Title
AGREEMENT BETWEEN JAPAN AND THE STATE OF ISRAEL FOR THE LIBERALIZATION, PROMOTION AND PROTECTION OF INVESTMENT
Preamble
The Government of Japan and the Government of the State of Israel respectively on behalf of Japan and the State of Israel (hereinafter referred to as "the Contracting Parties"),
Desiring to further promote investment in order to strengthen the economic relationship between the Contracting Parties;
Intending to further create stable, equitable, favorable and transparent conditions for greater investment by investors of one Contracting Party in the Territory of the other Contracting Party;
Recognizing the growing importance of the progressive liberalization of investment for stimulating initiative of investors and for promoting prosperity in both Contracting Parties; and
Recognizing that these objectives can be achieved without relaxing health, safety and environmental measures of general application;
Have agreed as follows:
Body
Section I. Investment
Article 1. Definitions
For the purposes of this Agreement:
(a) The term "investment" means every kind of asset made in accordance with applicable laws and regulations, owned or controlled, directly or indirectly, by an investor, including:
(i) An enterprise and a branch of an enterprise;
(ii) Shares, stocks or other forms of equity participation in an enterprise;
(iii) Bonds, debentures, loans and other forms of debt;
(iv) Futures, options and other derivatives;
(v) Rights under contracts, including turnkey, construction, management, production or revenue-sharing contracts;
(vi) Claims to money and to any performance under contract having a financial value;
(vii) Intellectual property rights and goodwill;
(viii) Concessions, licenses, authorizations, permits and similar rights conferred by laws and regulations or under contracts, including those for the exploration and exploitation of natural resources; and
(ix) Any other movable and immovable property, and any related property rights, such as leases, mortgages, liens and pledges;
An investment includes the amounts yielded by an investment, in particular, profit, interest, capital gains, dividends, royalties and fees. A change in the form in which assets are invested does not affect their character as an investment.
Note: For the avoidance of doubt in this Article, an investment does not include:
(i) Public debt; or
(ii) Claims to money arising solely from:
(A) Commercial contracts for the sale of goods or services by a national or an enterprise in the Territory of a Contracting Party to a national or an enterprise in the Territory of the other Contracting Party; or
(B) Credits granted in relation with a commercial transaction under a contract referred to in (ii)(A) of this note;
(b) The term "investment agreement" means a written agreement between the central or local government or authority of a Contracting Party and an investor of the other Contracting Party or its investment that is an enterprise in the Territory of the former Contracting Party, on which the investor or the investment relies in establishing or acquiring an investment in the former Contracting Party;
Note: Written agreement refers to an agreement in writing, executed by both parties, whether in a single instrument or in multiple instruments, that creates an exchange of rights and obligations, binding on both parties.
For greater certainty:
(i) a unilateral act of an administrative or judicial authority, such as a permit, license, concession or authorization issued by a Contracting Party solely in its regulatory capacity, or a decree, order, or judgment, standing alone; and
(ii) an administrative or judicial consent decree or order,
Shall not be considered a written agreement.
(c) the term "investor of a Contracting Party" means:
(i)
(A) With respect to Japan: a natural person who is a national of Japan and who is not also a national of the State of Israel; and
(B) With respect to the State of Israel: a natural person who is a national or permanent resident of the State of Israel and who is not also a national of Japan; or
(ii) An enterprise of that Contracting Party, that seeks to make, is making or has made investments in the Territory of the other Contracting Party;
(iii) Notwithstanding subparagraph (c)(i)(A), a natural person who is a national of Japan and who is also a permanent resident of the State of Israel shall not be a claimant;
(d) The term "enterprise" means any legal person or any other entity duly constituted or organized under the applicable laws and regulations, whether or not for profit, and whether private or government owned or controlled, including any corporation, trust, partnership, sole proprietorship, joint venture, association, organization or company;
(e) The term "enterprise of a Contracting Party" means an enterprise:
(i) Duly constituted or organized under the applicable laws and regulations of that Contracting Party; and
(ii) Carrying out substantial business activities in the Territory of the Contracting Party;
(f) The term "investment activities" means establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment and sale or other disposal of investments;
(g) The term "Territory" means:
(i) With respect to Japan: the territory of Japan, and the exclusive economic zone and the continental shelf with respect to which Japan exercises sovereign rights or jurisdiction in accordance with international law; and
(ii) With respect to the State of Israel: the territory of the State of Israel including the territorial sea as well as the continental shelf and the exclusive economic zone, over which the State of Israel exercises sovereignty, sovereign rights or jurisdiction in accordance with international law and the laws of the State of Israel;
(h) The term "existing" means being in effect on the date of entry into force of this Agreement;
(i) The term "freely usable currency" means freely usable currency as defined under the Articles of Agreement of the International Monetary Fund;
(j) The term "the WTO Agreement" means the Marrakesh Agreement Establishing the World Trade Organization, done at Marrakesh, April 15, 1994;
(k) The term "the TRIPS Agreement" means the Agreement on Trade-Related Aspects of Intellectual Property Rights in Annex 1C to the WTO Agreement;
(l) The term "claimant" means an investor of a Contracting Party that is a party to an investment dispute with the other Contracting Party;
(m) The term "disputing party" means either the claimant or the respondent;
(n) The term "disputing parties" means the claimant and the respondent;
(o) The term "ICSID" means the International Center for Settlement of Investment Disputes;
(p) The term "ICSID Additional Facility Rules" means the Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the International Center for Settlement of Investment Disputes;
(q) The term "ICSID Convention" means the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, March 18, 1965;
(r) The term "New York Convention" means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958;
(s) The term "respondent" means the Contracting Party that is a party to an investment dispute; and
(t) The term "UNCITRAL Arbitration Rules" means the Arbitration Rules of the United Nations Commission on International Trade Law, as revised in 2010.
Article 2. National Treatment
Each Contracting Party shall in its Territory accord to investors of the other Contracting Party and to their investments treatment no less favorable than the treatment it accords in like circumstances to its own investors and to their investments with respect to investment activities.
Article 3. Most–favored–nation Treatment
1. Each Contracting Party shall in its Territory accord to investors of the other Contracting Party and to their investments treatment no less favorable than the treatment it accords in like circumstances to investors of a non- Contracting Party and to their investments with respect to investment activities.
2. For greater certainty, the treatment referred to in this Article does not encompass definitions and international dispute settlement procedures or mechanisms under any international agreement or any written agreement between a Contracting Party and an investor of a non- Contracting Party or its investment that is an enterprise in the Territory of the former Contracting Party.
3. The provisions of paragraph 1 shall not be construed so as to oblige a Contracting Party to extend to the investors of the other Contracting Party and to their investments the benefits of any treatment under any bilateral or multilateral international agreement which was in force prior to the date of entry into force of this Agreement.
4. The provisions of paragraph 1 shall not be construed so as to oblige a Contracting Party to extend to investors of the other Contracting Party and to their investments any preferential treatment by virtue of any existing or future customs union, economic or monetary union, free trade area or similar international agreements to which the former Contracting Party is a party or may become a party in the future.
Article 4. General Treatment
Each Contracting Party shall in its Territory accord to investments of investors of the other Contracting Party treatment in accordance with customary international law, including fair and equitable treatment and full protection and security.
Article 5. Access to the Courts of Justice
Each Contracting Party shall in its Territory accord to investors of the other Contracting Party treatment no less favorable than the treatment which it accords in like circumstances to its own investors or investors of a non- Contracting Party with respect to access to the courts of justice and administrative tribunals and agencies in all degrees of jurisdiction, both in pursuit and in defense of such investors' rights.
Article 6. Prohibition of Performance Requirements
1. Neither Contracting Party may impose or enforce any of the following requirements, or enforce any commitment or undertaking, in connection with an investment or investment activities of an investor of the other Contracting Party in its Territory:
(a) To achieve a given level or percentage of domestic content;
(b) To purchase, use or accord a preference to goods produced or services provided in its Territory, or to purchase goods or services from a natural person or an enterprise in its Territory;
(c) 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 an investment of the investor;
(d) To restrict sales of goods or services in its Territory that an investment of the investor produces or provides by relating such sales in any way to the volume or value of its exports or foreign exchange earnings;
(e) To restrict the exportation or sale for export;
(f) To export a given level or percentage of goods or services;
(g) To transfer technology, a production process or other proprietary knowledge to a natural person or an enterprise in its Territory, except those undertaken in a manner not inconsistent with the TRIPS Agreement;
(h) To adopt:
(i) A given rate or amount of royalty under a license contract; or
(ii) A given duration of the term of a license contract,
In regard to any license contract freely entered into between the investor and a natural person or an enterprise in its Territory, whether it has been entered into or not, provided that the requirement is imposed or the commitment or undertaking is enforced by an exercise of governmental authority of the Contracting Party;
Note: A "license contract" referred to in this subparagraph means any license contract concerning transfer of technology, a production process, or other proprietary knowledge.
(i) To locate the headquarters of the investor for a specific region or the world market in its Territory;
(j) To hire a given number or percentage of its nationals;
(k) To achieve a given level or value of research and development in its Territory; or
(l) To supply one or more of the goods that the investor produces or the services that the investor provides to a specific region or the world market, exclusively from its Territory.
2. The provisions of paragraph 1 do not preclude either Contracting Party from conditioning the receipt or continued receipt of an advantage, in connection with an investment or investment activities of an investor of the other Contracting Party in its Territory, on compliance with:
(a) Any requirement other than the requirements set forth in subparagraphs 1(a) through 1(e);
(b) A requirement to locate production, supply or acquire a service, train or employ workers, construct or expand particular facilities, or carry out research and development, in its Territory; or
(c) The requirements set forth in subparagraphs 1(a) and 1(b), when the requirements relating to the content of goods necessary to qualify for preferential tariffs or preferential quotas are imposed by an importing Contracting Party.
3. Subparagraphs 1(g) and 1(h) shall not apply when the requirement is imposed or the commitment or undertaking is enforced by a court of justice, administrative tribunal or competition authority to remedy an alleged violation of competition laws.
4. This Article does not preclude enforcement of any commitment, undertaking or requirement between private parties, where a Contracting Party did not impose or require the commitment, undertaking or requirement.
Article 7. Senior Management and Board of Directors
1. Neither Contracting Party may require that an enterprise of that Contracting Party that is an investment of an investor of the other Contracting Party appoint to senior management positions, or as senior executives, a natural person of any particular nationality.
2. Without prejudice to paragraph 1, a Contracting Party may require that a majority or less of the board of directors, or any committee thereof, of an enterprise of that Contracting Party that is an investment of an investor of the other Contracting Party be of a particular nationality, or a resident in the Territory of the former Contracting Party, provided that:
(a) The requirement does not materially impair the ability of the investor to exercise control over its investment; and
(b) The nationality of members of the board or committee required thereunder is not of any non- Contracting Party which does not maintain diplomatic relations with the latter Contracting Party.
Article 8. Non–conforming Measures
1. Articles 2, 3, 6 and 7 shall not apply to:
(a) Any existing non-conforming measure that is maintained by the central government of a Contracting Party, as set out in the Schedule of each Contracting Party in Annex I;
(b) Any existing non-conforming measure that is maintained by a local government of a Contracting Party;
(c) The continuation or prompt renewal of any non- conforming measure referred to in subparagraphs (a) and (b); or
(d) An amendment or modification to any non- conforming measure referred to in subparagraphs (a) and (b), provided that the amendment or modification does not decrease the conformity of the measure, as it existed at the date of the entry into force of this Agreement, with Articles 2, 3, 6 and 7.
2. Articles 2, 3, 6 and 7 shall not apply to any measure that a Contracting Party adopts or maintains with respect to sectors, sub-sectors or activities set out in its Schedule in Annex II.
3. Neither Contracting Party shall, under any measure adopted after the date of entry into force of this Agreement and covered by its Schedule in Annex II, require an investor of the other Contracting Party, by reason of its nationality, to sell or otherwise dispose of an investment that exists at the time the measure becomes effective.
4. In cases where a Contracting Party makes an amendment or a modification to any existing non-conforming measure set out in its Schedule in Annex I or where a Contracting Party adopts any new or more restrictive measure with respect to sectors, sub-sectors or activities set out in its Schedule in Annex II after the date of entry into force of this Agreement, the Contracting Party shall upon request by the other Contracting Party, as soon as possible thereafter, provide characteristics of the measure to the other Contracting Party and hold discussions in good faith with the other Contracting Party with a view to achieving mutual satisfaction.
5. Each Contracting Party recognizes the importance of reviewing from time to time the non-conforming measures specified in its Schedules in Annexes I and II exploring the possibility for the reduction or elimination of the non-conforming measures.
6. Articles 2 and 3 shall not apply to any measure covered by the exceptions to, or derogations from, obligations under Articles 3 and 4 of the TRIPS Agreement, as specifically provided in Articles 3 through 5 of the TRIPS Agreement.
7. Articles 2, 3, 6 and 7 shall not apply to any measure that a Contracting Party adopts or maintains with respect to government procurement.
8. The Contracting Parties confirm their understanding that, when a new sector, which does not exist at the time of the entry into force of this Agreement, emerges in a Contracting Party after the entry into force of this Agreement and that Contracting Party, therefore, wishes to amend the Annexes to this Agreement, the Contracting Parties shall, upon request by that Contracting Party, enter immediately into discussion with a view to amending the Annexes.
9. When considering an amendment to the Annexes to this Agreement, in accordance with paragraph 3 of Article 28, the Contracting Parties shall take into account the effect of the amendment with regard to investments of investors of the Contracting Parties. In the case of the absence of such effect, the Contracting Parties will enter immediately into discussions with a view to amending the Annexes.
10. The Contracting Parties confirm their understanding that any requirement for nationality or residency imposed or enforced through non-discriminatory application of their laws with regard to junior or middle-level employees shall not be regarded as a non-conforming measure to Article 2, 3 or 7.
11. The Contracting Parties confirm their understanding that this Agreement does not apply to immigration or migration matters, to measures that regulate the entry of natural persons of a Contracting Party into, or their temporary stay in, the Territory of the other Contracting Party, or to movement of natural persons.
Article 9. Transparency
1. Each Contracting Party shall promptly publish, or otherwise make publicly available, its laws, regulations, administrative procedures, administrative rulings and court decisions of general application as well as international agreements which pertain to or affect the implementation and operation of this Agreement.
2. Each Contracting Party shall, upon request by the other Contracting Party, promptly respond to specific questions and provide that other Contracting Party with information on matters set out in paragraph 1.
3. Paragraphs 1 and 2 shall not be construed so as to oblige either Contracting Party to disclose confidential information, the disclosure of which would impede law enforcement or otherwise be contrary to the public interest, or which would prejudice privacy or legitimate commercial interests.
Article 10. Special Formalities and Information Requirements
1. Nothing in Article 2 shall be construed to prevent a Contracting Party from adopting or maintaining a measure that prescribes special formalities in connection with investment activities of investors of the other Contracting Party in its Territory, such as compliance with registration requirements or requirements that investors be residents of the former Contracting Party, provided that such special formalities do not impair the substance of the rights of such investors under this Agreement.
2. Notwithstanding Articles 2 and 3, a Contracting Party may require an investor of the other Contracting Party or its investments to provide information concerning its investments solely for informational or statistical purposes. The Contracting Party shall protect such information that is confidential from any disclosure that would prejudice the competitive position of the investor of the latter Contracting Party or its investments. Nothing in this paragraph shall be construed so as to prevent a Contracting Party from otherwise obtaining or disclosing information in connection with the equitable and good-faith application of its law.
Article 11. Expropriation and Compensation
1. Neither Contracting Party shall expropriate or nationalize an investment in its Territory of an investor of the other Contracting Party or take any measure equivalent to expropriation or nationalization (hereinafter referred to as "expropriation"), except:
(a) For a public purpose;
(b) In a non-discriminatory manner;
(c) Upon payment of prompt, adequate and effective compensation in accordance with paragraphs 2, 3 and 4;
(d) In accordance with procedures established in national legislation of either Contracting Party and fundamental internationally recognized rules; and
(e) Provided that the investors affected have a right, under the law of the Contracting Party making the expropriation, to prompt review, by a judicial or other independent authority of that Contracting Party, of the legality of the expropriation and of the valuation of their investment, in accordance with the principles set out in this Article.
2. The compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriation was publicly announced or immediately before the expropriation occurred, whichever is earlier. The fair market value shall not reflect any change in value occurring because the expropriation had become publicly known earlier.
3. The compensation shall be paid without delay and shall include interest at a commercially reasonable rate accrued from the date of expropriation until the date of payment and shall be effectively realizable and freely transferable.
4. Payments shall be made in a freely usable currency, and the compensation paid shall include interest, at a commercially reasonable rate for that currency, accrued from the date of expropriation until the date of payment.
5. This Article does not apply to authorization of a Contracting Party for use of intellectual property rights in accordance with the TRIPS Agreement.
Article 12. Compensation for Losses or Damages
1. Each Contracting Party shall accord to investors of the other Contracting Party that have suffered loss or damage relating to their investments in the Territory of the former Contracting Party due to armed conflict or a state of emergency such as a revolution, insurrection, civil disturbance or any other similar event in the Territory of that former Contracting Party, treatment, as regards restitution, indemnification, compensation or any other settlement, that is no less favorable than that which it accords to its own investors or to investors of a non- Contracting Party, whichever is more favorable to the investors of the other Contracting Party.
2. Any payment as a means of settlement referred to in paragraph 1 shall be effectively realizable, freely transferable and freely convertible at the market exchange rate into freely usable currencies.
3. Neither Contracting Party shall be derogated from its obligation under paragraph 1 by reason of its measures taken pursuant to paragraph 2 of Article 15.
Article 13. Subrogation
1. If a Contracting Party or its designated agency makes a payment to an investor of the Contracting Party pursuant to an indemnity, guarantee or insurance contract pertaining to an investment of that investor within the Territory of the other Contracting Party, that other Contracting Party shall recognize:
(a) The assignment, to the former Contracting Party or its designated agency, of any right or claim of the investor in respect of such investment, that formed the basis of such payment; and
(b) The right of the former Contracting Party or its designated agency to exercise by virtue of subrogation such right or claim to the same extent as the original right or claim of the investor.
2. The former Contracting Party or its designated agency shall be entitled in all circumstances to:
(a) The same treatment in respect of the rights and claims acquired by it by virtue of the assignment referred to in paragraph 1; and
(b) The same payments due pursuant to those rights and claims,
As the investor referred to in paragraph 1 was entitled to receive by virtue of this Agreement in respect of the investment.
Article 14. Transfers
1. Each Contracting Party shall allow all transfers relating to investments in its Territory of an investor of the other Contracting Party to be made freely into and out of its Territory without delay. Such transfers shall include, in particular, though not exclusively: