ASEAN
Bilateral Investment Agreements
By:
Dr. Lawan Thanadsillapakul
The
comparison of the ASEAN BITs (18)
Table 4 shows that all bilateral investment agreements concluded between
ASEAN member countries and the Western capital-exporting countries conform
to a general pattern, although the terms used in the agreements were divergent.
All ASEAN countries share the same common principle that admission of
foreign investment is based on the domestic laws and regulations of the
host countries, so that all foreign investments may be subject to a government
screening process. This can be seen from the terms and conditions regarding
this issue, to all ASEAN BITs Thus, the BIT between Philippines and Germany
stated in the attached Protocol that:
"Either
Contracting Party reserves the right to requie as a pre-requiste to the
admaisions of an investment within is territory a "certificate of
admission" which is shall issue to investments it considers admissible
pursuant to Art.1"
Art,
2 (I) of the BIT between Indonesia and Britain also provided that:
"This
Agreement shal only apply to investments by nationals or eompanies of
the United Kingdom in the territory of the Republic of Indonesia which
have been granted
adminsion in accordance with the Foreign Capital Investment law No. 1
of 1976 or any law amending or replacing it"
Art.
1 (b) of BIT between Malaysia and Britain simllarly stated that:
"In
respect of investments in the territory of Malaysia, to all investments
made in projects classified by the appropriate Ministry of Malaysia in
accordance with its legislation and administrative practice as an "approved
project"
Art.
2 of the BIT between Philippines and Netherlands provided that:
'This
Agreement shall apply only to investment brought into, derived from, or
directly connected with investments brought into the territory of one
Contracting Party by nationals of the other Contracting Party, in conformity
with the former Partv's laws end regulation including due registation
with the appropriate agencies of the receiving Contracting Party, if so
required its laws"
Protocol (1) to Art. 1 of BIT between Thailand and Germany provided that:
"in
respect of investments in the terriitory of the Kingdom of Thailand the
term "investment"'
wherever it is used in this Treaty, shall refer to all investments made
in projects classified in
the certificate of admission by the appropriate authority of the Kingdom
of Thailand in
accordance with its legislation and administrative practice as an "approved
project".
The
Singapore BITs clearly stated that the scope of agreement or the protection
of foreign investors would cover only investments approved in writing.
For example the BIT between Singapore and Germany (19) provided that:
"in
respect of investment in the territory, of the Republic of Singapore,
to all investments approved in writmg by the Government of the Republic
of Singapore irrespecnive of
whether these investments were made before or after the coming into force
of the present Treaty"
This
can be seen also in BIT between Singapore and France (20),
which provided that:
The
provision of this Agreement shall only extend to investments whether made
before or after the comma into force of this Ameement which ue specbically
approved
in writing by the contracting party in whose territory the investment
have been made or will be made.
Also
the agreement between Singapore and Germany further specifies that the
admission of investment must be in accordance with the economic policy
of the host countries(21). BITs made by Indonesia with
Britain, Norway and Belgium 22 state that investment must be subject to
foreign investment laws and regulations(see
Table 4) which are distinct from the general national law provided
for the constitu-tion of domestic companies.
Moreover,
all ASEAN countries' BITs cover only investment made directly in the territory
of the contracting party (see
Table 4). Specifically, the BIT between Malaysia and Germany clearly
defined the term "companies" as follows:
"The
term "Companies referred to in paragraph (4) of Art. 1 shall not
include a branch or branches of any judical person, company or association
which has its seat or is incorporatad or constituted in the territory
or by or under the laws of a child party'"
Generally,
the objective of admission criteria for foreign investment of ASEAN countries
is to screen out the entry of harmful foreign investments and also to
seek to ensure that foreign investment which enters the ASEAN countries
will continue to benefit the host countries, even after the commencement
of the operation. The requirements to comply with internal laws and regulations
of the host countries would cover performance requirements provided in
such laws, which are usually applied in conjunction with investment incentives
packages. These usually require the export of an agreed-upon percentage
of the production, compliance with planning and environmental controls,
conditions for hiring local labour and also requirements related to repatriation
of profits of the foreign investment.
Regarding
post-entry treatment of foreign investors, even though all BITs guarantee
the free transfer or repatriation of profit derived from the investment,
they all subject this to the rules and regulations of the host countries,
which allow for controls due to the balance of payment conditions or financial
situation. For instance, Art. IV of the BIT between Thailand and Netherlands
provided that:
(1)
Each Contracting Party us prepared, within the limits of its legislation,
to facilitate the delivery of capital goods to,. or the carrying out of
public works for
. , and (2) In pursuance of transactions entered
into under paragraph (1) above, each Contracting Party shall authrorize,
within the limits of its legislation the transfer, when due, of money
owing to nationals of the other Contracting Party'
Also
the BIT between Indonesia and Norway provided in Art. VII that:
"Each
Contracting Party guarantees, subject to and to the extent permitted by
its laws and regulations, to the investors of the other Contracting Party,
in respect of their investment, without delay the transfer of:
..".
The
existence of these requirements, and the administrative mechanisms which
supervise foreign investment to ensure that it complies with the conditions
imposed, guarantee that foreign investment functions within a tightly
regulated sphere of the host ASEAN countries' laws.
Even
though all ASEAN BITs provided Most-Favoured-Nation treatment (MFN) and
some BITs even grant National Treatment, the protection is subject to
or under the limitation of the domestic laws of the host countries. For
instance, Art. 2 (3) of BIT between Indonesia and Belgium provided NT/MFN
treatment to investors from the contracting parties but this is subject
to the stipulations contained in the Protocol attached to the present
Agreement (24).. And Art. 2 of the Protocol attached
to this BIT provided a reservation for Indonesia that:
"For
the purpose of peotecting the Indonesian national economy, the Government
of the Republic of Indonesia may grant some failities to Indonesian concerns
which do
not fully apply to Belgian concerns"
Therefore,
Indonesia needs not extend some rights to investors from Belgium on the
grounds of protecting the Indonesian national economy Even. though the
Protocol further stated that MFN treatment still applies, nevertheless
national treatment granted in the BIT is affected by this reservation.
Some
agreements provided both MFN and national treatment, but the two treatments
were applied to different cases and conditions or different fields of
protection. The BIT between Thailand and Netherlands provided both National
and MFN treatment for protection of foreign investment but each applies
to different fields of protection, in Art. V, in respect of the payment
of taxes, fees or charges and to the enjoyment of fiscal deduction, MFN
treatment is required. But in Art. VI the protection of industrial property,
national treatment is expected while Art. VII provides for MFN treatment
for the protection of investment, goods, rights and interest of the investors
of the other Contracting Party.
Foreign
investment that does not comply with the conditions on which it was permitted
entry can be subjected to fines, diminution of the rights that had been
granted, and even to termination. Therefore, the admission of foreign
investment on the basis of fair and equitable treatment, and even the
treatment after the entry of such investment on the MFN basis or national
treatment, is fundamentally based on laws and regulations as well as policies
of the host ASEAN countries.
However,
the ASEAN BITs do provide protection against nationalisation and expropriation,
and also compensation in case expropriation takes place. Regarding expropriation
and compensation, ASEAN countries accept the minimum standard rule that
nationalisation or expropriation will take place only for public purposes
and with prompt, adequate and effective compensation. Nevertheless, some
agreements have divergent provisions, for instance, Thailand can apply
the rules and regulations of the Bank of Thailand and also large transfers
can be required to be made on an instalment basis(25).Some
agreements apply the rule of market value to the affected investment(26)..These
variations are closely related to the internal policies, investment laws
and investment regimes of each ASEAN country.
The
dispute settlement measures provided in the ASEAN's BITs mainly refer
to ICSID, but some BITs provide for preliminary measures for seeking amicable
settlement between the parties, or by seeking remedies from local tribunals
before bringing the case before an arbitration tribunal (see
Table 4).
This
comparison of the ASEAN BITs clearly shows that they do not over ride
or affect ASEAN countries' national laws, and especially the entry of
FDI may be subject to screening procedures and other requirements. Post-entry
treatment of FDI is also still under control of ASEAN host countries.
Next I compare the ASEAN Investment Agreement, which is entered into among
the ASEAN countries themselves, with the ASEAN BITs to see whether or
not it is different from the ASEAN BITs, and its implications.
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(18)
The discussion in this section is the original analysis of the author
based on the comparison of us ASEAN BITs in Table 4, which is compiled
by the author.
(19)
Art 1 (ii) of BIT between Singapore end Germany..
(20)
Art.9 of BIT between Singapore and France
(21)
Art 2 (i) of BIT between Singapore and Germany provided that "Each
Contracting Party shall endeavour to admit investment by nationals or
companies of the other Contracting Party in accordance with its legislation
and administrative practice within the framework of the general economic
policy and to promote such investment as far as possible".
(22)
See Art 2 (1) of BIT between Indonesia and the Great Britain, Art II of
BIT between Indonesia and Norway, and Art 2 of BIT between Indonesia and
Belgium.
(23)
Paragraph (1) of the Protocol attached to the BIT between Malaysia and
Germany, dated 22nd December 1960.
(24)
Art 2 (3) of BIT between Indonesia and Belgium provided that "the
investment of nationals or legal persons of either Contracting Party in
the territory of the other Contracting Party shall be accorded by such
other Party, a treatment no less favourable than that which it accords
in its territory to any similar investment owned by it own nationals or
legal persons or by nationals or legal persons of third States with due
regard to the sipulations contained at the Protocol attached to fhe present
Agreement and the Protocol".
(25)
Protocol (4) (b) of BIT between Thailand and Germany reads that "in
the case of transfers from Thailand under Art, 4 the Bank of Thailand
may, when considerations regarding exchange market stability and balance
of payments necessitate the introduction of measures to assure the availability
of foreign exchange specify that large amounts shall be transferred in
instalments of
"
(26)
For instance, BIT between Indonesia and Britain, Art 5 read that "
.Such
compensation shall amount to the markat value of the investment expropriated"
and BIT between Indonesia and Norway also provided in Art VI that "Such
compensation shell amount to the market value of the investment
.". |