Colombia - Northern Triangle FTA (2013) - Electronic Database of Investment Treaties (EDIT)

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Colombia - Northern Triangle FTA (2013)

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Chapter 12. INVESTMENT

Section A. Investment

Article 12.1. Definitions

For the purposes of this Chapter:

TRIPS Agreement means the Agreement on Trade-Related Aspects of Intellectual Property Rights, which forms part of the WTO Agreement;

New York Convention means the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York on June 10, 1958;

Inter-American Convention means the Inter-American Convention on International Commercial Arbitration, done at Panama on January 30, 1975;

ICSID Convention means the Convention on the Settlement of Investment Disputes between States and Nationals of other States, done at Washington on March 18, 1965; ICSID Convention means the Convention on the Settlement of Investment Disputes between States and Nationals of other States, done at Washington on March 18, 1965;

Respondent means the Party that is a party to an investment dispute;

claimant means the investor of a Party that is a party to an investment dispute with the other Party;

protected information means confidential business information or information that is confidential or privileged or otherwise protected from disclosure under the laws of the Party;

investment means

1. Any type of asset of an economic nature owned or controlled, directly or indirectly, by an investor that has the characteristics of paragraph 3, including in particular, but not limited to, the following:

(a) movable and immovable property, as well as all rights in rem thereon;

(b) shares, social quotas and any other type of economic participation in companies;

(d) intellectual property rights;

(e) concessions granted by law, by an administrative act or by virtue of a contract, such as concessions to explore, cultivate, extract or exploit natural resources; and

(f) any external credit operation, under the terms established by the legislation of each Party that is linked to an investment.

It will not be considered an investment:

(a) public debt operations;

(b) pecuniary claims arising exclusively from:

(i) commercial contracts for the sale of goods or services by a national or legal entity in the territory of a Party to a national or enterprise in the territory of the other Party; or

(ii) the granting of credit in connection with a commercial transaction;

2. A change in the manner in which the assets have been invested or reinvested does not affect their character as an investment under this Chapter, provided that such change falls within the definitions of this Article.

3. In accordance with paragraph 1 of the definition of investment, an investment must have at least the following elements:

(a) the contribution of capital or other resources;

(b) expectation of benefits and returns; and

(c) the existence of risk for the investor; covered investment means, with respect to a Party, an investment, as defined in this Article, in its territory of an investor of the other Party that exists as of the date of entry into force of this Agreement or is subsequently established, acquired or expanded;

investor of a Party

1. Designates for each of the Parties, to:

(a) a natural person of a Party who is considered a national of that Party in accordance with Annex 2.1 (Country-Specific Definitions);

(b) enterprise, which means any entity or person, whether or not for profit, and whether privately or governmentally owned, including companies, corporations, partnerships, foundations, trusts, participations, sole proprietorships, joint ventures, joint ventures, trade associations, or other associations, which are incorporated or otherwise duly organized under the law of that Party, and which have their domicile and substantial economic activities in the territory of the same Party;

(c) enterprise not established under the law of that Party but effectively controlled, according to the law of the Party in which the investment is made, by one or more natural persons as defined in subparagraph (a) or by one or more enterprises as defined in subparagraph (b).

2. The term investor of a Party refers to the natural person and enterprise, as defined in (a), (b) and (c) above, who intend to make, through concrete actions, are making or have made an investment in the territory of the other Party; provided, however, that a natural person who has dual nationality shall be considered exclusively a national of the State of his dominant and effective nationality;

freely usable currency means "freely usable currency" as determined in accordance with the Articles of Agreement of the International Monetary Fund;

disputing party means the plaintiff or the defendant; disputing parties means the plaintiff and the defendant; Non-disputing Party means a Party that is not a party to an investment dispute;

UNCITRAL Arbitration Rules means the Arbitration Rules of the United Nations Commission on International Trade Law;

ICSID Additional Facility Rules means the Additional Facility Rules for the Administration of Proceedings by the Secretariat of the International Centre for Settlement of Investment Disputes;

income means the sums produced by an investment during a given period of time, and includes in particular, but not exclusively, profits, dividends and interest;

Secretary-General means the Secretary-General of ICSID; and

Tribunal means an arbitral tribunal established pursuant to Articles 12.21 y 12.28.

Article 12.2. Scope of Application (1)

1. This Chapter applies to measures adopted or maintained by a Party, at any level of government, relating to:

(a) investors of the other Party in all matters relating to their investment;

(b) covered investments; and

2. This Chapter does not apply to disputes that have arisen prior to its entry into force, nor to disputes concerning events that occurred prior to its entry into force, even if their effects remain even after its entry into force.

3. In the case of external credits, this Chapter shall apply exclusively to those contracted after the entry into force of the Treaty.

4. Nothing in this Chapter shall obligate any Party to protect investments made with funds or assets of illicit origin, nor shall it be construed to prevent a Party from adopting or maintaining measures designed to preserve public order, the fulfillment of its obligations for the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

5. This Chapter does not apply to measures that a Party adopts or maintains relating to financial services.

(1) For greater certainty, nothing in this Agreement shall be construed to require a Party to privatize public services supplied in the exercise of governmental authority.

Article 12.3. Relationship to other Chapters

1. In case of incompatibility between a provision of this Chapter and a provision of another, the provision of the latter shall prevail to the extent of the incompatibility.

2. Notwithstanding the foregoing, for the purposes of this Chapter, the definitions provided herein shall prevail over any other definition set forth in this Agreement.

3. 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 the supply of a cross-border service does not, of 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.

Article 12.4. Investment Protection

1. Each Party shall ensure fair and equitable treatment in accordance with customary international law and full protection and security within its territory for covered investments.

2. For greater certainty,

(a) the concept of "fair and equitable treatment" does not require treatment in addition to that required by the minimum standard of treatment of aliens under customary international law, nor does it create additional substantive rights;

(b) "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 embodied in the principal legal systems of the world; and

(c) the concept of "full protection and security" does not imply treatment superior to the level of police protection afforded to nationals of the Party where the investment has been made.

3. A determination that another provision of this Chapter or of another international agreement has been violated shall not imply a breach of fair and equitable treatment or of full protection and security.

Article 12.5. 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 in its territory of its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.

Article 12.6. 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 any other Party or 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 in its territory of investors of any other Party or 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. Most-Favored-Nation Treatment to be granted in similar circumstances does not extend to dispute settlement mechanisms provided for in international investment treaties or agreements. (2)

(2) This Article refers to dispute settlement mechanisms such as those contained in Section B of this Chapter.

Article 12.7. Free Transfer

1. Each Party shall, subject to compliance with the requirements of its domestic legal system, permit all transfers relating to a covered investment to be made freely and without undue delay to and from its territory. Such transfers include:

(a) capital contributions;

(b) investment income, as defined in Article 12.1;

(d) interest, royalty payments, management fees, technical assistance and other charges;

(e) payments made under a contract, including a loan contract;

(f) payments made pursuant to Article 12.8 and 12.14;

(g) payments arising from a dispute; and

(h) salaries and other remuneration received by personnel hired abroad in connection with a hedged investment.

2. Notwithstanding the foregoing, for reasons affecting macroeconomic equilibrium, the Parties may adopt measures related to capital inflows from external credits and/or implying a surcharge on prepayment thereof, provided that such measures are applied equitably, non-discriminatorily and in good faith.

3. Each Party shall permit transfers related to a covered investment to be made in a freely usable currency at the market rate of exchange prevailing at the time of transfer.

4. Each Party shall permit transfers of profits in kind relating to a covered investment to be executed as authorized or specified in a written agreement between the Party and a covered investment or an investor of the other Party.

5. Notwithstanding paragraphs 1, 3 and 4, a Party may condition or prevent the implementation of a transfer, through the equitable, non-discriminatory and good faith application of its laws relating to:

(a) bankruptcy, bankruptcy proceedings, corporate restructuring, insolvency or protection of creditors' rights;

(b) issuance, trading or operations of securities, futures, options or derivatives;

(d) financial reporting or record keeping of transfers when necessary to cooperate with law enforcement, financial or foreign exchange regulatory authorities;

(e) guaranteeing compliance with orders or judgments in judicial, arbitration or administrative proceedings that have become final; or

(f) compliance with labor or tax obligations.

Article 12.8. Expropriation and Compensation

1. Covered investments of investors of one Party in the territory of the other Party shall not be subject to nationalization, direct or indirect expropriation, nor to any other measure having similar effects (hereinafter "expropriation") except for the reasons expressly provided for in the Constitutions of the Parties, in accordance with due process of law, in a non-discriminatory manner, in good faith and accompanied by the payment of prompt, adequate and effective compensation.

The reasons indicated in the preceding paragraph are as follows:

(a) with respect to the Republic of El Salvador: public utility or social interest;

(b) with respect to the Republic of Guatemala: collective utility, social benefit or public interest;

(c) with respect to the Republic of Honduras: public necessity or public interest; and (d) with respect to the Republic of Colombia: public utility or social interest.

2. Each Party, in accordance with the corresponding constitutional provisions, may establish monopolies or reserve strategic activities that deprive an investor of a Party from developing an economic activity, provided that it is for the constitutional reasons expressed in the preceding paragraph. In such events, the investor shall receive prompt, adequate and effective compensation, under the conditions provided for in this Article.

3. The Parties understand that:

(a) indirect expropriation results from a measure or series of measures of a Party that has an effect equivalent to a direct expropriation, without the formal transfer of the right of ownership;

(b) the determination of whether a measure or series of measures of a Party, in a specific situation, constitutes indirect expropriation requires a case-by- case analysis based on the facts and considering:

(i) the economic impact of the measure or series of measures. In any case, the mere fact that the measure or series of measures generates an adverse economic impact on the value of an investment does not imply that there is indirect expropriation; and

(ii) the scope of the measure or series of measures and their interference with the distinguishable and reasonable expectations of the investment;

(c) non-discriminatory measures of a Party that are designed and applied on the basis of the constitutional grounds set forth in paragraph 1 of this Article, or that are designed and applied for the reasons set forth in paragraph 1 of this Article, do not constitute indirect expropriation have objectives such as public health, safety and environmental protection; except in extraordinary circumstances, such as when a measure or series of measures are so severe in light of their objective that they cannot reasonably be perceived as the result of a bona fide adoption.

4. The compensation will be equivalent to the fair market value that the expropriated investment had immediately before the expropriation measure was taken or before the imminence of the expropriation became public knowledge, whichever occurs first (hereinafter "valuation date").

5. The fair market value will be calculated in a freely usable currency at the prevailing market rate of exchange for that currency on the valuation date. Compensation shall include interest at a commercial rate fixed at market rates for that currency from the date of expropriation to the date of payment. The compensation shall be paid without undue delay, shall be effectively realizable and freely transferable.

6. The legality of the measure and the amount of compensation may be challenged before the judicial authorities of the Party that adopted it, without prejudice to the administrative remedies available under the laws of each Party. (3)

7. The Parties confirm that, in development of the provisions of the TRIPS Agreement, the issuance of compulsory licenses granted in relation to intellectual property rights, or to the revocation, limitation or creation of intellectual property rights, cannot be challenged under the provisions of this Article.

(3) For greater certainty, this paragraph is subject to the provisions of Article 12.22 (2) with respect to final forum selection.

Article 12.9. 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 to: (4)

(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 supplies, by relating such sales in any way to the volume or value of its exports or to the foreign exchange earnings it generates;

(f) transfer to a person in its territory a particular technology, production process or other proprietary knowledge;$ or

(g) supply exclusively from the territory of the Party the goods produced by the investment or the services supplied by the investment to a specific regional market or to the world market.

2. 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 requirement to:

(a) to reach 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 supplies by relating such sales in any way to the volume or value of its exports or to foreign exchange earnings.

3. (a) Nothing in paragraph 2 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 investment in 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 facilities or carry out research and development in its territory.

(b) Paragraph 1 (f) does not apply:

(i) where a Party authorizes the use of an intellectual property right in accordance with Article 31 of the TRIPS Agreement or measures requiring the disclosure of proprietary information that fall within the scope of, and are consistent with, Article 39 of the TRIPS Agreement; or

(ii) where the requirement is imposed, or the commitment or obligation is ordered by a judicial or administrative tribunal or a competition authority, to remedy a practice that has been determined after judicial or administrative process to be anticompetitive under a Party's competition laws. (6)

(c) 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 international trade or investment, nothing in paragraphs 1 (b), (c) and (f) and 2 (a) and (b) shall be construed to prevent a Party from adopting or maintaining measures, including measures of an environmental nature, that are:

(i) necessary to ensure compliance with laws and regulations not inconsistent with the provisions of this Agreement;

(ii) necessary to protect human, animal or plant life or health; or

(iii) related to the preservation of non-renewable natural resources, living or non-living.

(d) Paragraphs 1 (a), (b) and (c) and 2 (a) and (b) do not apply to requirements for qualification of goods or services with respect to export promotion programs and foreign aid programs.

(e) Paragraphs 1 (b), (c), (f) and (g) and 2 (a) and (b) do not apply with respect to Public Procurement.

(f) Paragraphs 2(a) and (b) do not apply to requirements imposed by an importing Party with respect to the content of goods necessary to qualify for preferential duties or quotas.

4. For greater certainty, paragraphs 1 and 2 do not apply to any requirements other than those indicated in those same paragraphs.

5. This Article does not preclude the application of any commitment, obligation or requirement between private parties, where a Party did not impose or require the commitment, obligation or requirement.

(4) For greater certainty, a condition for the receipt or continued receipt of an advantage referred to in paragraph 2 does not constitute an "obligation or commitment" for purposes of paragraph 1.

(5) 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 an investment of an investor of a Party or of a non-Party in its territory, from imposing or enforcing a requirement or obligation or commitment to train workers in its territory, provided that such training does not require the transfer of any particular technology, production process or other proprietary knowledge to a person in its territory.

(6) The Parties recognize that a patent does not necessarily confer market power.

Article 12.10. 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, board committees or equivalent management bodies of an enterprise 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 significantly impair the ability of the investor to exercise control over its investment.

Article 12.11. Denial of Benefits

Upon notification and consultation, a Party may deny the benefits of this Chapter to:

(a) an investor of the other Party that is an enterprise of that other Party and the investments of such investor, if an investor of a non-Party owns or controls the enterprise and the enterprise does not have substantial business activities in the territory of the other Party; or

(6) an investor of the other Party that is an enterprise of that other Party and the investments of such investor, if an investor of the denying Party owns or controls the enterprise and the enterprise does not have substantial business activities in the territory of the other Party.