Title
MAINLAND AND HONG KONG CLOSER ECONOMIC PARTNERSHIP ARRANGEMENT INVESTMENT AGREEMENT
Preamble
Preamble
To promote and protect investments by investors ofthe Mainland (1) and the Hong Kong Special Administrative Region (hereinafter referred to as the "two sides") in the other side, to progressively reduce or eliminate substantially all discriminatory measures on investments between the two sides, to protect the rights of investors and to promote achieving progressive liberalisation and facilitation of investments of the two sides, as well as to further enhance the level of bilateral economic and trade exchanges and cooperation, the two sides decided to sign, under the framework of the Mainland and Hong Kong Closer Economic Partnership Arrangement (hereinafter referred to as "CEPA"), the Investment Agreement between the Mainland and the Hong Kong Special Administrative Region (hereinafter referred to as "Hong Kong") as follows:
Body
Chapter 1. Initial Provisions
Article 1. Relationship with CEPA
1. This Agreement is the Investment Agreement of CEPA.
2. Article 5 (National Treatment), Article 6 (Most-Favoured Treatment), Article 7 (Performance Requirements) and Article 8 (Senior Management, Boards of Directors and Entry of Personnel) do not apply to measures affecting any sectors and any forms of investments covered by the Agreement on Trade in Services of CEPA.
Article 2. Definitions
For the purpose of this Agreement,
1. "investment" means every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, and the assumption of risks. Forms that an investment may take include, though not exclusively:
(i) An enterprise;
(ii) Shares, stocks and other forms of equity participation in an enterprise;
(iii) Bonds, debentures, loans and other debt instruments, including debt instruments issued by an enterprise or one side (2);
(iv) Futures, options and other derivatives;
(v) Turnkey, construction, management, production, concession, revenue-sharing and other similar contracts;
(vi) Intellectual property rights;
(vii) Licenses, authorisations, permits and similar rights conferred pursuant to the laws of one side (3) (4); and
(viii) Other tangible or intangible assets, movable or immovable property, and related property rights, such as leases, mortgages, liens and pledges.
For greater certainty, any change in the form in which an asset is invested does not affect its character as an investment.
2. "investor" means one side, or a natural person or an enterprise of one side, that seeks to make, is making or has made a covered investment;
3. "covered investment" means, with respect to one side, an investment in its area that an investor of the other side owns or controls, directly or indirectly, and exists on the date of the coming into effect of this Agreement or is made or acquired thereafter;
4. "natural person" means, in the case of the Mainland, a citizen of the People's Republic of China; and in the case of Hong Kong, a permanent resident of the Hong Kong Special Administrative Region of the People's Republic of China;
5. "enterprise" means:
(i) An entity constituted or organised under the laws of one side, whether or not for profit, whether privately-owned or governmentally-owned, and whether its liabilities are limited or otherwise, such as a public institution, corporation, foundation, agency, cooperative, trust, society, association and similar entity and a private company, firm, partnership, establishment, joint venture and organisation;
(ii) A branch of any such entity;
6. "measure" includes any law, regulation, rule, procedure, decision, requirement, administrative action, or practice;
7. "government procurement" means the process by which a government obtains the use of or acquires goods or services, or any combination thereof, for governmental purposes by any contractual means including purchase, rental or lease with or without an option to buy, as well as build-operate-transfer contracts and public works concession contracts, etc., and not with a view to commercial sale or resale or use in the production or supply of goods or services for commercial sale or resale;
8. "returns" means the amounts yielded by investments, and in particular, though not exclusively, profits, capital gains, dividends, interest, royalties, returns-in-kind or other income;
9. "disputing investor" means an investor that makes a claim under Article 19 (Dispute Settlement between a Hong Kong Investor and the Mainland) or Article 20 (Dispute Settlement between a Mainland Investor and Hong Kong);
10. "disputing side" means one side against which a claim is made under Article 18 (Dispute Settlement between the Two Sides under this Agreement), Article 19 (Dispute Settlement between Hong Kong Investor and the Mainland Side) or Article 20 (Dispute Settlement between the Mainland Investor and the Hong Kong Side);
11. "disputing party" means the disputing investor or the disputing side;
12. "WTO Agreement" means the Marrakesh Agreement Establishing the World Trade Organisation, done at Marrakesh on 15 April 1994;
13. "TRIPS Agreement" means the Agreement on Trade-Related Aspects of Intellectual Property Rights, contained in Annex 1C of the WTO Agreement, as revised or amended from time to time by a revision or amendment that applies to the two sides and including any waiver of any provision thereof granted by the General Council of the World Trade Organisation (WTO);
14. "taxation agreement" means an agreement, convention, treaty or arrangement for the avoidance of double taxation or other bilateral or multilateral taxation agreement, convention, treaty or arrangement;
15. "competition authority" means:
(i) In the case of the Mainland, the authority for enforcement of the Anti-Monopoly Law and the authority (for enforcement) of the Law Against Unfair Competition under the State Council, or their successors; and
(ii) In the case of Hong Kong, the Competition Commission established under the Competition Ordinance (Cap. 619), or its successor;
16. "information protected under its competition laws" means:
(i) In the case of the Mainland, information protected from disclosure under the relevant provisions of the Anti- Monopoly Law, the Pricing Law and the Law Against Unfair Competition, or any successor provisions; and
(ii) In the case of Hong Kong, information protected by the Competition Ordinance (Cap. 619), or any successor provisions.
Article 3. Scope of Application
1. This Agreement shall apply to measures adopted or maintained by one side relating to investors of the other side and covered investments.
2. This Agreement shall apply to investments made by investors of one side in the other side prior to or after the coming into effect of this Agreement, but shall not apply to the "investment disputes" as referred to in paragraph 1 of Article 19 (Dispute Settlement between a Hong Kong Investor and the Mainland) and paragraph 1 of Article 20 (Dispute Settlement between a Mainland Investor and Hong Kong) of this Agreement, settled before the coming into effect of this Agreement.
3. The obligations of one side under this Agreement shall apply to any entity when it exercises any regulatory, administrative or other governmental authority delegated to it by that side, such as the power to expropriate, grant licences, approve commercial transactions, or impose quotas, fees or other charges.
Chapter 2. Substantive Obligations
Article 4. Minimum Standard of Treatment
1. One side shall ensure that fair and equitable treatment is accorded to investors of the other side and their covered investments, and shall provide full protection and security.
2. In paragraph 1 of this Article:
(i) "fair and equitable treatment" means that one side shall not deny justice in criminal, civil or administrative adjudicatory proceedings in accordance with due process of law, or implement manifest discriminatory or arbitrary measures;
(ii) "full protection and security" means that one side shall adopt reasonable and necessary measures to provide police protection to the investors of the other side and their covered investments.
3. A breach of another provision of this Agreement does not establish that there has been a breach of this Article.
4. For greater certainty, the mere fact that one side takes or fails to take an action that may be inconsistent with an investor's expectations does not constitute a breach of this Article, regardless of whether there is loss or damage to the covered investment as a result.
5. For greater certainty, the mere fact that a subsidy or grant has not been issued, renewed or maintained, or has been modified or reduced, by one side, does not constitute a breach of this Article, regardless of whether there is loss or damage to the covered investment as a result.
Article 4. National Treatment
1. One side shall accord to investors of the other side 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 investments in its area.
2. One side shall accord to covered investments 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 investments in its area.
Article 6. Most-favoured Treatment
1. One side shall accord to investors of the other side treatment no less favourable than that it accords, in like circumstances, to investors of any other party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its area.
2. One side shall accord to covered investments treatment no less favourable than that it accords, in like circumstances, to investments of investors of any other party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its area.
3. For greater certainty, the provisions of this Agreement shall not be so construed as to prevent one side from conferring or according advantages to adjacent countries or regions in order to facilitate investments that engage in local production and consumption in contiguous frontier zones.
4. For greater certainty, the "treatment" referred to in paragraphs 1 and 2 of this Article does not encompass dispute resolution mechanisms in other investment agreements, international investment treaties and other trade agreements.
Article 7. Performance Requirements
1. Neither side may impose or enforce the following requirements, or enforce a commitment or undertaking, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of a covered investment in its area:
(i) To export a given level or percentage of goods or services;
(ii) To achieve a given level or percentage of domestic content;
(iii) To purchase, use or accord a preference to goods produced in its area, or to purchase goods from a person in its area;
(iv) To relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with the investment;
(v) To restrict sales of goods or services in its area that the investment produces or supplies by relating those sales in any way to the volume or value of its exports or foreign exchange earnings;
(vi) To transfer a particular technology, a production process or other proprietary knowledge to a person in its area; or
(vii) To supply exclusively from the area of one side the goods that the investment produces or the services that it provides to a specific regional market or to the world market.
2. Neither side may condition the receipt or continued receipt of an advantage, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of a covered investment in its area, on compliance with the following requirements:
(i) To achieve a given level or percentage of domestic content;
(ii) To purchase, use or accord a preference to goods produced in its area, or to purchase goods from a person in its area;
(iii) To relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with the investment; or
(iv) To restrict sales of goods or services in its area that the investment produces or supplies by relating those sales in any way to the volume or value of its exports or foreign exchange earnings.
3. (i) Nothing in paragraph 1 shall be construed to prevent one side from imposing or enforcing any requirement, or enforcing any commitment or undertaking, in connection with an investment of an investor of the other side in its area, to locate production, supply a service, train or employ workers, construct or expand particular facilities, or carry out research and development, in its area, provided that such measures are consistent with sub- paragraph 1(vi).
(ii) Nothing in paragraph 2 shall be construed to prevent one side from conditioning the receipt or continued receipt of an advantage, in connection with an investment of an investor of the other side in its area, on compliance with a requirement to locate production, supply a service, train or employ workers, construct or expand particular facilities, or carry out research and development, in its area.
(iii) Sub-paragraph 1(vi) does not apply to the following situations or measures:
(1) If one side authorises use of an intellectual property right in accordance with Article 31 of the TRIPS Agreement, or to measures requiring the disclosure of proprietary information that fall within the scope of, and are consistent with, Article 39 of the TRIPS Agreement; or
(2) If the requirement is imposed or the commitment or undertaking is enforced by the judicial authority or competition authority to remedy a practice determined after judicial or administrative process to be anticompetitive under the competition laws of one side.
(iv) Sub-paragraphs 1(i), 1(ii), 1(iii) and sub-paragraphs 2(i) and 2(ii) do not apply to qualification requirements for goods or services with respect to export promotion and foreign aid programs.
(v) Sub-paragraphs 1(ii), 1(iii), 1(vi), 1(vii) and sub- paragraphs 2(i) and 2(ii) do not apply to government procurement.
(vi) Sub-paragraphs 2(i) and 2(ii) do not apply to requirements imposed by the importing side relating to the content of goods necessary to qualify for preferential tariffs or preferential quotas.
4. For greater certainty, paragraphs 1 and 2 do not apply to any commitment, undertaking or requirement other than those set out in those paragraphs.
5. This Article does not preclude the enforcement of any commitment, undertaking or requirement between private parties, if one side did not impose or require the commitment, undertaking or requirement.
Article 8. Senior Management, Boards of Directors and Entry of Personnel
1. One side may not require that an enterprise of that side that is a covered investment appoint to a senior management position an individual of any particular nationality.
2. One side may require that a majority of the board of directors, or any committee thereof, of an enterprise of that side that is a covered investment be of a particular nationality or resident in the area of that side, provided that the requirement does not materially impair the ability of the investor to exercise control over its investment.
3. Subject to its laws and policies relating to entry and stay, one side shall permit a natural person of the other side employed by an enterprise that is a covered investment of an investor, or a subsidiary or affiliate of such an enterprise, to enter and stay temporarily in a capacity that is managerial or executive or that requires specialised knowledge.
Article 9. Non-conforming Measures
1. Article 5 (National Treatment), Article 6 (Most-Favoured Treatment), Article 7 (Performance Requirements) and Article 8 (Senior Management, Boards of Directors and Entry of Personnel) do not apply to:
(i) 1. Any existing non-conforming measures maintained by one side, as specified in its lists in Table 1 of Part I (Schedule of the Mainland) in Annex 2 or Part II (Schedule of Hong Kong) in Annex 2; and
2. Any measure maintained or adopted after the date of coming into effect of this Agreement that, at the time of sale or other disposition of a government's equity interests in, or the assets of, an existing enterprise owned or invested by the government or an existing governmental entity, prohibits or imposes limitations on the ownership or control of equity interests or assets, or imposes nationality requirements relating to senior management or members of the board of directors;
(ii) The continuation or prompt renewal of any non-conforming measure referred to in sub-paragraph (i); or
(iii) An amendment to any non-conforming measure referred to in sub-paragraph (i), to the extent that the amendment does not increase the non-conformity of the measure, as it existed immediately before the amendment, with the obligations in Article 5 (National Treatment), Article 6 (Most-Favoured Treatment), Article 7 (Performance Requirements) and Article 8 (Senior Management, Boards of Directors and Entry of Personnel).
2. Article 5 (National Treatment), Article 6 (Most-Favoured Treatment), Article 7 (Performance Requirements) and Article 8 (Senior Management, Boards of Directors and Entry of Personnel) do not apply to the measures adopted or maintained by one side with respect to sectors, sub-sectors or activities as set out in Table 2 of Part I (Schedule of the Mainland) in Annex 2 or Part II (Schedule of Hong Kong) in Annex 2.
3. For greater certainty, Hong Kong will not impose any new discriminatory measures on Mainland investors in the areas of non- services investments covered by this Agreement in respect of the obligations under Article 5 (National Treatment), Article 6 (Most- Favoured Treatment), Article 7 (Performance Requirements) and Article 8 (Senior Management, Boards of Directors and Entry of Personnel). The two sides shall, through consultation, formulate and implement measures for further liberalisation by Hong Kong for Mainland investors and their covered investments. The specific commitments will be listed in Part II (Schedule of Hong Kong) of Annex 2 to this Agreement.
4. Without prejudice to the other provisions and the annexes to this Agreement, an investor of one side must fulfil the relevant requirements in relation to the definition of "investor" in Annex 1 to this Agreement in order to enjoy the treatment of investments as set out in Article 5 (National Treatment), Article 6 (Most-Favoured Treatment), Article 7 (Performance Requirements) and Article 8 (Senior Management, Boards of Directors and Entry of Personnel).
5. In respect of intellectual property rights, one side may derogate from Article 5 (National Treatment), Article 6 (Most- Favoured Treatment) and Article 7 (Performance Requirements) of this Agreement in a manner that is consistent with agreements regarding intellectual property rights to which both sides are parties or applicable to both sides.
6. Article 5 (National Treatment), Article 6 (Most-Favoured Treatment) and Article 8 (Senior Management, Boards of Directors and Entry of Personnel) do not apply to:
(i) Government procurement by one side;
(ii) ( Subsidies or grants provided by one side, including government-supported loans, guarantees and insurance.
However, should the laws of one side provide otherwise for sub- paragraphs (i) and (ii) of this paragraph, such laws shall prevail.
7. If the two sides have different understandings with respect to the scope of the tables in Annex 2 to this Agreement, the two sides shall make an interpretation through the Committee on Investment established in accordance with Article 17 (Committee on Investment).
Article 10. Special Formalities and Information Requirements
1. Nothing in Article 5 (National Treatment) shall be construed to prevent one side from adopting or maintaining a measure that prescribes special formalities in connection with investors and covered investments, such as a requirement that investors be residents of that side, or that covered investments be legally constituted under the laws of that side, provided that such formalities do not materially impair the obligations of that side owed to investors and covered investments of the other side.
2. Notwithstanding Article 5 (National Treatment) and Article 6 (Most-Favoured Treatment), one side may require an investor or covered investment of the other side to provide information concerning the investor or the covered investment solely for informational or statistical purposes. The former side shall protect any confidential business information from disclosure that would prejudice the competitive position of the investor or the covered investment. Nothing in this paragraph shall be construed to prevent one side from otherwise obtaining or disclosing information in connection with the equitable and good faith application of its laws.
Article 11. Expropriation
1. Covered investments or returns of investors of one side shall not be expropriated or subjected to measures having an effect equivalent to expropriation in the area of the other side (hereinafter referred to as "expropriation"), except for a public purpose, in accordance with due process of law, in a non-discriminatory manner and on payment of compensation. For greater certainty, this Article shall be interpreted in accordance with Annex 3.
2. The compensation referred to in paragraph 1 of this Article shall be equivalent to the real value (5) of the expropriated investment immediately before the expropriation, or before the impending expropriation became public knowledge, whichever is earlier, and shall include interest at a normal commercial rate, accrued from the date of expropriation until the date of payment. Compensation shall be fully realisable, freely transferable, and paid without delay. The affected investor shall have a right under the laws of the side making the expropriation to prompt review of its case and of the valuation of its investment by a judicial or other independent authority of that side in accordance with the principles set out in this paragraph.
3. This Article does not apply to the issuance of compulsory licenses granted in relation to intellectual property rights, or to other measures related to intellectual property rights, to the extent that such measures are consistent with agreements regarding intellectual property rights to which both sides are parties or applicable to both sides.
4. For greater certainty, the mere fact that a subsidy or grant has not been issued, renewed or maintained, or has been modified or reduced, by one side, does not constitute an expropriation, regardless of whether there is loss or damage to the covered investment as a result.
Article 12. Compensation for Losses
1. Notwithstanding the provision of sub-paragraph 6(ii) of Article 9 (Non-Conforming Measures), investors of one side who suffer losses in respect of covered investments owing to war, state of emergency, insurrection, riot, natural disaster or other similar events, shall be accorded treatment by the other side, in respect of restitution, indemnification, compensation or other settlement, no less favourable than that it accords in like circumstances, to its own investors or to investors of any other party, whichever is most favourable.
2. Notwithstanding paragraph 1 of this Article, if an investor of one side, in the situations referred to in paragraph 1 of this Article, suffers a loss in the area of the other side resulting from:
(i) Requisitioning of its covered investment or part thereof by the other side; or
(ii) Destruction of its covered investment or part thereof by the other side, which was not required by the necessity of the situation,
The latter side shall provide the investor restitution, compensation or both, as appropriate, for that loss. Any compensation shall be made in accordance with the principles set out under paragraph 2 of Article 11 (Expropriation).
Article 13. Subrogation
If one side or its agency makes a payment to an investor of that side under a guarantee or a contract of insurance that it has granted to a covered investment of that investor, the other side shall recognise the transfer of any right or claim of that investor to the former side or its agency. The subrogated right or claim shall not be greater than the original right or claim of the said investor. Such right may be exercised by the former side or its agency so authorised.
Article 14. Transfer (6)
1. One side shall permit all transfers relating to a covered investment to be made freely, and without delay, into and out of its area. Those transfers include:
(i) Contributions to capital;
(ii) Profits, dividends, capital gains, and proceeds from the sale of all or part of the covered investment or from the partial or complete liquidation of the covered investment;
(iii) Interest, royalty payments, management fees, and technical assistance and other fees;
(iv) Payments made under a contract, including a loan agreement or an employment contract;
(v) Payments made pursuant to Article 11 (Expropriation) and Article 12 (Compensation for Losses);
(vi) Payments arising out of Chapter 3 (Investment Facilitation and Settlement of Disputes); and
(vii) Earnings and remuneration of a natural person of one side who works in a covered investment in the area of the other side.
2. One side shall permit transfers relating to a covered investment to be made in a freely usable currency at the market rate of exchange prevailing at the time of transfer.
3. One side shall permit returns-in-kind relating to a covered investment to be made as authorised or specified in a written agreement between that side and a covered investment or an investor of the other side.
4. Notwithstanding paragraphs 1 to 3, one side may prevent or delay a transfer through the equitable, non-discriminatory and good faith application of its laws relating to:
(i) Bankruptcy, insolvency, or the protection of the rights of creditors;
(ii) Issuing, trading, or dealing in securities, futures, options, or derivatives;
(iii) Criminal offenses;
(iv) Financial reporting or record keeping of transfers when necessary to assist law enforcement or financial regulatory authorities; or
(v) Ensuring compliance with orders or judgments in judicial or administrative proceedings.
5. In case of a serious balance of payments difficulty or of a threat thereof, one side may implement measures to restrict transfer in accordance with the relevant principles of the Articles of Agreement of the International Monetary Fund. Those measures shall be imposed on an equitable and non-discriminatory basis, implemented only temporarily and progressively eliminated following the improvement of such kind of circumstances, and shall not exceed what is necessary to deal with such kind of circumstances.
6. Provided that such measures are not applied in an arbitrary or unjustifiable manner, and provided that such measures do not constitute a disguised restriction on international trade or investment, paragraphs 1 to 3 shall not be construed to prevent one side from adopting or maintaining measures that are necessary to secure compliance with laws, including those relating to the prevention of deceptive and fraudulent practices, that are not inconsistent with this Agreement.