The Multilateral Agreement on Investment
The MAI Negotiating Text
(as of 14 February 1998)

This document consolidates the text of the agreement considered in the course of the MAI negotiations so far. The text reproduced here results mainly from the work of expert groups and has not yet been adopted by the MAI Negotiating Group. It is presented with footnotes and proposals that are still under consideration. The final text will be accompanied by country specific exceptions which will form an integral part of the agreement. Commentary to this text will be issued at a later date
DIRECTORATE FOR FINANCIAL, FISCAL AND ENTERPRISE AFFAIRS

GENERAL PROVISIONS
PREAMBLE
The Contracting Parties to this Agreement, 1, 2
Desiring to strengthen their ties of friendship and to promote greater economic co-operation between them; Considering that international investment has assumed great importance in the world economy and has considerably contributed to the development of their countries; Recognising that agreement upon the treatment to be accorded to investors and their investments will contribute to the efficient utilisation of economic resources, the creation of employment opportunities and the improvement of living standards; Emphasising that fair, transparent and predictable investment regimes complement and benefit the world trading system; 3
[Wishing that this Agreement enhances international co-operation with respect to investment and the development of world-wide rules on foreign direct investment in the framework of the world trading system as embodied in the World Trade Organization;] 4
Wishing to establish a broad multilateral framework for international investment with high standards for the liberalisation of investment regimes and investment protection and with effective dispute settlement procedures; [Recognising that investment, as an engine of economic growth, can play a key role in ensuring that economic growth is sustainable, when accompanied by appropriate environmental policies to ensure it takes place in an environmentally sound manner] [Recognising that appropriate environmental
 1. One delegation proposed that the Preamble include the following language on taxation: "aware of the importance of taxation for investments and investors, emphasising that double taxation agreements cover most OECD countries in a satisfactory manner, and that tax policy considerations shall be taken into account in the process of accession of new Contracting Parties, in particular the existence of a network of bilateral tax treaties;". This proposal was not discussed. It may need to be revisited in the light of further consideration of taxation matters by the Negotiating Group
2. One delegation, with the support of another delegation, proposed that the Preamble include the following language on natural resources: "Reaffirming the sovereignty and sovereign rights of States over natural resources within the limits of national jurisdiction"
3. Some delegations proposed an explicit reference to the World Trade Organisation. One delegation proposed the addition immediately after the words "world trading system" of: "encompassing multilateral and bilateral investment instruments as well as agreements of the World Trade Organisation". This proposal would need some refinement to ensure that it does not limit the scope of the phrase "world trading system" by excluding, for example, regional agreements
4. One delegation proposed this language. Some delegations oppose the inclusion of such language because they believe that it would prejudge, and be prejudicial to, future work on investment in the World Trade Organisation 8 policies can play a key role in ensuring that economic development, to which investment contributes, is sustainable] 5 , and resolving to [desiring to] 6 implement this agreement [in accordance with international environmental law and] 7 in a manner consistent with sustainable development, as reflected in the Rio Declaration on Environment and Development and Agenda 21, [including the protection and preservation of the environment and principles of the polluter pays and the precautionary approach;] 8, 9, 10, 11, 12
5. There is about even support for each "recognising" formulation
6. Four delegations object to "resolving to" and would prefer "desiring to"
7. This phrase raises the questions whether the MAI intends to set a presumption that multilateral environmental agreements have precedence and over it, and, if so, whether a preambular reference establishes that presumption. One delegation is strongly opposed to the inclusion of this phrase because it is impossible to define precisely
8. While a majority favour explicit mention of these two principles, a number of delegations prefer a more general reference to Rio Declaration and Agenda 21 principles without specifics. One delegation would explicitly mention two additional principles: "public participation and the right of communities to have access to information, and the avoidance of relocation and transfer of activities causing severe environmental degradation or found to be harmful to human health"
9. It was the strong feeling of many delegations that preambular reference to the environment be limited to one paragraph and that it be as short as possible. Similarly, it was the feeling of many delegations that preambular reference to labour be limited to one paragraph and that it be as short as possible. One delegation is willing to consider preambular language on the environment as part of the entire package on labour and environment. One delegation opposes any reference to the environment unless its concerns are met
10. One delegation proposed additional language: "and recognising that such environmental policies shall not constitute a means of disguised restriction on international trade and investment;". Some delegations supported this proposal in concept but wondered if it belonged in the Preamble or in a more general anti-abuse clause in the MAI
11. One delegation, supported by another delegation, would insert four additional tirets from its alternative for the Preamble (DAFFE/MAI/DG3(97)18, Annex, pp. 6-7): Convinced of the need for optimal use of the world’s resources in accordance with the objective of sustainable development; Recognising that investment can result in changes in the scale and structure of economic activity within countries, with potential effects on health and the environment; Recognising the interdependent nature of their environments; Encouraging the protection, conservation, preservation and enhancement of the environment;
12. One delegation believes that the proposal for two paragraphs of preambular language on the environment reflected broadly shared ideas of substance and was prepared to continue work on the basis of that text Bracketed text in that proposal related primarily to nuance. The paragraph now contained in the text has lost or weakened at least two concepts that had been broadly shared by the group. This delegation would like to know why a number of delegations appear to find it a preferred basis on which to continue work The two key concepts that have been lost and the substance of the delegation’s concern are set out below:
1. The commitment (or desire) of Parties to implement the agreement in a manner consistent with environmental protection and conservation has been omitted. In the current text this idea is expressed only as a subsidiary notion to the Rio declaration when in fact environmental protection and conservation should be a generally affirmed principle that is not limited to the provisions of Rio
2. A clear statement of reaffirmation of commitment to the Rio Declaration, writ large, is not clearly made. In the current text, parties resolve to implement the agreement in a manner consistent only with 9 Renewing their commitment to the Copenhagen Declaration of the World Summit on Social Development 13 and to observance of internationally recognised core labour standards, i.e. freedom of association, the right to organise and bargain collectively, prohibition of forced labour, the elimination of exploitative forms of child labour, and non-discrimination in employment, and noting that the International Labour Organisation is the competent body to set and deal with core labour standards world-wide 14, 15, 16 Affirming their decision to create a free-standing Agreement open to accession by all countries; 17 specific ideals (sustainable development and/or international environmental law) as reflected in the Rio Declaration; they do not reaffirm a commitment to the Rio Declaration as a whole. Furthermore, the new text adds the idea of implementing the agreement in accordance with the specified concepts of Rio; this is an idea that has not been explicitly discussed by the group Therefore, in addition to the position set out in footnote 8 above, the proposal by one delegation is: Resolving to implement this agreement in a manner consistent with environmental protection and conservation;
Reaffirming their commitment to the RIO Declaration on Environment and Development and Agenda 21, including to sustainable development as reflected therein, and recognising that investment, as an engine of economic growth, can play a key role in ensuring that growth is sustainable, when accompanied by appropriate environmental policies to ensure it takes place in an environmental sound manner; Noting that the Rio Declaration principles of relevance to investment include, inter alia, the polluter pays, the precautionary approach, public participation and the right of communities to have access to information, and the avoidance of relocation and transfer of activities causing severe environmental degradation or found to be harmful to human health;
13. A number of delegations maintain a scrutiny reserve to consider whether there should also be explicit mention of the Singapore WTO Ministerial
14 Three delegations continue to oppose any reference to labour in the Preamble
15. One delegation could not support a reference to labour in the preamble if it included explicit statement of basic principles of core labour standards
16. One delegation would insert three additional tirets from its alternative for the Preamble: Recognising that development of economic and business ties can promote respect for core labour standards; Resolved to foster investment with due regard for the importance of labour laws and core labour standards; Noting that, as members of the International Labour Organisation, they have endorsed the Tripartite Declaration of Principles concerning Multilateral Enterprises and Social Policy, and agreeing to renew their support for that voluntary instrument
17. Some delegations proposed that the statement that the Agreement is open to accession by all countries be strengthened 10 [Noting] [Affirming their support for] the OECD Guidelines for Multinational Enterprises and emphasising that implementation of the Guidelines, which are non-binding and which are observed on a voluntary basis, will promote mutual confidence between enterprises and host countries and contribute to a favourable climate for investment; 18 HAVE AGREED AS FOLLOWS:
18. One delegation proposed that the Preamble state that the Guidelines include, in particular, recommendations on employment and industrial relations and environmental protection; other delegations were of the view that the text introducing the Guidelines as an annex should specify the eight subject areas, including those just mentioned, on which the Guidelines make recommendations (see Section III below). In addition, one delegation would like to add words to the effect that the Contracting Parties consider the Guidelines to be "a valuable part of the framework for the consideration of issues of investment and multilateral enterprises."
11 II. SCOPE AND APPLICATION
DEFINITIONS
1. Investor means:
(i) a natural person having the nationality of, or who is permanently residing in, a Contracting Party in
accordance with its applicable law; or
(ii) a legal person or any other entity constituted or organised under the applicable law of a Contracting
Party, whether or not for profit, and whether private or government owned or controlled, and includes
a corporation, trust, partnership, sole proprietorship, joint venture, association or organisation
2. Investment means:
Every kind of asset owned or controlled, directly or indirectly, by an investor, including:
1, 2
(i) an enterprise (being a legal person or any other entity constituted or organised under the applicable
law of the Contracting Party, whether or not for profit, and whether private or government owned or
controlled, and includes a corporation, trust, partnership, sole proprietorship, branch, joint venture,
association or organisation);
(ii) shares, stocks or other forms of equity participation in an enterprise, and rights derived therefrom;
(iii) bonds, debentures, loans and other forms of debt, and rights derived therefrom;
(iv) rights under contracts, including turnkey, construction, management, production or revenue-sharing
contracts;
(v) claims to money and claims to performance;
(vi) intellectual property rights;
(vii) rights conferred pursuant to law or contract such as concessions, licenses, authorisations, and permits;
(viii) any other tangible and intangible, movable and immovable property, and any related property rights,
such as leases, mortgages, liens and pledges
1. The Negotiating Group agreed that this broad definition of investment calls for further work on appropriate
safeguard provisions. In addition, the following issues require further work to determine their appropriate
treatment in the MAI: indirect investment, intellectual property, concessions, public debt and real estate
2. For greater certainty, an interpretative note will be required to indicate that, in order to qualify as an
investment under the MAI, an asset must have the characteristics of an investment, such as the commitment
of capital or other resources, the expectation of gain or profit, or the assumption of risk
12 GEOGRAPHICAL SCOPE OF APPLICATION
3
This Agreement shall apply in:
(a) the land territory, internal waters, and the territorial sea of a Contracting Party, and, in the case of a
Contracting Party which is an archipelagic state, its archipelagic waters; and
(b) the maritime areas beyond the territorial sea with respect to which a Contracting Party exercises
sovereign rights or jurisdiction in accordance with international law, as reflected particularly in the 1982
United Nations Convention on the Law of the Sea
4
APPLICATION TO OVERSEAS TERRITORIES
1. A State may at any time declare in writing to the Depositary that this Agreement shall apply to all or to one
or more of the territories for the international relations of which it is responsible
5
Such declaration, made prior to or
upon ratification, accession or acceptance, shall take effect upon entry into force of this Agreement for that State. A
subsequent declaration shall take effect with respect to the territory or territories concerned on the ninetieth day
following receipt of the declaration by the Depositary
2. A Party may at any time declare in writing to the Depositary, that this Agreement shall cease to apply to all
or to one or more of the territories for the international relations of which it is responsible. Such declaration shall take
effect upon the expiry of one year from the date of receipt of the declaration by the Depositary, with the same effect
regarding existing investment as withdrawal of a Party
3. A number of EG1 delegations were of the view that rather than an article on geographical scope, an article
should define the "territory" or "area" of a Contracting Party to which the MAI would be applicable and in
that case, it could be included in a general definitions part of the agreement. Some delegations had serious
misgivings about the feasibility of embarking on this approach
4. EG1 agreed that an alternative text of subparagraph (b) illustrating the "functional" approach supported by
some delegations should be included in order to preserve the approach for future consideration if the
Negotiating Group were to decide to pursue that option further. An alternative subparagraph (b), could read:
".................investments beyond the territorial sea under the jurisdiction of a Contracting Party in
accordance with international law as reflected in the 1982 United Nations Convention on the Law of the
Sea."
5. In case such a declaration of application were to be accompanied by reservations or exceptions beyond
those of the declaring state, these would be subject to acceptance of the other Parties
13 III. TREATMENT OF INVESTORS AND INVESTMENTS
NATIONAL TREATMENT AND MOST FAVOURED NATION TREATMENT
1. Each Contracting Party shall accord to investors of another Contracting Party and to their investments, treatment no less favourable than the treatment it accords [in like circumstances] to its own investors and their investments with respect to the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment and sale or other disposition of investments
2. Each Contracting Party shall accord to investors of another Contracting Party and to their investments, treatment no less favourable than the treatment it accords [in like circumstances] to investors of any other Contracting Party or of a non-Contracting Party, and to the investments of investors of any other Contracting Party or of a non-Contracting Party, with respect to the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment, and sale or other disposition of investments
3. Each Contracting Party shall accord to investors of another Contracting Party and to their investments the better of the treatment required by Articles 1.1 and 1.2, whichever is the more favourable to those investors or investments
TRANSPARENCY
1. Each Contracting Party shall promptly publish, or otherwise make publicly available, its laws, regulations, procedures and administrative rulings and judicial decisions of general application as well as international agreements which may affect the operation of the Agreement. Where a Contracting Party establishes policies which are not expressed in laws or regulations or by other means listed in this paragraph but which may affect the operation of the Agreement, that Contracting Party shall promptly publish them or otherwise make them publicly available
1
2. Each Contracting Party shall promptly respond to specific questions and provide, upon request, information to other Contracting Parties on matters referred to in Article 2.1
3. Nothing in this Agreement shall prevent a Contracting Party from requiring an investor of another Contracting Party, or its investment, to provide routine information concerning that investment solely for information or statistical purposes. Nothing in this Agreement requires a Contracting Party to furnish or allow access to: a) information related to the financial affairs and accounts of individual customers of particular investors or investments, or 1. The Chairman of the Negotiating Group proposed to keep this sentence without brackets, noting that several
delegations could go along with this proposal provided that there was a satisfactory explanatory statement
in the commentary
14 b) any confidential or proprietary information, including information concerning particular investors or investments, the disclosure of which would impede law enforcement or be contrary to its laws 2
protecting confidentiality or prejudice legitimate commercial interests of particular enterprises
2. Two delegations propose to insert after "laws", the terms "policies, or practices". One delegation can only
support the proposed text for paragraph 3 of the Transparency article if these terms are inserted
15 TEMPORARY ENTRY, STAY AND WORK OF INVESTORS AND KEY PERSONNEL
3
1. Subject to the application of Contracting Parties’ national laws, regulations and procedures affecting the entry, stay and work of natural persons: (a) Each Contracting Party shall grant temporary entry, stay and authorisation to work 4
and provide any necessary confirming documentation to a natural person of another Contracting Party who is: (i) an investor who seeks to establish, develop, administer or provide advice or essential technical services to the operation of an enterprise 5
in the territory of the former Contracting Party to which the investor has committed, or is in the process of committing, a substantial amount of capital, or (ii) an employee employed by an enterprise referred to in (i) above, or by an investor 6
, [who may be required to have been employed for a specified minimum period, for example one year] 7
in a capacity of executive, manager or specialist and who is essential to the enterprise; so long as that person continues to meet the requirements of this Article; 8
(b) (i) Each Contracting Party shall grant temporary entry and stay and provide any necessary confirming documentation to the spouse and minor children of a natural person who has been granted temporary entry, stay and authorisation to work in accordance with subparagraph (a) above. The spouse and minor children shall be admitted for the period of the stay of that person
(ii) Each Contracting Party is encouraged 9
to grant authorisation to work to the spouse of the person who has been granted temporary entry, stay and authorisation to work in accordance with subparagraph (a) above
3. Whether there should be an anti-abuse clause, its precise wording, as well as its specific placement is to be
decided
4. Interpretative note: "The granting of an "authorisation to work" may imply that a natural person may have
to meet specific professional qualifications required in order to carry out particular activities. Professional
qualification criteria that may be applicable are outside the scope of this Article."
5. "Enterprise" under this Article would have the same meaning as under the MAI definition of "investment"
6. It is recalled that the MAI definition of an "investor" includes both natural and legal persons. It is
understood that the national authorities may impose on investors some requirements under domestic
immigration laws regulations and procedures given the content of the chapeau of paragraph 1
7. The phrase "who may be required to have been employed for a specified minimum period, for example one
year" reproduces an amendment proposed by one delegation. It is generally agreed, however, that legally
speaking, it is not necessary to clarify in the text that specific minimum periods, for example one year, are
allowed by the chapeau of paragraph 1. Some delegations consider, however, the retention of this language
to be a political necessity
8. Interpretative note: "It is understood that the national authorities may periodically verify continued
eligibility under this paragraph"
9. Some countries prefer "shall endeavour" and may need to refer to capitals before agreeing to deletion
16 2. No Contracting Party may deny entry and stay as provided for by this Article, or authorisation to work as provided for by paragraph 1(a) of this Article, for reasons relating to labour market or other economic needs tests or numerical restrictions in national laws, regulations, and procedures
10
3. For the purposes of this Article: Natural person of another Contracting Party means a natural person having the nationality of [or who is permanently residing in] 11
another Contracting Party in accordance with its applicable law; Executive means a natural person who primarily directs the management of an enterprise or establishes goals and policies for the enterprise or a major component or function of the enterprise, exercises wide latitude in decision-making and receives only general supervision or direction from higher-level executives, the board of directors, or stockholders of the enterprise; Manager means a natural person who directs the management of an enterprise, or department, or subdivision of the enterprise, supervises and controls the work of other supervisory, professional or managerial employees, has the authority to hire and fire or recommend hiring, firing, or other personnel actions and exercises discretionary authority over day-to-day operations at a senior level; and Specialist means a natural person who possesses knowledge at an advanced level of expertise and who may be required to possess specific or proprietary knowledge of the enterprise’s product, service, research equipment, techniques, or management
10. There is no substantive disagreement about making it clear in an interpretative note that "numerical
restrictions referred to in this paragraph are restrictions on the maximum number of natural persons who
can enter, stay or work in the Contracting Party." A number of delegations maintain a scrutiny reserve on
the wording of this interpretative note
11. Several delegations have concerns with extending the benefits of the MAI Key Personnel provisions to
permanent residents of another Contracting Party. As a result of the Negotiating Group discussion on 23-25
April 1997, the Chairman proposed that at least for the purposes of investors, nationals and permanent
residents should be covered. Delegations should reflect further on the inclusion of permanent residents as
concerns the categories of executive, manager, or specialist
17 NATIONALITY REQUIREMENTS FOR EXECUTIVES, MANAGERS AND MEMBERS OF
BOARDS OF DIRECTORS
No Contracting Party may require that an enterprise of that Contracting Party that is an investment of an investor of another Contracting Party appoint as executives, managers 12
and members of boards of directors 13
individuals of any particular nationality
EMPLOYMENT REQUIREMENTS
14
A Contracting Party shall permit investors of another Contracting Party and their investments to employ any natural person of the investor’s or the investment’s choice regardless of nationality and citizenship provided that such person is holding a valid permit of sejour and work delivered by the competent authorities of the former Contracting Party and that the employment concerned conforms to the terms, conditions and time limits of the permission granted to such person
12. The definitions of "Executive" and "Manager" are the same as those provided by the article on Temporary
Entry, Stay and Work of Investors and Key Personnel. The placement of these definitions in the Agreement
could be considered at a later stage. It is understood that technical differences between MAI definitions and
national definitions of these terms could be highlighted in country specific exceptions
13. Three delegations reserve on the coverage of membership in boards of directors. Given the diversity of
corporate governance rules across countries, it is proposed that the MAI rely on national definitions
14. It is understood that this article would not interfere with domestic anti-discrimination and labour laws
18 PERFORMANCE REQUIREMENTS
15
1. A Contracting Party shall not, in connection with the establishment, acquisition, expansion, management, operation, maintenance, use, enjoyment, sale or other disposition 16
of an investment in its territory of an investor of a Contracting Party or of a non-Contracting Party, impose, enforce or maintain 17
any of the following requirements, or enforce any commitment or undertaking: 18
(a) to export a given level or percentage of goods or services; (b) to achieve a given level or percentage of domestic content; 15. One delegation reserves its position on all obligations on performance requirements that go beyond those in
the TRIMS Agreement and the Energy Charter Treaty. Another maintains a reserve on the prohibition of
requirements listed in paragraph 1(a) through (e), when linked to an advantage. Another delegation
maintains a reserve on the scope of the article. Another delegation reserves its position on the scope of
paragraphs 3 to 5 of this article
16. A large majority of delegations consider that the enumeration of activities in the chapeau should closely
follow the list of activities in the National Treatment/MFN articles to avoid any confusion over the meaning
of any differences in the lists. They consider furthermore that there are no substantive grounds for the
deletion of the terms "maintenance, use, enjoyment" since the implications for intellectual property rights
are taken care of by the proposed carve-out in paragraph 1(f) and the consequences of keeping them as
regards land assets are immaterial. It is noted that these are also arguments for not mentioning these terms
in the chapeau. One delegation favours the deletion of these terms. Two delegations question the relevancy
of the terms "sale or other disposition"
17. One delegation reserves its position on the inclusion of the word "maintain". One delegation suggests that
the use of this word could oblige Contracting Parties to undertake the burdensome task of having to
expunge all possible non-conforming requirements from existing laws, regulations, contracts, etc. It should
be sufficient, and less burdensome, for a Contracting Party to be obliged not to "impose" and "enforce"
such requirements
18. One delegation presented an explanatory note on the formulation of NAFTA article 1106 which, in its view,
is significantly clearer than the proposed MAI article on Performance Requirements. In order to improve
on the MAI articles, the delegation proposes that the following phrase be added at the end of the chapeau of
this paragraph: "or condition the receipt or continued receipt of an advantage on compliance with any of the
following requirements". This addition is intended to make clear that the performance requirements article
applies in two basic circumstances: i) when linked to the establishment, expansion, etc. of an investment;
and ii) when linked to the granting of an advantage
According to one delegation, unless expressly stated (as proposed) in paragraph 1, there may always be
some uncertainty as to whether the article would apply in cases of granting an advantage. This delegation
considers this addition necessary to provide greater certainty. As was the intention in the development of a
"one list" approach in the MAI article, the proposed addition would, in the second case (linked to an
advantage), limit prohibitions to "requirements" imposed by governments. Extending the prohibitions to
only certain (but not all) "commitments and undertakings" would, according to this delegation, unduly
interfere with government practices regarding "voluntary" commitments in exchange for an advantage and
could result in a significant burden on Contracting Parties on lodging reservations for government-firm
agreements containing "prohibited" voluntary undertakings
The other delegations feel, however, that there is no need to modify the structure of the Article
19 (c) to purchase, use or accord a preference to goods produced or services 19
provided in its territory, or to purchase goods or services from persons in its territory; (d) to 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) to restrict sales of goods or services in its territory that such investment produces or provides by relating such sales to the volume or value of its exports or foreign exchange earnings; (f) to transfer technology, a production process or other proprietary knowledge to a natural or legal person in its territory, except when the requirement -- is imposed or the commitment or undertaking is enforced by a court, administrative tribunal or competition authority to remedy an alleged violation of competition laws, or -- concerns the transfer of intellectual property and is undertaken in a manner not inconsistent with the TRIPS Agreement; 20
(g) to locate its headquarters for a specific region or the world market in the territory of that Contracting Party; 21
19. It is understood that item (c) is not meant to cover the provision of cross-border services as defined under
the GATS. It is felt that this understanding could be recorded by using the following language: "This
provision does not obligate a Contracting Party to permit cross-border trade in services beyond the
obligations it has undertaken pursuant to GATS." This understanding could also be part of a general
provision in the Agreement concerning the relationship between the MAI and the GATS. One delegation
reserves its position on the inclusion of "services" in 1(c) with respect to requirements associated with the
granting of an advantage. It is noted that the relationship between the MAI and the GATS is an issue that
could be addressed in a number of ways, including by way of individual footnotes
20. The wording of this tiret is being elaborated in consultations with intellectual property experts, (See Article
on Intellectual Property, Section III below). These experts have not agreed whether the current wording
covers future IPRs and moral rights. It remains to be seen how the article will relate to other agreements
such as the Rome and Berne Conventions. Paragraphs 1(b) and 1(c) may also have implications for IPRs
Some delegations note that a general provision for interpreting MAI obligations in a manner consistent with
other obligations under international agreements would avoid the need for specific language for IPRs. It is
understood that the concept of "proprietary knowledge" has a broader coverage than that of "trade secrets"
or "undisclosed information" (see TRIPS Article 39) and can include information collected by an investor
from publicly available sources by "the sweat of the brow"
21. One delegation reserves its position on paragraph (g) and notes that the inclusion of (g) may inadvertently
oblige Contracting Parties to lodge exceptions in respect of basic business incorporation laws in so far as
such laws oblige the establishment and/or maintenance of representative or head offices for legal purposes
It is noted that the prohibition is intented to apply to head offices or headquarters and not to the
establishment of other offices
20 (h) to supply one or more of the goods that it produces or the services that it provides to a specific region or the world market exclusively from the territory of that Contracting Party; (i) to achieve a given level or value of research and development in its territory; 22
(j) to hire a given level of nationals; 23
(k) to establish a joint venture with domestic participation; 24
or (l) to achieve a minimum level of domestic equity participation other than nominal qualifying shares for directors or incorporators of corporations
25
22. Two delegations maintain a scrutiny reserve on this paragraph while two other delegations maintain the
view that paragraph (i) should be deleted
23. There is wide agreement to retain paragraph (j) with the inclusion of the following footnote with the same
legal standing as the paragraph itself:
"Nothing in this paragraph shall be construed as interfering with programmes targeted at disadvantaged
regions/persons or other equally legitimate employment policy programmes. It is also understood that
permanent residency requirements are not inconsistent with this paragraph."
It is confirmed that this provision will not overlap with the MAI article on Employment Requirements since
it is meant to cover specific performance requirements expressed in terms of given numbers or percentages
of employees while the article on employment requirements addresses problems of discrimination among
natural persons holding a valid permit of sejour and work in a given Contracting Party
Two delegations continue to favour the deletion of paragraph (j)
24. Paragraph (k) includes joint ventures even if not covered by paragraph 1(l) because they do not involve
equity participation. It allows, however, joint venture requirements not involving a requirement of
domestic participation which may be motivated by an economic concern to spread risk
Some delegations maintain a scrutiny reserve on paragraph (k) and (l) on the basis that they are covered by
the National Treatment provision of the MAI. Some delegations point out to the difficulty of defining
"joint-ventures". Some delegations consider that the scope of (k) and (l) needs to be defined in particular
with reference to whether the paragraphs would cover a Contracting Party when it establishes a joint
venture in which it is a participant. It is noted that Paragraph 2 of the Privatisation article states that
"Nothing in this Agreement" shall be construed as imposing an obligation to privatise
25. The phrase "other than nominal qualifying shares for directors or incorporators of corporations" clarifies
that this performance requirement will not be breached merely because members of boards of directors and
those who establish a corporation (incorporators) may be required by domestic law, as a condition of that
position, to hold a small equity participation in the corporation
21 2. A Contracting Party is not precluded by paragraph 1 from conditioning the receipt or continued receipt of an advantage, in connection with an investment in its territory of a Contracting Party or of a non-Contracting Party, on compliance with any of the requirements, commitments or undertakings set forth in paragraphs 1(f) through 1(l)
26
3. [ ] 27
26. It is understood that the receipt or continued receipt of an advantage with respect to paragraphs (k) and (l)
will need to be granted on a non-discriminatory basis (provided that no country reservation has been
lodged)
Several delegations consider that the concerns that paragraph 5(abis) intends to cover in respect of rights
and obligations under the WTO agreements would better be addressed by the reinsertion of paragraph 1(a)
in paragraph 2. This would avoid, in particular, confusion and overlap with respect to the dispute settlement
provision of the MAI and the WTO. In that regard, some delegations note, in particular, a concern that if the
extent of paragraph 1(a)’s disciplines were defined, [as proposed in one of the alternatives to paragraph,
5(abis) (see footnote)], by reference to WTO Disciplines, then if paragraph 1(a) were to become a subject
of MAI dispute settlement, the MAI arbital panel would have to determine whether a WTO violation had
occurred, which would be an inappropriate role for it to undertake. two delegations would also support a
reference to paragraphs 1(b) and 1(c) in paragraph 2 to exclude the coverage of advantages associated with
services from paragraph 1. Some delegations view adding paragraphs 1(b) and 1(c) to paragraph 2 as an
undesirable "TRIMs-minus" solution because TRIMs covers paragraphs 1(b) and 1(c) with respect to goods
in all circumstances. Other delegations consider that the reinsertion of any of these items would result in too
much of a carve-out from paragraph 1 because this carve-out would apply across the board to all sectors or
economic activities and not limited to the exclusions allowed under the WTO provisions. They favour
instead a solution in the context of paragraph 5(abis)
27. It is agreed to transform the previous paragraph 3 in DAFFE/MAI/ST(97)14 into a footnote to paragraph 1
with the same legal standing and which reads:
"For the avoidance of doubt, nothing in paragraphs 1(a), 1(b), 1(c), 1(d) and 1(e) shall be construed to
prevent a Contracting Party from conditioning the receipt or continued receipt of an advantage, in
connection with an investment in its territory of an investor of a Contracting Party or of a non-Contracting
Party, on compliance with a requirement, commitment or undertaking to locate production, provide
particular services, train or employ personnel, construct or expand particular facilities, or carry out
research and development in its territory."
One delegation notes that the question of the status of footnotes and interpretative notes for the MAI
remains to be determined
22 4
28
[Provided that such measures are not applied in an arbitrary or unjustifiable manner, or do not constitute a disguised restriction on investment, nothing in paragraphs 1(b) and 1(c) shall be construed to prevent any Contracting Party from adopting or maintaining measures, including environmental measures: (a) necessary to secure compliance with laws and regulations that are not inconsistent with the provisions of this Agreement; (b) necessary to protect human, animal or plant life or health; (c) necessary for the conservation of living or non-living exhaustible natural resources.] 29, 30
28. A majority of delegations see no need for paragraph 4. They consider that the proposed text is too broad,
especially that of paragraph 4(a). Some delegations also wonder whether there is a need for an interpretative
note. If there is such a need, a majority of delegations consider that it should be along the line proposed by
one delegation which reads as follows:
"Provided that such measures are not applied in an arbitrary or unjustifiable manner, or do not constitute a
disguised restriction on investment, nothing in paragraphs 1(b) and 1(c) shall be construed to prevent any
Contracting Party from adopting or maintaining measures necessary to secure compliance with
environmental [laws and regulations] [that are not otherwise inconsistent with the provisions of this
Agreement and] that are necessary for the conservation of living or non-living resources, [or that are
necessary to protect human, animal or plant life or health.]"
See proposed "Additional Clause on Labour and Environment" and footnote, Section III, below
29. One delegation would like the words "within its jurisdiction" to be added to paragraph 4(c) to make it clear
that this provision has no extra-territorial ramifications
30. One delegation believes that paragraph 4 is properly framed and that its scope should not be limited to
environmental measures, which would be the consequence of another delegation’s proposal. It suggests
replacing the words "necessary for" by "relating to", which are used in article XX of GATT 1994. It also
withdraws the example it provided in footnote 29 in DAFFE/MAI/ST(97)14; the example did not describe a
situation that would be disciplined by this article
One delegation favours the retention of paragraph 4
It is confirmed that no other general exceptions covered by Article XX of GATT 1994 would need to be
covered by the proposed paragraph 4. The same confirmation is given with respect to Article XI of GATT
1994 on the General Elimination of Quantitative Restrictions
23 5
31
(a) Paragraphs 1(a), 1(b), and 1(c) do not apply to qualification requirements for goods or services with respect to export promotion 32
and foreign aid programmes; [(abis) Paragraph 1(a), 1(b), and 1(c) do not apply to: 33
31. One delegation favours the inclusion of the following header to paragraph 5: "Without prejudice to rights
and obligations under the WTO" to ensure that the latter are not modified by the provision
32. One delegation suggests adding the word "and investment" after the word "export". It also suggests
clarifying by means of an interpretative note the meaning of "promotion" for the purposes of this article
33. The obligations of the Performance Requirements article relate to requirements, undertakings and
commitments that are directly imposed on or made by investors and their investments. In addition, they are
not intended to discipline "advantages" as such. It is recognised that the performance requirement article
raises questions about the relationship with the WTO Agreements, notably relating to agriculture, services
and government procurement
In this connection, it is agreed that the performance requirements article should not undo or undermine the
Contracting Parties obligations under any WTO Agreements. It is also generally recognised that this article
should not interfere with WTO rights and obligations in the agricultural sector. Some delegations consider
in addition that the MAI should not attempt to discipline subsidies relating to services since this matter is
presently being addressed in the WTO
Paragraph 5(abis) is proposed as a way of addressing these concerns. Discussions on this proposal focused
on: a) the need of specific reference to measures covered by WTO Agreements; b) the coverage of such a
reference; and c) whether it could be a viable alternative to the inclusion of a reference of paragraph 1(a),
and possibly paragraphs 1(b) and 1(c) in paragraph 2
One delegation proposes to add the following phrase after "agriculture sector": "covered by and consistent
with rights and obligations under the WTO Agreements". Another delegation questions excluding this
sector in respect to export performance requirements not linked to an advantage. It also wondered whether
paragraph 5(abis) would provide an exception for duty drawback programs outside the agriculture sector
(e.g. chemicals)
Two delegations propose the following language as a possible alternative to paragraph 5(abis):
"Paragraphs 1(a), 1(b) and 1(c) do not apply to measures consistent with rights and obligations under the
WTO Agreements." One delegation also proposes to limit the scope of this wording by adding the phrase "if
linked to an advantage" at the end of this sentence
While some delegations recognise that the proposals of two delegations could provide a technical solution,
several delegations remain concerned about the reference to WTO disciplines which, as noted in footnote
of the paragraph 2, could lead a MAI panel to pass judgement on WTO provisions. There is general
agreement that a MAI panel should not be put in a situation of interpreting WTO disciplines. One
delegation notes that under the safeguard provisions of the MAI, the IMF would be consulted in any MAI
dispute settlement case involving a measure that the IMF approved or found to be consistent with the MAI
It suggests that a similar solution could be found in the dispute settlement provisions of the MAI where it
could be stated that WTO provisions can only be interpreted by WTO
The following examples were provided to focus discussion on which cases should or should not be covered
by the Performance Requirements article, so that the article’s exclusions (paragraph 2) and exceptions
(paragraph 5) can be drafted appropriately
1. A Contracting Party screens investments:
(a) In connection with the establishment of a widget manufacturing plant, a Contracting Party imposes a
requirement that the investor export 100 per cent of the widgets produced
24 - [measures] [advantages] related to the production, processing and trade of agricultural and processed agricultural products; - advantages related to trade in services;] b) Paragraphs 1(b), 1(c), 1(f), and 1(h) do not apply to procurement by a Contracting Party or an entity that is owned or controlled by a Contracting Party
34
[c) paragraphs 1(b) and 1(c) do not apply to requirements imposed by an importing Party relating to the content of goods necessary to qualify for preferential tariffs or preferential quotas
35
] [c) Paragraphs 1(a), 1(b), 1(c) and 1(d) do not apply to customs duties, exemptions from such duties and preferential tariffs or to any trade measure regulating imports and exports provided that such measures are not applied in an arbitrary or unjustified manner, and do not constitute a disguised restriction on investment
36
] (b) Same as 1(a), but the investor receives an advantage: no customs duties are imposed on manufacturing
equipment or materials
2. A Contracting Party allows any investor to establish a widget manufacturing plant:
(a) Any widget manufacturer may operate in an "export processing zone" but if it does so, it is required to
export 100 per cent of the widgets produced in the zone. No customs duties are imposed on manufacturing
equipment or materials that enter the zone
(b) Any widget manufacturer may operate in an "export processing zone". No customs duties are imposed
on manufacturing equipment or materials that enter the zone. Customs duties are imposed on any products
produced in the zone that are sold within a Contracting Party’s territory
34. It is agreed to add the following interpretative note:
"The Performance Requirements article does not affect any obligations that may exist under the WTO
Government Procurement Agreement."
Two delegations consider that a reference to paragraph 1(i) may be needed if that paragraph is retained
35. Discussion regarding this subparagraph focused on the following example provided by one delegation,
which others found useful and requested to be recorded:
"A French manufacturer of textiles located in the US manufactures and cuts cloth for garments in the US,
sends it to a country eligible for the special programme (e.g., Jamaica), to be assembled into finished
garments, and then re-imports the garments into the US for retail sale. The tariff rate on the re-imported
garments is lower than on garments from other countries. Without the subparagraph 5(c) exception,
subparagraphs 1(b) and 1(c) would prevent the US from offering the special access programme, which is
consistent with existing international obligations. Many MAI countries have similar programmes."
Several delegations believe that customs tariff issues fall outside the scope of this Article and thus there is
no need for the proposed general carve-out. This issue should be discussed further; there may be also a link
with the issues raised with respect to paragraph (a). one delegation agrees to circulate any relevant material
in advance of the next round of consultations. Another delegation believes that there is no need for the
proposed carve-out if the interpretative note in the footnote of 1(j) is accepted
36. Given the understandings noted at the beginning of the footnote of the paragraph 5(abis), one delegation
considers that the need for paragraph 5(c) may be limited only to the case of duty exemptions
25 PRIVATISATION
37
Paragraph 1 (Application of National Treatment/MFN)
The obligation on a Contracting Party to accord National Treatment and MFN treatment as defined in Paragraph XX (NT/MFN) applies to: a) all kinds of privatisation, irrespective of the method of privatisation (whether by public offering, direct sale or other method) 38
; and b) subsequent transactions involving a privatised asset
39
[Paragraph 1a (voucher schemes)
Notwithstanding paragraph 1, arrangements under which natural persons of a Contracting Party are granted exclusive rights as regards the initial privatisation are acceptable as a method of privatisation under this Agreement provided that the exclusive right as regards the initial privatisation is limited to natural persons only and provided that there is no restriction on subsequent sales]
40
Paragraph 2 (Right to privatise)
Nothing in this Agreement shall be construed as imposing an obligation on a Contracting Party to privatise
41
37. Four delegations reserve their position on all privatisation obligations
38. One delegation reserves its position
39. Four delegations reserve their position on sub-paragraph (b) as it goes beyond the scope of a privatisation
article. Delegations agree that this provision does not apply to the behaviour of private entities (corporate
practices). It is understood that the meaning of that provision is to prevent Contracting Parties from
imposing rules on such secondary transactions which are inconsistent with NT/MFN. In the light of this,
some delegations propose to include language along the lines of "b) measures governing subsequent ...". It
is felt useful that legal experts examine the ultimate formulation of this provision on the basis of this
understanding
40. One delegation is ready to withdraw this proposal if reference to vouchers schemes under paragraph 3,
alternative 2, letter d, is deleted
41. Two delegations propose to insert "prejudice Contracting Parties’ rules governing the system of property
ownership or" between the words "shall" and "be"
26 Paragraph 3 (Special share arrangements)
42, 43
Alternative 1 Contracting Parties acknowledge that special share arrangements are compatible with Paragraph 1, unless they explicitly or intentionally favour investors or investments of a Contracting Party or discriminate against investors or investments of another Contracting Party on the grounds of their nationality or permanent residency
44
Alternative 2 45
[Special share holding arrangements including, inter alia, a) the retention of "golden shares" by Contracting Parties, b) stable shareholder groups assembled by a Contracting Party, c) management/employee buyouts, and d) voucher schemes for members of the public, hold strong potential for discrimination against foreign investors and are, in fact, inconsistent with National Treatment and MFN treatment obligations in many instances.] Alternative 3 46
Footnote to paragraph 1 Special share arrangements which explicitly discriminate (i.e. de jure) against foreign investors and their investment are contrary to obligations on National Treatment/MFN Treatment. It is also understood that when, in their application, special share arrangements lead to de facto discrimination they are also contrary to National Treatment/MFN Treatment
42. Work on paragraph 3 has been based on alternative 1, which is supported by a large number of delegations
However, one delegation maintains its preference for alternative 2. It cannot accept the phrase "are
compatible with paragraph 1" (Alternative 1, paragraph 3) on the grounds of the implication that such
special rules, regardless of how they are exercised, necessarily conform with NT/MFN. The use, application
or exercise of such relevant measures under the tirets (alternative 1) may in fact not conform with
NT/MFN. One delegation proposes the deletion of paragraph 3
43. It was recalled that the issue of providing the possibility for lodging exceptions after the entry into force of
the MAI concerning privatisations is under consideration in the Negotiating Group
44. One delegation would still prefer the inclusion of an illustrative list
45. Proposal of one delegation, together with the following note: "As with other measures contrary to
obligations on National Treatment and MFN treatment, use of special share arrangements should be subject
to listing as exceptions. Recognising that Contracting Parties may privatise assets in the future, Contracting
Parties will be permitted to take precautionary exceptions for the use of special share arrangements in those
sectors where Contracting Parties generally have state-owned enterprises or government restrictions." This
proposal was not discussed by the delegations
46. This language is put forward as a compromise. A number of delegations supporting alternative 1 state their
willingness to accept this compromise pending the outcome of the discussions in the Negotiating Group on
how to handle de facto discrimination in the context of lodging country specific exceptions. One delegation
suggests the insertion, after "investments" on the second line, of the words "on the ground of nationality";
of the word "intentionally" after "arrangements" on the third line; and, "on the ground of nationality", after
"discrimination" on the same line. It also suggests the inclusion of an illustrative list
27 [Alternative 4 47
Nothing in this Agreement shall prevent Contracting Parties from using special methods of privatisation or having special rules as regards ownership, management or control of privatised assets such as: -- a Contracting Party or any person designated by the Contracting Party maintaining special shareholder rights to influence or veto any decision concerning such assets after the privatisation, -- arrangements under which managers or other employees of an enterprise are granted special treatment as regards the acquisition of shares of that enterprise, -- arrangements under which shareholders are required to maintain their share in the capital of the enterprise during a certain period of time, -- arrangements under which locals of a certain community are granted special treatment as regards the acquisition of this community’s property, unless they explicitly or intentionally favour investors or investments of a Contracting Party or discriminate against investors or investments of another Contracting Party on the grounds of their nationality or permanent residency.] 47. This proposal by one delegation has not been discussed
28 Paragraph 4 (Transparency)
48
For the purposes of this Article, each Contracting Party or its designated agency shall promptly publish or otherwise make publicly available the essential features and procedures for participation in each prospective privatisation 49
.* *Footnote
This footnote confirms the application of the Transparency Article YY. This footnote also confirms that the obligations to accord National Treatment and MFN Treatment prohibit discrimination against investors and investments of other Contracting Parties with respect to all arrangements for making public information about a privatisation operation. It is also understood that there can be variance in the methods used to make information available, including in the case of small scale privatisations
48. One delegation reserves its position on the Transparency article. It considers that a principle of parallelism
should guide the treatment of privatisation and that of concessions, which are two connected fields. It also
considers the transparency obligations should apply to all levels of government. This delegation therefore
conditions its agreement concerning the insertion of a transparency clause for privatisation to the inclusion
of a similar clause for concessions
49. It is understood that the obligation of this article will be met wherever the information on a privatisation
operation is made available. One delegation notes that there is a need for discussion of the potential
implications of the proposed transparency provision for legitimate financial market transactions. It also
proposes the addition of the following interpretative note: "It is understood that paragraph 4 does not place
any obligation on a Contracting Party to take actions that could prejudice respect for, or compliance with,
the requirements of securities and exchange laws." While several delegations did not need this clarification,
they did not oppose that it be added to the Agreement as an interpretative note
29 Paragraph 5 (Definition)
Privatisation means the sale by a Contracting Party, in part or in full, of its equity interests 50
in any entity 51
or other disposal having substantially the same effect.* * This definition: - does not cover transactions between different levels or entities of the same Contracting Party; - excludes transactions in the normal conduct of business
52
50. One delegation considered that the sale of the assets of a state company such as the sale of a division of an
entity are to be covered by the definition. It also felt that it was necessary to replace the term "equity
interests" by "ownership interests" to clarify the scope of the definition. Another delegation would have
preferred to return to the previous definition but could accept the alternative wording "equity or other
interests". Another delegation reserved on the phrase "or other disposal having substantially the same
effect"
51. One delegation is of the view that the word "entity" should be qualified by the addition of "it owns or
controls through ownership interests."
52. It is understood that transactions by entities created for the purpose of the sale or other disposal of a
Contracting Party’s equity interests in an entity are captured by the revised definition in accordance with the
MAI Article on entities with delegated governmental authority
30 MONOPOLIES/STATE ENTERPRISES/CONCESSIONS
A. Article on Monopolies
53
1. Nothing in this Agreement shall be construed to prevent a Contracting Party from maintaining, designating or eliminating a monopoly
54
2. Each Contracting Party shall [endeavour to] 55
accord non-discriminatory treatment when designating a monopoly
3. Each Contracting Party shall ensure that any privately-owned monopoly that its national [or subnational] governments [maintain] 56
or designate and any public monopoly that its national [or subnational] governme

ts maintain or designate: a) provides non-discriminatory treatment to investments of investors of another Contracting Party in its supply of the monopoly good or service in the relevant market ;
53. One delegation reserves its position on all obligations on monopolies that go beyond those of the GATT and
GATS
54. It is understood that paragraph 1 is without prejudice to the article on Expropriation and Compensation. One
delegation maintains a scrutiny reserve on this question. Another delegation continues to believe that
"Agreement" should be replaced with "Article" but will consider this proposal for an interpretative note that
would be an integral part of the Agreement
55. Delegations remain divided on the desirability of removing these brackets. The issue is linked to the
inclusion of provisions in the Agreement on concessions. Some delegations are willing to drop the contents
of the brackets if there would be satisfactory provisions in the MAI on concessions
56. One delegation considers that all the provisions of the Monopoly article should not apply to monopolies at
subnational levels of government. It also has difficulties with the inclusion of the term "maintains" since
this could create disciplines with respect to existing contracts between the government and such privately-owned
monopolies and have general ramifications on the rights of existing shareholders. This delegation
considers that the disciplines of paragraph 3 should not apply to monopolies designated by subnational
authorities. Other delegations consider it essential that monopolies designated by subnational authorities
should be covered by the disciplines. They recognise that the reference to national and subnational
governments is also related to the coverage of the monopoly definition and more broadly to the solution
found for the general treatment of subnational entities under the MAI
31 b) provides non-discriminatory treatment to investments of investors of another Contracting Party in its purchase of the monopoly good or service in the relevant market. This paragraph does not apply to procurement by governmental agencies of goods or services for government purposes and not with a view to commercial resale or with a view to use in the production of goods or services for commercial sale; 57
Subparagraph c)
Alternative 1 58
c) does not abuse its monopoly position, in a non-monopolised market in its territory, to engage, either directly or indirectly, including through its dealing with its parent company, its subsidiary or other enterprise with common ownership, in anticompetitive practices that adversely affect [an investor or] 59
an investment by an investor of another Contracting Party, including through the discriminatory provision of the monopoly good or service, cross-subsidisation or predatory conduct
60
Alternative 2: zero option 61
57. One delegation raises the issue of the treatment of sub-contracting of monopoly activities. Another
delegation remains concerned about the broad scope of the carve-out implied by the second sentence and
favours its deletion, noting that much, if not all, of the core business of government is not involved in
producing goods and services for commercial sale
58. This draft article originally proposed by one delegation is supported by several delegations. One delegation
notes that the reference to "anti-competitive practices" should not be problematic since the GATS contains
obligations with respect to anti-competitive practices as an integral part of the GATS agreement on basic
telecommunications (cf. GATS Telecoms Reference Paper)
59. The inclusion of the term "investor" would confirm the application of subparagraph (c) to the pre-establishment
phase. Some delegations indicate that their support for Alternative 1 is conditional upon the
coverage of the pre-establishment phase. A number of delegations note, however, that this coverage could
also create problems with respect to the dispute settlement provisions of the MAI and consider that it should
not be retained
60. One delegation could agree to the deletion of the phrase "in particular through the abusive use of prices" on
the understanding that this practice was covered by the terms "predatory conduct". Another delegation
considers that the term "abusive use of prices" has a broader coverage than the concept of anti-competitive
practices
61. The zero option is supported by some delegations to avoid undue intrusion into the competition policy field
A number of these delegations support, as a fallback position, the inclusion of a subparagraph (c) based on
article VIII of the GATS which reads as follows:
"c) which competes, either directly or indirectly, or through an affiliated company, in an economic activity
outside the scope of its monopoly rights does not abuse its monopoly position in that activity to act in a
manner inconsistent with the obligations of this Agreement;"
One delegation considers that this proposal adds little in substance to the Monopoly article and could even
be politically counterproductive
32 [d) Except to comply with any terms of its designation that are not inconsistent with subparagraph (a) or (b), acts solely in accordance with commercial considerations in its purchase or sale of the monopoly good or service in the relevant market, including with regard to price, quality, availability, marketability, transportation and other terms and conditions of purchase or sale.] 62
[Nothing in Article A shall be construed to prevent a monopoly from charging different prices in different geographic markets, where such differences are based on normal commercial considerations, such as taking account of supply and demand conditions in those markets
63
Article A, paragraphs 3(c) and 3(d) differences in pricing between classes of customers, between affiliated and non-affiliated firms, and cross-subsidisation are not in themselves inconsistent with this provision; rather, they are subject to this subparagraph when they are used as instruments of anti-competitive behaviour by the monopoly firm]
64
62. A large majority of delegations are in favour of the deletion of subparagraph (d) and the following two
paragraphs. One delegation is prepared to accept the removal of subparagraph (d) provided that these two
paragraphs are maintained as interpretative notes. Two other delegations, which are proponents of
subparagraph (d) in its entirety, wish to maintain their position for inclusion in the article
One delegation provides a number of explanations in favour of the inclusion of subparagraph (d). In its
view, sub-paragraph (d) would present the advantage of increasing transparency: non-commercial
considerations must be both non-discriminatory [as indicated in (a), and (b)] and must be clearly stated in
terms of its designation. (Note, however, that if a government wants to continue to pursue social and other
non-economic objectives, it can still do so through the designation.) Sub-paragraph (d) would also clarify
that outside the terms of a monopoly’s designation, a monopoly should act in accordance with commercial
considerations just like any other enterprise (i.e. that it not use its monopoly power to influence the market)
This is particularly important given the potential power of monopolies over markets in the context of
accession. Finally, the proposed language in the two notes would make it clear that charging different
prices to different customers, for example, might be justified on the basis of commercial considerations
Consideration could be given to a definition of "commercial considerations" along the lines of the accepted
wording in GATT Article XVII
Many delegations remain sceptical, however, about the feasibility and desirability of requiring monopolies
to act in accordance with "commercial considerations"
63. Delegations discussed whether this paragraph should be maintained as an interpretative note, particularly in
case subparagraph (d) is deleted. One delegation considers that this clarification has a bearing on all the
provisions of paragraph 3, particularly subparagraph 3(a). Another delegation is of the view that the only
relevant link with other subparagraphs, with the exception of subparagraph d), is to subparagraph (a). In this
context, subparagraph (d) is not necessary because of the general understanding that the non-discrimination
principle in subparagraph (a) is limited to "like circumstances" thereby allowing for differentiation on the
basis of commercial considerations. While other delegations did not exclude a possible link to other
subparagraphs, for example subparagraph (b), they support its deletion
64. A large majority are of the view that the clarification intended by this paragraph is not necessary, especially
if subparagraph d) is deleted. One delegation considers that this explanatory paragraph is also relevant to
subparagraph 3(c)
33 [4. Each Contracting Party is allowed to lodge an exception to the Agreement concerning an activity previously monopolised at the moment of the elimination of the monopoly.] 65
5. Each Contracting Party shall notify 66
to the Parties Group any existing designated monopoly within [60] 67
days after the entry into force of the Agreement, any newly designated monopoly within [60] days after its creation, and any elimination of a designated monopoly [and related new exception to the Agreement] 68
within [60] days after its elimination
[6. Neither investors of another Contracting Party nor their investments may have recourse to investor-state arbitration for any matter arising out of paragraph 3 of this Article.] 69
65. Proposal by one delegation. Some delegations are opposed to the principle of lodging country exceptions
after entry into force of the MAI. Another delegation proposes that such reservations be made the subject
of scrutiny by the "Parties Group" to ensure that they do not negatively affect the level of liberalisation
under the MAI
66. One delegation suggests that the concept of prior notification found in Article VIII.4 of the GATS should
also be examined and that the Parties Group should have a role in examining all notifications resulting from
this article
67. It is suggested that the period of three months, which is the notification period for monopolies under
paragraph VIII.4 of the GATS, could be an alternative. The length of the notification period could also be
decided in light of other notification requirements that might arise under the Agreement. One delegation
points out to the difficulty it would have in notifying the very large number of monopolies designated by
subnational authorities. It is agreed that a solution needs to be found to the practical problem that the
Contracting Parties may encounter with respect to the designation of every single monopoly designated at a
subnational level authority. It is suggested that the alternative approach found in the Energy Charter to
notify a summary of the types of monopolies under the jurisdiction of subnational levels of government
could be considered. Another delegation does not agree that this paragraph applies with respect to
subnational governments
68. The issue of notification of monopolies is also linked to the question dealt with under paragraph 4 of this
Article
69. Several delegations point to the novelty and complexity of the proposed provisions on monopolies, which
argue in favour of limiting the dispute settlement procedures to state-to-state disputes. They also believe
that most governments do not even allow private "anti-trust" actions in their own courts by their citizens;
thus it would be a leap to suggest that there be privately-initiated scrutiny of monopolies’ anti-competitive
actions pursuant to 3(c). These delegations consider that state-to-state dispute settlement should provide a
useful procedural compromise. Many delegations consider, however, this paragraph should be deleted as
they believe that Contracting Parties should only sign up to commitments that they would be prepared to
defend against individual investors
34 [B. Article on [state enterprises][entities with which a Government has a specific relationshi p]
i) Option 1: zero option
70
ii) Additional provisions
a. Proposal byTwo Delegations 71
[1. Each Contracting Party shall ensure that any state enterprise that it maintains or establishes accords non-discriminatory treatment in the sale, in the Contracting Party’s territory, of its goods or services to investors of another Contracting Party and their investments
2. Neither investors of another Contracting Party nor their investments may have recourse to investor-state arbitration for any matter arising out of paragraph 3 of this Article
72
] b. Proposal by One Delegation 73
[ Each Contracting Party shall ensure that any entity that a national or a subnational government owns or controls through ownership interest or which a national or subnational governments authority has a relationship with through any specific legislative, regulatory or administrative act, any contracts, or any practices related to some of its activities acts in a manner that is not inconsistent with the Contracting Party's obligations under this Agreement in connection with these activities.] 70. A large majority of delegations support this option, particularly since the anti-circumvention clause in
Section VIII is intended to cover all enterprises, i.e. both state and private enterprises, to which authority
has been granted
A number of delegations underline the legal and practical difficulties that governments would encounter in
ensuring the conformity of the behaviour of state enterprises and all their affiliates with the obligations of
additional provisions, such as those proposed by two delegations
71. Two delegations believe that the need for such provisions is predicated by the fact that state enterprises are
different from private enterprises because of the links with governmental authorities. They felt that the
term "state enterprise" could be replaced by "an enterprise that it owns or controls"
One delegation points out that under its existing legislation the state as a shareholder has no special
privilege in comparison with any other shareholder. This would require legislative action
72. Some delegations point out that this paragraph would be needed whichever alternative is chosen. Other
delegations consider that any additional disciplines that might be adopted would need to be subject to both
state-to-state and investor-to-state dispute settlement. One delegation would like this paragraph to apply to
both paragraph 1 and the article on Entities with Delegated Governmental Authority
73. This proposal is offered as a compromise by one delegation which favours, nevertheless, no additional
provisions as its first option. It is meant to cover all possible avenues for exercising influence other than
government ownership (such as through the granting of contracts to private enterprises). This proposal did
not receive broad support
35 C. Definitions Related to Articles on Monopolies [and State Enterprises]
1. "Delegation" means a legislative grant, and a government order, directive or other act transferring to the monopoly or state enterprise, or authorising the exercise by the monopoly or state enterprise of, governmental authority
2. "Designate" means to establish or authorise, or to expand the scope of a monopoly
74
3. "Monopoly" means any person or entity designated by a [national [or subnational] 75
government authority] [Contracting Party] as the sole supplier or buyer of a good or service in a relevant market in the territory of a Contracting Party. It does not include a person or entity that has an exclusive intellectual property right solely by reason of such right or the exercise of such right 76
[nor does it include a person or entity that has an exclusive right such as a concession, license, authorisation or permit]
77
74. One delegation maintains a scrutiny reserve on this paragraph which is also related to the coverage of the
chapeau of paragraph 3 of the article on monopolies
75. A large majority of delegations consider that, in substance, the MAI disciplines on monopolies should apply
to all levels of governments. This could be achieved in a number of ways. The preferred option by most
delegations holding this view is the second bracketed text "Contracting Party". This would present the
advantage of ensuring consistency with the coverage of this term across the Agreement. Other delegations
remain of the opinion, however, that the most secure way to capture all designated monopolies would be to
have a specific reference to subnational authorities in the definition. One delegation suggests the alternative
wording of "the competent authority of a Contracting Party"; this language is considered to be a promising
compromise for delegations supporting the broadest definition of monopolies and should be discussed
further. Another delegation could accept the deletion of the reference to "national or subnational
government" on the understanding that a reference would be made in paragraph 3 in Section A that it does
no apply to subnational monopolies. Another delegation favours a definition limited to monopolies
designated by national governments and suggests the deletion of the reference to "subnational" authorities"
76. There is agreement that the definition of monopolies should explicitly exclude exclusive rights derived from
intellectual property rights. Intellectual Property experts would also like to add at the end of the second
sentence the following bracketed text. Such an addition would read "[nor does it include an entity charged
with the collective management of intellectual property rights]". This phrase would exclude royalty
collection agencies (which usually have a legal monopoly). See also the Article on Intellectual Property,
Section III, below
Some delegations reserve their position pending the outcome, inter alia, of the discussion on the
relationship between monopolies and concessions, authorisations, etc
77. There is a broad consensus that, in conformity with item (vii) of the MAI definition of "investment", any
rights conferred pursuant to law or contract such as concessions, licenses, authorisations, and permits are to
be covered fully by the obligations of the MAI. One delegation underlines, however, that because the
proposed definition of "monopoly" in paragraph 3 is so inadvertently broad, it encompasses these rights
and, as a result, these rights are, in practice, "carved out" from the MAI obligations. The addition of the
bracketed text could be one way to address this problem. Most delegations believe it would carve out too
much of the definition of monopolies
One delegation made additional remarks on the matter. Monopolies and concessions are two different legal
entities and have two opposite economic effects, namely, in the first case, to subtract an economic activity
from competition and in the second case, to organise competition with respect to a particular economic
activity. These differences call for a different treatment of MAI obligations with respect to the designation
of monopolies ("a best endeavour obligation"), for instance to provide a public good or service, and the
granting of concessions (full National Treatment/MFN obligations)
36 4. "Relevant market" means the geographic and product market for a good or service in the territory of the Contracting Party
78
5. "Non-discriminatory treatment" means the better of national treatment and most favoured nation treatment, as set out in the relevant provisions of this Agreement
79
[6. "State enterprises" means, [subject to Annex ...., ] an enterprise owned, or controlled through ownership interest, by a Contracting Party.] 80
This does not prevent the MAI, however, from imposing a non-discriminatory obligation on the behaviour
of persons or entities which have been conferred "monopoly rights". This could be done, for instance, by
making it clear in an additional provision that "any person or entity which acquires monopoly rights as a
result of the implementation of such law or contract must fulfil the obligations of paragraph 3 of the
Monopoly article in the exercise of such rights"
A lot of interest was expressed in this proposal. Delegations agreed to give it further consideration
See also the discussion below on Intellectual Property
78. Some delegations propose the inclusion of the word "commercial" before "goods and services" to clarify, in
particular, that the "relevant markets" for monopolies would not include government services such as the
delivery of passports or driving licenses. A majority of delegations also recognises that the inclusion of the
terms "in the territory of the Contracting Party" at the end of the paragraph presents the advantage of giving
greater precision to the concept of "relevant market", also used in paragraphs 3(a) and 3(b) of article A on
monopolies. The inclusion of these terms would also do away with the need for making a similar reference
in paragraph 3 on the definition of "Monopoly"
One delegation is of the view that the proposed definition needs to be improved for greater precision and
clarity. Another delegation draws the attention to the fact that the concept of "relevant market" has been
discussed in the OECD Competition Policy Committee and that the result of this work should be taken into
account
One delegation proposes the insertion at the end of the definition of the words "that includes all its close
substitutes". This would narrow the coverage of "relevant market". It argues that this definition will be
useful to narrow down the definition of monopoly and will exclude from it those firms that although have
been granted exclusive rights compete in the market against other firms producing close substitutes. Other
delegations point out that the notion of close substitutes is normally included in national competition
policies and consider the addition by this delegation unnecessary. However this delegation considers that
the extended definition of "relevant market" should be included in the MAI for the sake of clarity
79. Several delegations question the need for this definition
80. A number of delegations question the need for a definition of state enterprises
37 [D. Article on Concessions
81, 82
Transparency
1. All concessions are granted subject to a tender procedure designed to guarantee competition between competing offers
2. The tender procedure must be published as follows: (a) a notice must be inserted in a journal of official notices and in a publication related to the sector concerned; (b) this notice must describe the purpose of the contract, the tender conditions and the tender deadline; (c) publication must be made in due time, and no less than 30 days before the tender deadline, so as to enable tenderers to submit an offer and to accomplish the formalities required by qualifying evaluations
3. The reasons for the rejection of an offer in the tender procedure will be made known to the tenderer upon request
4. This article applies to the delegations concerning an amount equal or superior to XX (amount to be decided)
81. New proposal by one delegation. It is recognised that there is a link between the issue of concessions and
monopolies [paragraph 2 of the article on monopolies (see Section A)]. Those delegations favouring the
inclusion of provisions on concessions into the MAI are ready to drop their opposition to the inclusion of
"best endeavour" in paragraph 2 if the suggested provision on concessions is included in the MAI
One delegation is opposed to this proposal. Several delegations continue to question the need for this article
Some delegations note that the introduction of such an article would require a definition on concessions, the
elaboration of which could be rather difficult given the different coverage of this concept in national
legislations. Some see some parallelism with the Transparency article envisaged for Privatisation (section
V) and are prepared to discuss the proposal under this light. Some delegations feel that further work is
required to clarify the issues
82. One delegation provided a background note on natural resources and concessions in the context of the MAI
38 Definition
1. A concession is any delegation, direct or indirect, which entails a transferring of operation of activities, carried out by a government authority, national or subnational, or any public or para-public authority, to a distinct and independent legal entity
2. The delegation shall be realised either by any laws, regulations, administrative rulings or established policies, or by any private or public contract. The aim of the delegation is to entrust to a distinct and independent legal body with the operation of public services, including the operation of networks or infrastructures, or the exploitation of natural resources 83
and if needed with the construction of all or part of networks or infrastructures
3. [If necessary: The legal act of delegation includes the modes of payment to the investor. These modes of payment can consist of any price paid by consumers, any royalty, tax licence, subsidy or contribution from the delegatory authority, or any combination of the modes.] 83. One delegation proposes the deletion of the reference to natural resources
39 [GRANTING OF AUTHORISATIONS FOR THE PROSPECTION, EXPLOITATION AND PRODUCTION OF MINERALS, INCLUDING HYDROCARBONS 84, 85
"(1) For the purpose of the present Article, "authorisation" means any law, regulation, administrative or contractual provision or instrument issued thereunder by which the competent authorities of a Contracting Party entitle any investor or a group of investors to exercise, on its own behalf and on its own risk, the exclusive right to prospect or explore for or produce minerals, including hydrocarbons, in a geographical area
84 Proposal by one delegation. This delegation also proposes to add to paragraph (vii) of the current definition
of "investment" in the MAI, the following language with respect to mineral resources, including
hydrocarbons resources:
"-- Rights conferred pursuant to law or contract regarding property ownership over mineral resources,
including hydrocarbon resources;
-- rights conferred pursuant to any law, regulation, administrative or contractual provision or instrument
issued thereunder by which the competent authorities of a Contracting Party entitle an investor or a group of
investors to exercise, on its own behalf and at its own risk, the exclusive right to prospect for or explore for
or produce minerals, including hydrocarbons, in a geographical area."
85. There is general agreement that the MAI obligations (NT, MFN, Performance Requirements...) should
apply fully to the granting of authorisations for the prospection, exploitation and production of minerals,
including hydrocarbons . This is also valid for any rights granted in connection with the prospection,
exploitation and production of any other natural resources. Views differ, however, as to whether additional
language, along the lines that proposed by one delegation or another formulation, need to be incorporated
into the MAI to confirm this understanding
Some delegations are prepared to work on the basis of the text of one delegation provided some
amendments are made to it. One delegation suggests replacing the word " authorisation" by the word
"concessions" which would correspond more accurately to its legal situation as well to that of other
countries. Some delegations consider that the words "To the extent that the measures are consistent with the
Agreement" would convey greater certainty as to the consistency of the proposed article with other MAI
provisions that the words "Consistent with the present Agreement," appearing at the beginning of
paragraph 2. Some delegations wonder if the reference to state participation in sup-paragraph 2(c) is all that
necessary; some other delegations consider, that other conditions or requirements may need to be
mentioned. Several delegations are of the view that paragraph 3 could create confusion as the applicability
of the National Treatment/MFN obligations and support its deletion. In their view, the operative part of the
article should be limited to the paragraph 2. Other delegations see value in referring specifically to the these
obligations in the paragraph to avoid potential problems of interpretation of the MAI obligations to the
granting of authorisations, concessions, etc. in the future. One delegation suggests the addition of the words
" when granting the authorisation s" at the end of paragraph 3
Drawing on the approach elaborated under the draft privatisation article, some propose a two -pronged
alternative solution which would a) recognise the sovereign rights of the State over the country’s natural
resources while b) confirming the full applicability of the MAI obligations at the time of the granting to
MAI investors and their investments of any specific right under a concession, license, authorisation or
permit concerning the prospection, exploitation or production of all natural resources, including
hydrocarbons or minerals
40 (2) Consistent with the present Agreement, the Contracting Parties may establish: (a) procedures to be followed for the granting of authorisations according to which all interested investors may submit applications pursuant to this article; (b) criteria on the basis of which authorisations are granted; (c) conditions and requirements, including requirement of state participation, concerning the exercise or termination of the activities of prospecting, exploring for and producing minerals, including hydrocarbons, whether contained in the authorisation or to be accepted prior to the grant of the authorisation
(3) The Contracting Parties shall apply such procedures, criteria, conditions and requirements as referred to in paragraph (2) above in a transparent and objective manner and in a way which ensures that there is no discrimination on grounds of nationality between investors as regards access to and exercise of the activities of prospecting, exploring for and producing minerals, including hydrocarbons. ] 41 ENTITIES WITH DELEGATED GOVERNMENTAL AUTHORITY 86
Each Contracting Party shall ensure that any entity to which it has delegated a regulatory, administrative or other governmental authority acts in a manner that is not inconsistent with the Contracting Party’s obligations under this Agreement wherever such entity exercises that delegated authority
86. This article covers all entities, including monopolies and state enterprises, with respect to the exercise of
any delegated regulatory, administrative or other governmental authority. This provision renders the need
for a provision on this subject under the Monopolies article unnecessary. One delegation can only consider
this provision if its concern relating to the chapeau of the Monopoly Article (see footnote subparagraph c,
alternative 1) could be adequately covered and, secondly, points out that the Vienna Convention of the Law
of Treaties may, in its view, make this provision redundant
Several delegations consider it essential that the proposed anti-circumvention clause apply to monopolies
designated by subnational authorities. It is recognised, however, that this matter is linked to the treatment
of subnational entities generally under the MAI
42 INVESTMENT INCENTIVES
Alternative 1 Several delegations believe that no additional text is necessary. They consider that the current draft articles in the MAI are sufficient to cover investment incentives at this time
Alternative 2 Many delegations, however, would favour specific provisions on incentives in the MAI although they hold different views as to their nature and scope. Some proposed a built-in agenda for future work
Discussion of possible provisions focused on the following draft article which is regarded as a compromise text by those who would still prefer more far-reaching disciplines
43 Article
87
1. The Contracting Parties confirm that Article XX (on NT and MFN) and Article XX (Transparency) applies to [the granting of] 88
investment incentives
89
2. [The Contracting Parties acknowledge that[, in certain circumstances,] even if applied on a non-discriminatory basis, investment incentives may have distorting effects on the flow of capital and investment decisions
90
[Any Contracting Party which considers that its investors or their investments are adversely affected by an investment incentive adopted by another Contracting Party and having a distorting effect, may request consultations with that Contracting Party.] [The former Contracting Party may also bring the incentive before the Parties Group for its consideration.]] 91, 92
87. With respect to the treatment of tax incentives see separate Article on Taxation in this Consolidated Text
88. Some delegations favour the deletion of "the granting of"
89. While it is agreed that investment incentives should be subject to NT and MFN obligations, there are
different views on the desirability of making this explicit. Consequently, some delegations consider this
paragraph to be unnecessary. One delegation maintains a pre-scrutiny reservation on the text of this draft
article. The dispute settlement mechanism would, in particular, apply to this article. One delegation raises
the possibility of taking reservations with regard to NT
90. Several delegations point out that not all investment incentives are bad -- the problem arises in drawing a
line between good and bad incentives. It is suggested that the distorting effects of investment incentives on
investment decisions and capital flows should be balanced against their possible benefits in achieving
legitimate social objectives. Other delegations note that these concerns were addressed in paragraph 3 of the
draft article
91. Some Delegations remain unconvinced by the need for special consultation procedures for non-discriminatory
investment incentives as defined in paragraph 2, although final judgement would need to
await the decisions taken on the coverage of the MAI. The presumption is that, as with other agreements,
consultations would be the first procedural step of the dispute settlement mechanism of the MAI. It should
be possible to revisit the adequacy of the provisions on dispute settlement and the role of the Parties Group
when their configuration is better known. One delegation questions whether the dispute settlement
mechanism of the MAI could apply to investment distorting investment incentives or to investment
incentives granted illegally. These questions would also deserve further attention. Some delegations
question the role of the Parties Group in any consultation process
92. One delegation suggests the first sentence of paragraph 3 could be added to paragraph 4, and the rest of
paragraph 3 deleted
44 3
93
[In order to further avoid and minimise such distorting effects and to avoid undue competition between Contracting Parties in order to attract or retain investments, the Contracting Parties [shall] enter into negotiations with a view to establishing additional MAI disciplines [within three years] after the signature of this Agreement
94
These negotiations shall recognise the role of investment incentives with regard to the aims of policies, such as regional, structural, social, environmental or R&D policies of the Contracting Parties, and other work of a similar nature undertaken in other fora. These negotiations shall, in particular, address the issues of positive discrimination, 95
[transparency 96
], standstill and rollback 97
.] 4. [For the purpose of this Article, an "investment incentive" means: The grant of a specific advantage arising from public expenditure [a financial contribution] in connection with the establishment, acquisition, expansion, management, operation or conduct of an investment of a Contracting Party or a non-Contracting Party in its territory]
93. The form and placement of this text would have to be decided
94. Some delegations feel that the MAI should include additional disciplines on investment incentives from the
time it enters into force. Another delegation cautions that additional disciplines could have far-reaching
implications for other multilateral agreements as well as for national tax laws and regulatory regimes
95. Some delegations express the view that positive discrimination should be prohibited and this should be
placed in the text
96. One delegation considers the transparency Article of the MAI would already be sufficient
97. Some delegations consider it very difficult to recommend future negotiations without agreement on their
nature and scope
45 RECOGNITION ARRANGEMENTS 98
1. A Contracting Party may recognise prudential measures in financial services of another country, or standards or criteria for the authorisation, licensing or certification of investors of another country and their investments. On the basis of such recognition, a Contracting Party may accord to investors of another country and their investments more favourable treatment than it accords to investors of any other country and its investments. Such recognition, which may be achieved through harmonisation or otherwise, may be based on an agreement or arrangement with any other Contracting Party or non-Contracting Party concerned or may be accorded autonomously
2. A Contracting Party that is a party to an agreement or arrangement referred to in paragraph 1, whether future or existing, shall afford adequate opportunity for other interested Contracting Parties to negotiate their accession to such agreements or arrangements, or to negotiate comparable ones with it, under circumstances in which there would be equivalent regulation, oversight and implementation of such regulation, and, if appropriate, procedures concerning the sharing of information between parties to the agreement or arrangement. Where a Contracting Party accords recognition autonomously, it shall afford adequate opportunity for any other Contracting Party to demonstrate that these circumstances exist
3. A Contracting Party shall not accord recognition in a manner which would constitute a means of avoiding the Contracting Party’s commitments or obligations under the Agreement
AUTHORISATION PROCEDURES 99
1. Each Contracting Party’s regulatory authorities shall make available to interested persons their requirements for completing applications relating to an investment
2. On the request of an applicant, the regulatory authority shall inform the applicant of the status of its application. If such authority requires additional information from the applicant, it shall notify the applicant without undue delay
3. A regulatory authority shall make an administrative decision on a completed application of an investor or an investment of an investor of another Contracting Party within a reasonable period of time, and shall promptly notify the applicant of the decision. An application shall not be considered complete until [all relevant hearings are held and] all necessary information is received
98. DG3 is divided as to the desirability of a generalised text on recognition arrangements and has referred it to
the Negotiating Group for decision
99. DG3 is not convinced of the value of a generalisation of the financial services text concerning authorisation
procedures
46 INTELLECTUAL PROPERTY Intellectual property issues are being examined by intellectual property experts. The results of these discussions are contained in reports DAFFE/MAI(97)32, DAFFE/MAI/IP(97)2. The most recent status of discussions [DAFFE/MAI/IP(98)1] is reproduced here
Transfers
100
Agreed: text on collective management charges should be added to the first sentence in paragraph 2 of the Commentary on Transfers (DAFFE/MAI(97)1/REV2, p. 125) after "purposes": ", or any authorised deduction by an entity charged with collective management of intellectual property rights. " Not agreed: whether the modified paragraph should remain in the Commentary or be placed in the text of the Agreement
Monopolies
101
Agreed: the definition of "monopoly" should be amended to refine the definition’s treatment of intellectual property rights: "Monopoly" means any person or entity designated by a [national [or subnational] government authority] [Contracting Party] as the sole supplier or buyer of a good or service in a relevant market in the territory of a Contracting Party, but does not include a person or entity that has an exclusive intellectual property right, concession, licence authorisation or permit solely by reason of such right or exercise of such right [nor does it include an entity charged with the collective management of intellectual property rights]
Not agreed: as indicated by the final bracketed phrase, whether entities charged with collective management of IPRs should also be excluded from the definition
Performance Requirements
102
Agreed: paragraph 1(f) in the Article on Performance Requirements requires explicit reference to the transfer of IPRs. Not agreed: (a) whether the current wording of paragraph 1(f) adequately covers future IPRs and moral rights; and (b) whether paragraphs 1(b) and (c) of the Article on Performance Requirements have an impact on IPRs
100. See Section IV, below
101. See Section III, above
102. See Section III, above
47 Expropriation
103
Agreed: text is needed to ensure that certain IP management and legal provisions do not constitute expropriation
Not agreed: flowing from proposed text: "The creation, limitation, revocation, annulment, statutory licensing, compulsory licensing and compulsory collective management of IPRs, the withholding of authorised deductions by an entity charged with the collective management of IPRs, and the sharing of remuneration between different holders of IPRs are not expropriation within the terms of this agreement, to the extent that they are not inconsistent with specialised IPR conventions." (a) whether there should be a specific IP text or reliance on a general text clarifying that expropriation does not include normal government regulatory activity; (b) whether and how the statement should be qualified; (c) whether that list of actions should be exhaustive or illustrative; (d) whether the current wording adequately covers future rights; (e) whether the question of consistency with IPR agreements should be worded positively; (f) whether a specific IP text should be in the text of the Agreement, in an interpretative footnote or in the Commentary; and (g) whether the word "creation" adequately covers the intended concept
National Treatment and MFN Treatment
104
and General Treatment
105
Agreed: MAI obligations should not extend NT/MFN obligations in existing IP agreements
Not agreed: (a) whether there should be a NT/MFN exception through a link to existing IP agreements; (b) whether there should be a NT/MFN exception to MAI obligations for IPRs; (c) whether the eventual solution should also be applied to the General Treatment articles; and (d) the applicability of the MAI obligations with respect to future IPRs
103. See Section IV, below
104. See Section III, above
105. See Section IV, below
48 Definitions of "Investment" and "Investor" 106
Agreed: there needs to be clarification of the definition of "investment". The required clarification is tied to the resolution of the eventual substantial MAI obligations for IPRs
Not agreed: (a) whether the definition of "investment" should be limited to those IPRs included in the TRIPS Agreement; (b) whether it should exclude copyrights and related rights; (c) whether it should include future IPRs; (d) whether it should include only the "economic aspects" of IPRs; (e) whether it should include only those rights provided domestically; and (f) what implications the definition of "investor" has for an IP "rightsholder"
Dispute Settlement
107
Agreed: IP experts wish to limit forum shopping and conflicting jurisprudence with the WTO
Not agreed: (a) how to achieve these goals; (b) the desirability of applying investor-state dispute settlement to IPRs; and (c) whether the existing MFN obligations in the TRIPS Agreement create the risk of "free-riders"
Information Transfers and Data Processing
108
Agreed: there are concerns that the text of the generalisation of financial services (see Information Transfer and Data Processing, page 57) has implications for IPRs, and may have to be amended or deleted to take these concerns into account
Exhaustion of Rights
Not agreed: whether there needs to be any language on this issue to ensure that the MAI does not create new obligations in this area
106. See Section II, above
107. See Section V, below
108. See Section IV, below
49 PUBLIC DEBT
109
"The [rescheduling] of the debts of a Contracting Party or its appropriate institutions [owed to another Contracting Party or its appropriate institutions and the related [rescheduling] of its debts owed to [private] creditors will not be subject to [the provisions of this Agreement]." 110
CORPORATE PRACTICES
111
TECHNOLOGY R&D
112
109. The majority of delegations remained of the view that public debt should be covered by the MAI
disciplines. However, there was general agreement that public debt rescheduling should fall outside the
MAI disciplines
110. One delegation proposed alternative language to this text, which reads as follows:
"Reorganisation of debts due by a Contracting Party to another Contracting Party or its
appropriate institutions, including the related obligations of comparability of treatment between
all creditors, whether public or private, shall prevail over the terms of this Agreement."
Under a third proposal, one delegation suggested that " there might be an alternative approach to the current
text’s sweeping exclusion of rescheduled public debt. This approach would add an interpretative note to the
definition of "investment" that would make clear that:
-- consistent with international law and practice, particularly as related to treaties with
provisions on investment, MAI obligations (e.g., on expropriation, transfers, treatment)
do not apply to a government’s failure to pay on government debt or government-guaranteed
debt;
-- breach of a debt agreement does not in itself constitute a breach of any of the provisions
of the MAI (e.g., expropriation, transfers, treatment); and
-- public debt does not include government obligations to pay for goods and services
purchased from an investor
The interpretative note would provide guidance for tribunals in both state-to-state and investor-to-state
arbitration. The interpretative note would be accompanied by an express exclusion of public debt and
government-guaranteed debt from the "investment agreement" provision of investor-to-state dispute
settlement. "
111. The Chairman concluded that there is full agreement that government-imposed discriminatory practices
would be covered by the MAI. In view of the views expressed by a clear majority of delegations, the MAI
should not contain disciplines on non-government imposed discriminatory corporate practices. However,
Contracting Parties to the MAI should follow future developments in this area and could take up the matter
again if the need arises
112. See Commentary
50 NOT LOWERING STANDARDS
113
[Alternative 1
The Parties recognise that it is inappropriate to encourage investment by lowering [domestic] health, safety or environmental [standards] [measures] 114
or relaxing [domestic] [core] 115
labour standards
116
Accordingly, a Party should not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such [standards] [measures] as an encouragement for the establishment, acquisition, expansion or retention in its territory of an investment of an investor. If a Party considers that another Party has offered such an encouragement, it may request consultations with the other Party and the two Parties shall consult with a view to avoiding any such encouragement
Alternative 2
A Contracting Party [shall] [should] 117
not waive or otherwise derogate from, or offer to waive or otherwise derogate from [domestic] health, safety or environmental [measures] [standards] or [domestic] [core] labour standards as an encouragement for the establishment, acquisition, expansion or retention of an investment of an investor.] 113. Three delegations oppose any provision on labour. One delegation thinks the issue of "not lowering
standards" in the environmental area would be more appropriately dealt with in the context of a general
article on investment incentives
114. If "measure" is preferred, then the word "lowering" should be replaced by "relaxing". In either case, the
term selected should be defined. For reference purposes, delegations mentioned the definition of "measure"
in NAFTA or to be found in the Transparency Article of the MAI and the definition of "standard" in
NAFTA and in the WTO Agreement on Technical Barriers to Trade
115. Delegations noted that no universally accepted definitions existed for "core" or "domestic" standards. Most
delegations preferred "domestic" which was recognised to be wider in scope
116. A major difference of view as between Alternative 1 and Alternative 2 concerns the first sentence of
Alternative 1. This sentence is part of a difference of approach as to whether the provision should refer to
respect for universal standards or only to the relaxation of domestic standards. Views differ on whether this
sentence is useful or necessary
117. If "should" were preferred, it might be desirable to add the last sentence of Alternative 1. Those preferring
"should" argued that use of the word "shall" would prevent the authorities offering necessary waivers under
domestic law, for example, to help resolve a specific case of damage to the environment and might prevent
resolution of particular cases through consultations and persuasion. They also expressed concern that
"shall" might expose the authorities to dispute settlement challenge. One delegation expressed concern over
the use of the broader phrase "domestic labour" standards with recourse to dispute settlement in that it
could create disputes under the MAI over changes in programmes relating to minimum wages or retirement
qualifications; this delegation questioned if this was what was intended by this provision. Those preferring
"shall" argued that the purpose of this Article is to prohibit a waiver or derogation only if used as an
encouragement to an investment
51 PROPOSED "ADDITIONAL CLAUSE" ON LABOUR AND ENVIRONMENT
118
118. One delegation proposes to delete paragraph 4 of the existing text on performance requirements and add a
general exception article:
Subject to the requirement that such measures are not applied in a manner which would constitute a
means of arbitrary or unjustifiable discrimination or a disguised restriction on investment, nothing in
this agreement shall be construed to prevent the adoption, maintaining or enforcement by any
Contracting party of measures:
(a) necessary to protect human, animal or plant life or health
(b) relating to the conservation of living or non-living exhaustible natural resources
One delegation proposed as a general article the text of NAFTA Article 1114(1) with a second paragraph to
address investment outflows:
Nothing in this agreement shall be construed to prevent a Contracting Party from adopting, maintaining
or enforcing any measure otherwise consistent with this Agreement that it considers appropriate to
ensure that investment activity in its territory is undertaken in a manner sensitive to environmental
concerns
Likewise, no Contracting party shall adopt, maintain or enforce any environmental measure in a manner
which would constitute a disguised restriction for investment outflows from that Contracting Party to
another Contracting party, or for investment among Contracting parties
The "Package of Additional Environmental Proposals" presented to the Negotiating Group on 14 January
also proposes the language of NAFTA Article 1114(1)
52 IV. INVESTMENT PROTECTION
1. GENERAL TREATMENT
1
1.1. Each Contracting Party shall accord to investments in its territory of investors of another Contracting Party fair and equitable treatment and full and constant protection and security. In no case shall a Contracting Party accord treatment less favourable than that required by international law
1.2. A Contracting Party shall not impair by [unreasonable or discriminatory] [unreasonable and discriminatory] measures the operation, management, maintenance, use, enjoyment or disposal of investments in its territory of investors of another Contracting Party
2. EXPROPRIATION AND COMPENSATION
2.1. A Contracting Party shall not expropriate or nationalise directly or indirectly an investment in its territory of an investor of another Contracting Party or take any measure or measures having equivalent effect (hereinafter referred to as "expropriation") except: a) for a purpose which is in the public interest, b) on a non-discriminatory basis, c) in accordance with due process of law, and d) accompanied by payment of prompt, adequate and effective compensation in accordance with Articles 2.2 to 2.5 below
2.2. Compensation shall be paid without delay
2.3. Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriation occurred. The fair market value shall not reflect any change in value occurring because the expropriation had become publicly known earlier
2.4. Compensation shall be fully realisable and freely transferable
1. One delegation proposed to delete Article 1.2 and revise Article 1.1 as follows:
"Each Contracting Party shall accord to investments in its territory of investors of another Contracting Party
fair and equitable treatment and full and constant protection and security. Such treatment shall also apply to
the operation, management, maintenance, use, enjoyment or disposal of such investments. In no such case
shall a Contracting Party accord treatment less favourable than that required by international law."
53 2.5. [Compensation shall include interest at a commercial rate established on a market basis for the currency of payment from the date of expropriation until the date of actual payment.] 2
2.6. Due process of law includes, in particular, the right of an investor of a Contracting Party which claims to be affected by expropriation by another Contracting Party to prompt review of its case, including the valuation of its investment and the payment of compensation in accordance with the provisions of this article, by a judicial authority or another competent and independent authority of the latter Contracting Party
3. PROTECTION FROM STRIFE
3.1. An investor of a Contracting Party which has suffered losses relating to its investment in the territory of another Contracting Party due to war or to other armed conflict, state of emergency, revolution, insurrection, civil disturbance, or any other similar event in the territory of the latter Contracting Party, shall be accorded by the latter Contracting Party, as regards restitution, indemnification, compensation or any other settlement, treatment no less favourable than that which it accords to its own investors or to investors of any third State, whichever is most favourable to the investor
3.2. Notwithstanding Article 3.1, an investor of a Contracting Party which, in any of the situations referred to in that paragraph, suffers a loss in the territory of another Contracting Party resulting from (a) requisitioning of its investment or part thereof by the latter’s forces or authorities, or (b) destruction of its investment or part thereof by the latter’s forces or authorities, which was not required by the necessity of the situation, shall be accorded by the latter Contracting Party restitution or compensation which in either case shall be prompt, adequate and effective and, with respect to compensation, shall be in accordance with Articles 2.1 to 2.5
2. DG3 identified four options for calculating compensation which are set out in the commentary. The
Negotiating Group Chairman noted that a large majority were in favour of having no explicit provision in
the MAI addressing this issue. However, to respond to the concerns of some countries that this approach
might lead to uncertainty, the MAI could contain an interpretative note providing that in the case of undue
delay in the payment of compensation on the part of a Contracting Party, any exchange rate loss arising
from this delay should be borne by the host country
54 4. TRANSFERS
4.1. Each Contracting Party shall ensure that all payments relating to an investment in its territory of an investor of another Contracting Party may be freely transferred into and out of its territory without delay. Such transfers shall include, in particular, though not exclusively : a) the initial capital and additional amounts to maintain or increase an investment ; b) returns; 3
c) payments made under a contract including a loan agreement; d) proceeds from the sale or liquidation of all or any part of an investment ; e) payments of compensation under Articles 2 and 3; f) payments arising out of the settlement of a dispute; g) earnings and other remuneration of personnel engaged from abroad in connection with an investment
4.2. Each Contracting Party shall further ensure that such transfers may be made in a freely convertible 4
currency. [Freely convertible currency means a currency which is widely traded in international foreign exchange markets and widely used in international transactions.] or [Freely convertible currency means a currency which is, in fact, widely used to make payments for international transactions and is widely traded in the principal exchange markets]
4.3. Each Contracting Party shall also further ensure that such transfers may be made at the market rate of exchange prevailing on the date of transfer
[4.4. In the absence of a market for foreign exchange, the rate to be used shall be the most recent exchange rate for conversion of currencies into Special Drawing Rights.] 4.5. Notwithstanding Article 4.1(b) above, a Contracting Party may restrict the transfer of a return in kind in circumstances where the Contracting Party is permitted under the GATT 1994 to restrict or prohibit the exportation or the sale for export of the product constituting the return in kind. Nevertheless, a Contracting Party shall ensure that transfers of returns in kind may be effected as authorised or specified in an investment agreement, investment authorisation, or other written agreement between the Contracting Party and an investor or investment of another Contracting Party
5
3. As defined in the Article on definitions
4. The agreement in Article 4.2 on the deletion of "usable" and acceptance of the word "convertible" supposes
agreement on its definition and on Article 4.6
5. One delegation has difficulties with the obligations referred to in the second sentence
55 4.6
6
Notwithstanding paragraphs 1 to 5 of this Article, a Contracting Party may delay or prevent a transfer through the equitable, non-discriminatory and good faith application of measures: (a) to protect the rights of creditors, (b) relating to or ensuring compliance with laws and regulations (i) on the issuing, trading and dealing in securities, futures and derivatives, (ii) concerning reports or records of transfers, or (c) in connection with criminal offences and orders or judgements in administrative and adjudicatory

proceedings; provided that such measures and their application shall not be used as a means of avoiding the Contracting Party’s commitments or obligations under the Agreement
7
6. This version of paragraph 4.6 was refined by DG3 taking account of earlier proposals by financial experts
7. Some DG3 delegations consider that if the footer were to be deleted and included in a MAI general anti-abuse
clause, the need to re-introduce a more specific footer, such as the one proposed by one delegation,
"provided that such measures and their application shall not unreasonably impair the free and undelayed
transfer ensured by this Agreement", may have to be considered
56 5. INFORMATION TRANSFER AND DATA PROCESSING
8
1. No Contracting Party shall take measures that prevent transfers of information or the processing of information outside the territory of a Contracting Party, including transfers of data by electronic means, where such transfer of information or processing of information is: a) necessary for the conduct of the ordinary business of an enterprise located in a Contracting Party that is the investment of an investor of another Contracting Party; or b) in connection with the purchase or sale by an enterprise located in a Contracting Party that is the investment of an investor of another Contracting Party of: i) data processing services; or ii) information, including information provided to or by third parties
2. Nothing in paragraph 1: a) affects the enterprise’s obligation to comply with any record keeping and reporting requirements; or b) restricts the right of a Contracting Party to protect privacy, including the protection of personal data, intellectual and industrial property, and the confidentiality of individual records and accounts, so long as such right is not used to circumvent the provisions of the Agreement
6. SUBROGATION
If a Contracting Party or its designated agency makes a payment under an indemnity, guarantee or contract of insurance 9
given in respect of an investment of an investor in the territory of another Contracting Party, the latter Contracting Party shall recognise the assignment of any right or claim of such investor to the former Contracting Party or its designated agency and the right of the former Contracting Party or its designated agency to exercise by virtue of subrogation any such right and claim to the same extent as its predecessor in title
10
8. DG3 recommends adoption of this generalised text after taking account of the text earlier by financial
experts
9. Two delegations cannot agree to deletion of the words "non-commercial risks" at this stage
10. One delegation has difficulties with the obligations in this paragraph
57 7. PROTECTING EXISTING INVESTMENTS
[This Agreement shall apply to investments made prior to its entry into force for the Contracting Parties concerned [consistent with the legislation of the Contracting Party in whose territory it was made] as well as investments made thereafter. This Agreement shall not apply to claims arising out of events which occurred, or to claims which had been settled, prior to its entry into force.] or [This Agreement shall apply to investments existing at the time of entry into force as well as to those established or acquired thereafter.] 58 V. DISPUTE SETTLEMENT
1
STATE-STATE PROCEDURES
A. GENERAL PROVISIONS 1. The rules and procedures set out in Articles A-C shall apply to the avoidance of conflicts and the resolution of disputes between Contracting Parties regarding the interpretation or application of the Agreement unless the disputing parties agree to apply other rules or procedures. However, the disputing parties may not depart from any obligation regarding notification of the Parties Group and the right of Parties to present views, under Article B, paragraphs 1.a and 4.c, and Article C, paragraphs 1.a, 4, and 6.e
2. Contracting Parties and other participants in proceedings shall protect any confidential or proprietary information which may be revealed in the course of proceedings under Articles B and C and which is designated as such by the Party providing the information. Contracting Parties and other participants in the proceedings may not reveal such information without written authorisation from the Party which provided it
3. [EC or Contracting Party REIO text being developed for possible inclusion] B. CONSULTATION, CONCILIATION AND MEDIATION 1. Consultations
a. One or more Contracting Parties may request any other Contracting Party to enter into consultations regarding any dispute between them about the interpretation or application of the Agreement. The request shall be submitted in writing and shall provide sufficient information to understand the basis for the request, including identification of any actions at issue. The requested Party shall enter into consultations within thirty days of receipt of the request. The requesting Contracting Party shall provide the Parties Group with a copy of the request for consultation, at the time it submits the request to the other Contracting Party
b. A Contracting Party may not initiate arbitration against another Contracting Party under Article C of this Agreement unless the former Contracting Party has requested consultation and has afforded that other Contracting Party a consultation period of no less than 60 days after the date of the receipt of the request
1. Note: It is understood that for a number of delegations further work is needed on dispute settlement. In
particular, different options remain in the field of multilateral consultations and scope of dispute settlement
The present text has been prepared by the Chairman of the Expert Group on Dispute Settlement on the basis
of the discussions in the group. It is under consideration by the Negotiating Group
59 2. Multilateral Consultations
a. In the event that consultations under paragraph 1 of this Article have failed to resolve the dispute within 60 days after the date of receipt of the request for those consultations, the Contracting Parties in dispute may, by agreement, request the Parties Group to consider the matter
b. Such request shall be submitted in writing and shall give the reason for it, including identification of any actions at issue, and shall indicate the legal basis for the complaint
c. The Parties Group may make recommendations to the Contracting Parties in dispute. The Parties Group shall conclude its deliberations within 60 days after the date of receipt of the request 3. Mediation or Conciliation
If the Parties are unable to reach a mutually satisfactory resolution of a matter through consultations, they may have recourse to good offices or to mediation or conciliation under such rules and procedures as they may agree
4. Confidentiality of Proceedings, Notification of Results
a. Proceedings involving consultations, mediation or conciliation shall be confidential
b. No Contracting Party may, in any binding legal proceedings, invoke or rely upon any statement made or position taken by another Contracting Party in consultations, conciliation or mediation proceedings initiated under this Agreement, with the exception of factual representations
c. The Parties to consultations, mediation, or conciliation under this Agreement shall inform the Parties Group of any mutually agreed solution
C. ARBITRATION 1. Scope and Initiation of Proceedings
a. Any dispute between Contracting Parties as to whether one of them has acted in contravention of this Agreement shall, at the request of any Contracting Party that is a party to the dispute and has complied with the consultations requirements of Article B, be submitted to an arbitral tribunal for decision. A request, identifying the matters in dispute, shall be delivered to the other Party through diplomatic channels, unless that Contracting Party has designated another channel for receipt of notification and so notified the Depositary, and a copy of the request shall be delivered to the Parties Group
60 b. A Contracting Party may not initiate proceedings under this Article for a dispute which its investor has submitted, or consented to submit, to arbitration under Article D, unless the other Contracting Party has failed to abide by and comply with the award rendered in that dispute or those proceedings have terminated without resolution by an arbitral tribunal of the investor’s claim
c. If a dispute arises between Contracting Parties as to whether one of them has acted in contravention of a substantially similar obligation of that Contracting Party under this Agreement and another agreement to which both are party, the complaining Contracting Party may submit it for decision under the agreement of its choice. In doing so, it waives its right to submit the matter for decision under the agreement not chosen
2. Formation of the Tribunal
a. Within 30 days after receipt of a request for arbitration, the Parties to the dispute shall appoint by agreement three members of the tribunal and designate one of them as Chairman
Except for compelling reasons, the members shall be persons proposed by the Secretary General ICSID. At the option of either party or, where there is more than one Party on the same side of the dispute, either side, two additional members may be appointed, one by each party or side
b. If the necessary appointments have not been made within the periods specified in subparagraph a, above, either Party or side to the dispute may, in the absence of any other agreement, invite the Secretary General of the Centre for the Settlement of Investment Disputes to make the necessary appointments. The Secretary-General shall do so, to the extent feasible, in consultations with the Parties to the dispute and within thirty days after receipt of the request
c. Parties and the Secretary-General should consider appointment to the tribunal of members of the roster maintained pursuant to subparagraph f, below. If arbitration of a dispute is considered by either Contracting Party to the dispute or the Secretary-General to require special expertise on the tribunal, rather than solely through expert advice under the rules governing the arbitration, the appointment of individuals possessing expertise not found on the roster should be considered
d. Members of a particular arbitral tribunal shal l be independent and impartial
e. Any vacancies which may arise in a tribunal shall be filled by the procedure by which the original appointment had been made
f. The Parties Group shall maintain a roster of highly qualified individuals willing and able to serve on arbitral tribunals under this Agreement. Each Contracting Party may nominate up to four persons who shall be included as members of the roster. Nominations are valid for five year terms. At the end of a term, the Contracting Party which nominated a member may renew the nomination or nominate a new member of the roster. A member shall withdraw from the roster if no longer willing or able to serve and the Contracting Party which nominated that member may nominate another member for a full term
61 3. Consolidation
a. Contracting Parties in dispute with the same Contracting Party over the same matter should act together as far as practicable for purposes of dispute settlement under this Article. Where more than one Contracting Party requests the submission to an arbitral tribunal of a dispute with the same Contracting Party relating to the same question, a single arbitral tribunal should be established to consider such disputes whenever feasible
b. To the extent feasible, if more than one arbitral tribunal is formed, the same persons shall be appointed as members of both and the timetables of the proceedings shall be harmonised
4. Third Parties
Any Contracting Party wishing to do so shall be given an opportunity to present its views orally or in writing to the arbitral tribunal on the issues of a legal nature in dispute. Such a Contracting Party shall be given access to the documents of the proceedings, other than confidential or proprietary information designated under Article A, paragraph 2. The tribunal shall establish the deadlines for such submissions in light of the schedule of the proceedings and shall notify such deadlines, at least thirty days in advance thereof, to the Parties Group
5. Scientific and Technical Expertise
a. On request of a disputing Contracting Party or, unless the disputing Contracting Parties disapprove, on its own initiative, the tribunal may request a written report of a scientific or technical review board, or expert, on any factual issue concerning environmental, health, safety or other scientific or technical matters raised by a disputing Contracting Party in a proceeding, subject to such terms and conditions as such Parties may agree
b. The board, or expert, shall be selected by the tribunal from among highly qualified, independent experts in the scientific or technical matters, after consultations with the disputing Parties and the scientific or technical bodies identified by those Parties
c. The disputing Contracting Parties shall be provided: i. advance notice of, and an opportunity to provide comments to the tribunal on the proposed factual issues to be referred to the board, or expert; and ii. a copy of the board’s, or expert’s, report and an opportunity to provide comments on the report to the tribunal
d. The tribunal shall take the report and any comments by the disputing Contracting Parties on the report into account in the preparation of its award
62 6. Proceedings and Awards
a. The tribunal shall decide disputes in accordance with this Agreement, interpreted and applied in accordance with the applicable rules of international law
b. The tribunal may, at the request of a Party, recommend provisional measures which either Party should take to avoid serious prejudice to the other pending its final award
c. The tribunal, in its award, shall set out its findings of law and fact, together with the reasons therefore, and may, at the request of a Party, award the following forms of relief: i. a declaration that an action of a Party is in contravention of its obligations under this Agreement; ii. a recommendation that a Party bring its actions into conformity with its obligations under the Agreement; iii. pecuniary compensation for any loss or damage to the requesting Party’s investor or its investment; and iv. any other form of relief to which the Party against whom the award is made consents, including restitution in kind to an investor
d. The tribunal shall draft its award consistently with the requirement of confidentiality set out in Article A, paragraph 2. It shall issue its award in provisional form to the Parties to the dispute on a confidential basis, as a general rule within 180 days after the date of formation of the tribunal. The parties to the dispute may, within 30 days thereafter, submit written comment upon any portion of it. The tribunal shall consider such submissions, may solicit additional written comments of the parties, and shall issue its final award within 15 days after closure of the comment period
e. The tribunal shall promptly transmit a copy of its final award to the Parties Group, which shall make it publicly available
f. Tribunal awards shall be final and binding between the parties to the dispute, subject to paragraph 7 below
g. Each party shall pay the cost of its representation in the proceedings. The costs of the tribunal shall be paid for equally by the Parties unless the tribunal directs that they be shared differently. Fees and expenses payable to tribunal members will be subject to schedules established by the Parties Group and in force at the time of the constitution of the tribunal
63 7. Nullification
a. Either party to the dispute may request the annulment of an award, in whole or in part, on one or more of the following grounds, that: i. the Tribunal was not properly constituted; ii. the Tribunal has manifestly exceeded its powers; iii. there was corruption on the part of a member of the Tribunal or on the part of a person providing decisive expertise or evidence; iv. there has been a serious departure from a fundamental rule of procedure; or v. the award has failed to state the reasons on which it is based
b. The request shall be submitted for decision by a tribunal which shall be constituted and operate under the rules applicable to a dispute submitted under paragraph 1 of this article
c. Such a request must be submitted within 120 days after the date on which the award was rendered or after the discovery of the facts relevant to nullification on the grounds of corruption, whichever is later and, in any event, within five years after the date on which the award was rendered
d. The tribunal may nullify the award in whole or in part. If the award is nullified, the fact of nullification shall be communicated to the Parties Group. In such a case, the dispute may be submitted for decision to a new tribunal constituted under this Article or to any other available forum, notwithstanding the Contracting Parties waiver under paragraph 1.c. of this article
8. Default Rules
The PCA Optional Rules for Arbitrating Disputes between Two States shall apply to supplement provisions of these Articles. The Parties Group may adopt supplemental provisions to ensure the smooth functioning of these rules, in particular to clarify the inter-relationship between these rules and the PCA Optional Rules
64 9. Response to Non-compliance
2
a. If a Contracting Party fails within a reasonable period of time to comply with its obligations as determined in the award, such Contracting Party shall, at the request of any Contracting Party in whose favour the award was rendered, enter into consultations with a view to reaching a mutually acceptable solution. If no satisfactory solution has been agreed within thirty days after the date of the request for consultations, any Contracting Party in whose favour the award was rendered, shall notify the other Contracting Party and the Parties Group if it intends to [take measures in response][suspend the application to the other Contracting Party of obligations under this agreement]
b. The effect of any such [responsive measures][suspension] must be proportionate to the effect of the other Party’s non-compliance
3
Such measures may not include suspension of the application of Article[s _ (General Treatment) and] _ (Expropriation) [and should not include denial of other protections to established investment]
c. At the request of any Party to the award upon conclusion of the thirty day period for consultation, the Parties Group shall consider the matter. [Until twenty days after the receipt by the Parties Group Secretariat of the request, responsive measures shall not be taken.] The Parties Group may: i. make recommendations, by consensus minus the disputing Contracting Parties; ii. suspend the non-complying Party’s right to participate in decisions of the Parties Group, by consensus minus the non-complying Contracting Party; and iii. [by consensus minus the Contracting Party which had intended to take responsive measures, decide that some or all of the responsive measures shall not be taken. The Contracting Party shall comply with that decision.] d. Any dispute concerning the alleged failure of a Contracting Party to comply with its obligations as determined in an award or the lawfulness of any responsive measures shall, at the request of any Contracting Party that is party to the dispute, be submitted for decision to the arbitral tribunal which rendered the award or, if the original tribunal is unavailable, to a single member or three member arbitral tribunal designated by the Secretary-General. The request shall be submitted in the same fashion, and the proceedings carried out in accordance with the same rules as are applicable to a request made under paragraph 1.a of this Article, with such modifications as the tribunal deems appropriate, and the final award shall be issued no later than 60 days after the date of the request, in case of the original tribunal, or after the date of its formation, in the case of a new tribunal. [No responsive measures may be taken from the time of submission of a dispute unless authorized by the tribunal as an interim measure or found lawful.] 2. Note: The text in paragraph 9 has been circulated separately. The Commentary indicates the general state of
development on this issue in informal consultations at expert level
3. As variant of this approach, one delegation suggests utilizing language based on the WTO agreements:
"The level of the suspension of benefits ... shall be equivalent to the level of the nullification or impairment
of benefits, which the aggrieved Party reasonably expected to accrue to it, resulting from the non-compliance."
65 INVESTOR-STATE PROCEDURES
D. DISPUTES BETWEEN AN INVESTOR AND A CONTRACTING PARTY 1. Scope and Standing
a. This article applies to disputes between a Contracting Party and an investor of another Contracting Party concerning an alleged breach of an obligation of the former under this Agreement which causes loss or damage to the investor or its investment
b. An investor of another Contracting Party may also submit to arbitration under this article any investment dispute concerning any obligation which the Contracting Party has entered into with regard to a specific investment of the investor through: i. An investment authorisation granted by its competent authorities specifically to the investor or investment, ii. a written agreement granting rights with respect to [categories of subject matters] on which the investor has relied in establishing acquiring, or significantly expanding an investment
2. Means of Settlement
Such a dispute should, if possible, be settled by negotiation or consultation. If it is not so settled, the investor may choose to submit it for resolution: a. to any competent courts or administrative tribunals of the Contracting Party to the dispute; b. in accordance with any dispute settlement procedure agreed upon prior to the dispute arising; or c. by arbitration in accordance with this Article under: i. the Convention on the Settlement of Investment Disputes between States and Nationals of other States (the "ICSID Convention"), if the ICSID Convention is available; ii. the Additional Facility Rules of the Centre for Settlement of Investment Disputes ("ICSID Additional Facility"), if the ICSID Additional Facility is available; iii. the Arbitration Rules of the United Nations Commission on International Trade Law ("UNCITRAL"); or iv. the Rules of Arbitration of the International Chamber of Commerce ("ICC")
66 3. Contracting Party Consent
a. Subject only to paragraph 3.b, each Contracting Party hereby gives its unconditional consent to the submission of a dispute to international arbitration in accordance with the provisions of this Article
b. A Contracting Party may, by notifying the Depositary upon deposit of its instrument of ratification or accession, provide that its consent given under paragraph 3.a only applies on the condition that the investor and the investment waive in writing the right to initiate any other dispute settlement procedure with respect to the same dispute and withdraw from any such procedure in progress before its conclusion. A Contracting Party may, at any time, reduce the scope of that limitation by notifying the Depositary
4. Time periods and notification
An investor may submit a dispute for resolution pursuant to paragraph 2.c of this Article after sixty days following the date on which notice of intent to do so was received by the Contracting Party in dispute, but no later than five years from the date the investor first acquired or should have acquired knowledge of the events which gave rise to the dispute. Notice of intent, a copy of which shall be delivered to the Parties Group, shall specify: a. the name and address of the disputing investor; b. the name and address, if any, of the investment; c. the provisions of this Agreement alleged to have been breached and any other relevant provisions; d. the issues and the factual basis for the claim; and e. the relief sought, including the approximate amount of any damages claimed
5. Written Agreement of the Parties
The consent given by a Contracting Party in subparagraph 3.a, together with either the written submission of the dispute to resolution by the investor pursuant to subparagraph 2.c or the investor’s advance written consent to such submission, shall constitute the written consent and the written agreement of the parties to the dispute to its submission for settlement for the purposes of Chapter II of the ICSID Convention, the ICSID Additional Facility Rules, Article 1 of the UNCITRAL Arbitration Rules, the Rules of Arbitration of the ICC, and Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"). Neither party may withdraw its consent unilaterally, except as provided in paragraph 9.e of this Article
6. [EC or Contracting Party REIO text being developed, for possible inclusion]
67 7. Appointments to Arbitral Tribunals
a. Unless the parties to the dispute otherwise agree, the tribunal shall comprise three arbitrators, one appointed by each of the disputing parties and the third, who shall be the presiding arbitrator, appointed by agreement of the disputing parties
b. If a tribunal has not been constituted within 90 days after the date that a claim is submitted to arbitration, the arbitrator or arbitrators not yet appointed shall, on the request of either disputing party, be appointed by the appointing authority. For arbitration under paragraph 2, subparagraphs c.i, c.ii and c.iii, and paragraph 9, the appointing authority shall be the Secretary-General of ICSID. For arbitration under paragraph 2, subparagraph c.iv, the appointing authority shall be the International Court of Arbitration of the ICC
c. The parties to a dispute submitted to arbitration under this article and the appointing authority should consider the appointment of: i. members of the roster maintained by the Contracting Parties pursuant to Article C, paragraph 2.f; and ii. individuals possessing expertise not found on the roster, if arbitration of a dispute requires special expertise on the Tribunal, rather than solely through expert advice under the rules governing the arbitration
d. The appointing authority shall, as far as possible, carry out its function in consultation with the parties to the dispute
e. In order to facilitate the appointment of arbitrators of the parties’ nationality on three member ICSID tribunals under Article 39 of the ICSID Convention and Article 7 of Schedule C of the ICSID Additional Facility Rules, and without prejudice to each party’s right independently to select an individual for appointment as arbitrator or to object to an arbitrator on grounds other than nationality: i. the disputing Contracting Party agrees to the appointment of each individual member of a tribunal under paragraph 2.c.i or ii of this Article; and ii. a disputing investor may initiate or continue a proceeding under paragraph 2.c.i or ii only on condition that the investor agrees in writing to the appointment of each individual member of the tribunal
8. Standing of the Investment
An enterprise constituted or organised under the law of a Contracting Party but which, from the time of the events giving rise to the dispute until its submission for resolution under paragraph 2.c, was an investment of an investor of another Contracting Party, shall, for purposes of disputes concerning that investment, be considered "an investor of another Contracting Party" under this article and "a national of another Contracting State" for purposes of Article 25(2)(b) of the ICSID Convention regarding a dispute not submitted for resolution by the investor which owns or controls it
68 9. Consolidation of Multiple Proceedings
a. In the event that two or more disputes submitted to arbitration with a Contracting Party under paragraph 2.c have a question of law or fact in common, the Contracting Party may submit to a separate arbitral tribunal, established under this paragraph, a request for the consolidated consideration of all or part of them. The request shall stipulate: i. the names and addresses of the parties to the proceedings sought to be consolidated, ii. the scope of the consolidation sought, and iii. the grounds for the request
The Contracting Party shall deliver the request to each investor party to the proceedings sought to be consolidated and a copy of the request to the Parties Group
b. The request for consolidated consideration shall be submitted to arbitration under the rules chosen by agreement of the investor parties from the list contained in paragraph 2.c. The investor parties shall act as one side for the purpose of the formation of the tribunal
c. If the investor parties have not agreed upon a means of arbitration and the nomination of an arbitrator within 30 days after the date of receipt of the request for consolidated consideration by the last investor to receive it: i. the request shall be submitted to arbitration in accordance with this article under the UNCITRAL rules, and ii. the appointing authority shall appoint the entire arbitral tribunal, in accordance with paragraph 7
d. The arbitral tribunal shall assume jurisdiction over all or part of the disputes and the other arbitral proceedings shall be stayed or adjourned, as appropriate if, after considering the views of the parties, it decides that to do so would best serve the interest of fair and efficient resolution of the disputes and that the disputes fall within the scope of this paragraph
e. An investor may withdraw the dispute from arbitration under this paragraph 9 and such dispute may not be resubmitted to arbitration under paragraph 2.c. If it does so no later than 15 days after receipt of notice of consolidation, its earlier submission of the dispute to that arbitration shall be without prejudice to the investor’s recourse to dispute settlement other than under paragraph 2.c
f. At the request of the Contracting Party, the arbitral tribunal established under this paragraph may decide, on the same basis and with the same effect as under paragraph 9.d, whether to assume jurisdiction over all or part of a dispute falling with the scope of paragraph 9.a which is submitted to arbitration after the initiation of consolidation proceedings
69 10. Preliminary Objections
a. Any objection to the jurisdiction of the tribunal or to the admissibility of the application shall be raised no later than in the statement of defence
b. Upon receipt of such an objection, the tribunal may suspend the proceedings on the merits
c. After hearing the parties, the tribunal should give its decision, by which it shall either uphold the objection or reject it, within 60 days after the date on which the objection was made
11. Indemnification
A Contracting Party shall not assert as a defence, counter-claim, right of set-off or for any other reason, that indemnification or other compensation for all or part of the alleged damages has been received or will be received pursuant to an indemnity, guarantee or insurance contract
4
12. Third Party Rights
The arbitral tribunal shall notify the Parties Group of its formation. Taking into account the views of the parties, it may give to any Contracting Party requesting it an opportunity to submit written views on the legal issues in dispute, provided that the proceedings are not unduly delayed thereby. Any Contracting Party requesting it within thirty days after receipt by the Parties Group of the notification of the tribunal’s formation shall be given an opportunity to present its views on issues in dispute in which it has a legal interest
13. Scientific and Technical Expertise
a. On request of a disputing Contracting Party or, unless the disputing Contracting Parties disapprove, on its own initiative, the tribunal may request a written report of a scientific or technical review board, or expert, on any factual issue concerning environmental, health, safety or other scientific or technical matters raised by a disputing Contracting Party in a proceeding, subject to such terms and conditions as such Parties may agree
b. The board, or expert, shall be selected by the tribunal from among highly qualified, independent experts in the scientific or technical matters, after consultations with the disputing Parties and the scientific or technical bodies identified by those Parties
c. The disputing Contracting Parties shall be provided: i. advance notice of, and an opportunity to provide comments to the tribunal on, the proposed factual issues to be referred to the board, or expert; and ii. a copy of the board’s, or expert’s, report and an opportunity to provide comments on the report to the tribunal
4. This subparagraph does not bar as a defence, counter-claim, right of set-off or for any other reason, that the
Contracting Party has already paid indemnification or other compensation to the subrogee or assignee of the
investor’s rights in the matter
70 d. The tribunal shall take the report and any comments by the disputing Contracting Parties on the report into account in the preparation of its award
14. Applicable law
a. Issues in dispute under paragraph 1.a. of this article shall be decided in accordance with this Agreement, interpreted and applied in accordance with the applicable rules of international law
b. Issues in dispute under paragraph 1.b. of this article shall be decided in accordance with such rules of law as may be agreed by the parties to the dispute. In the absence of such agreement, such issues shall be decided in accordance with the law of the Contracting Party to the dispute (including its rules on the conflict of laws), the law governing the authorisation or agreement and such rules of international law as may be applicable
15. Interim measures of relief
a. An arbitral tribunal established under this Article may recommend an interim measure of protection to preserve the rights of a disputing Contracting Party or to ensure that the Tribunal’s jurisdiction is made fully effective
b. The seeking of interim relief not involving the payment of damages, from judicial or administrative tribunals, by a party to a dispute submitted to arbitration under this article, for the preservation of its rights and interests pending resolution of the dispute, is not deemed a submission of the dispute for resolution for purposes of a Contracting Party’s limitation of consent under paragraph 3.b, and is permissible in arbitration under any of the provisions of paragraph 2.c
16. Final awards
a. The arbitral tribunal, in its award shall set out its findings of law and fact, together with the reasons therefor and may, at the request of a Party, provide the following forms of relief: i. a declaration that the Contracting Party has failed to comply with its obligations under the this Agreement; ii. pecuniary compensation, which shall include interest from the time the loss or damage was incurred until time of payment; iii. restitution in kind in appropriate cases, provided that the Contracting Party may pay pecuniary compensation in lieu thereof where restitution is not practicable; and iv. with the Agreement of the parties to the dispute, any other form of relief
b. In appropriate cases where the loss or damage was incurred by an investment which remains a going concern, the tribunal may direct that the compensation or restitution be made to the investment
71 c. An arbitration award shall be final and binding between the parties to the dispute and shall be carried out without delay by the party against whom it is issued, subject to its post-award rights under the arbitral systems utilised
d. The award shall be drafted consistently with the requirements of paragraph 17 and shall be a publicly available document. A copy of the award shall be delivered to the Parties Group by the Secretary-General of ICSID, for an award under the ICSID Convention or the Rules of the ICSID Additional Facility; by the Secretary-General of the ICC International Court of Arbitration, for an award under its rules; and by the tribunal, for an award under the UNCITRAL rules
17. Confidential and Proprietary Information
Parties and other participants in proceedings shall protect any confidential or proprietary information which may be revealed in the course of the proceedings and which is designated as such by the party providing the information. They shall not reveal such information without written authorisation from the party which provided it
18. Place of Arbitration and Enforceability
Any arbitration under this article shall be held in a state that is party to the New York Convention. Claims submitted to arbitration under this article shall be considered to arise out of a commercial relationship or transaction for purposes of Article 1 of that Convention. Each Contracting Party shall provide for the enforcement of the pecuniary obligations imposed by an award rendered pursuant to this Article D
19. Tribunal member fees
Fees and expenses payable to a member of an arbitral tribunal established under these Articles will be subject to schedules established by the Parties Group and in force at the time of the constitution of the tribunal
20. Supplemental Provisions
The Parties Group may adopt supplemental provisions to ensure the smooth functioning of these rules, in particular to clarify the inter-relationship between these rules and the rules of arbitration available under paragraph 2.c of this article D
72 VI. EXCEPTIONS AND SAFEGUARDS
GENERAL EXCEPTIONS
1
1. This Article shall not apply to Article IV, 2 and 3 (Expropriation and compensation and protection from strife)
2. Nothing in this Agreement shall be construed: a. to prevent any Contracting Party from taking any action which it considers necessary for the protection of its essential security interests: (i) taken in time of war, or armed conflict, or other emergency in international relations ; (ii) relating to the implementation of national policies or international agreements respecting the non-proliferation of weapons of mass destruction; (iii) relating to the production of arms and ammunition; b. to require any Contracting Party to furnish or allow access to any information the disclosure of which it considers contrary to its essential security interests; c. to prevent any Contracting Party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security
3. Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between Contracting Parties, or a disguised investment restriction, nothing in this Agreement shall be construed to prevent any Contracting Party from taking any measure necessary for the maintenance of public order
2
4. Actions or measures taken pursuant to this Article shall be notified to the Parties Group
5. If a Contracting Party (the "requesting Party") has reason to believe that actions or measures taken by another Contracting Party (the "other Party") under this article have been taken solely for economic reasons, or that such actions or measures are not in proportion to the interest being protected, it may request consultations with that other Party in accordance with Article V, B.1 (State-State Consultation Procedures). That other Party shall provide information to the requesting Party regarding the actions or measures taken and the reasons therefor
1. This text was propsed for discussion by the Chairman. It is under consideration by the Negotiating Group
2. The public order exception may be invoked only where a genuine and sufficiently serious threat is posed to
one of the fundamental interests of society
73 TRANSACTIONS IN PURSUIT OF MONETARY AND EXCHANGE RATE POLICIES
3
1. Articles XX (National Treatment), YY (Most Favoured Nation Treatment) and ZZ (Transparency) do not apply to transactions carried out in pursuit of monetary or exchange rate policies by a central bank or monetary authority of a Contracting Party
2. Where such transactions do not conform with Articles XX (National Treatment), YY (Most Favoured Nation Treatment) and ZZ (Transparency), they shall not be used as a means of avoiding the Contracting Party’s commitments or obligations under the Agreement
3. While some delegations questioned the need for any specific provisions carving out transactions by a
central bank or monetary authority in pursuit of monetary and exchange rate policies, most delegations
would support adoption of this text
74 TEMPORARY SAFEGUARD
4
1. A Contracting Party may adopt or maintain measures inconsistent with 5
· its obligations under Article xx (Transfers); [· Article yy, para 1.1 (National Treatment) for cross-border capital transactions as it relates to non-resident 6
investors and investments] 7
: (a) in the event of serious balance-of-payments and external financial difficulties or threat thereof; or (b) where, in exceptional circumstances, movements of capital cause, or threaten to cause, serious difficulties for the operation of [economic,] monetary or exchange rate policies
8
2. Measures referred to in paragraph 1 9
: (a) shall be consistent with the Articles of Agreement of the International Monetary Fund; (b) shall not exceed those necessary to deal with the circumstances described in paragraph 1 10
; (c) shall be temporary and shall be eliminated as soon as conditions permit; (d) shall be promptly notified to the Parties Group and International Monetary Fund, including any changes in such measures
4. This text was developed during informal consultations on financial matters
5. It was recognised that the MAI provisions on performance requirements, which are still under discussion,
could have implications for the scope of this paragraph
6. One delegation expressed concern that the "resident/non-resident" concept is not used or defined in the
MAI; it also noted that the definition of a "resident" may differ from one national jurisdiction to another
Another delegation noted that the term "cross-border transactions" was also meant to refer to transactions
between residents and non-residents
7. Most delegations favoured this text. Some delegations, however, questioned the need to allow for a
derogation from National Treatment. One delegation proposed a narrower derogation in respect of National
Treatment: "Article yy, para 1.1 (National Treatment) for the acquisition of investments where the point of
comparison for a foreign investor using foreign-sourced funds is a domestic investor using domestic-sourced
funds"
8. Delegations held different views on including the reference to "economic" policies (in addition to monetary
and exchange rate policies) which would provide for a broader National Treatment exception . One
delegation considered that the scope of paragraph 1 (b) should be limited to capital inflows or deleted
9. It was agreed that measures referred to in paragraph 1 shall provide MFN treatment, and shall also provide
National Treatment except as specifically provided in paragraph 1, but that it is not necessary or appropriate
to include text to this effect. Two delegations considered that this matter may need to be reviewed later
once it is known how similar situations will be addressed elsewhere in the MAI
10. One delegation suggested adding: "and shall provide for the least disruptive effect to the functioning of the
Agreement". Reference was also made in this context to the language in paragraph 2. (c) of Article XII of the
GATS: "shall avoid unnecessary damage to the commercial, economic and financial interest of any other
Member"
75 3. (a) Measures referred to in paragraph 1 and any changes therein shall be subject to review and approval within six months of their adoption and every six months thereafter until their elimination
(b) These reviews shall address the compliance of any measure with paragraph 2, in particular the elimination of measures in accordance with paragraph 2 (c)
4. Measures referred to in paragraph 1 and any changes therein that are approved by the International Monetary Fund in the exercise of its jurisdiction shall be considered as consistent with this Article 11

5 12
. With regard to measures not falling within paragraph 4: (a) The Parties Group shall consider the implications of the measures adopted under this Article for the obligations of the Contracting Party concerned under this Agreement
(b) The Parties Group shall request an assessment by the Fund of the conditions mentioned under paragraph 1 and of the consistency of any measures with paragraph 2 (a) and [may/shall] request an assessment by the Fund of the consistency of any measures with paragraphs 2 (b) and (c). Any such assessment by the Fund shall be accepted by the Parties Group
(c) Unless the Fund determines that the measure is either consistent or inconsistent with the provisions of this Article, the Parties Group may either approve or disapprove the measure. The Parties Group shall establish procedures for this purpose
6. The Contracting Parties shall seek agreement with the Fund regarding the role of the Fund in the review procedures established under this Article
11. Two delegations wished to give further consideration to measures which do not fall within the purview of
paragraph 1, but which are approved by the IMF in the exercise of its jurisdiction
12. Some delegations wished to reflect further on paragraph 5 in the light of developments in respect of the
Fund’s jurisdiction over capital movements
76 VII. FINANCIAL SERVICES
1, 2
PRUDENTIAL MEASURES
1. Notwithstanding any other provisions of the Agreement, a Contracting Party shall not be prevented from taking prudential measures with respect to financial services, including measures for the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by an enterprise providing financial services, or to ensure the integrity and stability of its financial system
2. Where such measures do not conform with the provisions of the Agreement, they shall not be used as a means of avoiding the Contracting Party’s commitments or obligations under the Agreement
RECOGNITION ARRANGEMENTS
1. A Contracting Party may recognise prudential measures of any other Contracting Party or non-Contracting Party in determining how the Contracting Party’s measures relating to financial services shall be applied. Such recognition, which may be achieved through harmonisation or otherwise, may be based on an agreement or arrangement with the other Contracting Party or non-Contracting Party concerned or may be accorded autonomously
2. A Contracting Party that is a party to such an agreement or arrangement referred to in paragraph 1, whether future or existing, shall afford adequate opportunity for other interested Contracting Parties to negotiate their accession to such agreements or arrangements, or to negotiate comparable ones with it, under circumstances in which there would be equivalent regulation, oversight, implementation of such regulation, and, if appropriate, procedures concerning the sharing of information between the parties to the agreement or arrangement. Where a Contracting Party accords recognition autonomously, it shall afford adequate opportunity for any other Contracting Party to demonstrate that such circumstances exist
1. EG5 agreed that the financial services sector, which is highly regulated for prudential reasons, is unique in
some respects and to some extent calls for specific treatment. However, a number of delegations considered
that the general provisions of the MAI are sufficient to meet the needs of the financial services sector in a
number of potential areas. In some cases, proposals for text on financial services were considered to have
more general application in the MAI. It was suggested that such text could be useful in the development of
general disciplines in the MAI
2. The Negotiating Group discussed financial services issues at its April 1997 and January 1998 meetings. The
proposed text on prudential measures and the definition of financial services were agreed. Proposed texts on
payments and clearing systems/lender of last resort and dispute settlement have not yet been discussed by
the Negotiating Group. Placement of financial services texts is to be decided. See also Commentary
77 AUTHORISATION PROCEDURES
1. Each Contracting Party’s regulatory authorities shall make available to interested persons their requirements for completing applications relating to an investment in, or the operations of, a financial services enterprise
2. On the request of an applicant, the regulatory authority shall inform the applicant of the status of its application. If such authority requires additional information from the applicant, it shall notify the applicant without undue delay
3. A regulatory authority shall make an administrative decision on a completed application of an investor in a financial services enterprise or a financial services enterprise that is an investment of an investor of another Contracting Party within [120][180] days, and shall promptly notify the applicant of the decision. An application shall not be considered complete until [all relevant hearings are held and] all necessary information is received. Where it is not practicable for a decision to be made within [120][180] days, the regulatory authority shall notify the applicant without undue delay and shall endeavour to make the decision within a reasonable time thereafter
TRANSPARENCY
3
Nothing in this Agreement requires a Contracting Party to furnish or allow access to: a) information related to the financial affairs and accounts of individual customers of financial services enterprises; or b) any confidential or proprietary information, the disclosure of which would impede law enforcement or otherwise be contrary to the public interest or prejudice legitimate commercial interests of particular enterprises
3. The text proposed here by EG5 would be additional to the text of the General Transparency provision (see
Section III, Treatment of Investors and Investments)
78 INFORMATION TRANSFER AND DATA PROCESSING
1. No Contracting Party shall take measures that prevent transfers of information or the processing of financial information outside the territory of a Contracting Party, including transfers of data by electronic means, where such transfer of information or processing of financial information is: a) necessary for the conduct of the ordinary business of a financial services enterprise located in a Contracting Party that is the investment of an investor of another Contracting Party; or b) in connection with the purchase or sale by a financial services enterprise located in a Contracting Party that is the investment of an investor of another Contracting Party of: i) financial data processing services; or ii) financial information, including information provided to or by third parties
2. Nothing in paragraph 1: a) affects the financial service enterprise’s obligation to comply with any record keeping and reporting requirements; or b) restricts the right of a Contracting Party to protect privacy, including the protection of personal data and the confidentiality of individual records and accounts, so long as such right is not used to circumvent the provisions of the Agreement
MEMBERSHIP OF SELF-REGULATORY BODIES AND ASSOCIATIONS
When membership or participation in, or access to, any self-regulatory body, securities or futures exchange or market, clearing agency, or any other organisation or association is required by a Contracting Party in order for investments of investors of any other Contracting Party in a financial services enterprise established in the territory of the Contracting Party to provide financial services on an equal basis with financial services enterprises of the Contracting Party, or when the Contracting Party provides directly or indirectly such entities, privileges or advantages in providing financial services, the Contracting Party shall ensure that such entities accord national treatment to such investments
79 PAYMENTS AND CLEARING SYSTEMS/LENDER OF LAST RESORT
4
1. Under terms and conditions that accord national treatment, each Contracting Party shall grant to financial services enterprises that are investments of investors of any other Contracting Party established in its territory access to payment and clearing systems operated by public entities, and to official funding and refinancing facilities available in the normal course of ordinary business
2. The provisions of this Agreement are not intended to confer access to the Contracting Party’s lender of last resort facilities
DISPUTE SETTLEMENT
DETERMINATION OF CERTAIN FINANCIAL ISSUES IN INVESTOR TO STATE PROCEEDINGS The following text was considered in informal consultations on financial matters: 1. Where an investor of a Contracting Party submits a claim under Article D (Investor-State Procedures) against another Contracting Party and the disputing Contracting Party invokes Article xx (Prudential Measures) Article xx (Transactions in Pursuit of Monetary and Exchange Rate Policies) [Article xx (Temporary Safeguards)], on request of the disputing Contracting Party, the Tribunal shall refer the matter in writing to [the appropriate financial authority in each of] the Contracting Parties involved in the dispute for a decision 5
. The Tribunal may not proceed pending receipt of a decision or report under this Article
2. In a referral pursuant to paragraph 1, the [authorities referred to in paragraph 1] [Contracting Parties] shall consult with each other to decide the issue of whether [and to what extent] Article xx (Prudential Measures) Article xx (Transactions in Pursuit of Monetary and Exchange Rate Policies) [Article xx (Temporary Safeguards)], is a valid defence to the claim of the investor. The [authorities] [Contracting Parties] shall transmit a copy of their common decision to the Tribunal and to the Parties Group. The decision shall be binding on the Tribunal
3. Where the [authorities] [Contracting Parties] have not decided the issue within 60 6
days of the receipt of the referral under paragraph 1, the disputing Contracting Party or the Contracting Party of the investor may request the establishment of an arbitral panel under Article xx (Request for a State to State Arbitral Tribunal) to determine whether[, and to what extent,] Article xx (Prudential Measures) Article xx (Transactions in Pursuit of Monetary and Exchange Rate Policies) [Article xx (Temporary Safeguards)], is a valid defence to the claim of the investor. The Tribunal shall be constituted in accordance with [Article xx (see Article B below on Composition of Dispute Settlement Panels in Financial Services Disputes)]. Further to Article xx (Final Report), the panel shall transmit its final report to the [authorities] 4. These matters need further work with a view to finalising text. See also Commentary
5. Two delegations suggested adding at the end of this sentence the following text: ", unless the investor
rejects this request within 20 days". Some delegations considered that such an addition would undermine
the purpose of a special dispute settlement regime for financial matters
6. One delegation considered that 60 days may be too short a period to decide the issues in question
80 [Contracting Parties], to the Investor-State Tribunal and to the Parties Group. The report shall be binding on the Tribunal
4. Where no request for the establishment of a State to State Tribunal pursuant to paragraph 3 has been made within 10 days of the expiration of the 60-day period referred to in paragraph 3, the Investor-State Tribunal may proceed to decide the matter." Alternative to paragraphs 3 and 4 (proposed by one delegation) 3. Where the [authorities] [Contracting Parties] have not decided the issue within 60 days of the receipt of the referral under paragraph 1, the Investor-State Tribunal may proceed to decide the matter." COMPOSITION OF DISPUTE SETTLEMENT PANELS IN FINANCIAL MATTERS DISPUTES The following proposals for text were considered in informal consultations on financial matters: Proposal 1
"Panels for disputes on prudential issues and other financial matters shall have the necessary expertise relevant to the specific financial services under dispute. " Proposal 2
Selection of the Panel 1. Where a Party claims that a dispute involves financial [services] and monetary matters, Articles C.2 and D.7 as applicable (Panel Formation) shall apply, except that: (a) where the disputing Parties so agree, the tribunal panel shall be composed entirely of panellists meeting the qualifications in paragraph 2; and (b) where the disputing Parties do not agree that the panel be composed in accordance with (a), (i) each disputing Party may select panellists meeting the qualifications set out in paragraph 2, or in Article C.2.c or D.7.c as applicable (Qualifications of Panellists), and (ii) if the Party complained against invokes Article xx (Prudential Measures) Article xx (Transactions in Pursuit of Monetary and Exchange Rate Policies) [Article xx (Temporary Safeguards)] the chair of the panel shall meet the qualifications set out in paragraph 2
81 2. Financial services experts shall: (a) have expertise or experience in financial services law or practice, which may include the regulation of financial institutions; (b) be chosen strictly on the basis of objectivity, reliability and soun d judgement; and (c) be independent of, and not be affiliated with or take instructions from, any Party. " 82 DEFINITION OF FINANCIAL SERVICES
Financial services include all insurance and insurance-related services, and all banking and other financial services (excluding insurance). Financial services include the following activities: Insurance and insurance-related services (i) Direct insurance (including co-insurance): (A) life (B) non-life (ii) Reinsurance and retrocession; (iii) Insurance intermediation, such as brokerage and agency; (iv) Services auxiliary to insurance, such as consultancy, actuarial, risk assessment and claim settlement services
Banking and other financial services (excluding insurance) (v) Acceptance of deposits and other repayable funds from the public; (vi) Lending of all types, including consumer credit, mortgage credit, factoring and financing of commercial transaction; (vii) Financial leasing; (viii) All payment and money transmission services, including credit, charge and debit cards, travellers cheques and bankers drafts; (ix) Guarantees and commitments; (x) Trading for own account or for account of customers, whether on an exchange, in an over-the-counter market or otherwise, the following: (A) money market instruments (including cheques, bills, certificates of deposits); (B) foreign exchange; (C) derivative products including, but not limited to, futures and options; (D) exchange rate and interest rate instruments, including products such as swaps, forward rate agreements; (E) transferable securities; (F) other negotiable instruments and financial assets, including bullion
83 (xi) Participation in issues of all kinds of securities, including underwriting and placement as agent (whether publicly or privately) and provision of services related to such issues; (xii) Money broking; (xiii) Asset management, such as cash or portfolio management, all forms of collective investment management, pension fund management, custodial, depository and trust services; (xiv) Settlement and clearing services for financial assets, including securities, derivative products, and other negotiable instruments; (xv) Provision and transfer of financial information, and financial data processing and related software by suppliers of other financial services; (xvi) Advisory, intermediation and other auxiliary financial services on all the activities listed in subparagraphs (v) through (xv), including credit reference and analysis, investment and portfolio research and advice, advice on acquisitions and on corporate restructuring and strategy
84 VIII. TAXATION
1
1. Nothing in this Agreement shall apply to taxation measures except as expressly provided in paragraphs 2 to 5 below
2
2. Article ... (Expropriation) shall apply to taxation measures
3
3. Article ... (Transparency) shall apply to taxation measures, except that nothing in this Agreement shall require a Contracting Party to furnish or allow access to information covered by tax secrecy or any other provision or administrative practice protecting confidentiality in domestic laws or international agreements, and including information: a) contained in or exchanged pursuant to any agreement or arrangement relating to taxation between governments and investors; b) pursuant to any agreement with a foreign government concerning the application or interpretation of an international agreement relating to taxation in the case of an investor, including exchange of information between governments; 1. Political Declaration of the Contracting Parties:
Contracting Parties recognise the importance of the principle of non-discriminatory treatment in taxation for
foreign investors and their investments. In this respect, they refer to their commitments under their
agreements for the avoidance of double taxation. The Contracting Parties shall pursue their efforts to
conclude agreements for the avoidance of double taxation, where appropriate, with Contracting Parties with
which they have not yet entered into such agreements
2. One delegation proposed to add an additional paragraph to the Taxation article as follows:
"This Article shall not affect the rights of a Contracting Party and its investors as contained in
any other international agreement covering taxation, including bilateral investment protection
treaties."
3. Interpretative Note: When considering the issue of whether a taxation measure effects an expropriation, the
following elements should be borne in mind:
a) The imposition of taxes does not generally constitute expropriation. The introduction of a new taxation
measure, taxation by more than one jurisdiction in respect to an investment, or a claim of excessive
burden imposed by a taxation measure are not in themselves indicative of an expropriation
b) A taxation measure will not be considered to constitute expropriation where it is generally within the
bounds of internationally recognised tax policies and practices. When considering whether a taxation
measure satisfies this principle, an analysis should include whether and to what extent taxation measures
of a similar type and level are used around the world. Further, taxation measures aimed at preventing the
avoidance or evasion of taxes should not generally be considered to be expropriatory
c) While expropriation may be constituted even by measures applying generally (e.g., to all taxpayers),
such a general application is in practice less likely to suggest an expropriation than more specific
measures aimed at particular nationalities or individual taxpayers. A taxation measure would not be
expropriatory if it was in force and was transparent when the investment was undertaken
d) Taxation measures may constitute an outright expropriation, or while not directly expropriatory they
may have the equivalent effect of an expropriation (so-called "creeping expropriation"). Where a
taxation measure by itself does not constitute expropriation it would be extremely unlikely to be an
element of a creeping expropriation
85 c) concerning the identity of an investor or other information which would disclose any trade, business, industrial, commercial or professional secret or trade process; d) pertaining to the negotiation of tax treaties or of any other international agreement relating partly or wholly to taxation or the participation by a government in the work of international organisations; or e) the disclosure of which would affect the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, taxation, or any information the disclosure of which would aid or assist in the avoidance or evasion of taxes
4. The provisions of Article [C] (State to State Dispute Settlement) and Article [D] (Investor to State Dispute Settlement), [except for paragraph 1b of Article [D]], and only those provisions, shall apply to a dispute under paragraph 2 or 3 of this Article
4 5
5. For the purposes of this Article: a) A Competent Tax Authority means the minister or ministry responsible for taxes or their authorised representatives
b) "Taxation measures" include
i) any provision relating to taxes of the law of the Contracting Party or of a political
subdivision thereof or a local authority therein, or any administrative practices of
the Contracting Party relating to taxes; and
ii) any provision relating to taxes of any convention for the avoidance of double
taxation or of any other international agreement or arrangement by which the
Contracting Party is bound
Taxes shall be taken for this purpose to include direct taxes, indirect taxes and social security contributions
6
4. Interpretative Note: "For greater certainty regarding the application of Articles (C)(5) and (D)(13), the
terms "scientific or technical" in those provisions shall refer to taxation; and the written report of such a
board shall be obtained on request of a disputing party. The written report of such a board regarding
paragraph 2 of this Article shall include an analysis of whether the measure falls within one or more of the
elements of footnote [2] (Interpretative Note on the Application of Expropriation to Taxation); and a
conclusion of the board that the measure falls within one or more of the elements described in subparagraph
(b) or (c), shall be taken into account by the tribunal in the preparation of its award. Paragraph 4 of this
Article shall not apply to claims arising out of events that occurred, or claims that have been settled, prior to
the entry into force of this Agreement for the Contracting Party applying the taxation measure." One
delegation wishes to see the second and third sentences of this note in square brackets. Another delegation
would delete the interpretative note entirely
5. Interpretative Note: For greater certainty, Article XX (most favoured nation treatment) shall not be invoked
to avoid the provisions of paragraph ... (dispute settlement) of this Article. Several delegations maintain a
scrutiny reservation on the text of this Note
86 6. One delegation has a scrutiny reserve on the treatment of social security. Another delegation has proposed
that social security benefits be carved out of the agreement. Another delegation proposed a general carve-out
of social security and proposed the following separate article: "Nothing in this Agreement shall apply to
social security."
87 IX. COUNTRY SPECIFIC EXCEPTIONS
LODGING OF COUNTRY SPECIFIC EXCEPTIONS , 1, 2
A
3
Articles X (National Treatment), Y (Most Favoured Nation Treatment), [Article Z, ..., ... and Article ...] 4
, do not apply to: (a) any existing non-conforming measure as set out by a Contracting Party in its Schedule to Annex A of the Agreement, to the extent that the measure is maintained, continued or promptly renewed in its legal system 5, 6;
1. It was generally agreed to replace the term "reservations" by the term "exceptions". Under treaty law,
"reservations" normally have reciprocal effect unless otherwise specified. This is clearly not intended to be
the case with respect to Country Schedules. Any possible confusion with general exceptions is taken care of
by the qualification "country-specific". The use of the term "exception" would not prevent the listing of a
measure with a reciprocity requirement. It would help avoid confusion in the case of any genuine
"reservations" in the treaty law sense were to be made and called such. One delegation maintains a scrutiny
reserve on this change
2. The draft article to address existing measures should be examined in conjunction with the proposed
introduction to Annex A of the Agreement and the standard presentation suggested for the lodging of
country specific exceptions (reproduced in footnote 11). These three elements combined provide the
methodology for lodging country specific exceptions under the MAI
3. It is agreed that part A of the draft article is needed as the core provision to "grandfather" existing
non-conforming measures and prevent the introduction of more restrictive measures ("standstill")
4. It is agreed that the disciplines listed in the chapeau text of parts A and B of the draft Article should remain
incomplete for the time being pending political decisions by the Negotiating Group. The text could also be
reviewed after negotiators have decided how measures by sub-national entities and regional economic
integration organisations should be treated across the MAI
5. All delegations agree that foreign investors should benefit from any liberalisation measure as soon as the
relevant law, regulation or practice ... enters into force. The words "continued or promptly renewed in its
legal system" at the end of the sentence are intended to make this clear. Two delegations maintain a
scrutiny reserve on this addition
One delegation maintains a scrutiny reserve on the basis that the words " in its legal system" may not cover
government policies. The Group agreed that government policies enunciated under the framework of
domestic legislation would be covered by the words "in its legal system". Another delegation would see
merit in clarifying in a footnote or in the text that the coverage of "measure" should include any subordinate
measure adopted or maintained under the legal authority and consistent with the measure. The Chairman
offers, for the consideration of delegations, the following additional explanatory note: "It is understood that
the term "legal system" includes subordinate measures and policies"
6. One delegation seeks the opinion of the Group whether and how Part A of Article A can take care of
temporary liberalisation. Some delegations consider that this possibility is provided if the liberalisation
measures are announced prior to the entry into force of the MAI. Some delegations consider that this
delegation‘s question relates to the issue of the implementation of a non-conforming measure . They feel
that Part A would provide the possibility to temporarily implement a measure in a more liberal way than
the way described in a country schedule. Other delegations, believe on the contrary that this interpretation
is not compatible with the ratchet effect built in Part A, namely that a return to a more restrictive regime
should not be possible. Such an interpretation is also bound to create legal uncertainty for the investor and
even encourage a proliferation of temporary measures. Delegations are invited to reflect further on this
issue
88 (b) an amendment to any non-conforming measure referred to in subparagraph (a) to the extent that the amendment does not increase the non-conformity of the measure, as it existed immediately before the amendment, with Articles X (National Treatment), Article Y (Most Favoured Nation), [Article Z, ..., and Article ...] 7

7. Delegations agree that notification of a reduction in the non-conformity of a measure would not be
necessary for its effective application under the MAI. Notification is a matter of transparency and should be
addressed separately
It is agreed that article 79 of the Vienna Convention concerning Corrections of Errors in texts or Certified
Copies of Treaties would do away with the need of a notification obligation for rectifications of errors
Delegations identified three policy issues for consideration by the Negotiating Group:
a) First, whether there is a need for a notification obligation for modifications in the non-conformity of
measures
Some delegations consider that a mandatory notification obligation for changes in country exceptions lists
would be too cumbersome. Update of the country lists could be a result of a possible review mechanism
Some other delegations consider that it would be highly desirable to ensure that country lists of exceptions
are kept up to date as this would enhance the usefulness of the MAI for foreign investors. This could,
according to some delegations, be done at regular intervals (for instance once a year)
The Group recalls in this context by way of illustration the following proposal:
"Each Contracting Party shall notify (the "Parties Group") promptly and in any case no later than
60 days after their entry into force, of any change in the non-conformity of its measures with obligations
under the Agreement, including the motivation or purpose of the change."
b) Second, whether such notification obligation would have implications for the role of the Parties Group
and, if so, what should be the role of the Parties Group on this regard; and
c) Third, whether it would be allowed to rectify errors or omissions made in good faith. Delegations note
the following proposal made by one delegation to address this issue:
"Modifications made to take care of errors or omissions made in good faith relating to Annex ..., along
with information about the likely circumstances of the change, shall be notified to the Parties Group and
shall become effective provided there is no objection within 30 days after their notification."
Several delegations support this proposal given the complexity and novelty of the MAI as regards the top
down approach to the lodging of country exceptions. They consider that the safeguard provided by the
possibility to object is sufficiently dissuasive to prevent an abusive recourse to this provision. Some
delegations, on the contrary, have serious misgivings about the proposal. Some of them point out to the
difficulty of defining the terms "good faith". Others feel the proposal is too broad. Others stress the moral
hazards. Two delegations also wonder whether it is necessary to have an explicit provision in this article
given existing practice
The Group notes the technical issue raised by one delegation on how to relate a Contracting Party’s
notification to a modification of its Schedule to the Agreement. It also notes the proposal of another
delegation for a possible solution to this issue
"(c) A Contracting Party shall notify a change to its Schedule to Annex A of the Agreement to reflect any
changes to the non-conformity of measures as provided for in paragraph (b) above."
89 [B
8
Articles X; Y, [Article Z, ...,and Article ...] do not apply to any measure that a Contracting Party [adopts] or [maintains] with respect to sectors, subsectors or activities, as set out in its Schedule to Annex B of the Agreement.] [C. No Contracting Party may, under any measure adopted after the date of entry into force of this Agreement and covered by its Schedule to Annex B 9
, require an investor of another Contracting Party, by reason of its nationality, to sell or otherwise dispose of an investment existing at the time the measure becomes effective.] 8. There are different views with respect to Part B of the draft article which would allow new non-conforming
measures to be introduced after the Agreement comes into force. One view is that such a provision might
undermine the MAI disciplines to which it applied. The opposite view is that Part B would make it easier to
preserve high standards in the disciplines of the agreement by allowing flexibility to countries in lodging
their exceptions
9. It is agreed that Part C is applicable only to non-conforming measures referred to in Part B. The objective
of Part C is to protect existing rights of foreign investors against discriminatory treatment resulting from
measures permitted under Part B. This situation is different from that of expropriation of assets of
established enterprises which is addressed in the expropriation chapter of the MAI. This favourable reaction
to the proposed wording does not prejudge acceptance of Part B, however. One delegation can accept Part
C subject to an interpretative note which would read as follows:
"A Contracting Party may, under this Article, take steps that seek to ensure compliance with any
measure notified under Annex A or Annex B. Any such action shall not be taken as reducing the
conformity of the measure notified in Annex A or Annex B."
90 Introduction to Annex A
10
of the Agreement listing country-specific exceptions
11
1. The Schedule of a Contracting Party sets out, pursuant to Article ... [on the lodging of country specific exceptions], the exceptions taken by that Party with respect to existing measures that do not conform with obligations imposed by: (a) Article X (National Treatment), (b) Article Y (Most-Favoured-Nation Treatment), (c) Article Z (...), or (...) Article (...)
together with any commitment to eliminate or reduce the non-conformity of any of the measures
12
10. It was agreed to withhold the drafting of the introduction of "Annex B" until the Negotiating Group had
taken a political decision on the status and coverage of Part B of the Article. Moreover, a number of
delegations felt that the wording of such introduction might need to be drafted in a limited way (i.e. to cover
only cases of privatisation or demonopolisation). Two delegations circulated a proposal for text on the
introduction of Annex B which was not discussed by the Group
11. The following format has been followed by delegations for submitting their initial lists of country specific
exceptions :
"Sector:
Sub-Sector:
Obligation or MAI article in respect of which an Exception is taken:
Level of Government:
Legal source or authority of the Measure:
Succinct Description of the Measure:
Motivation or purpose of the Measure:"
12. One delegation reserves its position on the issue of future liberalisation commitments
91 2. Each exception sets out the following elements: 13
(a) Sector refers to the general sector in which the exception is taken; (b) Sub-Sector refers to the specific sector in which the exception is taken; (c) Obligation specifies the MAI provision referred to in paragraph 1 for which an exception is taken; (d) Level of Government indicates the level of government maintaining the measure for which an exception is taken; (e) Legal source or authority of the measure identifies the specific legal source of the exception, whether in the form of a law, regulation, rule, decision, or any other form; 14
(f) Succinct Description of the Measure sets out non-conforming aspects of the existing measures for which the exception is taken, together with any commitment to eliminate or reduce the non-conformity of the measure; 15
and (g) Motivation or purpose describes the rationale for a given measure
16
13. A large majority of delegations consider that the presentation would gain in transparency by incorporating
an "industry classification" element into the reservation. Both the Common Product Classification (CPC) or
Standard Industrial Classification (ISIC) could provide a useful reference for identifying non-conforming
measures. The CPC system may perhaps be more appropriate to services sectors given the GATS
precedent. But this should not detract from delegations’ ongoing efforts to finalise country exceptions
Delegations thus should feel free to provide such entries on a voluntary basis using the relevant
international or comparable domestic classifications. The introduction of an "industry classification" could
also be taken up in the context of future updates or negotiations on country schedules
14. In order to clarify the automatic ratchet effect of List A measures, the Chairman proposed the addition of
the following phrase at the end of paragraph (e): "as of the date of entry into force of the Agreement, or as
continued, renewed or amended after that date."
This issue is solved by the revised paragraph (a) of Part A or the Article but this language may be relevant
to the discussion of a notification obligation
15. As in footnote 12, one delegation maintains a full reservation with regard to commitments for future
liberalisation
16. A number of delegations could support the inclusion of element (g). A number of delegations supported its
deletion. Some delegations could support inclusion provided it would not be considered in the context of
dispute settlement. Some delegations considered that this information should be provided in the context of
the MAI negotiations but should not be retained in the final text of exceptions
92 3. In the interpretation of an exception, [all the above elements] [elements (a) to (f) 17
] shall be considered. In the event of a discrepancy between the non-conformity of the measure as set out in the legal source or authority identified and the non-conformity as set out in the other elements, the exception shall be deemed to apply to the non-conformity of the measure as set out in the legal source or authority [to the extent that the resulting non-conformity does [not significantly] exceed the scope of the non-conformity as set out in the other elements][ unless any discrepancy between the legal source or authority element and other elements considered in their totality is so substantial and material that it would be unreasonable to conclude that the legal source or authority element should prevail, in which case the other elements shall prevail to the extent of that discrepancy ] 18
." 17. Several delegations feel that if element (g) were to be retained, it should not be taken into account in the
context of dispute settlement. A few delegations consider that element (g) could provide valuable
information in that context as well. One delegation considers that only elements (a) to (e) should be taken
into account
18. The second bracketed phrase, proposed by the one delegation, is supported by several delegations. Most
delegations consider, however, that the first bracketed phrase is preferable. Some delegations question the
meaning of the word "significant". One delegation also reserves its position, considering that the legal
source or authority should always prevail in all circumstances. Delegations are invited to finalise their
position on this paragraph
93 X. RELATIONSHIP TO OTHER INTERNATIONAL AGREEMENTS
OBLIGATIONS UNDER THE ARTICLES OF AGREEMENT OF THE INTERNATIONAL
MONETARY FUND
Nothing in this Agreement shall be regarded as altering the obligations undertaken by a Contracting Party as a Signatory of the Articles of Agreement of the International Monetary Fund
1
THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES
1. The following draft text was developed on associating the Guidelines with the MAI: 2
1. The OECD Guidelines for Multinational Enterprises are set out in Annex (xx)
2. The Contracting Parties at the invitation of the Organisation for Economic Co-operation and Development are encouraged to participate in the Guidelines work of the Organisation in order to promote co-operation on the application, clarification, interpretation and revision of the Guidelines and to facilitate the maintenance of consensus among the Contracting Parties and the members of the Organisation on the matters addressed in the Guidelines
3. The Contracting Parties [shall] [are encouraged to] set up National Contact Points for undertaking promotional activities, handling enquiries and for discussions with the parties concerned on all matters related to the Guidelines so that they can contribute to the solution of problems which may arise in this connection. The business community, employee organisations and other interested parties should be informed of the availability of such facilities
4. Annexation of the Guidelines shall not bear on the interpretation or application of the Agreement, including for the purpose of dispute settlement; nor change their non-binding character
2. Several delegations proposed that the following additional text be added to the list of powers given to the Parties Group under Section XI of the Consolidated Text, paragraph 2: (e) consider revision of the Guidelines referred to in Article (xx) of the [Agreement] [Final Act] by adoption of any revised Guidelines developed in the OECD
1. The coverage of this article would include, for example, cases where the Fund would request the imposition
of capital controls in accordance with the Fund’s Articles of Agreement
2. EG4 delegations differed on whether this text should be placed in the Final Act or the Agreement
94 3. Finally, delegations developed draft text that would be placed in an annex 3
immediately before the Guidelines, as follows: The following Guidelines for Multinational Enterprises are a joint recommendation by participating Governments to multinational enterprises operating in their territory. Their purpose is to help multinational enterprises ensure that their operations are in harmony with the national policies of the countries in which they operate. The Guidelines include recommendations on general policies, disclosure of information, competition, financing, taxation, employment and industrial relations, environmental protection and science and technology. The Guidelines are part of the OECD Declaration on International Investment and Multinational Enterprises of 21 June 1976 as amended. Background and official clarifications are found in the publication "The OECD Guidelines for Multinational Enterprises"
[The text of the preamble to the Declaration on International Investment and Multinational Enterprises, Part I of the Declaration, and the full Annex 1 text of the Guidelines would be set out verbatim] 3. Delegations differed on whether the annex should be placed in the Final Act or the Agreement
95 XI. IMPLEMENTATION AND OPERATION
THE PREPARATORY GROUP
(Text to be included in the Final Act)
1. There shall be a Preparatory Group comprised of the Signatories to the Final Act and the Signatories to the Agreement. A Signatory to the Final Act shall cease to be a member if it fails to become a Signatory to the Agreement by the closing date for signature of the Agreement
2. The Preparatory Group shall: (a) prepare for entry into force of the Agreement and the establishment of the Parties Group; (b) conduct discussions with non-signatories to the Final Act; (c) conduct negotiations with interested non-signatories to the Final Act and make decisions on their eligibility to become a Signatory to the Agreement; and (d) ..
1
3. The Preparatory Group shall elect a Chair, who shall serve in a personal capacity. Meetings shall be held at intervals to be determined by the Preparatory Group. The Preparatory Group shall establish its rules and procedures
2
4. Except where otherwise provided, the Preparatory Group shall make decisions by consensus. A Signatory may abstain and express a differing view without barring consensus
5. Decisions under paragraph 4 may include a decision to adopt a different voting rule for a particular question or category of questions
3
6. Where a decision cannot be made by consensus, the decision shall be made by a majority comprising [three quarters] [two thirds] of the Signatories
1. This and any subsequent subparagraphs would be necessary only if there is business that remains unfinished
at the conclusion of the negotiations that the negotiators consider should be completed by the Preparatory
Group; the further subparagraphs would itemise the clean-up tasks to be undertaken by the Preparatory
Group
2. At informal consultations on Institutional Matters in January 1998, it was decided to request that OECD
provide Secretariat services for the Preparatory Group
3. Delegations discussed the question of whether this paragraph should be deleted and concluded that the
question requires further consideration
96 7. Paragraph 6 shall not apply to the following decisions: (a) decisions under paragraph 5; [and] (b) decisions under Article ... [see section XI of the Consolidated Text on decisions by the Preparatory Group on the eligibility of non-signatories to the Final Act to become a Signatory to the Agreement], which shall be made by [consensus] [a majority comprising ...]; [and] (c) ..
4
8. Where the European Community exercises its right to vote, it shall have a number of votes equal to the number of its Member States which are Contracting Parties to this Agreement. The number of votes of the European Community and its Member States shall in no case exceed the number of the Member States of the European Community which are Contracting Parties to this Agreement
5
4. The Final Act may require an article on the costs of the Preparatory Group, in which case there may be a
need for a paragraph that addresses the question of how the Preparatory Group will make financial
decisions
5. This text is a proposal by one delegation. Some delegations said that they want to consider whether the MAI
should contain such a provision. Assuming that it should, two questions were raised: whether the provision
should apply only in cases where this delegation has competence and whether it should be restricted to
casting a number of votes equal to the number of its Member States that are present when the vote takes
place. It was also suggested that a provision might be drafted that applied to Regional Economic
Integration Organisations rather than specifically to that delegation
97 THE PARTIES GROUP
1. There shall be a Parties Group comprised of the Contracting Parties
2. The Parties Group shall facilitate the operation of this Agreement. To this end, it shall: (a) carry out the functions assigned to it under this Agreement; (b) [at the request of a Contracting Party, clarify [by consensus] the interpretation or application of this Agreement] 6
; (c) consider any matter that may affect the operation of this Agreement; and (d) take such other actions as it deems necessary to fulfil its mandate
3. In carrying out the functions specified in paragraph 2, the Parties Group may consult governmental and non-governmental organisations or persons
4. The Parties Group shall elect a Chair, who shall serve in a personal capacity. Meetings shall be held at intervals to be determined by the Parties Group. The Parties Group shall establish its rules and procedures
5. Except where otherwise provided, the Parties Group shall make decisions by consensus. A Contracting Party may abstain and express a differing view without barring consensus
6. Decisions under paragraph 5 may include a decision to adopt a different voting rule for a particular question or category of questions
7
7. Where a decision cannot be made by consensus, the decision shall be made by a majority comprising [three quarters] [two thirds] of the Contracting Parties
6. Expert Group No. 1 is considering the role of the Parties Group with respect to Dispute Settlement; this
sub-paragraph would address clarification of interpretation and application outside the Dispute Settlement
context. Delegations have varying views on the question of whether it is appropriate that the Parties Group
expressly be given a formal role in clarifying the interpretation or application of the MAI. On a point of
detail, one delegation has expressed the view that the Parties Group should have such authority, but only if
more than one Contracting Party makes a request
7. See footnote 3
98 8. Paragraph 7 shall not apply to the following decisions: (a) decisions under paragraph 6; (b) decisions under Article ... [see section XII of the Consolidated Text on amendment], which shall be made by consensus; (c) decisions under Article ... [see Section XII of the Consolidated Text on accession], [which shall be made by consensus] [which shall be made, failing consensus, by a [three quarters] [two thirds] majority] [which shall be made by a [three quarters] [two thirds] majority]; and (d) decisions on budgetary matters, which shall be made by [consensus] [a [three quarters] [two thirds] majority] [of Contracting Parties whose assessed contributions represent, in combination, at least two thirds of the total assessed contributions]
9. The Parties Group shall be assisted by a Secretariat
10. [Parties Group and Secretariat costs shall be borne by the Contracting Parties as approved and apportioned by the Parties Group.] 8
11. Where the European Community exercises its right to vote, it shall have a number of votes equal to the number of its Member States which are Contracting Parties to this Agreement. The number of votes of the European Community and its Member States shall in no case exceed the number of the Member States of the European Community which are Contracting Parties to this Agreement
9
8. Further work is required on paragraphs 9 and 10. Some delegations noted that funding of the MAI will need
to be addressed by delegations in advance of ratification and that there may be a need to include a formula
in the Agreement
9. This text is a proposal by one delegation. Some delegations said that they want to consider whether the MAI
should contain such a provision. Assuming that it should, two questions were raised: whether the provision
should apply only in cases where this delegation has competence and whether the Commission should be
restricted to casting a number of votes equal to the number of its Member States that are present when the
vote takes place. It was also suggested that a provision might be drafted that applied to Regional Economic
Integration Organisations rather than specifically to that delegation
99 XII. FINAL PROVISIONS
SIGNATURE
This Agreement shall be open for signature at the Depositary, until [date], by Signatories of the Final Act 1
and thereafter until entry into force by any State, or separate customs territory which possesses full autonomy on the matters covered by this Agreement, which is willing and able to take on its obligations on terms agreed between it and the Signatories of this Agreement acting through the Preparatory Group
ACCEPTANCE AND ENTRY INTO FORCE
In the Final Act
1. The Signatories to this Final Act agree to submit the Agreement for the consideration of their respective competent authorities with a view to seeking approval of the Agreement in accordance with their procedures
2. The Signatories to this Final Act agree on the desirability of acceptance of the Agreement by all signatories with a view to its entry into force by [date] or as early as possible thereafter
In the MAI
3. Not later than [date], the Signatories to this Agreement will meet to determine the date for entry into force and related matters 2
. Decisions shall be made by [consensus] [a [two-thirds] majority 3
of the Signatories]
4. This Agreement shall enter into force on the date determined by the Signatories to this Agreement in accordance with paragraph 3 for the Signatories that have accepted this Agreement as of that date. An acceptance following the entry into force of this Agreement shall enter into force on the 30th day following the deposit of its instrument of acceptance
1. One delegation is considering a formula for the signature of the MAI and its Regions and Communities
2. Delegations agree that there should be an interpretative note as follows: "Related matters" includes such
matters as whether there is a critical mass to proceed with entry into force of the Agreement, but not
changes to the Agreement
3. There are additional possibilities for a majority voting rule, including consensus minus one (or some
number greater than one), three quarters and a critical mass of delegations comprising a certain percentage
of investment flows
100 ACCESSION
1. This Agreement shall be open for accession by any State, regional economic integration organisation 4
, and any separate customs territory which possesses full autonomy in the conduct of matters covered by this agreement, which is willing and able to undertake its obligations on terms agreed between it and the Contracting Parties acting through the Parties Group
2. Decisions on accession shall be taken by the Parties Group
5
3. Accession shall take effect on the thirtieth day following the deposit of the instruments of accession with the Depositary
NON-APPLICABILITY
This Agreement shall not apply as between any Contracting Party and any acceding Party if, at the time of accession, the Contracting Party does not consent to such application
REVIEW
The Parties Group may review this Agreement as and when it determines
AMENDMENT
Any Contracting Party may propose to the Parties Group an amendment to this Agreement. Any amendment adopted by the Parties Group 6
shall enter into force on the deposit of an instrument of ratification by all of the Contracting Parties, or at such later date as may be specified by the Parties Group at the time of adoption of the amendment
4. A definition of this term will need to be agreed
5. See Consolidated Text, Section XI, Preparatory Group, paragraph 7 and Parties Group, paragraph 8
6. Delegations agree that when the Parties Group considers a proposed amendment, the Group will need to
consider both the extent to which reservations will be allowed and any proposed reservations themselves
Delegations will consider how best to reflect this thought in the Agreement. It might be reflected in an
interpretative note or in the provision on lodging country specific exceptions
101 WITHDRAWAL
1. At any time after five years from the date on which this Agreement has entered into force for a Contracting Party, that Contracting Party may give written notice to the Depositary of its withdrawal from this Agreement
2. Any such withdrawal shall take effect on the expiry of six months from the date of the receipt of the notice by the Depositary, or on such later date as may be specified in the notice of withdrawal. If a Contracting Party withdraws, the Agreement shall remain in force for the remaining Contracting Parties
3. The provisions of this Agreement shall continue to apply for a period of fifteen years from the date of notification of withdrawal to an investment existing at that date
DEPOSITARY
The [...............] shall be the Depositary of this Agreement
STATUS OF ANNEXES
The Annexes to this Agreement are [an integral part of the Agreement]
7
AUTHENTIC TEXTS
The English and French [and ............] texts of this Agreement are equally authentic
8
7. This provision will need to be revisited when the content of the Annexes is known
8. The question arises as to whether the MAI text should be in a language or languages additional to English
and French. It should be noted that this question has budgetary implications
102 DENIAL OF BENEFITS
a. [Subject to prior notification to and consultation with the Contracting Party of the investor,] a Contracting Party may deny the benefits of the Agreement to an investor [as defined in 1 (ii)] and to its investments if investors of a non-Party own or control the first mentioned investor and that investor has no substantial business activities in the territory of the Contracting Party under whose law it is constituted or organised
or b. [Subject to prior notification and consultation in accordance with Articles XXX (Transparency) and XXX (Consultations), a Contracting Party may deny the benefits of this Agreement to an investor of another Contracting Party that is an enterprise of such Contracting Party and to investments of such investors if investors of a non-Contracting Party own or control the enterprise and the enterprise has no substantial business activities in the territory of the Contracting Party under whose law it is constituted or organised.] 9
9. Possible additional text not discussed by DG3 [A Contracting Party may deny the benefits of the Agreement to an investor of another Contracting Party that is an enterprise of such Contracting Party and to investment of such investor if investors of a non-Contracting Party own or control the enterprise and the denying Contracting Party: (a) does not maintain diplomatic relations with the non-Contracting Party; or (b) adopts or maintains measures with respect to the non-Contracting Party that prohibit transactions with the enterprise or that would be violated or circumvented if the benefits of this Chapter were accorded to the enterprise or to its investments.] Some delegations also proposed a wider denial of benefits clause, in particular, to allow denial in cases where the parent was a national or enterprise of a country with which the investment host state lacked diplomatic relations. DG3 agreed that this matter should be considered in the wider context of "general exceptions"
103 ANNEX:
COUNTRY SPECIFIC PROPOSALS FOR DRAFT TEXTS
104 GEOGRAPHICAL SCOPE
(Paper Contributed from One delegation)
I. Introduction
The main objective of the multilateral international agreements must be to assist governments in their efforts to maintain the international peace and security, since no international agreement can be drafted in a way to disregard the existing international peace and security
No agreement can include provisions which may violate the rights and interests of a party or parties, or upset the sensitive balance of international order
This delegation would like to highlight the fact that there was a broad acceptance, during MAI negotiations of the principle that international peace and security shall be respected
II. Perspective of MAI
The aim of MAI should be to provide a comprehensive protection for investors and investments
However if it diverges from the existing definition of territory under international law this may raise legal complications. In this Delegation’s view, it is not the intention of the OECD members to raise new international legal complications
III. Some Comments on the Draft Provision on Geographical Scope-DAFFE/MAI(97)I
Regarding the draft article MAI shall apply not only in the land territory, the internal waters and the territorial sea of each party, (the definition of "territory" already comprises with respect to international law), but also in the maritime areas beyond the territorial sea as well as the archipelagic waters
None of the OECD members is an archipelagic State. In addition to this fact, it has not been taken into consideration that without contemplating all maritime issues between archipelagic states and their views on draft article, such a provision may produce contingencies between the relevant states as well as on investors and investments
It should be recalled that not every state has ratified the 1982 UNCLOS. Furthermore, this Convention does not include any specific investment-related provisions. In the light of these facts, establishment of a relationship between MAI and the UNCLOS should be avoided. Consequently if a reference to the UNCLOS is going to be preferred, it is our view that a broader view should be followed in order to avoid discrepancies
105 It should not be overlooked that there are many jurisdictional issues between the opposite or adjacent coastal states, even regarding the air territory above maritime areas, arising from the claims to extend the air territory beyond the frontiers of territorial sea. Therefore the area of application of MAI should be defined in a way so as not to produce negative effects on the nature and extent of already existing maritime issues and increase the number of countries involved to such cases. Extending the scope to the maritime areas to which a new international agreement shall apply will certainly aggravate the already existing disputes. This will also be a risk for the third countries and investors into which they never wanted to be involved
IV. Conclusion
This Delegation should like to reiterate its opposition to the extension of the scope of MAI to cover maritime areas and offers the following text: "This Agreement shall apply in the land territory, internal waters and the territorial sea of a Contracting Party." 106 SCOPE
(Contribution from One Delegation)
1. One delegation notes that while the draft text of the MAI contains Part II which is entitled "Scope and Application", there is no scope provisions other than provisions that relate to geographical scope. Accordingly, it is not obvious from the preliminary provisions of the text to what precisely the agreement purport to apply
2. Other recent trade agreements such as the General Agreement on Trade in Services (the "GATS") and the North American Free Trade Agreement ("NAFTA") set out the extent of the scope of the agreement
3. Article I:1 of the GATS states that it applies to "...measures by Members affecting trade in services." The investment chapter of NAFTA states that it chapter applies to measures of a Party relating to "...investors of another Party... (and) investments of another Party in the territory of the Party..." 1
4. This delegation believes that a provision setting out the scope of the agreement is important in order to identify the extent of the obligation being undertaken. It notes that many of the contributions made by participants have implicitly assumed that the agreement applies to government measures 2 In addition, the draft format for the lodging of country-specific reservations uses the concept of measures in describing the reservation
5. This delegation, as a signatory to both the GATS and NAFTA, submits that the concept of obligations applying to government measures is the correct approach. Stating so explicitly in the text of the agreement is good practice and allows countries to make a clear evaluation of their obligation and further permits them to reach a clear judgement as to what matters need to be reserved
6. Countries should only be bound with respect to their measures. Not all actions, statements or actions of a government necessarily constitutes a measure and the proposition that all such matters could be adjudicated is a matter that should be of some concern to governments. While it is perhaps unlikely that another government or a dissatisfied investor might initiate dispute settlement over, for example, a statement that in and of itself has no legal effect, it is possible that such a matter could be raised in dispute settlement in addition to a more substantive claim. In this delegation’s view this would be wrong as being outside the scope to which we envisage the agreement applying. This is not to say that some actions by government that are not measures could not be placed before an arbitral panel as, for example, being evidence that a measure has violated a provision of the agreement
7. This delegation proposes that a scope and application provision could be drafted as follows: "This Agreement applies to measures adopted or maintained by Contracting Party relating to investors of another Contracting Party and investments of investors of another Contracting Party in the territory of the Contracting Party." "measure" includes any law, regulation, procedure, requirement or practice;" 1 See: Article 1101(1) of Chapter 11 of NAFTA for full text 2 See, for example, the contributions on Secondary Investment Boycotts, an Exception Clause for Cultural Industries and Social Security Contributions
107 SUBSTANTIVE APPROACH TO THE RESPECT CLAUSE
(Note by One Delegation)
Each Contracting Party shall observe any other obligation in writing, it has assumed with regard to investments in its territory by investors of another Contracting Party
Disputes arising from such obligations shall only be settled under the terms of the contracts underlying the obligations
108 RESPECT CLAUSE
(Contribution by One Delegation)
Each Contracting Party shall observe any obligation it has entered into with regard to a specific investment of an investor of another Contracting Party
109 CLAUSE FOR REGIONAL ECONOMIC INTEGRATION
ORGANISATIONS (REIO-CLAUSE)
(Contribution from One Delegation)
This delegation has presented the principle reasons for the inclusion of a clause for Regional Economic Integration Organisations in the Multilateral Agreement on Investment at the April meeting of the Negotiating Group
Building on this contribution, this delegation herewith submits its proposal for such a REIO-clause
Article X on Regional Economic Integration Organisations (REIOs) 1. For the purpose of this Agreement, a REIO is an organisation of sovereign States which have committed themselves to abolish in substance all barriers to investment among themselves and to which these States have transferred competence on a range of matters within the purview of this Agreement, including the authority to adopt legislation and to make decisions binding on them in respect of those matters
2. Article ..... (MFN clause) shall not prevent a Contracting Party which is a Member State of a REIO from according more favourable treatment to investors and their investments from other Member States of the organisation as a result of the measures applied within the framework of that organisation than it accords to investors and their investments from other Contracting Parties
3. Nothing in this Agreement shall prevent a REIO and its Member States from applying, consistent with the objectives of this Agreement, new harmonised measures adopted within the framework of such organisation and which replace the measures previously applied by these States
4. A Contracting Party which joins a REIO shall not be prevented from applying in place of its previous national legislation the corresponding legislation of the said organisation from the day of its accession to it. If a Contracting Party has concluded an agreement with a REIO and its Member States in preparation for its accession to it, nothing in this Agreement shall prevent it from aligning its national legislation to the measures applied in the framework of such organisation, nor shall this Agreement prevent Member States of a REIO from extending to the investors and their investments of such a Contracting Party more favourable treatment as referred to in paragraph 2
110 CLAUSE FOR REGIONAL ECONOMIC INTEGRATION
ORGANISATIONS (REIO - CLAUSE)
(Contribution from Three Delegations)
Hereby the three delegations, supporting in principle the draft text of REIO-Clause contained in this Annex do submit , for the sake of clarity, their proposal for modification of last sentence of the paragraph 4 of the mentioned REIO-Clause, which should read as follows: „ A Contracting Party which joins a REIO shall not be prevented from applying in place of its previous national legislation the corresponding legislation of the said organisation from the day of its accession to it
If a Contracting Party has concluded an agreement with a REIO and its Member States in preparation for its accession to it, nothing in this Agreement shall prevent it from aligning its national legislation to the measures applied in the framework of such Organisation. This Agreement shall prevent neither this Contracting Party nor a Member State of that REIO from according more favourable treatment resulting from such an alignment to each other’s investors and their investments than they accord to investors and their investments from other Contracting Parties."
 111 DRAFT ARTICLE ON CONFLICTING REQUIREMENTS
(Amendment of the proposal introduced by One Delegation)
1
(Contribution from One Delegation)
Paragraph 1. A Contracting Party shall not prohibit outside its territory, directly or indirectly, or cause to refrain, an investor from another Contracting Party from acting in accordance with the latter Contracting Party’s laws, regulations or express policies unless those laws, regulations or express policy are contrary to international law (conflicting requirement)
"Express policy" means a situation in which the conduct of an investor is not explicitly regulated but allowed on the basis of general principles of law or general policy in the relevant country REASONS FOR REFORMULATING PARAGRAPH 1
1. It appears to be necessary to cover not only cases where a contracting party is (directly) requiring an investor to behave in a certain way but also cases where the Contracting Party enjoins sanctions on investors when they behave in that way (e.g. loss of rights or advantages that would otherwise be granted)
2. The wording proposed "to act in conflict" seems to be unduly narrow as it implies that there is an open conflict between two legal orders, one imposing to do X, the other to do Y in the same situation
Those cases exist, but are extremely rare (e.g. a Saudi Arabian law imposes on investors not to export to or invest in Israel/a US law imposes on American investors abroad not to accept boycott against Israel)
The normal situation is, however, that the legal order of a Contracting Party simply allows certain activities (e.g. Norway permits whaling) whilst the legal order of another Contracting Party prohibits investors such activities, even abroad (e.g. the UK would not allow its investors at home and abroad to invest in whaling)
In this case there would be no real conflict according to the delegation’s proposal as the investor can abide by the UK rule without entering in conflict with the Norwegian laws
Thus, there is a choice to make between the two concepts. The "open conflict" rule does in the EC view not serve much purpose
Moreover, a "conflict" in the meaning of requirements that are really opposed to one another is not possible between a law on the one hand and a "policy" on the other as a pure policy measure is not mandatory. If one would choose the narrow approach (open conflict), the reference to such policy measure would have to be deleted
1. Original proposal by one delegation is reproduced at the end of this contribution
104 GEOGRAPHICAL SCOPE
(Paper Contributed from One delegation)
I. Introduction
The main objective of the multilateral international agreements must be to assist governments in their efforts to maintain the international peace and security, since no international agreement can be drafted in a way to disregard the existing international peace and security
No agreement can include provisions which may violate the rights and interests of a party or parties, or upset the sensitive balance of international order
This delegation would like to highlight the fact that there was a broad acceptance, during MAI negotiations of the principle that international peace and security shall be respected
II. Perspective of MAI
The aim of MAI should be to provide a comprehensive protection for investors and investments
However if it diverges from the existing definition of territory under international law this may raise legal complications. In this Delegation’s view, it is not the intention of the OECD members to raise new international legal complications
III. Some Comments on the Draft Provision on Geographical Scope-DAFFE/MAI(97)I
Regarding the draft article MAI shall apply not only in the land territory, the internal waters and the territorial sea of each party, (the definition of "territory" already comprises with respect to international law), but also in the maritime areas beyond the territorial sea as well as the archipelagic waters
None of the OECD members is an archipelagic State. In addition to this fact, it has not been taken into consideration that without contemplating all maritime issues between archipelagic states and their views on draft article, such a provision may produce contingencies between the relevant states as well as on investors and investments
It should be recalled that not every state has ratified the 1982 UNCLOS. Furthermore, this Convention does not include any specific investment-related provisions. In the light of these facts, establishment of a relationship between MAI and the UNCLOS should be avoided. Consequently if a reference to the UNCLOS is going to be preferred, it is our view that a broader view should be followed in order to avoid discrepancies
105 It should not be overlooked that there are many jurisdictional issues between the opposite or adjacent coastal states, even regarding the air territory above maritime areas, arising from the claims to extend the air territory beyond the frontiers of territorial sea. Therefore the area of application of MAI should be defined in a way so as not to produce negative effects on the nature and extent of already existing maritime issues and increase the number of countries involved to such cases. Extending the scope to the maritime areas to which a new international agreement shall apply will certainly aggravate the already existing disputes. This will also be a risk for the third countries and investors into which they never wanted to be involved
IV. Conclusion
This Delegation should like to reiterate its opposition to the extension of the scope of MAI to cover maritime areas and offers the following text: "This Agreement shall apply in the land territory, internal waters and the territorial sea of a Contracting Party." 106 SCOPE
(Contribution from One Delegation)
1. One delegation notes that while the draft text of the MAI contains Part II which is entitled "Scope and
Application", there is no scope provisions other than provisions that relate to geographical scope. Accordingly, it is
not obvious from the preliminary provisions of the text to what precisely the agreement purport to apply
2. Other recent trade agreements such as the General Agreement on Trade in Services (the "GATS") and the
North American Free Trade Agreement ("NAFTA") set out the extent of the scope of the agreement
3. Article I:1 of the GATS states that it applies to "...measures by Members affecting trade in services." The
investment chapter of NAFTA states that it chapter applies to measures of a Party relating to "...investors of another
Party... (and) investments of another Party in the territory of the Party..."
1
4. This delegation believes that a provision setting out the scope of the agreement is important in order to
identify the extent of the obligation being undertaken. It notes that many of the contributions made by participants
have implicitly assumed that the agreement applies to government measures
2
In addition, the draft format for the
lodging of country-specific reservations uses the concept of measures in describing the reservation
5. This delegation, as a signatory to both the GATS and NAFTA, submits that the concept of obligations
applying to government measures is the correct approach. Stating so explicitly in the text of the agreement is good
practice and allows countries to make a clear evaluation of their obligation and further permits them to reach a clear
judgement as to what matters need to be reserved
6. Countries should only be bound with respect to their measures. Not all actions, statements or actions of a
government necessarily constitutes a measure and the proposition that all such matters could be adjudicated is a matter
that should be of some concern to governments. While it is perhaps unlikely that another government or a dissatisfied
investor might initiate dispute settlement over, for example, a statement that in and of itself has no legal effect, it is
possible that such a matter could be raised in dispute settlement in addition to a more substantive claim. In this
delegation’s view this would be wrong as being outside the scope to which we envisage the agreement applying. This
is not to say that some actions by government that are not measures could not be placed before an arbitral panel as, for
example, being evidence that a measure has violated a provision of the agreement
7. This delegation proposes that a scope and application provision could be drafted as follows:
"This Agreement applies to measures adopted or maintained by Contracting Party relating to investors of
another Contracting Party and investments of investors of another Contracting Party in the territory of the
Contracting Party."
"measure" includes any law, regulation, procedure, requirement or practice;"
1
See: Article 1101(1) of Chapter 11 of NAFTA for full text
2
See, for example, the contributions on Secondary Investment Boycotts, an Exception Clause for Cultural Industries and
Social Security Contributions
107 SUBSTANTIVE APPROACH TO THE RESPECT CLAUSE
(Note by One Delegation)
Each Contracting Party shall observe any other obligation in writing, it has assumed with regard to investments in its territory by investors of another Contracting Party
Disputes arising from such obligations shall only be settled under the terms of the contracts underlying the obligations
108 RESPECT CLAUSE
(Contribution by One Delegation)
Each Contracting Party shall observe any obligation it has entered into with regard to a specific investment of an investor of another Contracting Party
109 CLAUSE FOR REGIONAL ECONOMIC INTEGRATION
ORGANISATIONS (REIO-CLAUSE)
(Contribution from One Delegation)
This delegation has presented the principle reasons for the inclusion of a clause for Regional Economic Integration Organisations in the Multilateral Agreement on Investment at the April meeting of the Negotiating Group
Building on this contribution, this delegation herewith submits its proposal for such a REIO-clause
Article X on Regional Economic Integration Organisations (REIOs) 1. For the purpose of this Agreement, a REIO is an organisation of sovereign States which have committed themselves to abolish in substance all barriers to investment among themselves and to which these States have transferred competence on a range of matters within the purview of this Agreement, including the authority to adopt legislation and to make decisions binding on them in respect of those matters
2. Article ..... (MFN clause) shall not prevent a Contracting Party which is a Member State of a REIO from according more favourable treatment to investors and their investments from other Member States of the organisation as a result of the measures applied within the framework of that organisation than it accords to investors and their investments from other Contracting Parties
3. Nothing in this Agreement shall prevent a REIO and its Member States from applying, consistent with the objectives of this Agreement, new harmonised measures adopted within the framework of such organisation and which replace the measures previously applied by these States
4. A Contracting Party which joins a REIO shall not be prevented from applying in place of its previous national legislation the corresponding legislation of the said organisation from the day of its accession to it. If a Contracting Party has concluded an agreement with a REIO and its Member States in preparation for its accession to it, nothing in this Agreement shall prevent it from aligning its national legislation to the measures applied in the framework of such organisation, nor shall this Agreement prevent Member States of a REIO from extending to the investors and their investments of such a Contracting Party more favourable treatment as referred to in paragraph 2
110 CLAUSE FOR REGIONAL ECONOMIC INTEGRATION
ORGANISATIONS (REIO - CLAUSE)
(Contribution from Three Delegations)
Hereby the three delegations, supporting in principle the draft text of REIO-Clause contained in this Annex do submit , for the sake of clarity, their proposal for modification of last sentence of the paragraph 4 of the mentioned REIO-Clause, which should read as follows: „ A Contracting Party which joins a REIO shall not be prevented from applying in place of its previous national legislation the corresponding legislation of the said organisation from the day of its accession to it
If a Contracting Party has concluded an agreement with a REIO and its Member States in preparation for its accession to it, nothing in this Agreement shall prevent it from aligning its national legislation to the measures applied in the framework of such Organisation. This Agreement shall prevent neither this Contracting Party nor a Member State of that REIO from according more favourable treatment resulting from such an alignment to each other’s investors and their investments than they accord to investors and their investments from other Contracting Parties." 111 DRAFT ARTICLE ON CONFLICTING REQUIREMENTS
(Amendment of the proposal introduced by One Delegation)
1
(Contribution from One Delegation)
Paragraph 1. A Contracting Party shall not prohibit outside its territory, directly or indirectly, or cause to refrain, an investor from another Contracting Party from acting in accordance with the latter Contracting Party’s laws, regulations or express policies unless those laws, regulations or express policy are contrary to international law (conflicting requirement)
"Express policy" means a situation in which the conduct of an investor is not explicitly regulated but allowed on the basis of general principles of law or general policy in the relevant country REASONS FOR REFORMULATING PARAGRAPH 1
1. It appears to be necessary to cover not only cases where a contracting party is (directly) requiring an investor to behave in a certain way but also cases where the Contracting Party enjoins sanctions on investors when they behave in that way (e.g. loss of rights or advantages that would otherwise be granted)
2. The wording proposed "to act in conflict" seems to be unduly narrow as it implies that there is an open conflict between two legal orders, one imposing to do X, the other to do Y in the same situation
Those cases exist, but are extremely rare (e.g. a Saudi Arabian law imposes on investors not to export to or invest in Israel/a US law imposes on American investors abroad not to accept boycott against Israel)
The normal situation is, however, that the legal order of a Contracting Party simply allows certain activities (e.g. Norway permits whaling) whilst the legal order of another Contracting Party prohibits investors such activities, even abroad (e.g. the UK would not allow its investors at home and abroad to invest in whaling)
In this case there would be no real conflict according to the delegation’s proposal as the investor can abide by the UK rule without entering in conflict with the Norwegian laws
Thus, there is a choice to make between the two concepts. The "open conflict" rule does in the EC view not serve much purpose
Moreover, a "conflict" in the meaning of requirements that are really opposed to one another is not possible between a law on the one hand and a "policy" on the other as a pure policy measure is not mandatory. If one would choose the narrow approach (open conflict), the reference to such policy measure would have to be deleted
1. Original proposal by one delegation is reproduced at the end of this contribution
120 LABOUR MARKETS INTEGRATION AGREEMENTS
(Contribution from Five Delegations)
During the MAI negotiations in Paris delegations have agreed on the inclusion of a provision regarding "key personnel". The basic provision is that the Contracting Parties are obliged to permit certain groups of natural persons to enter into and stay in a Contracting State in connection with investments covered by the MAI, subject to the application of Contracting Parties’ national laws, regulations and procedures affecting the entry, stay and work of natural persons. Under the stated condition, the same groups of natural persons are entitled to work permits in connection with covered investments. A Contracting Party may make the issue of such permits conditional on the submission of formal written applications for such permits in accordance with its relevant laws and regulations
For more than 40 years the Nordic countries have maintained a special legal regime for the entry by their nationals into their respective employment markets
1
Under this regime nationals of the Nordic countries may move freely from one country to another and are not required to obtain residence permits and/or work permits from the relevant national authorities. It goes without saying that this also covers nationals of the five countries in their capacity as investors or key personnel. The regime covers all groups of workers and also provides for certain social benefits regardless of nationality. The rules of the Nordic common labour market are thus more favourable to nationals of the Nordic countries than the rules applicable to nationals of third countries
2
The historical, economic and political ties between the five Nordic countries as well as the similarities in their welfare systems have motivated the integration of their labour markets and have been the rationale for the intergovernmental agreements on the subject. Thus, the motivation for the Nordic Labour Market agreements goes far beyond purely economic considerations
While it would seem clear that the MAI is not intended to interfere with integrated labour markets, such as the Nordic Labour Market, it cannot be excluded that the Most Favoured Nation provision of the MAI to some extent interferes with the Nordic Labour Market
1. The rules are contained in an Agreement of May 22, 1954 concerning exemption from requirements of
passport, residence and work permits, an Agreement of July 12, 1957 concerning the suspension of passport
control at the common Nordic borders and in the Nordic Convention on Social Security of 1955 (new
Convention 1992). The Agreement of May 22, 1954 has been replaced by a subsequent agreement which
entered into force on August 1, 1983. The duration of the Agreement is indefinite
2. Another distinct legal regime is applicable to nationals of the EU and EEA states
121 Even if there are important differences between the scope of MAI and the WTO General Agreement on Trade in Services, which e.g. directly covers movement of natural persons, it is worth recalling that the Nordic countries obtained special coverage for integrated labour markets in GATS, through the insertion of article V bis of that agreement. This provision allows Contracting Parties to enter into labour markets integration agreements without having to extend to nationals of third countries by means of MFN treatment an benefits deriving from such an agreement
In order to obtain complete legal certainty concerning the relationship between the MAI and substantially integrated labour markets the Nordic Countries propose the insertion of a provision similar to GATS art. V bis in the MAI. This would not in any way derogate from the binding MAI obligation regarding key personnel
Based on the above the five delegations suggest the insertion of a GENERAL labour markets integration provision in the MAI with the following wording 3
: "Labour markets integration agreements Paragraph 1 Nothing in this Agreement shall prevent any of the Contracting Parties from being a party to an agreement establishing full integration of the labour markets between the parties to such an agreement
Paragraph 2 For the purpose of this Agreement the term "labour markets integration agreements" means agreements which allow citizens of the parties to such agreements a right of free entry to the employment markets of the parties concerned and which exempts citizens of parties to the agreement from requirements concerning residency and work permits
Labour markets integration agreements may also include measures concerning conditions of pay, other conditions of employment and social benefits. " 3. The wording is based on the GATS article V bis
122 MAI: PROPOSED ANNEX ON THE SAMI PEOPLE
(Contribution by Three Delegations)
THE CONTRACTING PARTIES, RECOGNIZING the obligations and commitments of these countries with regard to the Sami people under national and international law, NOTING, in particular,

hat these countries are committed to preserving and developing the means of livelihood, language, culture and way of life of the Sami people, CONSIDERING the dependence on traditional Sami culture and livelihood on primary economic activities, such as reindeer husbandry in the traditional areas of Sami settlement, HAVE AGREED on the following provisions
Article 1
Notwithstanding the provisions of this Agreement, exclusive rights to reindeer husbandry within traditional Sami areas may be granted to the Sami people
Article 2
This Annex may be extended to take account of any further development of exclusive Sami rights linked to their traditional means of livelihood. The Parties Group may adopt the necessary amendments to this Annex
123 PACKAGE OF ADDITIONAL ENVIRONMENTAL PROPOSALS
(Contribution by One Delegation)
In addition to the environmental elements in the preamble, the article based on NAFTA 1114, and the association of the OECD Guidelines for Multinational Enterprises, the delegation proposes the following additional language to address environmental issues in the MAI
1) Health, Safety and Environment
Two new paragraphs, to add to the already tabled NAFTA 1114.2-type provision (regarding the lowering of standards for the purpose of attracting investment)
a) "Nothing in this Agreement shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this Agreement that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental concerns." (Text same as NAFTA 1114.1) b) "Parties, through the cooperation of relevant international organizations and industry, where appropriate, should encourage investors wherever they operate to introduce policies and make commitments to follow environmentally protective standards regarding toxic chemicals and hazardous waste generation and disposal." 2.) Maintaining and Enforcing High Environmental Standards "Recognizing the right of each Party to establish its own levels of domestic environmental protection and environmental development policies and priorities, and to adopt or modify accordingly its environmental laws and regulations, each Party should ensure that its laws and regulations provide for high levels of environmental protection and should continue to improve those laws and regulations. Moreover, each Party should effectively enforce its environmental laws and regulations through appropriate governmental action." 3) Environmental Impact Assessments "Each Party should require or undertake, as appropriate, and consistent with Articles ** on most-favoured national and national treatment, environmental impact assessments for proposed investment in its territory that is likely to have a significant adverse impact on health or the environment and is subject to a decision of a competent national authority." In addition, we propose the following additional language. While this language is not strictly environmental, it addresses some environmental concerns that were identified during our analysis of the potential environmental implications of the MAI
4) "In Like Circumstances" The following language already tabled for a footnote or interpretive note to "in like circumstances" in the national and MFN treatment articles would also include new language in bold: "National Treatment and most favoured nation treatment are relative standards requiring a comparison between treatment of a foreign investor and its investment and treatment of 124 domestic or third country investors and investments. The goal of both standards is to prevent discrimination in fact or in law compared with domestic investors or investments of those of a third country. At the same time, however, governments may have legitimate policy reasons to accord differential treatment to different types of investments. Similarly, governments may have legitimate policy reasons to accord differential treatment as between domestic and foreign investors and their investments in certain circumstances, for example where needed to secure compliance with domestic laws that are not inconsistent with national treatment and most favoured nation treatment. Moreover, the fact that a measure applied by a government has a different effect on an investment or investor of another Party would not in itself render the measure inconsistent with national treatment and most favoured nation treatment
" ‘In like circumstances’ ensures that comparisons are made between investors and investment on the basis of characteristics that are relevant for the purposes of the comparison. The objective is to permit the consideration of all relevant circumstances, including those relating to a foreign investor and its investment, in deciding to which domestic or third country investors and investments they should appropriately be compared, while excluding from consideration those characteristics that are not germane to such a comparison. " 5) Transparency
A new phrase (in bold) would be added to the already tabled articles on Transparency. The brackets in the text below are presently in the draft MAI text itself
"2.3 Nothing in this Agreement shall prevent a Contracting Party from requiring an investor of another Contracting Party, or its investment, to provide or allow the verification of
information to ensure compliance with the first Contracting Party’s laws and regulations, or to provide routine information concerning that investment solely for information or statistical purposes. No contracting Party shall be required to furnish or allow access to information concerning particular investors or investments the disclosure of which would impede law enforcement or would be contrary to its laws [policies, or practices] protecting confidentiality. " In addition, the one delegation is continuing to consider the need to address other environmental concerns in the text. In particular, we are continuing to review the expropriation and general treatment articles to ensure concerns in that area are addressed. We also note that we will need to ensure that MAI obligations do not conflict with the Climate Change Convention
 

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