Title

AGREEMENT ON INVESTMENT UNDER THE FRAMEWORK AGREEMENT ON COMPREHENSIVE ECONOMIC COOPERATION AMONG THE GOVERNMENTS OF THE MEMBER COUNTRIES OF THE ASSOCIATION OF SOUTHEAST ASIAN NATIONS AND THE REPUBLIC OF KOREA

Preamble

The Governments of Brunei Darussalam, the Kingdom of Cambodia, the Republic of Indonesia, the Lao Peoples Democratic Republic, Malaysia, the Union of Myanmar, the Republic of the Philippines, the Republic of Singapore, the Kingdom of Thailand and the Socialist Republic of Viet Nam, Member Countries of the Association of Southeast Asian Nations, and the Republic of Korea,

RECALLING the Framework Agreement on Comprehensive Economic Cooperation among the Govemments of the Member Countries of the Association of Southeast Asian Nations and the Republic of Korea (Framework Agreement) signed in Kuala Lumpur, Malaysia on the 13th day of December 2005;

FURTHER RECALLING Articles 1.3 and 2.3 of the Framework Agreement, which reflect their commitment to establish the ASEAN-Korea Free Trade Area covering investment;

REAFFIRMING their commitment to create a liberal, facilitative, transparent and competitive investment regime with business-friendly environment among the ASEAN Member Countries and the Republic of Korea, and to provide protection for investors of the Parties and their investments under the investment regime;

RECOGNISING that mutually enhanced investment opportunities will stimulate the flow of private capital and the economic development among the ASEAN Member Countries and the Republic of Korea; and

NOTING the different stages of economic development among the ASEAN Member Countries and the need for flexibility to be given to the new ASEAN Member Countries, in particular the need to facilitate their increasing participation in the economic cooperation of the Parties and the expansion of their exports, including, inter alia, through strengthening their domestic capacity, efficiency and competitiveness,

HAVE AGREED as follows:

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Article 1. Definitions

For the purposes of this Agreement:

(a) ASEAN Member Country means Brunei Darussalam, the Kingdom of Cambodia, the Republic of Indonesia, the Lao People's Democratic Republic, Malaysia, the Union of Myanmar, the Republic of the Philippines, the Republic of Singapore, the Kingdom of Thailand or the Socialist Republic of Viet Nam, individually;

(b) ASEAN Member Countries means Brunei Darussalam, the Kingdom of Cambodia, the Republic of Indonesia, the Lao People's Democratic Republic, Malaysia, the Union of Myanmar, the Republic of the Philippines, the Republic of Singapore, the Kingdom of Thailand and the Socialist Republic of Viet Nam, collectively;

(c) covered investment means, with respect to a Party, an investment in its territory 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 national policies, and where applicable, specifically approved in writing (1) by its competent authority;

(d) disputing parties means a disputing investor and a disputing Party;

(e) disputing Party means a Party against which a claim is made under Article 18 (Investment Dispute Settlement between a Party and an Investor of any other Party);

(f) Framework Agreement means the Framework Agreement on Comprehensive Economic Cooperation among the Governments of the Member Countries of the Association of Southeast Asian Nations and the Republic of Korea;

(g) freely usable currency means any currency designated as such by the International Monetary Fund (IMF) under its Articles of Agreement and any amendments thereto;

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

(i) Implementing Committee means the Implementing Committee established under Article 5.3 of the Framework Agreement;

(j) investment 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, and in particular, shall include but is not limited to:

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

(ii) shares, stocks and debentures of a juridical person or interests in the property of such juridical person;

(iii) intellectual property rights which are recognised pursuant to laws and regulations of a host Party and international agreements to which the host Party is a party and goodwill;

(iv) Business concessions (2) conferred by law or under contract, including concessions to search for, cultivate, extract or exploit natural resources; and

(v) a claim to money or any performance having financial value,

But the term investment does not include claims to money that arise solely from:

(i) commercial contracts for the sale of goods or services by a natural or juridical person in the territory of a Party to natural or juridical person in the territory of any other Party; or

(ii) the extension of credit in connection with a commercial transaction, such as trade financing.

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

(k) investor of a Party means a natural person or a juridical person of a Party that is seeking to make (3), is making, or has made an investment in the territory of any other Party;

(l) juridical person of a Party means any legal entity duly constituted or otherwise organized under a Partys applicable law, whether for profit or otherwise, and whether privately-owned or governmentally-owned, including any corporation, trust, partnership, sole proprietorship, joint venture, or other association, and its branch; (4)

(m) Korea means the Republic of Korea;

(n) measures means 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 and/or investments, and include measures taken by:

(i) central, regional or local governments and authorities; and

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

(o) natural person of a Party (5) means any natural person possessing the nationality or citizenship of or right of permanent residence in that Party in accordance with its laws and regulations;

(p) new ASEAN Member Countries means the Kingdom of Cambodia, the Lao Peoples Democratic Republic, the Union of Myanmar and the Socialist Republic of Viet Nam;

(q) non-disputing Party means the Party of the disputing investor;

(r) Parties means the ASEAN Member Countries and Korea, collectively;

(s) Party means an ASEAN Member Country or Korea;

(t) returns means amounts yielded by or derived from an investment particularly, though not exclusively, any profits, interests, capital gains, dividends, royalties or fees;

(u) WTO means the World Trade Organisation; and

(v) WTO Agreement means the Marrakesh Agreement Establishing the World Trade Organisation, done at Marrakesh on the 15th day of April 1994 and the other agreements negotiated thereunder.

(1) For the purpose of protection, the procedures relating to specific approval in writing shall be in Annex 1 (Approval in Writing).

(2) Business concessions include contractual rights such as those under turnkey, construction, management, production or revenue-sharing, concessions, or other similar contracts and may include investment funds for projects such as Build-Operate and Transfer (BOT) and Build-Operate and Own Schemes (BOO).

(3) For greater certainty, the Parties understand that an investor that is seeking to make an investment refers to an investor of any other Party that has taken active steps to initiate a notification or approval process, where applicable, for making an investment.

(4) For greater certainty, a branch of a legal entity of a non-Party shall not be considered as a juridical person of a Party

(5) In the case of a Party who does not grant rights of permanent residence to foreigners or accord its permanent residents the same benefits as its nationals or citizens, it shall not be legally obliged to acrord the benefits of this Agreement to permanent residents of any other Party or claim the aforesaid benefits for its permanent residents, if applicable, from any other Party.

Article 2. Scope and Coverage

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 does not apply to:

(a) government procurement;

(b) subsidies or grants provided by a Party;

(c) any taxation measure, except under Article 10 (Transfers) and Article 12 (Expropriation and Compensation);

(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 such as law enforcement, correctional services, income security or insurance, social security or insurance, social welfare, public education, public training, health, and child care, provided that such services are supplied neither on a commercial basis, nor in competition with one or more service suppliers; or

(f) measures adopted or maintained by a Party to the extent that they are covered by the Agreement on Trade in Services under the Framework Agreement.

3. Notwithstanding paragraph 2(f) of this Article, Article 5 (General Treatment of Investment), Article 10 (Transfer), Article 12 (Expropriation and Compensation), Article 13 (Compensation for Losses), Article 14 (Subrogation), and Article 18 (Investment Dispute Settlement between a Party and an Investor of any other Party) of this Agreement shall apply, mutatis mutandis, to any measure affecting the supply of service by a service supplier of a Party through commercial presence (6) in the territory of any other Party pursuant to the provisions of the Agreement on Trade in Services under the Framework Agreement, only to the extent that they relate to a covered investment.

(6) Commercial presence shall have the same meaning as that in the Agreement on Trade in Services under the Framework Agreement.

Article 3. National Treatment (7)

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 through its measures, in like circumstances, to its own investors and investments with respect to admission, establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments in its territory.

Article 4. Most-favoured-nation Treatment (8)

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

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

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

(b) any existing or future preferential treatment accorded to investors and/or their investments in any agreement or arrangement between or among ASEAN Member Countries.

4. Notwithstanding paragraphs 1 and 2, if a Party accords more favourable treatment to investors of any other Party or a non-Party or their investments by virtue of any future agreements or arrangements 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.

Article 5. General Treatment of Investment

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

2. For greater certainty:

(a) fair and equitable treatment requires each Party not to deny justice in any legal or administrative proceedings;

(b) full protection and security requires each Party to take such measures as may be reasonably necessary to ensure the protection and security of the covered investments; 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 provided under the customary international law and do not create additional substantive rights. (9)

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. Performance Requirements (10)

The provisions of the WTO Agreement on Trade-related Investments Measures (TRIMs), which are not specifically mentioned in or modified by this Agreement, shall apply, mutatis mutandis, to this Agreement unless the context otherwise requires.

Article 7. Senior Management and Boards of Directors (11)

1. A Party shall not require a juridical person of that Party that is a covered investment appoint to senior management positions natural persons of any particular nationality.

2. A Party may require that a majority of the board of directors, or any committee thereof, of a juridical person of that Party that is a covered investment, be of a particular nationality, or resident in the territory of the Party, provided that the requirement does not materially impair the ability of the investor to exercise control over its investment.

Article 8. Transparency

1. Each Party shall promptly publish, or othewise make publicly available, its laws, regulations, administrative rulings and judicial decisions of general application as well as international agreements which pertain to or affect any matter covered by this Agreement.

2. Each Party shall promptly make publicly available any new laws or any changes to existing laws, regulations or administrative guidelines which significantly affect investments or commitments of a Party under this Agreement.

3. The provisions of paragraphs 1 and 2 shall not be construed so as to oblige a Party to disclose confidential information, the disclosure of which would impede law enforcement or othewise be contrary to the public interest or which would prejudice privacy or legitimate commercial interests.

4. Each Party shall establish or designate an enquiry point where, upon request of any natural person, juridical person or any other Party, all information relating to the measures required to be published or made available under paragraphs 1 and 2 may be promptly obtained.

5. Each Party shall notify all the other Parties through the Implementing Committee at least once annually of any future investment related agreement or arrangement which grants any preferential treatment and to which it is a party.

6. All notifications and communications pursuant to paragraphs 4 and 5 shall be in the English language.

Article 9. Reservations (12)

1. Article 3 (National Treatment), Article 4 (MostFavoured-Nation Treatment), Article 7 (Senior Management and Boards of Directors), and in the case of the Lao Peoples Democratic Republic Article 6 (Performance Requirements), shall not apply to:

(a) any existing non-conforming measure that is maintained by a Party at:

(i) the central level of government as set out by the Party in its Schedule of Reservations in List 1;

(ii) the regional level of government as set out by the Party in its Schedule of Reservations in List 1; or

(iii) the local level of government.

(b) the continuation or prompt renewal of any nonconforming measure referred to in subparagraph (a); or

(c) an amendment to any non-conforming measure referred to in subparagraph (a) to the extent that the amendment does not decrease the conformity of the measure, as it existed at the date of entry into force of the Partys Schedule of Resewations in List 1, with Article 3 (National Treatment), Article 4 (Most-Favoured-Nation Treatment), Article 7 (Senior Management and Boards of Directors), and in the case of the Lao People's Democratic Republic Article 6 (Performance Requirements).

2. Article 3 (National Treatment), Article 4 (MostFavoured-Nation Treatment), Article 7 (Senior Management and Boards of Directors), and in the case of the Lao People's Democratic Republic Article 6 (Performance Requirements), shall not apply to any resewation for measures that a Party adopts or maintains with respect to sectors, sub-sectors or activities, as set out in List 2.

3. Other than pursuant to any procedures for the modification of Schedules of Resewations, a Party may not, under any measure adopted after the date of entry into force of this Agreement and covered by List 2, require 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.

4. Procedures for the modification of the Schedules of Reservations referred to in paragraph 3 are to be pursuant to Article 27 (Work Programme).

5. Nothing in this Agreement shall be construed so as to derogate from rights and obligations under international agreements in respect of protection of intellectual property rights to which the Parties are party, including the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and other treaties concluded under the auspices of the World Intellectual Property Organization.

Article 10. Transfers

1. Each Party shall allow transfers relating to a covered investment to be made freely and without delay into and out of its territory in any freely usable currency at the prevailing market rate of exchange in its territory on the date of transfer. Such transfers shall include:

(a) the initial capital and additional amounts to maintain or increase the investment;

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

(c) proceeds from the sale or liquidation of all or any part of the investment;

(d) payments made under a contract including payments made pursuant to a loan agreement;

(e) payments made in accordance with Article 12 (Expropriation and Compensation) and Article 13 (Compensation for Losses); and

(f) payments arising out of the settlement of a dispute under this Agreement.

2. Notwithstanding paragraph 1, 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) social security, public retirement or compulsory savings scheme;

(e) ensuring compliance with the judgments in judicial or administrative proceedings;

(f) severance entitlement of employees;

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

(h) taxation.

3. Nothing in this Agreement shall affect the rights and obligations of the Parties as members of the International Monetary Fund (IMF) under the Articles of Agreement of the Fund, including the use of exchange actions which are in conformity with the Articles of Agreement, provided that a Party shall not impose restrictions on any capital transactions inconsistently with its specific commitments regarding such transactions, except under Article 11 (Temporary Safeguard Measures) or at the request of the Fund.

Article 11. Temporary Safeguard Measures

1. A Party may adopt or maintain measures not conforming with its obligations under Article 3 (National Treatment) relating to cross-border capital transactions or Article 10 (Transfers) in the event of serious balance of payments and external financial difficulties or under threat thereof.

2. A Party may adopt or maintain measures not conforming with its obligations under Article 10 (Transfers) in cases where, in exceptional circumstances, movements of capital cause or threaten to cause serious economic or financial disturbance or serious difficulties for the operation of monetary or exchange rate policies in the Party concerned (13).

3. The measures referred to in paragraphs 1 and 2 shall:

(a) be consistent with the Articles of Agreement of the IMF, as may be amended;

(b) avoid unnecessary damage to the commercial, economic and financial interests of any other Party;

(c) not exceed those necessary to deal with the circumstances described in paragraph 1 or 2;

(d) be temporary and phased out progressively as the situation specified in paragraph 1 improves; and

(e) be applied such that any one of the other Parties is treated no less favourably than any other Party or non-Party.

4. Measures adopted or maintained pursuant to paragraph 2 shall, in addition to paragraphs 3(a) to (e):

(a) be phased out within one year or when conditions would no longer justify their institution or maintenance (14);

(b) be applied on a national treatment basis; and

(c) avoid unnecessary damage to investors and covered investments of any other Party.

5. Any restrictions adopted or maintained under paragraphs 1 and 2 or any changes' therein, shall be promptly notified to the other Parties.