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An Asian View on the CETA Investment Chapter

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Foreign Investment Under the Comprehensive Economic and Trade Agreement (CETA)

Part of the book series: Studies in European Economic Law and Regulation ((SEELR,volume 15))

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Abstract

The Canada-EU Free Trade Agreement (CETA) has been completed and awaits ratification against a backdrop of global economic uncertainty. The Trans-Pacific Partnership Agreement (TPP), which includes five Asian parties among its signatories, has lost the support of the United States and its fate is uncertain as well. The CETA is significant for Asian countries given that one of its parties—the EU—has signalled strongly that it wishes to negotiate a number of free trade agreements in the Asian region. The agreement offers valuable insight into the thinking of the EU in terms of investment protection guarantees, its proposed investment dispute settlement which offers an alternative to existing international arbitration options, and provisions permitting flexibility and regulatory control. However, Asia is by no means a homogeneous region, as its countries have diverse economic interests, resources and negotiating priorities. There is also a number of ongoing investment treaty “reform” activities in parts of Asia. While the EU may draw on the CETA to work with Asian partners in FTA negotiations, it will also have to examine the existing economic systems, treaties and priorities in Asia, to navigate such negotiations well.

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Notes

  1. 1.

    See, for example, https://www.cnbc.com/2017/07/13/vietnam-malaysia-stand-in-the-way-of-japans-trans-pacific-partnership-dream.html.

  2. 2.

    See e.g. report, “Trudeau praises CETA as ‘blueprint’ for trade deals”, BBC, 16 February 2017, http://www.bbc.com/news/world-europe-38991597.

  3. 3.

    See European Commission, http://ec.europa.eu/eurostat/statistics-explained/index.php/EU_trade_and_investment_statistics_with_the_Association_of_South_East_Asian_Nations_(ASEAN).

  4. 4.

    Ibid. See generally, http://ec.europa.eu/eurostat/statistics-explained/index.php/File:Foreign_direct_investment,_EU-28,_2012%E2%80%932015_YB17.png.

  5. 5.

    The full report is available at http://asean.org/storage/2016/09/ASEAN-Investment-Report-2016.pdf.

  6. 6.

    FDI falls under the Common Commercial Policy of the EU through the Treaty of Lisbon, signed on 13 December 2007 and entered into force on 1 December 2009.

  7. 7.

    See European Commission, Communication, ‘Towards a Comprehensive European Investment Policy, COM(2010)343 final, 7 July 2010. The priorities for investment dispute provisions are also set out in the mandate for negotiating the Trans-Atlantic Trade and Investment Agreement with the US; see EU, http://data.consilium.europa.eu/doc/document/ST-11103-2013-DCL-1/en/pdf.

  8. 8.

    See CJEU, Opinion 2/15, 16 May 2017. A summary is available at https://curia.europa.eu/jcms/jcms/p1_350692/fr/.

  9. 9.

    See United States Trade Representative press release, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/january/US-Withdraws-From-TPP.

  10. 10.

    See CNBC, “TPP Nations Agree to Pursue Trade Deal without US”, 21 May 2017.

  11. 11.

    Convention on the International Centre for the Settlement of Investment Disputes (ICSID).

  12. 12.

    CETA, Art. 8.4. Compare these with the market access provisions of GATS, Art. XVI.

  13. 13.

    There are also significant Reservation Lists to the ACIA where member States have carved out areas of exceptions; see ASEAN, http://investasean.asean.org/index.php/page/view/acia-reservation-list.

  14. 14.

    See OECD (2016a), “Economic Outlook for Southeast Asia, China, and India - 2016”, p. 144.

  15. 15.

    See ASEAN Economic Blueprint 2025.

  16. 16.

    The 23 WTO members are engaged in the Trade in Services Agreement (TISA) negotiations; see European Commission, http://ec.europa.eu/trade/policy/in-focus/tisa/. The members, which include a number of Asian WTO members, are: Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, the EU, Hong Kong (China), Iceland, Israel, Japan, Korea, Liechtenstein, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, Switzerland, Turkey and the United States.

  17. 17.

    Although Art. 25 of the ICSID Convention does not contain any definition of an “investment”, the provision has been interpreted by various arbitral tribunals as requiring fulfilment of certain characteristics; see for example, Salini Costruttori S.p.A. and Italstrade S.p.A. v. the Kingdom of Morocco, ICSID Case No. ARB/00/4, and numerous subsequent arbitral decisions.

  18. 18.

    See European Commission, http://trade.ec.europa.eu/doclib/press/index.cfm?id=1396&title=EU-finalises-proposal-for-investment-protection-and-Court-System-for-TTIP.

  19. 19.

    See EU-Vietnam FTA, Chapter 1, definition provision (as yet unnumbered), footnote 7.

  20. 20.

    See Part 3.2, OECD (2016b), “State-owned Enterprises in Asia: National Practices for Performance Evaluation and Management 2016”.

  21. 21.

    See http://trade.ec.europa.eu/doclib/docs/2016/february/tradoc_154221.pdf.

  22. 22.

    EU-Vietnam FTA, Chapter 1, definition provision (as yet unnumbered), footnote 7. The definition is as follows: “an ‘investor’ means a natural person or a juridical person of a Party that seeks to make, is making or has already made an investment in the territory of the other Party. For greater certainty, the Parties understand that an investor that “seeks to make” an investment refers to an investor of any other Party that has taken active steps to make an investment, such as channelling resources or capital in order to set up a business, or applying for permits or license.”

  23. 23.

    See Ackhurst et al. (2016). See generally, Gallagher (2016). See also Feldman (2016).

  24. 24.

    See http://www.reuters.com/article/us-citigroup-lawsuit-idUSKBN16Z2K6.

  25. 25.

    More specifically, on SWFs as potential claimants in investment arbitration, see Feldman (2016), pp. 24–35.

  26. 26.

    See Hubbard (2014).

  27. 27.

    Vattenfall AB, Vattenfall Europe AG, Vattenfall Europe Generation AG v. Federal Republic of Germany, ICSID Case No. ARB/09/6.

  28. 28.

    Vattenfall AB and others v. Federal Republic of Germany, ICSID Case No. ARB/12/12.

  29. 29.

    See https://www.bloomberg.com/news/articles/2016-10-14/goldman-sachs-wins-libya-investment-fund-s-1-2-billion-lawsuit and https://www.ft.com/content/71e49c24-4ceb-11e6-8172-e39ecd3b86fc. On the settlement of the Société Générale dispute, see “SocGen agrees EUR 963m settlement with Libyan Investment Authority; French bank apologises to sovereign wealth fund over long-running dispute”, 5 May 2017, Financial Times. In the Goldman Sachs dispute, the Libyan Investment Authority has sought leave to appeal from the UK Court of Appeal against a judgment handed down in October 2016, dismissing the Authority’s action; see Reuters report, 4 November 2016, http://www.reuters.com/article/libya-swf-litigation-idUSL8N1D52XW. Other actions brought by SWFs or their representatives include actions by the Rhas Al Khaimah Investment Authority against Farhad Azima, and by the Japan Government Pension Investment Fund (through Japan Trustee Services Bank, Ltd) against Toyota.

  30. 30.

    See http://www.swfinstitute.org/swf-article/adia-sues-petrobras-thanks-to-operation-car-wash-results/; https://www.pacermonitor.com/public/case/20843542/Abu_Dhabi_Investment_Authority_v_Petroleo_Brasileiro_SA__Petrobras_et_al#.

  31. 31.

    See The Straits Times, 24 April 2017, http://www.straitstimes.com/asia/se-asia/abu-dhabi-malaysia-conditionally-agree-1mdb-debt-deal. For a general discussion of SOE claims, see Feldman (2016) pp. 24–35. See also http://www.cisarbitration.com/2017/05/16/state-immunity-and-state-owned-enterprises-a-recent-dispute-involving-moldova/; SOEs have also faced actions as defendants. An example can be seen in TNB Fuel Services SDN BHD v. China National Coal Group Corporation and Secretary for Justice, [2017] HKCFI 1016, the judgment is available at http://www.hklii.hk/eng/hk/cases/hkcfi/2017/1016.html.

  32. 32.

    See the definition of “investor” in Art. 8.1, CETA. Art. 18.3 also addresses SOEs, monopolies and enterprises granted special rights or privileges.

  33. 33.

    See https://www.treasury.gov/resource-center/international/Pages/Committee-on-Foreign-Investment-in-US.aspx.

  34. 34.

    See https://www.ic.gc.ca/eic/site/ica-lic.nsf/eng/home.

  35. 35.

    For a list of countries which have such screening systems, see UNCTAD (2016), ‘World Investment Report 2016 – Investor Nationality: Policy Challenges’, pp. 94–100.

  36. 36.

    Ibid., p. 98.

  37. 37.

    See the statement of the US Treasury Department, 2 December 2016, https://www.treasury.gov/press-center/press-releases/Pages/jl0679.aspx and “Obama Bars China’s Fujian from Buying Aixtron’s US Business”, 2 December 2016, Reuters, https://www.wsj.com/articles/obama-blocks-chinese-bid-for-technology-firm-aixtron-1480716287.

  38. 38.

    Ibid.

  39. 39.

    See however, generally, http://www.ecfr.eu/article/commentary_germanys_turnabout_on_chinese_takeovers_7251.

  40. 40.

    See https://www.bloomberg.com/news/articles/2017-06-22/europe-first-trade-rift-tops-eu-agenda-before-leaders-summit and http://www.businesstimes.com.sg/government-economy/eu-to-resist-macrons-call-to-curb-chinese-takeovers-diplomats.

  41. 41.

    TPP Agreement, Annex 9-L.

  42. 42.

    See CETA, Arts. 8.3.1, 13.20 and 13.21.

  43. 43.

    See CETA, Art. 8.22.(1)(f) and (g), and 8.22(2).

  44. 44.

    See also, CETA, Art. 13.2(4) (Financial Services Chapter).

  45. 45.

    CETA, Annex 8-D, ‘Joint Declaration Concerning Article 8.12(6)’: “Mindful that the Tribunal for the resolution of investment disputes between investors and states is meant to enforce the obligations referred to in Article 8.18.1, and is not an appeal mechanism for the decisions of domestic courts, the Parties recall that the domestic courts of each Party are responsible for the determination of the existence and validity of intellectual property rights. The Parties further recognise that each Party shall be free to determine the appropriate method of implementing the provisions of this Agreement regarding intellectual property within their own legal system and practice. The Parties agree to review the relation between intellectual property rights and investment disciplines within three years after entry into force of this Agreement or at the request of a Party. Further to this review and to the extent required, the Parties may issue binding interpretations to ensure the proper interpretation of the scope of investment protection under this Agreement in accordance with the provisions of Article 8.31.3.”

  46. 46.

    Note the cross-reference to Art. 8.5 in Arts. 13.9 and 13.17 of CETA.

  47. 47.

    EU-Vietnam FTA Investment Chapter, Art. 6, also prohibits certain performance requirements with respect to services specified in the Parties’ Schedules of Commitment. It also does not contain any exception on transfer of technology.

  48. 48.

    See Art. G-06(2). See also, more generally, G-06(6) on other general exceptions.

  49. 49.

    See European Commission, http://ec.europa.eu/trade/policy/accessing-markets/investment/.

  50. 50.

    Italics added.

  51. 51.

    Italics added.

  52. 52.

    Note that provisions on financial services cross-refer to the NT and MFN provisions in Chapter 8. CTEA, Art. 13.4(2) refers to the treatment in Art. 8.7, while Art. 13.3 refers to the treatment in Art 8.6.; Arts. 8.10, 8.11, 8.12, 8.13, 8.14, 8.16, and 8.17 are also incorporated by Art. 13.2 into Chapter 13.

  53. 53.

    Examples include the ACIA, the ASEAN-China Investment Agreement and the China, Japan and Korea Investment Agreement.

  54. 54.

    The arbitral tribunal eventually found in favour of Canada; see http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/disp-diff/eli.aspx?lang=eng.

  55. 55.

    See for example, the discussion in http://kluwerarbitrationblog.com/2017/04/21/taming-the-mercantile-adventurers-third-party-funding-and-investment-arbitration-a-report-from-the-14th-annual-ita-asil-conference/.

  56. 56.

    See Civil Law (Amendment) Act and Civil Law (Third Party Funding) Regulations. Arbitral institutions such as the Singapore Institute of Arbitrators have also issued guidelines on such funding; see https://siarb.org.sg/index.php/120-newsletter/articles/249-third-party-funding-in-singapore. See also Ministry of Law, https://www.mlaw.gov.sg/content/minlaw/en/news/press-releases/legislative-changes-to-enhance-singapore-as%2D%2Dan-international-hu.html and https://www.mlaw.gov.sg/content/minlaw/en/news/parliamentary-speeches-and-responses/second-reading-speech-by-senior-minister-of-state-for-law%2D%2Dindra3.html.

  57. 57.

    See http://www.straitstimes.com/singapore/courts-crime/first-third-party-funding-for-spore-arbitration-case.

  58. 58.

    Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill, amending the Arbitration Ordinance (Chapter 609), adding a new Section 7A and a new Part 10A to the Ordinance.

  59. 59.

    EU-Vietnam FTA, Art. 11.

  60. 60.

    See respectively, Art. 9.14 and Annex 9-E, and Art. 5 and Annex 1.

  61. 61.

    See CETA, Art. 8.20, Annex 29-C and Annex 15-B.

  62. 62.

    Emphasis added.

  63. 63.

    Emphasis added.

  64. 64.

    CETA, Art. 28.3.

  65. 65.

    See ICSID Arbitration Rules, Rule 37.

  66. 66.

    Emphasis added.

  67. 67.

    CETA, Arts. 8.31(3) and 8.44.

  68. 68.

    See speech by the EU Trade Commissioner, “The EU at 60: An Open Global Trading Partner”, speech delivered at the Singapore Management University on 8 March 2017; see the text of the speech, https://eeas.europa.eu/sites/eeas/files/20170308_cm_speech_at_singapore_management_university.pdf.

  69. 69.

    Ibid.

  70. 70.

    See CETA, Art. 8.23(2).

  71. 71.

    See CETA, Art. 8.27(6). The EU-Vietnam FTA also includes signatory country representation; see Arts. 12.2 and 13.8 thereof.

  72. 72.

    See http://europa.eu/rapid/press-release_MEMO-16-4350_en.htm and http://trade.ec.europa.eu/doclib/press/index.cfm?id=1608.

  73. 73.

    See Interpretative Instrument, para. 6(i).

  74. 74.

    EU-Vietnam FTA, Art. 12.15. See also Art. 13.15 relating to the Appellate Tribunal’s fees.

  75. 75.

    CETA, Art. 8.39(6).

  76. 76.

    See ASEAN, at http://www.aseansme.org/aboutus.

  77. 77.

    See López González (2017), Mapping the participation of ASEAN small- and medium- sized enterprises in global value chains, OECD Trade Policy Papers, No. 203, OECD Publishing, Paris. https://doi.org/10.1787/2dc1751e-en.

  78. 78.

    See CETA, Art. 8.19(2).

  79. 79.

    The costs would include airfare and hotel expenses in Brussels for the claimant.

  80. 80.

    See e.g. Japan-Myanmar BIT, Art. 18.11.

  81. 81.

    See CETA, Art. 8.39(4).

  82. 82.

    See also Chapter 8 of the present book.

  83. 83.

    CETA, Art. 8.27(4). Compare this with EU-Vietnam FTA, Art. 12.

  84. 84.

    See CETA, Art. 8.27(5).

  85. 85.

    See EU-Vietnam FTA, Art. 20.

  86. 86.

    See http://pib.nic.in/newsite/PrintRelease.aspx?relid=147849.

  87. 87.

    See indiainbusiness.nic.in/newdesign/upload/Consolidated_Interpretive-Statement.pdf.

  88. 88.

    See http://indiainbusiness.nic.in/newdesign/upload/Consolidated_Interpretive-Statement.pdf and https://www.iisd.org/itn/2016/12/12/indias-joint-interpretive-statement-for-bits-an-attempt-to-slay-the-ghosts-of-the-past-sarthak-malhotra/.

  89. 89.

    Ibid.

  90. 90.

    See http://trade.ec.europa.eu/doclib/press/index.cfm?id=1435.

  91. 91.

    See http://trade.ec.europa.eu/doclib/press/index.cfm?id=1837.

  92. 92.

    See www.sicc.gov.sg.

  93. 93.

    See Chinese Ministry of Foreign Affairs website, http://www.fmprc.gov.cn/mfa_eng/topics_665678/xjpfwzysiesgjtfhshzzfh_665686/t1076334.shtml, see also, http://www.scmp.com/news/china/diplomacy-defence/article/2081067/chinas-silk-road-fund-seeking-investment-projects.

  94. 94.

    See http://www.hzccpit.com/art/2017/7/17/art_8204_669151.htmlhttps://supremepeoplescourtmonitor.com/tag/one-belt-one-road/.

  95. 95.

    See http://english.court.gov.cn/2016-10/31/content_27262299.htm.

  96. 96.

    See e.g. Grimmer and Charemi (2017).

  97. 97.

    See http://africanbusinessmagazine.com/region/continental/china-africa-arbitration-bodies-sidestep-international-courts/.

  98. 98.

    An Australian entity, Kingsgate Consolidated Limited, initiated consultation proceedings against Thailand under the Thailand-Australia FTA in April 2017, in relation to suspension/closure of its gold mining operations; see https://www.italaw.com/cases/5572 and https://www.kingsgate.com.au/kingsgate-commences-claim-against-thailand/.

  99. 99.

    See EU, http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155693.doc.pdf.

  100. 100.

    See https://www.yidaiyilu.gov.cn/xwzx/gnxw/19755.htm and http://www.hzccpit.com/art/2017/7/17/art_8204_669151.html.

  101. 101.

    See Australia Department of Foreign Affairs and Trade, at http://dfat.gov.au/trade/topics/pages/isds.aspx.

  102. 102.

    See Financial Times, 12 May 2017, https://www.ft.com/content/38e98f94-359b-11e7-99bd-13beb0903fa3, see also Euractiv, 19 July 2017, https://www.euractiv.com/section/ceta/news/looming-ceta-application-undermines-macrons-campaign-promise/.

  103. 103.

    See EU Fact Sheet, 10 July 2017, http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155744.pdf.

  104. 104.

    See generally, http://www.volterrafietta.com/the-king-is-dead-long-live-the-king-the-eu-and-the-future-of-investor-state-dispute-settlement/.

  105. 105.

    See http://trade.ec.europa.eu/doclib/press/index.cfm?id=961.

  106. 106.

    See https://diplomatie.belgium.be/sites/default/files/downloads/ceta_summary.pdf.

  107. 107.

    See EU-Vietnam FTA, Art. 15; EU-Singapore IPA, Art. 3.12.

  108. 108.

    In the EU-Indonesia FTA negotiations, for example, as at March 2018, internal consultations were still ongoing in Indonesia with regard to the ICS system; see http://trade.ec.europa.eu/doclib/docs/2018/march/tradoc_156642.pdf.

  109. 109.

    See e.g. report at: https://www.thehindubusinessline.com/economy/india-opposes-eu-canadas-proposal-on-investment-pact/article9497901.ece.

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  1. Singapore Management University, School of Law, Singapore, Singapore

    Locknie Hsu

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    Makane Moïse Mbengue  & Stefanie Schacherer  & 

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    Makane Moïse Mbengue

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Hsu, L. (2019). An Asian View on the CETA Investment Chapter. In: Mbengue, M.M., Schacherer, S. (eds) Foreign Investment Under the Comprehensive Economic and Trade Agreement (CETA). Studies in European Economic Law and Regulation, vol 15. Springer, Cham. https://doi.org/10.1007/978-3-319-98361-5_11

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