Title

AGREEMENT ON INVESTMENT AMONG THE GOVERNMENTS OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION OF THE PEOPLE'S REPUBLIC OF CHINA AND THE MEMBER STATES OF THE ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Preamble

The Governments of the Member States of the Association of Southeast Asian Nations ("ASEAN"), namely Brunei Darussalam, the Kingdom of Cambodia ("Cambodia"), the Republic of Indonesia ("Indonesia"), the Lao People's Democratic Republic ("Lao PDR"), Malaysia, the Republic of the Union of Myanmar ("Myanmar"), the Republic of the Philippines ("Philippines"), the Republic of Singapore ("Singapore"), the Kingdom of Thailand ("Thailand"), and the Socialist Republic of Viet Nam ("Viet Nam") (hereinafter referred to collectively as the "ASEAN Member States" and individually as an "ASEAN Member State"), and the Government of the Hong Kong Special Administrative Region of the People's Republic of China ("the Hong Kong Special Administrative Region"), the latter having been duly authorised to conclude this Agreement by the Central People's Government of the People's Republic of China;

RECOGNISING the importance of enhancing investment flows among the Parties;

RECOGNISING that the creation of a business-friendly environment will be conducive to the stimulation of business initiative for greater investment among the Parties; and

REAFFIRMING that this Agreement is part of a wider process of economic integration and trade liberalisation among the Parties, initiated by the ASEAN - Hong Kong, China Free Trade Agreement;

HAVE AGREED AS FOLLOWS:

Body

Article 1. Definitions

For the purposes of this Agreement:

(a) Area in respect of:

(i) Each ASEAN Member State means its territory; and

(ii) The Hong Kong Special Administrative Region means the Hong Kong Special Administrative Region as delineated by the Order of State Council of the People's Republic of China No. 221 dated 1 July 1997, which includes Hong Kong Island, Kowloon and the New Territories;

(b) Covered investment means, with respect to a Party, an investment in its Area of an investor of any other Party, in existence as of the date of entry into force of this Agreement or established, acquired or expanded thereafter, and has been admitted, according to its laws, regulations and policies, and where applicable, specifically approved in writing by its competent authority;

(c) Freely usable currency means a freely usable currency as determined by the International Monetary Fund ("IMF") under its Articles of Agreement and any amendments thereto;

(d) GATS means the General Agreement on Trade in Services in Annex 1B to the WTO Agreement;

(e) Investment (1) means every kind of asset that an investor owns or controls, and that has the characteristics of an investment, such as the commitment of capital or other resources, the expectation of gains or profits or the assumption of risk, including but not limited to:

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

(ii) Shares, stocks, bonds and debentures and any other forms of participation in a juridical person and rights derived therefrom;

(iii) Intellectual property rights which are recognised pursuant to the laws and regulations of a host Party;

(iv) Claims to money or to any contractual performance having financial value (2);

(v) Business concessions required for conducting economic activities and having financial value conferred by law or under a contract, including any concession to search for, cultivate, extract or exploit natural resources;

For the purpose of the definition of "investment", returns that are invested shall be treated as investments and any alteration of the form in which assets are invested or reinvested shall not affect their character as investments;

(f) Investor of a Party means a natural person of a Party or a juridical person of a Party that has made an investment in the Area of another Party;

(g) Juridical person 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, including any corporation, trust, partnership, joint venture, sole proprietorship, association or similar organisation;

(h) Measures mean any measure by a Party, whether in the form of a law, regulation, rule, procedure, decision, administrative action, or in any other form affecting investors or investments, and include measures taken by:

(i) In the case of ASEAN Member States,

(1) Central, regional, or local governments or authorities; and

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

(ii) In the case of the Hong Kong Special Administrative Region,

(1) The Government of the Hong Kong Special Administrative Region; and

(2) Non-governmental bodies in the exercise of powers delegated by the Government of the Hong Kong Special Administrative Region;

(i) Natural person of a Party shall have the meaning as agreed by the Parties under Article 22 (Work Programme);

(ii) Newer ASEAN Member States means Cambodia, Lao PDR, Myanmar and Viet Nam;

(k) Parties means the ASEAN Member States and the Hong Kong Special Administrative Region collectively;

(l) Party means an ASEAN Member State or the Hong Kong Special Administrative Region;

(m) Returns mean amounts yielded by or derived from an investment including, but not limited to, any profits, interests, capital gains, dividends, royalties or fees;

(n) TRIPS Agreement means the Agreement on Trade-Related Aspects of Intellectual Property Rights in Annex 1C to the WTO Agreement, as revised or amended from time to time by a revision or amendment that applies to the Parties and including any waiver in force among the Parties of any provision thereof granted by Members of the World Trade Organization in accordance with the WTO Agreement; and

(o) WTO Agreement means the Marrakesh Agreement Establishing the World Trade Organization, done on 15 April 1994.

(1) For greater certainty, the term "investment" does not include an order or judgment entered in a judicial or administrative action or an arbitral award made in an arbitral proceeding.

(2) For greater certainty, investment does not mean claims to money that arise solely from: (i) commercial contracts for sale of goods or services; or (ii) the extension of credit in connection with such commercial contracts.

Article 2. Scope

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

(a) Investors of any other Party; and

(b) Covered investments.

2. This Agreement shall not apply to:

(a) Government procurement;

(b) Subsidies or grants provided by a Party;

(c) Taxation measures except under Article 12 (Transfers);

(d) Claims arising out of events which occurred, or claims which had been raised, prior to the entry into force of this Agreement;

(e) 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

(f) Measures adopted or maintained by a Party to the extent that they are covered by Chapter 8 (Trade in Services) of the ASEAN - Hong Kong, China Free Trade Agreement.

3. Notwithstanding subparagraph 2 (f), Article 5 (Treatment of Investment), Article 10 (Expropriation and Compensation), Article 11 (Compensation for Losses or Damages), Article 12 (Transfers), Article 14 (Subrogation) and Article 20 (Settlement of 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 Area of any other Party but only to the extent that any such measure relates to a covered investment and an obligation under this Agreement regardless of whether or not such service sector is scheduled in the latter Party's Schedule of Commitments under Chapter 8 (Trade in Services) of the ASEAN - Hong Kong, China Free Trade Agreement.

Article 3. National Treatment

Each Party shall accord to investors of any other Party, and to covered investments of investors of any other Party, treatment no less favourable than that it accords, in like circumstances, to its own investors and to investments of its own investors with respect to the management, conduct, operation, use, and sale or other disposition of investments in its Area.

Footnote (3) For greater certainty, the titles of Article 3 (National Treatment) and Article 4 (Most-Favoured-Nation Treatment), and references to the same in this Agreement, have no implication on the status of the Hong Kong Special Administrative Region as a part of the People's Republic of China.

Article 4. Most-favoured-nation Treatment

1. Each Party shall accord to investors of another Party treatment no less favourable than that it accords, in like circumstances, to investors of any other Party or a non-Party with respect to the management, conduct, operation, use, and sale or other disposition of investments in its Area.

2. Each Party shall accord to covered investments treatment no less favourable than that it accords, in like circumstances, to investments in its Area of investors of any other Party or a non-Party with respect to the management, conduct, operation, use, and sale or other disposition of investments in its Area.

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

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

(b) Any existing or future preferential treatment accorded to investors or their investments

Under any agreement or arrangement between or among ASEAN Member States, or between or among the Hong Kong Special Administrative Region and other customs territories of the People's Republic of China.

4. Notwithstanding paragraphs 1 and 2, if a Party accords more favourable treatment to investors of another Party or a non-Party or their investments by virtue of any future agreement or arrangement to which the Party is a party, it shall not be obliged to accord such treatment to investors of any other Party or their investments. However, upon request from any other Party, it shall accord adequate opportunity to negotiate the benefits granted therein.

5. 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 5. Treatment of Investment

1. Each Party shall accord to covered investments fair and equitable treatment and full protection and security.

(a) "fair and equitable treatment" requires each Party not to deny justice in any legal or administrative proceedings in accordance with the principle of due process of law;

(b) "full protection and security" requires each Party to take such measures as may be reasonably necessary to ensure the physical protection and security of the covered investment; and

(c) The concepts of "fair and equitable treatment" and "full protection and security" do not require treatment in addition to or beyond that which is required under customary international law, and do not create additional substantive rights.

3. 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.

Article 6. Non-conforming Measures

1. Article 3 (National Treatment) and Article 4 (Most-Favoured-Nation Treatment) shall not apply to:

(a) Any existing non-conforming measure maintained by a Party:

(i) In the case of an ASEAN Member State, at the central or regional levels of government, as set out by that Party in its Schedule to List 1 under Annex 1 (Schedules of Reservations), or at the local level of government; and

(ii) In the case of the Hong Kong Special Administrative Region, as set out in its Schedule to List 1 under Annex 1 (Schedules of Reservations);

(b) The continuation or prompt renewal of any non-conforming measure referred to in subparagraph 1 (a); or

(c) An amendment to any non-conforming measure referred to in subparagraph 1 (a) to the extent that the amendment does not decrease the conformity of the measure, as it existed as of the date of entry into force of that Party's Schedule to List 1 under Annex 1 (Schedules of Reservations), with Article 3 (National Treatment) and Article 4 (Most-Favoured-Nation Treatment).

2. Article 3 (National Treatment) and Article 4 (Most-Favoured-Nation Treatment) shall not apply to any measure that a Party adopts or maintains with respect to sectors, subsectors or activities as set out in its Schedule to List 2 under Annex 1 (Schedules of Reservations).

3. Procedures for the modification of the Schedules are to be agreed pursuant to Article 22 (Work Programme).

4. Article 3 (National Treatment) and Article 4 (Most-Favoured-Nation Treatment) shall not apply to any measure that falls within Article 5 of the TRIPS Agreement, and any measure that is covered by an exception to, or derogation from, the obligations under Article 3 or Article 4 of the TRIPS Agreement.

Footnote (4) This Article is subject to Article 22 (Work Programme).

Article 7. Transparency

1. Each Party shall make publicly available or provide upon request of another Party, its laws, regulations, procedures and administrative guidelines of general application as well as any of its international investment agreements in force which may affect the covered investments of investors of any Party.

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

Article 8. Security Exceptions

1. Nothing in this Agreement shall be construed to:

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

(b) Prevent a Party from taking any actions which it considers necessary for the protection of its essential security interests:

(i) Relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials or relating to the supply of services as carried on, directly or indirectly, for the purpose of supplying or provisioning any military establishments;

(ii) Taken in time of war or other emergency in domestic or international relations;

(iii) Relating to fissionable and fusionable materials or the materials from which they are derived;

(iv) Taken to protect critical public infrastructures, including communication, power and water infrastructures, from deliberate attempts intended to disable or degrade such infrastructures; or

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

2. The ASEAN - Hong Kong, China Free Trade Area Joint Committee ("AHKFTA Joint Committee") established pursuant to Article 1 (AHKFTA Joint Committee) of Chapter 12 (Institutional Provisions) of the ASEAN - Hong Kong, China Free Trade Agreement shall be informed to the fullest extent possible of measures taken under subparagraphs 1 (b) and 1 (c) and of their termination.

Article 9. General Exceptions

1. Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between the Parties or their investors where like conditions prevail, or a disguised restriction on investors of another Party or their investments, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Party of measures:

(a) Necessary to protect public morals or to maintain public order (5);

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

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

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

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

(iii) Safety;

(d) Inconsistent with Article 3 (National Treatment), provided that the difference in treatment is aimed at ensuring the equitable or effective imposition or collection of direct taxes in respect of investors of any other Party or their investments (6);

(e) Imposed for the protection of national treasures of artistic, historic or archaeological value; or

(f) Relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.

2. Insofar as measures affecting the supply of financial services are concerned, paragraph 2 (Domestic Regulation) of the Annex on Financial Services of GATS is incorporated into and shall form part of this Agreement, mutatis mutandis.

(5) The public order exception may be invoked by a Party only where a genuine and sufficiently serious threat is posed to one of the fundamental interests of society.

(6) For the purpose of this subparagraph, footnote 6 of Article XIV of GATS is incorporated into and shall form part of this Agreement, mutatis mutandis.

Article 10. Expropriation and Compensation

1. A Party shall not expropriate covered investments of an investor of any other Party, either directly or through measures equivalent to expropriation ("expropriation"), except:

(a) For a public purpose;

(b) In accordance with due process of law;

(c) On a non-discriminatory basis; and

(d) Upon payment of compensation accordance with the requirements of Article.

2. For the purpose of subparagraph 1 (d), compensation shall:

(a) Be equivalent to the fair market value (if the expropriating Party is an ASEAN Member State) or real value (if the expropriating Party is the Hong Kong Special Administrative Region) of the expropriated investment at the time when the expropriation was publicly announced (8), or when the expropriation occurred, whichever is applicable;

(b) Not reflect any change in value occurring because the intended expropriation had become known earlier;

(c) Be settled and paid without undue delay (9); and

(d) Be effectively realisable and freely transferable between the Areas of the Parties.

3. In the event of delay, the compensation referred to in subparagraph 1 (d) shall include appropriate interest (10) at the prevailing commercial rate. The compensation, including any accrued interest, shall be payable either in the currency of the expropriating Party, or if requested by the investor, in a freely usable currency.

4. Notwithstanding paragraphs 1, 2, and 3, any measure of expropriation relating to land shall be as defined in the existing laws and regulations of the expropriating Party on the date of entry into force of this Agreement, and shall be, for the purposes of and upon payment of compensation, in accordance with the aforesaid laws and regulations. Such compensation shall be subject to any subsequent amendments to the aforesaid laws and regulations relating to the amount of compensation where such amendments follow the general trends in the market value of the land.

5. For greater certainty, this Article does not apply to the issuance of compulsory licences granted in relation to intellectual property rights, or to the revocation, limitation, or creation of intellectual property rights, to the extent that such issuance, revocation, limitation, or creation is consistent with TRIPS Agreement (11).

Footnote (7) This Article is subject to Annex 2 (Expropriation and Compensation).

Footnote (8) ln the case of the Philippines, the time when or immediately before the expropriation was publicly announced refers to the date of filing of the Petition for Expropriation.

Footnote (9) The Parties understand that there may be legal and administrative processes that need to be observed before payment can be made.

Footnote (10) For Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Thailand and Viet Nam, in the event of delay, the rate and procedure for payment of interest of compensation for expropriation of covered investments of investors of another Party shall be determined in accordance with their laws, regulations and policies provided that such laws, regulations and policies are applied on a non-discriminatory basis.

Footnote (11) The Parties recognise that, for the purposes of this Article, the term "revocation" of intellectual property rights includes the cancellation or nullification of such rights, and the term "limitation" of intellectual property rights includes exceptions to such rights.

Article 11. Compensation for Losses or Damages

Each Party shall accord to investors of another Party that have suffered loss or damage relating to their covered investments in the Area of the former Party owing to war, armed conflict, a state of emergency, revolution, insurrection, civil strife or any other similar event in that former Party, treatment, as regards restitution, indemnification, compensation or any other settlement, that is no less favourable than that which it accords, in like circumstances, to its own investors or to investors of a non-Party.

Article 12. Transfers

1. Each Party shall allow all transfers relating to a covered investment to be made freely and without delay into and out of its Area. Such transfers include:

(a) Contributions to capital, including the initial contribution;

(b) Profits, capital gains, dividends, royalties, licence fees, technical assistance and technical and management fees, interest and other current income accruing from any covered investment;

(c) Proceeds from the total or partial sale or liquidation of any covered investment;

(d) Payments made under a contract, including a loan agreement;

(e) Payments made pursuant to Article 10 (Expropriation and Compensation) and Article 11 (Compensation for Losses or Damages);

(f) Payments arising out of the settlement of a dispute by any means including adjudication, arbitration or the agreement of the parties to the dispute; and

(g) Earnings and other remuneration of personnel engaged from abroad in connection with that covered investment.

2. Each Party shall allow such 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. Notwithstanding paragraphs 1 and 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 any of the following:

(a) Bankruptcy, insolvency, or the protection of the rights of creditors;

(b) Issuing, trading, or dealing in securities, futures, options, or derivatives;

(c) Criminal or penal offences and the recovery of the proceeds of crime;

(d) Financial reporting or record keeping of transfers when necessary to assist law enforcement or financial regulatory authorities;

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

(f) Taxation;

(g) Social security, public retirement, or compulsory savings schemes;

(h) Severance entitlements of employees; and