that it accords, in like circumstances, to investors of any other Party or third country and/or their respective investments with respect to admission, establishment, acquisition, expansion, management, conduct, operation, maintenance, use, liquidation, sale, and other forms of disposal of investments.

2． Notwithstanding Paragraph 1, if a Party accords more favourable treatment to investors of another Party or third country and their investments by virtue of any future agreements or arrangements to which that Party is a party, it shall not be obliged to accord such treatment to investors of another Party and their investments. However, upon request from another Party, it shall accord adequate opportunity to negotiate the benefits granted therein.

3. The treatment, as set forth in Paragraph 1 and Paragraph 2, shall not include:

(a) any preferential treatment accorded to investors and their investments under any existing bilateral, regional or international agreements, or any forms of economic or regional cooperation with any non-Party; and

(b) any existing or future preferential treatment accorded to investors and their investments in any agreement or arrangement between or among ASEAN Member States or between any Party and its separate customs territories.

4. For greater certainty, the obligation in this Article does not encompass a requirement for a Party to extend to investors of another Party dispute resolution procedures other than those set out in this Agreement. 

Article 6. Non-Conforming Measures

1. Article 4 (National Treatment) and Article 5 (MostFavoured-Nation Treatment) shall not apply to:

(a) any existing or new non-conforming measures maintained or adopted within its territory;

(b) the continuation or amendment of any nonconforming measures referred to in Subparagraph (a).

2. The Parties will endeavour to progressively remove the non-conforming measures.

3. The Parties shall enter into discussions pursuant to Article 24 (Review) with a view to furthering the objectives in Article 2(a) and Article 2(e). The Parties will endeavour to achieve the objectives to be overseen by the institution under Article 22 (Institutional Arrangement).

Article 7. Treatment of Investment

1. Each Party shall accord to investments of investors of another Party fair and equitable treatment and full protection and security.

2. For greater certainty:

(a) fair and equitable treatment refers to the obligation of each Party not to deny justice in any legal or administrative proceedings; and

(b) full protection and security requires each Party to take such measures as may be reasonably necessary to ensure the protection and security of the investment of investors of another Party.

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

Article 8. Expropriation

1. A Party shall not expropriate, nationalise or take other similar measures (“expropriation”) against investments of investors of another Party, unless the following conditions are met:

(a) for a public purpose;

(b) in accordance with applicable domestic laws, including legal procedures;

(c) carried out in a non-discriminatory manner; and

(d) on payment of compensation in accordance with Paragraph 2.

2. Such compensation shall amount to the fair market value of the expropriated investment at the time when expropriation was publicly announced or when expropriation occurred, whichever is earlier, and it shall be freely transferable in freely usable currencies from the host country. The fair market value shall not reflect any change in market value occurring because the expropriation had become publicly known earlier.

3. The compensation shall be settled and paid without unreasonable delay. In the event of delay, the compensation shall include interest at the prevailing commercial interest rate from the date of expropriation until the date of payment. (6) The compensation, including any accrued interest, shall be payable either in the currency in which the investment was originally made or, if requested by the investor, in a freely usable currency.

4. Notwithstanding Paragraph 1, Paragraph 2 and Paragraph 3, any measure of expropriation relating to land shall be as defined in the expropriating Party’s existing domestic laws and regulations and any amendments thereto, and shall be for the purposes of and upon payment of compensation in accordance with the aforesaid laws and regulations.

5. Where a Party expropriates the assets of a juridical person which is incorporated or constituted under its laws and regulations, and in which investors of another Party own shares, it shall apply the provisions of the preceding Paragraphs so as to ensure that compensation is paid to such investors to the extent of their interest in the assets expropriated.

6. This Article shall not apply to the issuance of compulsory licences granted to intellectual property rights in accordance with the Agreement on TradeRelated Aspects of Intellectual Property Rights in Annex 1C to the WTO Agreement.

Article 9. Compensation for Losses

Investors of a Party whose investments in the territory of another Party suffer losses owing to war or other armed conflict, revolution, a state of emergency, revolt, insurrection or riot in the territory of the latter Party shall be accorded by the latter Party treatment, as regard restitution, indemnification, compensation or other settlement, no less favourable than that which the latter Party accords, in like circumstances, to investors of any third country or its own nationals, whichever is more favourable.

Article 10. Transfers and Repatriation of Profits

1. Each Party shall allow all transfers in respect of investments in its territory of an investor of any other Party to be made in any freely usable currency at the prevailing market rate of exchange on the date of transfer, and allow such transfers to be freely transferred into and out of its territory without delay. Such transfers shall include:

(a) the initial capital, plus any additional capital used to maintain or expand the investments (7);

(b) net profits, capital gains, dividends, royalties, licence fees, technical assistance and technical and management fees, interest and other current income accruing from any investment of the investors of any other Party;

(c) proceeds from the total or partial sale or liquidation of any investment made by investors of any other Party;

(d) funds in repayment of borrowings or loans given by investors of a Party to the investors of any other Party which the respective Parties have recognised as investment;

(e) net earnings and other compensations of natural persons of any other Party, who are employed and allowed to work in connection with an investment in its territory;

(f) payments made under a contract entered into by the investors of any other Party, or their investments including payments made pursuant to a loan transaction; and

(g) payments made pursuant to Article 8 (Expropriation) and Article 9 (Compensation for Losses).

2. Each Party undertakes to accord to the transfer referred to in Paragraph 1, treatment as favourable as that accorded, in like circumstances, to the transfer originating from investments made by investors of any other Party or third country.

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

(a) bankruptcy, loss of ability or capacity to make payments, or protection of the right of creditors;

(b) non-fulfilment of the host Party’s transfer requirements in respect of trading or dealing in securities, futures, options or derivatives;

(c) non-fulfilment of tax obligations;

(d) criminal or penal offences and the recovery of the proceeds of crime;

(e) social security, public retirement or compulsory saving schemes;

(f) compliance with judgements in judicial or administrative proceedings;

(g) workers’ retrenchment benefits in relation to labour compensation relating to, amongst others, foreign investment projects that are closed down; and

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

4. For greater certainty, the transfers referred to in the preceding Paragraphs shall comply with relevant formalities stipulated by the host Party’s domestic laws and regulations relating to exchange administration, insofar as such laws and regulations are not to be used as a means of avoiding a Party’s obligations under this Agreement.

5. Nothing in this Agreement shall affect the rights and obligations of the Parties as members of the IMF under the Articles of Agreement of the IMF, including the use of exchange actions which are in conformity with the Articles of Agreement of the IMF, provided that a Party shall not impose restrictions on any capital transactions inconsistently with its specific commitments under this Agreement regarding such transactions, except:

(a) under Article 11 (Measures to Safeguard the Balance of Payments); or

(b) at the request of the IMF; or

(c) where, in exceptional circumstances, movements of capital cause, or threaten to cause, serious economic or financial disturbance in the Party concerned, provided such restrictions do not affect the rights and obligations of the Parties as members of the WTO under Paragraph 1 of Article XI of GATS, and the measures are taken in accordance with paragraph 2 of Article 11 of this Agreement, mutatis mutandis.

Article 11. Measures to Safeguard the Balance of Payments

1. In the event of serious balance of payments and external financial difficulties or threat thereof, a Party may adopt or maintain restrictions on investments, including payments or transfers related to such investments. It is recognised that particular pressures on the balance of payments of a Party in the process of economic development may necessitate the use of restrictions to ensure, inter alia, the maintenance of a level of financial reserves adequate for the implementation of its programme of economic development.

2. The restrictions referred to in Paragraph 1 shall:

(a) be consistent with the Articles of Agreement of the IMF;

(b) not discriminate among the Parties;

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

(d) not exceed those necessary to deal with the circumstances described in Paragraph 1;

(e) be temporary and be phased out progressively as the situation specified in Paragraph 1 improves; and

(f) be applied such that any other Party is treated no less favourably than any third country.

3. Any restrictions adopted or maintained by a Party under Paragraph 1 or any changes therein, shall be promptly notified to the other Parties.

Article 12. Subrogation

1. In the event that any Party or any agency, institution, statutory body or corporation designated by it, as a result of an indemnity it has given in respect of an investment or any part thereof, makes payment to its own investors in respect of any of their claims under this Agreement, the other Parties concerned shall acknowledge that the former Party or any agency, institution, statutory body or corporation designated by it is entitled by virtue of subrogation to exercise the rights and assert the claims of its own investors. The subrogated rights or claims shall not be greater than the original rights or claims of the said investor.

2. Where a Party or any agency, institution, statutory body or corporation designated by it has made a payment to an investor of that Party and has taken over the rights and claims of the investor, that investor shall not, unless authorised to act on behalf of the Party or the agency, institution, statutory body or corporation designated by it making the payment, pursue those rights and claims against the other Party.

Article 13. Dispute between Parties

The provisions of the Agreement on Dispute Settlement Mechanism of the Framework Agreement on Comprehensive Economic Co-operation between the People’s Republic of China and the Association of Southeast Asian Nations signed in Vientiane, Lao PDR on the 29th day of November 2004 shall apply to the settlement of disputes between or amongst the Parties under this Agreement. 

Article 14. Investment Disputes between a Party and an Investor

1. This Article shall apply to investment disputes between a Party and an investor of another Party concerning an alleged breach of an obligation of the former Party under Article 4 (National Treatment), Article 5 (MostFavoured-Nation Treatment), Article 7 (Treatment of Investment), Article 8 (Expropriation), Article 9 (Compensation for Losses) and Article 10 (Transfers and Repatriation of Profits), which causes loss or damage to the investor in relation to its investment with respect to the management, conduct, operation, or sale or other disposition of an investment.

2. This Article shall not apply:

(a) to investment disputes arising out of events which occurred, or to investment disputes which had been settled, or which were already under judicial or arbitral process, prior to the entry into force of this Agreement;

(b) in cases where the disputing investor holds the nationality or citizenship of the disputing Party.

3. The parties to the dispute shall, as far as possible, resolve the dispute through consultations.

4. Where the dispute cannot be resolved as provided for under Paragraph 3 within six (6) months from the date of written request for consultations and negotiations, unless the parties to the dispute agree otherwise, it may be submitted at the choice of the investor:

(a) to the courts or administrative tribunals of the disputing Party, provided such courts or administrative tribunals have jurisdiction; or

(b) under the International Centre for Settlement of Investment Disputes (ICSID) Convention and the ICSID Rules of Procedure for Arbitration Proceedings, (8) provided that both the disputing Party and the non-disputing Party are parties to the ICSID Convention; or