Abstract
This article focuses on the conflict between the economic interest and the security interest which has appeared in the recent Free Trade Agreements (FTA). In the investment chapter, the FTA tends to admit the liberalisation of foreign direct investment (FDI) and this can endanger the security interest of host-States. Thus, FTA contains several clauses which limit the liberalisation of FDI, for the purpose of balancing the two interests. This article is aimed at showing the legal techniques of this balancing in one of the most recent FTAs, i.e. Trans-Pacific Partnership Agreement (TPP).
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Notes
- 1.
The OECD Code of Liberalisation of Capital Movements (OECD/C(61)96). Available at [http://www.oecd.org/daf/inv/investment-policy/CapitalMovements_WebEnglish.pdf].
- 2.
This decision shall be called the Code. See Article 21 of the Code. It should be noted that the decisions of the OECD Council are legally binding. This differs from recommendations, declarations, and guidelines.
- 3.
The official text of the TPP (adopted on 26 January 2016) is available at [http://tpp.mfat.govt.nz/text].
- 4.
Article 9.5 stipulates the MFN treatment, and it also uses the terms ‘establishment’ and ‘acquisition’ for this purpose. This means that the MFN treatment must be applied right from the pre-establishment phase of foreign investment.
- 5.
Generally, there are two phases of investment: pre-establishment phase and post-establishment phase. In other words, if the NT obligation applies to the pre-establishment phase (i.e. pre-investment national treatment), this is regarded as liberalisation of FDI.
- 6.
Two examples were mentioned as consequences of liberalisation of investment. First, in Viet Nam, the small retailer sector was to be opened to foreign investors, and Viet Nam will be obliged to abolish its domestic regulations such as the ENT (Economic Needs Test) in this context. For more information on this point, see ‘Annex I - Viet Nam’ which touches upon the ‘Distribution services’ sector and clarifies that ‘five years after the date of entry into force of this Agreement for Viet Nam, the ENT shall be removed and this entry shall no longer have effect’. Second, in Malaysia, the small retailer sector will be opened to foreign investors.
- 7.
See Articles 19 to 23 of the Vienna Convention on the Law of Treaties.
- 8.
The exempted sector is ‘Public Law Enforcement and Correctional Services and Social Services’, and the description is as follows: ‘Japan reserves the right to adopt or maintain any measure relating to investments or the supply of services in public law enforcement and correctional services, and in social services established or maintained for a public purpose: income security or insurance, social security or insurance, social welfare, public training, health, child care, and public housing’.
- 9.
Act No. 228 of 1 December 1949.
- 10.
Article 27(5) provides that, ‘the Minister of Finance […] may recommend a person who has given notification of the inward direct investment to change the content pertaining to the inward direct investment or discontinue the inward direct investment pursuant to the provisions of Cabinet Order after hearing opinions of the Council on Customs, Tariff, Foreign Exchange and other Transactions’. (emphasis added).
- 11.
Article 27(10) provides that, ‘Where a person […] has not given a notice pursuant to the provision of paragraph 7 or has given a notice of refusal of the recommendation, the Minister of Finance and the minister […] may order the person to change the content pertaining to the inward direct investment or to discontinue the inward direct investment’. (emphasis added).
- 12.
The Opinion of 15 April 2008 was made public (in Japanese) and is available at [https://www.mof.go.jp/about_mof/councils/customs_foreign_exchange/sub-foreign_exchange/report/gaishibukaiiken.pdf].
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Tamada, D. (2017). Conflict of Interests: Liberalisation of Foreign Direct Investment Versus Security Interest . In: Tamada, D., Achilleas, P. (eds) Theory and Practice of Export Control. SpringerBriefs in Economics(). Springer, Singapore. https://doi.org/10.1007/978-981-10-5960-5_9
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DOI: https://doi.org/10.1007/978-981-10-5960-5_9
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