2. For greater certainty, the mere fact that a Party regulates, including through a modification to its laws, in a manner that negatively affects an investment or interferes with an investor’s expectations, including its expectation of profits, does not amount to a breach of an obligation under this Chapter.
Article 13.5. Regulatory Objectives
The Parties recognize the importance of encouraging investments that respect health, safety, the environment, and other regulatory objectives or the rights of Indigenous Peoples. (5) Accordingly, a Party shall not relax, waive, or otherwise derogate from, or offer to relax, waive,or otherwise derogate from, these measures in order to encourage the establishment, acquisition, expansion,or management of the investment of an investor in its territory.
Article 13.6. National Treatment
1. Each Party shall accord to an investor of the other Party treatment no less favourable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of an investment in its territory.
2. Each Party shall accord to a covered investment treatment no less favourable than that it accords, in like circumstances, to investments of its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of an investment in its territory.
3. The treatment accorded by a Party under paragraphs 1 and 2 means, with respect to a government other than at the central level, treatment accorded, in like circumstances, by that government to investors, and to investments of investors, of the Party of which it forms a part.
4. Whether treatment is accorded in like circumstances depends on the totality of the circumstances. Such circumstances include whether the relevant treatment distinguishes between investors or investments on the basis of legitimate public policy objectives, and, if relevant, competition in the economic or business sector concerned and the applicable legal and regulatory framework.
5. Paragraphs 1 and 2 prohibit discrimination based on nationality. A difference in treatment accorded to an investor or covered investment and a Party’s own investors or investments of its own investors does not, in and of itself, establish discrimination based on nationality.
Article 13.7. Most-Favoured-Nation Treatment
1. Each Party shall accord to an investor of the other Party treatment no less favourable than that it accords, in like circumstances, to investors of a non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of an investment in its territory.
2. Each Party shall accord to a covered investment treatment no less favourable than that it accords, in like circumstances, to investments of investors of a non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of an investment in its territory.
3. The treatment accorded by a Party under paragraphs 1 and 2 means, with respect to a government other than at the central level, treatment accorded, in like circumstances, by that government to investors, and to investments of investors, of the Party of which it forms a part.
4. Whether treatment is accorded in like circumstances depends on the totality of the circumstances. Such circumstances include whether the relevant treatment distinguishes between investors or investments on the basis of legitimate public policy objectives, and, if relevant, competition in the economic or business sector concerned and the applicable legal and regulatory framework.
5. Paragraphs 1 and 2 prohibit discrimination based on nationality. A difference in treatment accorded to an investor or covered investment and a non-Party’s investors or investments of a non-Party’s investors does not, in and of itself, establish discrimination based on nationality.
6. The treatment referred to in paragraphs 1 and 2 does not include procedures or mechanisms for the resolution of investment disputes between investors and States provided for in other international investment treaties and other trade agreements
7. Substantive obligations in other international investment treaties and other trade agreements do not in themselves constitute treatment, and thus cannot give rise to a breach of this Article, in the absence of measures adopted or maintained by a Party pursuant to those obligations.
Article 13.8. Treatment In Case of Armed Conflict or Civil Strife
1. Each Party shall accord to an investor of the other Party and to a covered investment, with respect to measures it adopts or maintains relating to restitution, indemnification, compensation, or other settlement for losses incurred by investments in its territory as a result of armed conflict or civil strife, treatment no less favourable than it accords, in like circumstances, to:
(a) its own investors and their investments; or
(b) investors of a non-Party and their investments.
2. Notwithstanding paragraph 1, if an investor of a Party, in a situation referred to in paragraph 1, suffers a loss in the territory of the other Party resulting from:
(a) requisitioning of its covered investment or part thereof by the latter’s forces or authorities; or
(b) destruction of its covered investment or part thereof by the latter’s forces or authorities, which was not required by the necessity of the situation,
the latter Party shall provide the investor restitution, compensation, or both, as appropriate, for that loss. (6)
Article 13.9. Minimum Standard of Treatment
1. Each Party shall accord in its territory to a covered investment of the other Party and to an investor with respect to their covered investment treatment in accordance with the customary international law minimum standard of treatment of aliens. A Party breaches this obligation only if a measure constitutes:
(a) denial of justice in criminal, civil, or administrative proceedings;
(b) fundamental breach of due process in judicial and administrative proceedings;
(c) manifest arbitrariness; (7)
(d) targeted discrimination on manifestly wrongful grounds such as gender, race, or religious beliefs;
(e) abusive treatment of investors, such as physical coercion, duress, and harassment; or
(f) a failure to provide full protection and security. (8)
2. 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.
3. The fact that a measure breaches domestic law does not establish a breach of this Article.
Article 13.10: Expropriation
1. A Party shall not expropriate a covered investment either directly or indirectly, except:
(a) for a public purpose; (9) (10)
(b) in accordance with due process of law;
(c) in a non-discriminatory manner; and
(d) on payment of compensation in accordance with paragraph 5.
2. A direct expropriation occurs only when a covered investment is nationalised or taken by a Party through formal transfer of title or outright seizure.
3. An indirect expropriation may occur when a measure or a series of measures of a Party has an effect equivalent to direct expropriation without formal transfer of title or outright seizure. A non-discriminatory measure of a Party that is adopted and maintained in good faith to protect legitimate public welfare objectives, such as health, safety, and the environment, does not constitute an expropriation. The determination of whether a measure or a series of measures of a Party has an effect equivalent to direct expropriation requires a case-by-case, fact-based inquiry that shall consider:
(a) the economic impact of the measure or the series of measures, although the sole fact that a measure or a series of measures of a Party has an adverse effect on the economic value of a covered investment does not establish that an indirect expropriation has occurred;
(b) the duration of the measure or series of measures of a Party;
(c) the extent to which the measure or the series of measures interferes with distinct, reasonable investment-backed expectations; and
(d) the character of the measure or the series of measures.
4. A measure of a Party cannot violate this Article unless it expropriates a covered investment that is a tangible or intangible property right under the domestic law of the Party in which the investment was made. This determination requires the consideration of relevant factors, such as the nature and scope of the tangible or intangible property right under the applicable domestic law of the Party in which the investment was made.
5. The compensation referred to in paragraph 1 shall:
(a) be paid without delay (11) in a freely convertible currency of the expropriating Party’s choice;
(b) be equivalent to the fair market value of the expropriated investment immediately before the expropriation took place (“date of expropriation”). Appropriate valuation criteria include going concern value, asset value including the declared tax value of tangible property, and other criteria, which may be appropriate or relevant under the circumstances, to determine fair market value;
(c) not reflect any change in value occurring because the intended expropriation had become known earlier; (d) include interest at a commercially reasonable rate for that currency accrued from the date of expropriation until the date of payment; and (e) be freely transferable.
6. With respect to direct expropriation relating to land, in the case of Indonesia, the concepts of “public purpose” under paragraph 1 and compensation “equivalent to the fair market value” under paragraph 5 are implemented in domestic laws and regulations.
7. A measure of a Party that would otherwise constitute an expropriation of an intellectual property right does not constitute a breach of this Article if it is consistent with Chapter 14 (Intellectual Property) and the TRIPS Agreement and any waiver or amendment of the TRIPS Agreement accepted by that Party.
Article 13.11. Transfer of Funds
1. Each Party shall permit all transfers of funds relating to a covered investment to be made freely, and without delay, into and out of its territory. Those transfers include:
(a) contributions to capital;
(b) profits, dividends, interest, capital gains, royalty payments, management fees, technical assistance fees, and other fees;
(c) proceeds from the sale or liquidation of the whole or part of the covered investment;
(d) payments made under a contract entered into by the investor or the covered investment, including payments made pursuant to a loan agreement;
(e) payments made under Article 13.8 (Treatment in Case of Armed Conflict or Civil Strife) and Article 13.10 (Expropriation);
(f) earnings and other remuneration of foreign personnel working in connection with an investment; and
(g) payments arising out of a dispute.
2. Each Party shall permit transfers of funds relating to a covered investment to be made in a freely convertible currency at the market rate of exchange in effect at the time of transfer.
3. A Party shall not require its investors to transfer, or penalize one of its investors for failing to transfer, the income, earnings, profits, or other amounts derived from, or attributable to, an investment in the territory of the other Party.
4. Notwithstanding paragraphs 1, 2, and 3, a Party may prevent or limit a transfer through the equitable, non-discriminatory, and good faith application of its domestic law relating to:
(a) bankruptcy, insolvency,or the protection of the rights of a creditor;
(b) issuing, trading, or dealing in securities;
(c) criminal or penal offences;
(d) financial reporting or record keeping of transfers if necessary to assist law enforcement or financial regulatory authorities;
(e) ensuring compliance with an order or judgment in judicial or administrative proceedings;
(f) taxation; or
(g) social security, public retirement, or compulsory savings programmes.
Article 13.12. Performance Requirements
1. A Party shall not, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of an investment in its territory, impose or enforce a requirement, or enforce a commitment or undertaking:
(a) to export a given level or percentage of a good or service;
(b) to achieve a given level or percentage of domestic content;
(c) to purchase, use, or accord a preference to a good produced or service provided in its territory, or to purchase a good or service from a person in its territory;
(d) to relate the volume or value of imports to the volume or value ofexports or to the amount of foreign exchange inflows associated with that investment;
(e) to restrict sales of a good or service in its territory that the investment produces or provides by relating those sales to the volume or value of its exports or foreign exchange earnings
(f) to transfer technology, a production process, source code of software, or other proprietary knowledge to a person in its territory; or
(g) to supply exclusively from the territory of the Party a good that the investment produces or a service it provides to a specific regional market or to the world market.
2. A Party shall notcondition 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, on compliance with a requirement:
(a) to achieve a given level or percentage of domestic content;
(b) to purchase, use, or accord a preference to a good produced in its territory, or to purchase a good from a producer in its territory;
(c) to relate the volume or value of imports to the volume or value ofexports or to the amount of foreign exchange inflows associated with that investment; or
(d) to restrict sales of a good or service in its territory that the investment produces or provides by relating those sales to the volume or value of its exports or foreign exchange earnings.
3. The provisions of:
(a) paragraph 2 do not prevent a Party from conditioning the receipt or continued receipt of an advantage, in connection with any investments, on compliance with a requirement to locate production, provide a service, train or employ workers, construct or expand particular facilities, or carry out research and development in its territory;
(b) subparagraphs 1(a), 1(b),1(c), 2(a), and 2(b) do not apply to a qualification requirement for a good or service with respect to export promotion and foreign aid programs;
(c) subparagraphs 2(a) and 2(b) do not apply to a requirement imposed by an importing Party relating to the content of a good necessary to qualify for a preferential tariff or preferential quota;
(d) subparagraph 1(f) do not apply:
(i) if a Party authorizes use of an intellectual property right in accordance with Article 31 (12 )of the TRIPS Agreement, or to a measure requiring the disclosure of proprietary information that falls within the scope of, and is consistent with, Article 39 of the TRIPS Agreement; or
(ii) if the requirement is imposed or the requirement, commitment, or undertaking is enforced by a court, administrative tribunal, or competition authority to remedy an alleged violation of domestic competition law;
(e) subparagraphs 1(b), 1(c), 1(f), 2(a), and 2(b) do not prevent a Party from adopting or maintaining a measure to achieve a legitimate public policy objective, provided that the measure:
(i) is not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on trade; and
(ii) does not impose restrictions greater than are required to achieve the objective; and
(f) subparagraph 1(f) do not preclude a regulatory body or judicial authority of a Party from requiring a person of the other Party to preserve and make available the source code of software, or an algorithm expressed in that source code, to the regulatory body for a specific investigation, inspection, examination, enforcement action, or judicial proceeding, (13 )subject to safeguards against unauthorized disclosure.
Article 13.13. Senior Management and Boards of Directors
1. A Party shall notrequirethat an enterprise of that Party that is a covered investment appoint to a senior management position an individual of a particular nationality.
2. A Party may require that up to a majority of the board of directors, ora 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.
3. A Party should encourage enterprises to consider greater diversity in senior management positions or on theirboard of directors, which may include a requirement to nominate women.
Article 13.14. Subrogation
1. If a Party oran agency of a Party makes a payment on non-commercial risks to one of its investors under a guarantee or a contract of insurance, or other form of indemnity it has entered into in respect of a covered investment:
(a) the other Party in whose territory the covered investment was made shall recognize the validity of the subrogation or transfer of any rights the investor would have possessed with respect to the covered investment but for the subrogation or transfer; and
(b) the investor shall be precluded from pursuing these rights to the extent of the subrogation or transfer, unless the other Party or an agency of the other Party authorizes the investor in writing to act on its behalf.
2. The subrogated or transferred right or claim shallnot be greater than the original right or claim of the investor.
Article 13.15. Denial of Benefits
A Party may, at any time prior to its principal submission on the merits, such as the counter-memorial, in an arbitration under this Chapter, deny the benefits of this Chapter to an investor of the other Party that is an enterprise of that Party and to investments of that investor if an investor of a non-Party owns or controls the enterprise and the denying Party:
(a) adopts or maintains a measure with respect to that non-Party or investors of that non-Party that prohibits transactions with the enterprise or would be violated or circumvented if the benefits of this Agreement were accorded to the enterprise or to its investment; or
(b) does not maintain diplomatic relations with that non-Party.
Article 13.16. Special Formalities and Information Requirements
1. Nothing in Article 13.6 (National Treatment) shall be construed to prevent a Party from adopting or maintaining any measure that prescribes special formalities in connection with covered investments, such as a requirement that investors be residents of the Party, that an investor register or otherwise notify the appropriate authorities of its covered investment, or that covered investments be legally constituted under the laws or regulations of the Party, provided that theseformalities do not materially impair the protection afforded by the Party to investors of the other Party and covered investments pursuant to this Chapter.
2. Notwithstanding Articles 13.6 (National Treatment) and 13.7 (Most-Favoured-Nation Treatment), a Party may require an investor of the other Party or a covered investment to provide information concerning that investment for informational or statistical purposes. The Party shall protect such information that is confidential from any disclosure that would prejudice the competitive position of the investor or the covered investment. Nothing in this paragraph shall be construed to prevent a Party from obtaining or disclosing information in connection with the equitable and good faith application of its law.
Article 13.17. Promotion of Investment
1. The Parties recognise the importance of cooperating to promote investment in priority sectors as a means to effectively achieve economic growth and development based on common interest and mutual benefits.
2. The cooperation referred to in paragraph 1 may include:
(a) promoting the principles underlying the obligations contained in this Chapter to investors;
(b) organising joint investment promotion activities, such as business matching events or identifying investment opportunities;
(c) organising and supporting the organisation of various briefings and seminars on investment opportunities and on investment laws, regulations, and policies; and
(d) conducting information exchanges on other issues of mutual interest relating to investment promotion.
Section C. Reservations, Exceptions, Exclusions
Article 13.18. Non-Conforming Measures and Exceptions
1. Article 13.6 (National Treatment), Article 13.7 (Most-Favoured-Nation Treatment), Article 13.12 (Performance Requirements), Article 13.13 (Senior Management and Boards of Directors) do not apply to:
(a) any existing non-conforming measure maintained in the territory of a Party at:
(i) the central level of government, as set out by that Party in its Schedule to Annex I-A (Reservations for Existing Measures – ratchet);
(ii) aregional level of government,as set out by that Party in its Schedule to Annex I-A (Reservations for Existing Measures – ratchet); o
r (iii) a government other than the central or regional levels;
(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 immediately before the amendment, with Article 13.6 (National Treatment), Article 13.7 (Most.Favoured-Nation Treatment), Article 13.12 (Performance Requirements), and Article 13.13 (Senior Management and Boards of Directors).(14)
2. Article 13.6 (National Treatment), Article 13.7 (Most-Favoured-Nation Treatment), Article 13.12 (Performance Requirements) and Article 13.13 (Senior Management and Boards of Directors) do not apply to:
(a) any existing non-conforming measure maintained in the territory of a Party at:
(i) the central level of government, as set out by that Party in its Schedule to Annex I-B (Reservations for Existing Measures – standstill); or
(ii) a regional level of government as set out by that Party in its Schedule to Annex I-B (Reservations for Existing Measures – standstill);
(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 entry into force of this Agreement, with Article 13.6 (National Treatment), Article 13.7 (Most-Favoured-Nation Treatment), Article 13.12 (Performance Requirements), and Article 13.13 (Senior Management and Boards of Directors).
3. Article 13.6 (National Treatment), Article 13.7 (Most-Favoured-Nation Treatment), Article 13.12 (Performance Requirements), and Article 13.13 (Senior Management and Boards of Directors) shall not apply to a measure that a Party adopts or maintains with respect to sectors, subsectors, or activities, as set out in its Schedule to Annex II(Reservations for Future Measures).
4. Notwithstanding subparagraph 2(c), aParty shall notwithdraw a right or benefit from acovered investment, in reliance on which a covered investment has been granted an investment permit, through an amendment to a limitation on foreign equity participation that decreases the conformity of the measure as it existed immediately before the amendment.
5. A Party shall not, under any measureadopted after the date of entry into force of this Agreement and covered by its Schedule to Annex II (Reservations for Future Measures), 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. For greater certainty, this paragraph does not apply to this requirement if specified in the initial approval of the investment by the relevant authorities.
6. In respect of intellectual property rights, a Party may derogate from Article 13.6 (National Treatment) and Article 13.7 (Most-Favoured-Nation Treatment) in a manner that is consistent with: