Neither Party may have recourse to the dispute settlement procedures set forth in Chapter 12 (Investment) and Chapter 15 (Dispute Setttement) with respect to any matter arising under this Chapter.
Chapter 12. Investment
Section A. Substantive Obligations
Article 12.1. Scope of Application and Coverage (1)
1. This Chapter shall apply to measures adopted or maintained by a Party relating to
(a) investors of the other Party,
(b) covered investments, and
(c) with respect to Articles 12.6 and 12.8, to all investments in the territory of the Party.
2. The obligations of a Party under this Section shall apply to a state enterprise or other person when it exercises regulatory, administrative or other governmental authority delegated to it by that Party, such as the authority to expropriate, grant licenses, approve commercial transactions or impose dues, fees or other charges.
3. For greater certainty, this Chapter does not bind a Party in relation to any act or fact that took place before the date of entry into force of this Agreement.
4. For greater certainty, nothing in this Chapter shall be construed to impose an obligation on a Party to privatize any investment that it owns or controls, or to prevent a Party from designating a monopoly.
5. Nothing in this Chapter shall require a Party to protect investments made with capital or assets derived from illegal activities, and shall not be construed to prevent a Party from adopting or maintaining measures aimed at the preservation of public order, the performance of its duties to maintain or restore intemational peace and security, or the protection of its own essential security interests.
6. In the event of any inconsistency between this Chapter and another Chapter of this Agreement, the other Chapter shall prevail to the extent of the inconsistency.
7. A Party's requirement that a service supplier of the other Party post a bond or other form of financial security as a condition for supplying a cross-border service does not, in itself, make this Chapter applicable to measures adopted or maintained by the Party with respect to the cross-border supply of the service. This Chapter applies to measures adopted or maintained by the Party with respect to the bond or financial security, to the extent that such bond or financial security constitutes a covered investment.
8. This Chapter does not apply to measures adopted or maintained by a Party with respect to investors of the other Party and investments of such investors in financial institutions in the territory of the Party.
Article 12.2. National Treatment
1. Each Party shall accord to investors of the other Party treatment no less favorable 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 territory.
2. Each Party shall accord to covered investments treatment no less favorable 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 territory.
Article 12.3. Most-Favored-Nation Treatment
1. Each Party shall accord to investors of the other Party treatment no less favorable 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 investments in its territory.
2. Each Party shall accord to covered investments treatment no less favorable 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 investments in its territory.
3. For greater certainty, the treatment with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments, referred to in paragraphs 1 and 2, does not include dispute setttement procedures, such as that provided for in Section B, that are set forth in intemational treaties, including trade or investment agreements.
Article 12.4. Minimum Standard of Treatment (2)
1. Each Party shall accord to covered investments treatment in accordance with customary international law, including fair and equitable treatment, as well as full protection and security.
2. For greater certainty, paragraph 1 prescribes that the minimum standard of treatment of aliens under customary international law is the minimum standard of treatment that may be afforded to covered investments. The concepts of "fair and equitable treatment" and "full protection and security" do not require treatment in addition to or beyond that required by that standard and do not create significant additional rights. The obligation in paragraph 1 to provide:
(a) The term "fair and equitable treatment" includes the obligation not to deny justice in criminal, civil or administrative proceedings, in accordance with the principle of due process incorporated in the main legal systems of the world; and
(b) "Full protection and security" requires each Party to provide the level of police protection that is required by customary international law.
3. A determination that another provision of this Agreement or of a separate international agreement has been violated does not establish that this Article has been violated.
Article 12.5. Senior Management and Boards of Directors
1. No Party may require an enterprise of that Party that is a covered investment to appoint natural persons of a particular nationality to senior management positions.
2. A Party may require that a majority of the members of the board of directors, or any committee thereof, of an enterprise of that Party thatis a covered investment be of a particular nationality or resident in the territory of the Party, provided that the requirement does not significantly impair the ability of the investor to exercise control over its investment.
Article 12.6. Performance Requirements
1. No Party may, in connection with the establishment, acquisition, expansion, management, conduct, operation, sale or other disposition of an investment of an investor of a Party or of a non-Party in its territory, impose or enforce any requirement or enforce any obligation or commitment of (3):
(a) export a certain level or percentage of goods or services;
(b) to reach a certain degree or percentage of domestic content,
(c) to purchase, use or give preference to goods produced in its territory, or to purchase goods from persons in its territory;
(d) 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 such investment,
(e) restrict sales in its territory of the goods or services that such investment produces or provides, by relating such sales in any way to the volume or value of its exports or to the foreign exchange eamings it generates;
(f) transfer a particular technology, production process or other proprietary knowledge to a person in its territory, except where the requirement is imposed or the obligation or undertaking is enforced by a judicial or administrative tribunal or a competition authority, to remedy a practice that has been determined after judicial or administrative proceedings to be anticompetitive under the Party's competition laws (4); or
(g) to supply exclusively from the territory of a Party the goods produced by the investment or the services it provides to a specific regional market or to the world market.
2. A measure that requires an investment to use a technology to comply with general regulations applicable to health, safety or the environment shall not be considered inconsistent with subparagraph 1(f).
3. Subparagraph 1(f) does not apply where a Party authorizes the use of an intellectual property right in accordance with Article 31 of the WTO 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 WTO TRIPS Agreement (5) of the WTO 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 WTO TRIPS Agreement (6).
4. For greater certainty, nothing in paragraph 1 shall be construed to prevent a Party, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of a covered investment or an investment of an investor of a non-Party in its territory, from imposing or enforcing a requirement or enforcing an obligation or commitment to training workers in their territory.
5. No Party may condition the receipt of an advantage, or the continued receipt of an advantage, in connection with the establishment, acquisition, expansion, management, conduct, operation, sale or other disposition of an investment in its territory by an investor of a Party or of a non-Party, on compliance with any of the following requirements:
(a) to achieve a certain degree or percentage of domestic content,
(b) to purchase, use or grant preferences to goods produced in its territory or to purchase goods from persons in its territory;
(c) 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 such investment, or
(d) restrict sales in its territory of the goods or services that such investment produces or provides by relating such sales in any way to the volume or value of its exports or to foreign exchange eamings.
6. Nothing in paragraph 5 shall be construed to prevent a Party from conditioning the receipt of an advantage, or the continued receipt of an advantage, in connection with an investmentin its territory by an investor of a Party or of a non-Party on compliance with a requirement that it locate production, provide services, train or employ workers, construct or expand particular facilities, or carry out research and development, in its territory.
7. Paragraphs 1 and 5 shall not apply to any requirement other than the commitment, obligation or requirements set forth in those paragraphs.
8. The provisions of the:
(a) subparagraphs 1 (a), (b) and (c), and 5 (a) and (b) shall not apply to the requirements for qualification of goods or services with respect to export promotion programs and foreign aid programs; and
(b) subparagraphs 5(a) and (b) shall not apply to requirements imposed by an importing Party with respect to the content of goods necessary to qualify for preferential duties or quotas.
9. Provided that such measures are not applied in an arbitrary or unjustified manner and provided that such measures do not constitute a disguised restriction on intemational trade or investment, nothing in subparagraphs 1(b), (c) and (f) and 5(a) and (b) shall be construed to prevent a Party from adopting or maintaining measures, including those of an environmental nature:
(a) necessary to ensure compliance with laws and regulations that are not inconsistent with the provisions of this Agreement,
(b) necessary to protect human, animal or plant life or health; or (c) related to the preservation of living or non-living non-renewable natural resources.
10. Subparagraphs 1 (b), (c), (f) and (g), and 5 (a) and (b) do not apply to public procurement.
11. This Article does not exclude the application of any commitment, obligation or requirement between private parties, where a Party did not impose or require the commitment, obligation or requirement.
Article 12.7. Nonconforming Measures
1. Articles 12.2, 12.3, 12.5 and 12.6 shall not apply to:
(a) any non-conforming measure existing or maintained by a Party in:
(i) the central or regional level of govemment, as specified by that Party in its Schedule to Annex I; or
(ii) a local level of goverment,
(b) the continuation or prompt renewal of any nonconforming measure referred to in subparagraph (a); or
(c) the modification of any nonconforming measure referred to in subparagraph (a) provided that such modification does not diminish the degree of conformity of the measure, as in effect immediately before the modification, with Articles 12.2, 12.3, 12.5, and 12.6.
2. Articles 12.2, 12.3, 12.5 and 12.6 shall not apply to any measure that a Party adopts or maintains, in relation to sectors, subsectors or activities, as indicated in its Schedule to Annex II.
3. Articles 12.2 and 12.3 do not apply to any measure adopted under the exceptions under Articles 3, 4 and 5 of the WTO TRIPS Agreement.
4. Neither Party may require, pursuant to any measure adopted after the date of entry into force of this Agreement and included in its Schedule to Annex II, 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.
5. The provisions of Articles 12.2, 12.3 and 12.5 shall not apply to:
(a) subsidies or grants provided by a Party, including government-backed loans, guarantees and insurance; or
(b) public procurement.
Article 12.8. Environmental Measures
1. The Parties recognize that it is inappropriate to promote investment by weakening or reducing the protections afforded by their domestic environmental laws. Accordingly, each Party shall endeavor to ensure that it shall not waive or derogate from, or offer to waive or derogate from, such legislation in a manner that weakens or reduces the protection afforded by that legislation, as a means of encouraging the establishment, acquisition, expansion or retention of an investment in its territory.
2. Nothing in this Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that investments in its territory are made taking into account environmental concerns.
Article 12.9. Treatment In the Event of a Dispute
1. Without prejudice to Article 12.7.5(a), each Party shall accord investors of the other Party and covered investments non-discriminatory treatment with respect to any measures it adopts or maintains with respect to losses suffered by investments in its territory as a result of armed conflict or civil strife.
2. Paragraph 1 shall not apply to existing measures relating to grants or donations that would be inconsistent with the provisions of Article 12.2, with the exception of Article 12.7.5(a).
Article 12.10. Expropriation and Compensation (7)
1. Neither Party shall nationalize or expropriate a covered investment, either directly or indirectly, through measures tantamount to expropriation or nationalization ("expropriation"), unless it is:
(a) for a public purpose (8), in the case of Costa Rica; and
(b) for reasons of public necessity or national security, in the case of Peru,
in accordance with due process, in a non-discriminatory manner and through the payment of prompt, adequate and effective compensation.
2. The compensation shall be paid promptly and shall be fully liquidable and freely transferable. Such compensation shall be equal to the fair market value of the expropriated investment immediately before the expropriation took place ("expropriation date"), and shall not reflect any change in value because the intention to expropriate was known in advance of the expropriation date.
3. If the fair market value is denominated in a freely usable currency, the compensation referred to in paragraph 1 shall not be less than the fair market value on the date of expropriation, plus interest at a commercially reasonable rate for that currency, accrued from the date of expropriation to the date of payment.
4. If the fair market value is denominated in a currency that is not freely usable, the compensation referred to in paragraph 1 - converted into the currency of payment, at the market rate of exchange prevailing on the date of payment - shall not be less than:
(a) the fair market value at the date of expropriation, converted into a freely usable currency at the market exchange rate prevailing on that date, plus;
(b) interest at a commercially reasonable rate for that freely usable currency, accrued from the date of expropriation to the date of payment.
5. The affected investor shall be entitled, under the national law of the Party executing the expropriation, to a review of his case by a judicial or other independent authority of that Party, and to the valuation of his investment in accordance with the principles set forth in this Article.
6. The provisions of this Article shall not apply to the issuance of compulsory licenses granted in connection with 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 Chapter 9 (Intellectual Property).
Article 12.11. Transfers
1. Each Party shall permit all transfers related to a covered investment to be made freely and without delay into and within its territory. Such transfers include:
(a) capital contributions;
(b) earnings, dividends, interest, capital gains, royalty payments, management fees, technical assistance and other charges, retums in kind and other amounts derived from the investment,
(c) proceeds from the sale or total or partial liquidation of the covered investment,
(d) payments made pursuant to a contract entered into by the investor, or the covered investment, including a loan agreement,
(e) payments made under paragraph 1 of Articles 12.9 and 12.10; and
(f) payments arising from the application of Section B.
2. Each Party shall permit transfers related to a covered investment to be made in freely usable currency at the market rate of exchange prevailing on the date of the transfer.
3. Notwithstanding paragraphs 1 and 2, a Party may prevent or delay a transfer in cash or in kind through the equitable, non-discriminatory and good faith application of its laws relating to:
(a) bankruptcy, insolvency or protection of creditors' rights (9) ;
(b) issuance, trading or operations of securities, futures, options or derivatives;
(c) criminal offenses;
(d) financial reporting or record keeping of transfers when necessary to assist law enforcement or financial regulatory authorities; and
(e) guarantee compliance with awards or judgments issued in judicial or administrative proceedings.
Article 12.12. Denial of Benefits
A Party may deny the benefits of this Agreement to:
(a) an investor of the other Party that is an enterprise of that other Party and the investments of such investor if a person of a non-Party owns or controls the enterprise and the enterprise does not engage in substantial business activities in the territory of the other Party; or
(b) an investor of the other Party that is an enterprise of that other Party and to the investments of such investor if the enterprise does not carry on substantial business activities in the territory of any Party, other than the denying Party, and a person of the denying Party owns or controls the enterprise.
Article 12.13. Special Formalities and Information Requirements
1. Nothing in Article 12.2 shall be construed to prevent a Party from adopting or maintaining a measure prescribing special formalities in connection with a covered investment, such as a requirement that investors be residents of the Party or that covered investments be constituted in accordance with the Party's laws or regulations, provided that such formalities do not significantly impair the protection afforded by a Party to investors of the other Party and to covered investments under this Agreement.
2. Notwithstanding Articles 12.2 and 12.3, a Party may require an investor of the other Party or its covered investment to provide information conceming that investment solely for informational or statistical purposes. A Party may request information of a confidential nature only if its domestic law so permits. In such a case, that Party shall protect the information that is confidential from any disclosure that could adversely affect 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 relating to the equitable and good faith application of its domestic law.
Article 12.14. Subrogation
1. If a Party or a designated agency of the Party makes a payment to any of its investors under a guarantee, insurance contract or any other form of compensation provided in respect of an investment of an investor of that Party, the other Party shall recognize the subrogation or transfer of any right or claim of such investment. The subrogated or transferred right or claim shall not be greater than the original right or claim of the investor.
2. Where a Party or a designated agency of the Party has made a payment to an investor of that Party and has assumed the rights and claims of the investor, that investor may not, unless it has been authorized to act on behalf of the Party or the designated agency of the Party that has made the payment, assert such rights and claims against the other Party.
Section B. Investor - State Dispute Settlement
Article 12.15. Consultations and Negotiation
1. In the event of an investment dispute, the disputing parties shall first seek to resolve the dispute through consultations and negotiation, which may include the use of non-binding third-party procedures. The consultation and negotiation procedure shall be initiated by the request sent to the address designated in Annex 12.15. Such a request shall be sent to the respondent prior to the notice of intention referred to in Article 12.16 and shall include the information set out in subparagraphs 12.16.2(a), (b) and (c).
2. Consultations shall be held for a minimum period of six (6) months and may include meetings in person at the respondent's capital city.
Article 12.16. Submission of a Claim to Arbitration
1. After the minimum period referred to in Article 12.15.2 has elapsed, if a disputing party considers that an investment dispute cannot be resolved through consultation and negotiation:
(a) the claimant, at its own expense, may submit to arbitration a claim alleging:
(i) that the Respondent has breached an obligation under Section A, other than an obligation under Article 12.8; and
(ii) that the claimant has suffered loss or damage by reason of or as a result of such breach.
(b) the claimant, on behalf of an enterprise of the respondent that is a legal person owned or controlled directly or indirectly by the claimant, may, in accordance with this Section, submit to arbitration a claim alleging:
(i) that the Respondent has breached an obligation under Section A, other than an obligation under Article 12.8; and
(ii) that the company has suffered loss or damage by reason of, or as a result of, such violation.
2. At least ninety (90) days before a claim is submitted to arbitration pursuant to this Section, the claimant shall deliver to the respondent a written notice of its intent to submit the claim to arbitration ("notice of intent"). The notice shall specify:
(a) the name and address of the claimant and, if the claim is submitted on behalf of a company, the name, address and place of incorporation of the company,
(b) for each claim, the provision of Section A alleged to have been violated and any other applicable provision;
(c) the legal and factual basis of each claim, including the measures at issue; and (d) the relief sought and the approximate amount of damages claimed.
3. The claimant must also submit, together with its notice of intent, evidence establishing that it is an investor of the other Party.
4. Provided that at least six (6) months have elapsed since the events giving rise to the claim took place, and provided that the claimant has complied with the conditions set forth in Article 12.18, the claimant may submit the claim referred to in paragraph 1:
(a) in accordance with the ICSID Convention and the ICSID Rules of Procedure for Arbitral Proceedings, provided that both the respondent and the Party of the claimant are parties to the ICSID Convention;
(b) in accordance with the ICSID Additional Facility Rules, provided that either the respondent or the Party of the claimant is a party to the ICSID Convention;
(c) in accordance with the UNCITRAL Arbitration Rules; or
(d) if the disputing parties so agree, before an ad hoc arbitration institution, or before any other arbitration institution or under any other arbitration rules.
5. A claim shall be deemed to be submitted to arbitration under this Section when the claimant's notice or request for arbitration ("notice of arbitration"):
(a) referred to in Article 36(1) of the ICSID Convention, is received by the Secretary-General;
(b) referred to in Article 2 of Annex C of the ICSID Additional Facility Rules, is received by the Secretary- General;
(c) referred to in Article 3 of the UNCITRAL Arbitration Rules, together with the statement of claim referred to in Article 18 of the UNCITRAL Arbitration Rules, is received by the respondent, or
(d) referred to any other arbitration institution or under any arbitration rules selected under subparagraph 4(q), is received by the respondent.