Emerging Global Trade Governance

Mega Free Trade Agreements and Implications for ASEAN

Lurong Chen, Shujiro Urata, Junji Nakagawa, Masahito Ambashi, Lurong Chen, Shujiro Urata, Junji Nakagawa, Masahito Ambashi

• Publisher: Routledge
• Year: 2018
• ISBN:
  9781351051286
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

Mega free trade agreements (FTAs) are being formed to fill the gap created by new developments in global governance and are reshaping the world economic order. The Trans-Pacific Partnership (TPP) agreement is one of such 21st century FTAs.

This book highlights three trade-related issues covered by the TPP that greatly concern emerging countries – investment, intellectual property rights (IPR), and state-owned enterprises (SOEs). It contains rigorous economic, legal, and political analyses on the final text of the agreement, combined with country-specific policy discussions focusing on Indonesia, the Philippines, Thailand, and Viet Nam, giving readers insights on the establishment of global rules and regulations for 21st century trade. The book also outlines the requirements for emerging Asian countries to better formulate trade policies in the new era of international trade and promote regional integration in ASEAN and East Asia.

Part I

Rules and regulations on investment

1 Investment in the Trans-Pacific Partnership

Possible impacts on ASEAN member states

Junji Nakagawa^*

1. Introduction

This chapter analyses Chapter 9 of the Trans-Pacific Partnership (TPP) document titled ‘Investment’.¹ Its main purpose is to clarify the obligations of the TPP parties on the liberalisation and protection of foreign investment so that member states of the Association of Southeast Asian Nations (ASEAN), which are parties to the TPP, may prepare domestic legal reforms to meet these obligations when the TPP enters into force. For ASEAN member states that are not parties to the TPP, this chapter will serve as a useful reference in considering what kind of domestic legal reforms will be needed when they join the TPP.

The United States (US), which initiated the negotiations on the TPP, intended to make the TPP ‘a new kind of trade agreement for the 21st century’,² with a high level of trade and investment liberalisation and a wide range of rules for streamlining trade and investment amongst the parties. The TPP investment chapter builds on the 2012 US Model Bilateral Investment Treaty (BIT),³ and carefully calibrates balance between providing strong investor protections and preserving the government’s ability to regulate in the public interest. It also promotes the liberalisation of foreign investment through the negative list approach, whereby each party liberalises foreign investment, as a rule, with the exceptions enumerated in its country-specific list of non-conforming measures. Accordingly, three stages of analysis are needed.

The first is the analysis of the general obligations as provided in Chapter 9. The second is the analysis of country-specific obligations with respect to liberalisation of investment, which are provided in country-specific lists of non-conforming measures. The third is a comparison of country-specific obligations and the existing restrictions on foreign investment of each member state. This chapter focuses on the first stage of analysis, leaving the second and third stages of analysis to separate country-specific surveys.

This chapter (i) conducts a comprehensive analysis of the general obligations as provided in Chapter 9; (ii) briefly explains the structure of Chapter 9 and compares it with that of the ASEAN Comprehensive Investment Agreement (ACIA),⁴ as the latter can serve as a common framework of reference for ASEAN member states, regardless of whether they are parties to the TPP; (iii) analyses the substantive obligations of the TPP parties on the liberalisation and protection of investment, as provided under Section A of Chapter 9, and compares the provisions of Chapter 9 of the TPP with those of ACIA so that the potential impact of Chapter 9 on ASEAN member countries may be clarified; (iv) analyses the procedural obligations of TPP parties on the investor–state dispute settlement (ISDS), using ACIA as a reference to clarify the real impact of TPP Chapter 9 on ASEAN member countries with respect to the ISDS; and (v) explains the basic structure of the country-specific lists of non-conforming measures, and presents an analytical framework for the country-specific survey of investment liberalisation under the TPP.

2. Structure of the TPP investment chapter

2.1. Article headings of the TPP investment chapter

Chapter 9 of the TPP is composed of two sections consisting of 30 articles. Section A covers definitions of terms, scope, and substantive obligations regarding liberalisation and protection of investment. Section B provides for the procedure of the ISDS. Table 1.1 shows the article headings of Chapter 9, including annexes.

Table 1.1 Article headings of chapter 9, including annexes

Section A
Article 9.1	Definitions
Article 9.2	Scope
Article 9.3	Relation to Other Chapters
Article 9.4	National Treatment
Article 9.5	Most-Favoured-Nation Treatment
Article 9.6	Minimum Standard of Treatment
Article 9.7	Treatment in Case of Armed Conflict or Civil Strife
Article 9.8	Expropriation and Compensation
Article 9.9	Transfers
Article 9.10	Performance Requirements
Article 9.11	Senior Management and Boards of Directors
Article 9.12	Non-conforming Measures
Article 9.13	Subrogation
Article 9.14	Special Formalities and Information Requirements
Article 9.15	Denial of Benefits
Article 9.16	Investment and Environmental, Health, and Other Regulatory Objectives
Article 9.17	Corporate Social Responsibility
Section B	Investor–state dispute settlement
Article 9.18	Consultation and Negotiation
Article 9.19	Submission of a Claim to Arbitration
Article 9.20	Consent of Each Party to Arbitration
Section B	Investor–state dispute settlement
Article 9.21	Conditions and Limitations on Consent of Each Party
Article 9.22	Selection of Arbitrators
Article 9.23	Conduct of the Arbitration
Article 9.24	Transparency of Arbitral Proceedings
Article 9.25	Governing Law
Article 9.26	Interpretation of Annexes
Article 9.27	Expert Reports
Article 9.28	Consolidation
Article 9.29	Awards
Article 9.30	Service of Documents
Annexes to Chapter 9
Annex 9-A	Customary International Law
Annex 9-B	Expropriation
Annex 9-C	Expropriation Relating to Land
Annex 9-D	Service of Documents on a Party under Section B (Investor–State Dispute Settlement)
Annex 9-E	Transfers
Annex 9-F	DL600
Annex 9-G	Public Debt
Annex 9-H	No title (exceptions to the dispute settlement provisions under Section B, Investor-State Dispute Settlement, or Chapter 28, Dispute Settlement)
Annex 9-I	Non-conforming Measures Ratchet Mechanism
Annex 9-J	Submission of a Claim to Arbitration
Annex 9-K	Submission of Certain Claims for Three Years after Entry into Force
Annex 9-L	Investment Agreements

To elucidate on the legal impact of Chapter 9 of the TPP on ASEAN member states, this chapter compares Chapter 9 with the provisions of ACIA because the latter can serve as a common framework of reference for ASEAN member states. Tables 1.1 and 1.2 compare the article headings of Chapter 9 of the TPP and ACIA. Article headings of the US 2012 Model BIT are also listed to show their similarity with those of the TPP. Table 1.1 compares the general provisions and substantive obligations while Table 1.2 compares the procedures for an ISDS.

We may draw two observations from these tables. First, there are many similarities between the article headings of Chapter 9 of the TPP and ACIA. These similarities exist both in the general provisions and in the substantive obligations, and in the ISDS procedures. Second, an elaborate comparative analysis of these two documents is needed to clarify the real, legal impact of implementing Chapter 9 of the TPP amongst ASEAN member states. There may be differences in their scope and content – even if they use similar terms or have the same subject matter, such as ‘national treatment’ or ‘submission of a claim to arbitration’.

Table 1.2 Comparison of the contents of chapter 9 of the TPP, ACIA, and the US 2012 Model BIT

Part 1: General provisions and substantive obligations
Topic	TPP	ACIA	US 2012 Model BIT
Objectives		Article 1
Guiding principles		A...

Table of contents

• Cover
• Half Title
• Series
• Title
• Copyright
• Contents
• List of figures
• List of tables
• List of boxes
• Notes on contributors
• Acknowledgements
• Introduction: mega FTAs in the 21st century global trade governance
• Part I Rules and regulations on investment
• Part II Rules and regulations on intellectual property rights
• Part III Rules and regulations on state-owned enterprises
• Index