Note: The application of this Article is subject to Article 51.23.
51.7. Reservations and Exceptions
1. Articles 51.3, 51.5 and 51.6 shall not apply to:
(a) any existing non-conforming measure that is maintained by the following, as set out in the Schedule of each Party in Annex 10-I:
(i) the central government of the Party; or
(ii) a prefecture of Japan or a regional government of an ASEAN Member State;
(b) any existing non-conforming measure that is maintained by a local government of a Party other than those referred to in subparagraph (a)(ii);
(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 nonconforming 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 entry into force of the Party’s Schedule in Annex 10-I, with Articles 51.3, 51.5 and 51.6.
2. Articles 51.3, 51.5 and 51.6 shall not apply to any measure that a Party adopts or maintains with respect to sectors, subsectors or activities set out in its Schedule in Annex 10-II.
3. No Party shall, under any measure adopted and covered by its Schedule in Annex 10-II, require an investor of another Party, by reason of its nationality, to sell or otherwise dispose of an investment that exists at the time that the measure becomes effective, unless otherwise specified in the initial approval by the relevant authorities.
4. In cases where a Party makes an amendment or a modification pursuant to subparagraph 1(d) to any existing non-conforming measure set out in its Schedule in Annex 10-I, or adopts any new or more restrictive measure with respect to sectors, subsectors or activities set out in its Schedule in Annex 10-II, the Party shall, prior to the implementation of the amendment or modification or the new or more restrictive measure, or as soon as possible thereafter:
(a) notify the other Parties of detailed information on such amendment or modification, or such measure; and
(b) respond, upon request of another Party, to specific questions from another Party, with respect to such amendment or modification, or such measure.
5. Each Party shall endeavour, where appropriate, to reduce or eliminate the reservations specified in its Schedules in Annexes 10-I and 10-II respectively.
6. Article 51.3 shall not apply to any measure covered by the exceptions to, or derogations from, obligations under Articles 3 and 4 of the Agreement on the Trade-Related Aspects of Intellectual Property Rights in Annex 1C to the WTO Agreement (hereinafter referred to as “TRIPS Agreement”) as specifically provided in Articles 3 through 5 of the TRIPS Agreement.
Note: The application of this Article is subject to Article 51.23.
51.8. Public Comments
Each Party shall, to the extent provided for under its domestic legal framework, endeavour to provide, except in cases of emergency, a reasonable opportunity for comments by the public before the adoption of regulations of general application that affect any matter covered by this Chapter.
51.9. Expropriation and Compensation
1. No Party shall expropriate or nationalise covered investments, or take any measure equivalent to expropriation or nationalisation (hereinafter referred to as “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 prompt, adequate and effective compensation.
2. For the purposes of subparagraph 1(d), the compensation shall:
(a) be equivalent to the fair market value of the expropriated investment at the time when the expropriation was publicly announced, or when the expropriation occurred, whichever is earlier;
Note: In the case of the Republic of the Philippines, the time when the expropriation was publicly announced refers to the date of filing of the Petition for Expropriation.
(b) not reflect any change in value occurring because the intended expropriation had become publicly known earlier;
(c) be settled and paid without undue delay; and
Note: The Parties understand that there may be legal and administrative processes that need to be observed before payment can be made.
(d) be effectively realisable and freely transferable.
3. The compensation shall include appropriate interest. 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. If an investor requests payment in a freely usable currency, the compensation, including any accrued interest, shall be converted into the currency of payment at the market exchange rate prevailing on the date of payment.
5. Notwithstanding paragraphs 1 through 4, any measure of expropriation relating to land shall be as defined in the existing domestic laws and regulations of the expropriating Party on the date of entry into force of the First Protocol, 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.
6. This Article shall not apply to the issuance of compulsory licences concerning intellectual property rights in accordance with the TRIPS Agreement.
51.10. 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 territory of the former Party owing to war, armed conflict or a state of emergency such as 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 to its own investors or to investors of a non-Party.
51.11. Transfers
1. Each Party shall allow all transfers relating to covered investments to be made freely and without delay into and out of its territory. Such transfers shall include:
(a) the initial capital and additional amounts to maintain or increase investments;
(b) profits, interest, capital gains, dividends, royalties, technical assistance fees, management fees and other current income accruing from covered investments;
(c) payments made under a contract, including payments made under a loan agreement in connection with covered investments;
(d) proceeds from the total or partial sale or liquidation of covered investments;
(e) earnings and other remuneration of personnel engaged in activities in connection with covered investments;
(f) payments made in accordance with Articles 51.9 and 51.10; and
(g) payments arising out of the settlement of an investment dispute under Article 51.13.
2. Each Party shall allow transfers referred to in paragraph 1 to be made in a freely usable currency at the market rate of exchange prevailing in its territory on the date of the transfer.
3. Notwithstanding paragraphs 1 and 2, a Party may delay or prevent a transfer through the equitable, non-discriminatory and good-faith application of its laws and regulations relating to:
(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;
(d) obligations arising from social security, public retirement or compulsory savings scheme;
(e) ensuring compliance with orders or judgments in judicial or administrative proceedings;
(f) severance entitlement of employees;
(g) reports or record keeping of transfers when necessary to assist law enforcement or financial regulatory authorities; and
(h) the requirement to register and satisfy any other formalities imposed by the central bank and any other relevant authorities of a Party.
Note: For greater certainty, by virtue of paragraph 1 of Article 6, each Party may delay or prevent a transfer through the equitable, non-discriminatory and good-faith application of its laws and regulations relating to taxation measures.
4. Nothing in this Chapter shall affect the rights and obligations of the Parties as members of the IMF under the Articles of Agreement of the IMF, including the use of exchange actions which are in conformity with the Articles of Agreement of the IMF.
51.12. Subrogation
1. Where a Party or an agency authorised by that Party has granted a contract of insurance or any form of financial guarantee with regard to a covered investment by one of its investors in the territory of another Party and when payment has been made under such contract or financial guarantee by the former Party or the agency authorised by it, the latter Party shall recognise the subrogation or transfer of any right or claim with regard to 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 an agency authorised by the Party has made a payment to its investor and has taken over rights and claims of the investor, that investor shall not, unless authorised to act on behalf of the Party or the agency authorised by the Party making the payment, pursue those rights and claims against the other Party.
3. In the exercise of subrogated rights or claims, a Party or an agency authorised by the Party exercising such rights or claims shall disclose the coverage of the claims arrangement with its investors to the other Party referred to in paragraph 2.
4. Articles 51.9, 51.10 and 51.11 shall apply mutatis mutandis as regards payment to be made to the Party or the agency prescribed in paragraphs 1 and 2 by virtue of such subrogation or transfer of rights or claims, and the transfer of such payment.
51.13. Settlement of Investment Disputes between a Party and an Investor of Another Party
1. This Article shall apply to investment disputes between a Party and an investor of another Party concerning an alleged breach of an obligation of the former Party under this Chapter which causes loss or damage to the covered investment of the investor.
2. For the purposes of this Chapter, the term:
(a) “disputing investor” means an investor of a Party that makes a claim against another Party under this Article;
(b) “disputing Party” means a Party against which a claim is made under this Article;
(c) “disputing parties” means a disputing investor and a disputing Party;
(d) “disputing party” means either a disputing investor or a disputing Party;
(e) “ICSID Convention” means the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, done at Washington, 18 March 1965;
(f) “ICSID Additional Facility Rules” means the Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat of the International Centre for Settlement of Investment Disputes;
(g) “New York Convention” means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, 10 June 1958;
(h) “UNCITRAL Arbitration Rules” means the arbitration rules of the United Nations Commission on International Trade Law adopted by the United Nations General Assembly, 15 December 1976; and
(i) “UNCITRAL Conciliation Rules” means the conciliation rules of the United Nations Commission on International Trade Law adopted by the United Nations General Assembly, 4 December 1980.
3. Subject to subparagraph 10(c), nothing in this Article shall be construed so as to prevent a disputing investor from seeking administrative or judicial settlement within the territory of the disputing Party.
4. A natural person possessing the nationality or citizenship of the disputing Party shall not pursue a claim against that Party under this Article.
5. Any investment dispute shall, as far as possible, be settled amicably through consultations between the disputing parties.
6. In the event that an investment dispute cannot be settled by consultation as provided for in paragraph 5, the disputing investor may, subject to this Article, submit to courts or administrative tribunals of the disputing Party or to conciliation or arbitration under this Article a claim:
(a) that the disputing Party has breached an obligation under Article 51.3, Article 51.4, subparagraphs 1(a) through (d) of Article 51.5, Article 51.6, Article 51.9, Article 51.10 and Article 51.11 relating to the management, conduct, operation, or sale or other disposition of a covered investment; and
(b) that the disputing investor or its covered investment has incurred loss or damage by reason of, or arising out of, that breach.
7. (a) A disputing investor may submit a claim referred to in paragraph 6 at the choice of the disputing investor to one of the following alternatives:
(i) courts or administrative tribunals of the disputing Party, provided that such courts or administrative tribunals have jurisdiction over such claim;
(ii) conciliation or arbitration under the ICSID Convention and the ICSID Rules of Procedure for Conciliation Proceedings and the ICSID Rules of Procedure for Arbitration Proceedings, provided that both the disputing Party and the Party of the disputing investor are parties to the ICSID Convention;
(iii) conciliation or arbitration under the ICSID Additional Facility Rules, provided that either the disputing Party or the Party of the disputing investor, but not both, is a party to the ICSID Convention;
(iv) conciliation under the UNCITRAL Conciliation Rules or arbitration under the UNCITRAL Arbitration Rules; or
(v) if agreed with the disputing Party, any other arbitration institution or arbitration under any other arbitration rules.
(b) For the purposes of subparagraph 7(a), a disputing investor may submit a claim to conciliation or arbitration under subparagraphs (a)(ii) through (v), only if the investment dispute cannot be resolved as provided for in paragraph 5 within one hundred and eighty (180) days from the date of receipt by the disputing Party of a written request for consultation and negotiation.
8. Once the disputing investor has submitted the claim to the courts or administrative tribunals of the disputing Party, the choice of forum shall be final.
9. (a) Each Party hereby consents to the submission of a claim to conciliation or arbitration set forth in paragraph 7 in accordance with the procedures set out in this Article.
Note 1: Notwithstanding subparagraph 9(a), in the event of an investment dispute between the Republic of Indonesia and an investor of another Party or the Republic of the Philippines and an investor of another Party, consent to the submission of a claim under the ICSID Convention and the ICSID Rules of Procedure for Arbitration Proceedings shall be subject to a separate written agreement between the disputing parties. For greater certainty, the institution of proceedings, commencement of conciliation proceedings, or reference to arbitration under subparagraphs 7(a)(iii) and (iv) shall be governed by the applicable arbitration or conciliation rules. For the avoidance of doubt, the aforementioned separate written agreement applies only to the submission of a claim under the ICSID Convention and the ICSID Rules of Procedure for Arbitration Proceedings.
Note 2: Notwithstanding subparagraph 9(a), in the case of an investment dispute between the Kingdom of Thailand and an investor of another Party or between another Party and an investor of the Kingdom of Thailand, the disputing Party consents to the submission of a claim to conciliation or arbitration set forth in paragraph 7, provided that the Kingdom of Thailand and the other Party had consented to submission of a claim to the conciliation or arbitration in existing international agreements to which both the Kingdom of Thailand and that other Party are parties. Such consent shall be subject to the same conditions and limitations as stipulated in such international agreements.
(b) The consent given under subparagraph 9(a) and the submission by a disputing investor of an investment dispute to conciliation or arbitration shall satisfy the requirements of:
(i) Chapter II of the ICSID Convention or the ICSID Additional Facility Rules, for written consent of the parties to an investment dispute; and
(ii) Article II of the New York Convention for an agreement in writing.
10. The submission of a claim to conciliation or arbitration under subparagraph 7(a)(ii), (iii), (iv) or (v) in accordance with the provisions of this Article shall be conditional upon:
(a) the submission of the claim to such conciliation or arbitration taking place within three (3) years from the time at which the disputing investor became aware, or should reasonably have become aware, of a breach of an obligation referred to in subparagraph 6(a) causing loss or damage to the disputing investor or its covered investment;
(b) the disputing investor providing written notice, which shall be submitted at least ninety (90) days before the claim is submitted, to the disputing Party of the disputing investor’s intent to submit the claim to such conciliation or arbitration.
The notice shall:
(i) specify either subparagraph 7(a)(ii), (iii), (iv) or (v) as the forum for dispute settlement and, in the case of subparagraphs 7(a)(ii) through (iv), whether conciliation or arbitration is being sought; and
(ii) briefly summarise the alleged breach of the disputing Party under this Chapter, including the Articles alleged to have been breached, and the loss or damage allegedly caused to the disputing investor or its covered investment; and
(c) the written request or invitation to conciliate or notice of arbitration being accompanied by the disputing investor’s written waiver of any right to initiate or continue before any court or administrative tribunal under the law of either Party or other dispute settlement mechanisms including investment dispute settlement mechanisms under any other bilateral or multilateral agreement to which both the disputing Party and the Party of the disputing investor are parties, any proceedings with respect to any measure of the disputing Party alleged to constitute a breach referred to in paragraph 6. Accordingly, once the disputing investor has submitted the claim to any of the conciliation or arbitration under subparagraph 7(a)(ii), (iii), (iv) or (v), the choice of forum shall be final.
11. Notwithstanding subparagraph 10(c), the disputing investor may initiate or continue an action that seeks interim injunctive relief for the sole purpose of preserving the disputing investor’s rights and interests and does not involve the payment of damages or resolution of the substance of the matter in dispute before a court or an administrative tribunal under the law of the disputing Party.
12. No Party shall give diplomatic protection, nor bring an international claim, in respect of an investment dispute which one of its investors and any one of the other Parties shall have consented to submit or have submitted to conciliation or arbitration under this Article, unless such other Party has failed to abide by and comply with the award rendered in such investment dispute. Diplomatic protection, for the purposes of this paragraph, shall not include informal diplomatic exchanges for the sole purpose of facilitating a settlement of the investment dispute.
13. An arbitral tribunal established under paragraph 7 shall decide the issues in dispute in accordance with this Chapter, and applicable rules of international law and, where applicable, relevant domestic laws of the disputing Party.
Note: The arbitral tribunal does not have jurisdiction to determine the legality of a measure alleged to constitute a breach of this Chapter under the domestic law of the disputing Party.
14. An arbitral tribunal shall address and decide on any objection by the disputing Party that a claim is not admissible, or the claim is outside the jurisdiction or competence of the arbitral tribunal, provided that the disputing Party so requests as soon as possible after the arbitral tribunal is established, and in no event later than the date that the arbitral tribunal fixes for the disputing Party to submit its counter-memorial.
15. Notwithstanding paragraph 14, the arbitral tribunal may on its initiative consider, at any stage of the proceeding, whether the claim is admissible, or within the jurisdiction or competence of the arbitral tribunal.
16. In general, the arbitral tribunal should decide on the objection referred to in paragraph 14 as a preliminary question. However, the arbitral tribunal may join it to the merits of the claim. In considering whether to join the objection to the merits of the claim, the arbitral tribunal shall, as far as possible, obtain the consent of the disputing parties.
17. Unless the disputing parties have agreed to another expedited procedure for making preliminary objections, a disputing Party may, no later than ninety (90) days after the constitution of the arbitral tribunal, and in any event before the first session of the arbitral tribunal, file an objection that a claim is manifestly without legal merit. The disputing Party shall specify as precisely as possible the basis for the objection. The arbitral tribunal, after giving the disputing parties the opportunity to present their observations on the objection, shall, at its first session or promptly thereafter, notify the disputing parties of its decision on the objection. The decision of the arbitral tribunal shall be without prejudice to the right of a disputing Party to file an objection pursuant to paragraph 14 or to object, in the course of the proceeding, that a claim lacks legal merit.
18. If the arbitral tribunal decides that the claim is not admissible, or the claim is outside the jurisdiction or competence of the arbitral tribunal, or that the claim is manifestly without legal merit, it shall render an award to that effect.
19. The arbitral tribunal may, if warranted, award the prevailing disputing party reasonable costs and fees incurred in submitting or opposing the objection. In determining whether such an award is warranted, the arbitral tribunal shall consider whether either the claim or the objection was frivolous or manifestly without legal merit, and shall provide the disputing parties with a reasonable opportunity to comment.
20. (a) The arbitral tribunal shall at the request of a disputing Party, or may on its own account, request a joint interpretation of any provision of this Chapter that is in issue in an investment dispute. The Parties shall submit in writing any joint decision declaring their interpretation made by consensus to the arbitral tribunal within sixty (60) days from the date of receipt of the request. Without prejudice to subparagraph (b), if the Parties fail to issue such a decision within sixty (60) days, any interpretation submitted by a Party shall be forwarded to the disputing parties and the arbitral tribunal, which shall decide the issue on its own account.
(b) A joint decision of the Joint Committee on the interpretation of any provision of thisChapter under subparagraph 2(e)(iv) of Article 11 shall be binding on an arbitral tribunal, and any decision or award issued by an arbitral tribunal must be consistent with that joint decision.
21. Unless the disputing parties agree otherwise, the arbitration shall be held in a country that is a party to the New York Convention.
22. Each Party shall provide for the enforcement of an award in its territory.
23. An award made by an arbitral tribunal shall be final and binding upon the disputing parties. An award shall have no binding force except between the disputing parties and in respect of the particular case.
51.14. General Exceptions
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 or investments made by investors of another Party, nothing in this Chapter 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, provided that the public order exception may only be invoked where a genuine and sufficiently serious threat is posed to one of the fundamental interests of society;
(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 Chapter 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) imposed for the protection of national treasures of artistic, historic or archaeological value; or
(e) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption.
51.15. Special Formalities and Information Requirements
1. Nothing in Article 51.3 shall be construed to prevent a Party from adopting or maintaining a measure that prescribes special formalities in connection with investments, including a requirement that investments be legally constituted or comply with registration requirements, provided that such formalities do not materially impair the rights afforded by a Party to investors of another Party and investments pursuant to this Chapter.
2. Notwithstanding Article 51.3, a Party may require an investor of another Party, or a covered investment, to provide information concerning that investment solely for information or statistical purposes. The Party shall protect any confidential information from any disclosure that would prejudice legitimate commercial interests of particular juridical persons, public or private, or the competitive position of the investor or the covered investment. Nothing in this paragraph shall be construed to prevent a Party from otherwise obtaining or disclosing information in connection with the equitable and good-faith application of its law.
51.16. Special and Differential Treatment for the Newer ASEAN Member States
In order to increase benefits of this Chapter for the newer ASEAN Member States, and in accordance with Articles 2, 3 and 52, special and differential treatment should be accorded to the newer ASEAN Member States under this Chapter, through:
(a) access to information on the investment policies of other Parties, business information, relevant databases and contact point for investment promotion;
(b) technical assistance to strengthen their capacity in relation to investment policies and promotion including in areas such as human resource development;
(c) commitments in areas of interest to the newer ASEAN Member States; and
(d) recognising that commitments by each newer ASEAN Member State may be made in accordance with its individual stage of development.
51.17. Promotion of Investment
1. Each Party should further promote investment in order to strengthen the economic relationship among Parties.
2. Subject to their laws and regulations and the availability of funds, the Parties shall cooperate in promoting and increasing awareness of ASEAN-Japan as an investment area, where possible, through, among others:
(a) organising investment promotion activities;
(b) promoting business matching events;
(c) organising and supporting the organisation of various briefings and seminars on investment opportunities and on investment laws, regulations and policies; and
(d) conducting information exchanges on other issues of mutual concern relating to investment promotion and facilitation.
51.18. Facilitation of Investment
1. Each Party shall endeavour to further create stable, favourable and transparent conditions in order to encourage greater investment by investors of another Party in its territory.
2. Subject to their laws and regulations and the availability of funds, the Parties shall cooperate to facilitate investments among Japan and ASEAN Member States, where possible, through, among others:
(a) creating the necessary environment for all forms of investment;
(b) simplifying procedures for investment applications and approvals;