FTAA - Free Trade Area of the Americas

Draft Agreement

Chapter on Investment

Article 1: SCOPE OF APPLICATION 

[1. This Chapter applies to measures adopted or maintained by a Party relating to:] ¹

a) [investors of another Party [with respect to all aspects of its investment];] 

b) [investments of investors of another Party in the territory of the Party, [upon entry into force of this Agreement. It shall also apply to investments made prior to the entry into force of the Agreement, provided the investments qualified as foreign investment;] [This Chapter covers investments existing at the time this Agreement enters into force and investments made or acquired thereafter.] [; and,]] 

c) [all investments of the investors of any Party in the territory of another Party with regard to the article on Performance Requirements.] 

[2. This [Agreement] [Chapter] shall apply to investments made, prior to or after its entry into force, [in the territory of a Contracting Party, in accordance with the laws of the Contracting Party.] [by the investors of a Contracting Party, in accordance with the legal provisions of the other Contracting Party, within that Party’s territory.]] 

[2. This Chapter applies to investments already existing prior to the entry into force of this Agreement, as well as to investments made or acquired subsequently.] 

[2. [Each Contracting Party shall promote, within its territory, the investments of investors of other Contracting Parties and shall admit such investments in accordance with its laws and regulations.] [The FTAA Chapter on Investment shall apply to all investments existing when the treaty enters into force, including investments made prior to the date of its entry into force.]] 

[2. This Agreement shall apply to investments admitted into the territory of a Party in accordance with national laws and regulations after the entry into force of this Agreement.] 

[2. The provisions of this Chapter do not bind any Party in relation to any act or fact that took place or any situation that ceased to exist before the date of entry into force of this agreement.]

[3. This Chapter does not apply to:]  [3. The stipulations of this Chapter shall not apply, however, to:] 

a) [economic activities reserved by each Party, [pursuant to its legislation in force on the date of the signing of this Agreement, pursuant to Annex XX] [in conformity with the prevailing domestic legislation of each Party];] 

b) [measures adopted or maintained by a Party [in relation to an investor of another Party, or the investments of such investors in financial institutions in the territory of the Party;] [in relation to financial services] [, pursuant to Chapter _____ (Financial Services)].]

c) [measures adopted by a Party to limit the participation of the investments of investors of another Party in its territory for reasons of national security [or] [,] public order [, and others pursuant to domestic legislation, including protection of the cultural heritage.]; [and]] 

d) [disputes or claims arising [or resolved] before the entry into force of this Agreement or relating to facts that occurred before it entered into force, even if their effects persist thereafter.] [divergences or disputes which arose prior to the entry into force of this Chapter, or which are directly related to events occurring before its entry into force.] 

[3. Without prejudice to the foregoing, this Agreement shall not apply to disputes or disputes involving facts occurring prior to its entry into force, even though the effects of the dispute may last beyond the entry into force of the Agreement. This Agreement shall not apply to investments made with capital or assets of illicit origin, nor shall it be construed as preventing Parties from adopting or maintaining measures aimed at preserving public order.] 

[3. [Each Party reserves the right to maintain reservations and exceptions that shall be set out in an Annex to this Chapter.] [This Chapter shall apply to all investments made prior to, or after, the entry into force of this Chapter, but the provisions thereof shall not apply to any dispute, complaint or difference that may have arisen prior to its entry into force.]] 

[3. A Party may deny the benefits of this Chapter to an investor of another Party that is a company of such other Party and to investments of that investor if -- 

(a) investors of a non-Party own or control the company and the denying Party: 

i. does not maintain diplomatic relations with the non-Party; or 

ii. adopts or maintains measures with respect to the non-Party that prohibit transactions with the company or that would be violated or circumvented if the benefits of this Chapter were accorded to the company or to its investments; or 

(b) the company has no substantial business activities in the territory of any Party, other than the denying Party, and investors of a non-Party, or of the denying Party, own or control the company.] 

[3. Parties may exclude investment in certain sectors from the provisions of this agreement. Smaller economies will be specifically facilitated in this regard.] 

[4. A Party has the right to perform exclusively the economic activities set out in Annex ___ and to refuse to authorize the establishment of investment in such activities.] 

[5. Nothing in this Chapter shall be construed to prevent a Party from providing a service or performing a function such as law enforcement, correctional services, income or unemployment insurance or social security services, social welfare, public education, public training, health, and child care[, when performed in a manner not inconsistent with this Chapter].] 

[6. Notwithstanding paragraph 5, if an investor of a duly authorized Party provides services or performs functions of correctional services, income insurance or unemployment insurance or social security services, social welfare, public education, public training, health, and child care, the investments of that investor shall be protected by the provisions of this Chapter.] 

[7. This Chapter applies to the entire territory of the Parties and to any level or order of government regardless of any inconsistent measure that may exist in legislation at those levels or orders of government.]

Article 2: NATIONAL TREATMENT 

[1. Each Party shall accord to the investors of another Party and to the investments of investors of another Party treatment no less favorable than that it accords [in like circumstances] to its own investors and to the investments of those investors [with respect to the establishment, acquisition, expansion, management, conduct, operation, sale or other disposition of investments].] 

[1. [Each Party] [A Party] shall accord to investors of another Party treatment no less favorable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments [in its territory]. [Each Party] [A Party] shall accord to [covered investments] [investments of investors of another Party] treatment no less favorable than that it accords, in like circumstances, to investments [in its territory] of its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments. [The treatment each Party shall accord under this paragraph is “national treatment.”]. [The treatment to be accorded by a state, territory, possession, or province under paragraph 1 is treatment no less favorable than the treatment that it accords, in like circumstances, to natural persons resident in and companies constituted under the laws of other states, territories, possessions, or provinces of the Party of which it forms a part, and to their respective investments.]] 

[1. [Each Contracting Party [, once it has admitted investments in its territory by investors of the other Contracting Party,] shall accord [them] [to the investments of the other Contracting Parties, established or executed in its territory] [to the investments made by the investors of other Contracting Parties in their territory] treatment which is no less favorable than that accorded to investments by [its own investors] [its own national investors, in the establishment, acquisition, expansion, management, conduct, operation, sale or other disposition of an investment] [or the investors of a third State, if the latter is more favorable]. [National treatment shall be granted in accordance with the laws of the host country.]] 

[2. The treatment accorded by a Party, under subparagraph 1 above, means, with respect to a State, treatment no less favorable than the most favorable treatment accorded by that State, in like circumstances, to the investors and investments of investors of the Party to which it belongs.] 

Article 3: MOST-FAVORED-NATION TREATMENT 

[1. Each Party shall accord to investors of another Party and to the investments of investors of another Party, treatment no less favorable than it accords [in like circumstances] to investors [and to the investments of the investors of another Party or] of a non-Party [with respect to the establishment, acquisition, expansion, management, conduct, operation, sale or other disposition of investments].] 

[1. [Each Party] [A Party] shall accord to investors of another Party treatment no less favorable than that it accords, in like circumstances, to [investors of any non-Party] [investors of any other Party or any non-Party] with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments [in its territory]. [Each Party] [A Party] shall accord [to covered investments] [to investments of investors of another Party] treatment no less favorable than that it accords, in like circumstances, to investments of investors of [any non-Party] [any other Party or of a non-Party] with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments. [The treatment each Party shall accord under this paragraph is “most favored nation treatment.”]] 

[1. [Also] Each Contracting Party [, once it has admitted investments in its territory by investors of the other Contracting Party,] shall accord [them] [to the investments] [of investors] [of the other Contracting Parties] [made] [established or executed] [in its territory] treatment which is no less favorable than that accorded to investments [by investors of third States] [of third countries] [of its own investors or the investors of a third State, if the latter is more favorable] [of another Contracting Party or of a third country, if the latter treatment is more favorable]. [The FTAA can co-exist with bilateral and sub-regional agreements, to the extent that the rights and obligations under these agreements are not covered by or go beyond the rights and obligations of the FTAA.]]

Article 4:  EXCEPTIONS TO NATIONAL TREATMENT AND MOST-FAVORED-NATION TREATMENT 

[1. Exceptions to these principles may be notified.] 

[2. [If a party grants special treatment to the investor and the investment of an investor of a Party or non-Party under present or future participation in: 

a) agreements that establish provisions to avoid double taxation; 

b) international agreements relating totally or partially to tax matters; 

c) free-trade areas, customs unions, common market, economic or monetary unions and similar institutions; 

Such Party shall not be obligated to extend this treatment to the other Parties of the agreement that are not part of a), b), and c).] 

[In applying the most-favored-nation principle, subparagraph f of the General Principles in Annex I of the San José Ministerial Declaration shall be taken into account: “The FTAA can co-exist with bilateral and sub-regional agreements, to the extent that the rights and obligations under these agreements are not covered by or go beyond the rights and obligations of the FTAA.”]] 

[2. What is provided in the article on the most favored nation treatment shall not be extended to: 

a) the privileges, advantages or benefits that one Contracting Party concedes to the investors of another Contracting Party in virtue of economic integration agreements, including those involving a free trade area, customs union, common market or economic or monetary union; 

b) the privileges, advantages or benefits derived from agreements whose purpose is to facilitate border relations; 

c) the rights and obligations derived from agreements aimed at avoiding double taxation and, in general, any matter related to taxation; and 

The reservations to national treatment and most favored nation treatment regarding specific matters or sectors shall be included in Annex 1 of the present Agreement.² ] 

[3. Parties will need to identify, where appropriate, specialized provisions for specific sectors and discuss how the Annexes containing exceptions to the obligations on national treatment and most-favored-nation treatment should be structured as well as the protection to be afforded to investments covered under such Annexes with respect to other obligations under the Investment Chapter.] 

Article 5:  STANDARD OF TREATMENT 

[1. Each Party shall accord to investors of another Party and [their covered investments] [to the investments of investors of another Party] the better of national treatment or most-favored-nation treatment.] 

Article 6:  FAIR AND EQUITABLE TREATMENT 

[1. [Each Party] [A Party] [Each Contracting Party] [shall accord] [shall ensure] [shall at all times ensure] [to the investments of the investors of another Party] [to the investors of another Party and their investments] [to the investments of investors of one of the Contracting Parties] [to the investments of investors of the other Contracting Parties, made in keeping with the present Agreement] [to covered investments of investors of the other Parties] [to the investments of another Contracting Party] [treatment in accordance with international law, including] fair and equitable treatment [within its territory] [as well as full protection and security] [as well as juridical protection and security within its territory] [in accordance with the norms and principles of international law] [in accordance with principles of international law] [and shall not impair their management, maintenance, use, enjoyment or disposal through unjustified or discriminatory measures] [and shall ensure that the exercise of the rights recognized herein are not impaired in practice.].] ³

Article 7:  PERFORMANCE REQUIREMENTS 

[1. [Performance Requirements:] [No Party may impose or enforce any of the following requirements or [enforce any] commitments [or undertaking],] [in connection with the establishment, acquisition, expansion, administration, management, conduct [or operation] [, operation, sale or other disposition] of an investment of an investor of a Party] [or of a non Party] [in connection with any investment of an investor of any Party] in its territory:] [1. None of the Contracting Parties shall impose, or demand, unless otherwise provided for in that Party’s legislation, any of the following requirements, with respect to permission to establish, expand, maintain or acquire an investment:] 

a) [to export a given [type,] level or percentage of goods or services;] 

b) [to achieve a given level or percentage of domestic content;] 

c) [to purchase, use or accord a preference to goods produced [or services provided] in its territory [, or to purchase goods from producers] [or to purchase goods from persons] [or services from service providers] [in its territory]; [or,]] 

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 [from such investments.] [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 in any way to the volume or value of its exports or foreign exchange earnings;] 

f) [to transfer [a particular] technology, production process or other proprietary knowledge to a person in its territory] [, except when the requirement is imposed [or the commitment is enforced] by a court, administrative tribunal or competent authority to remedy an alleged violation of competition laws or to act in a manner not inconsistent with other provisions of this Agreement]; or] 

g) [[to act as the exclusive supplier of] [to supply exclusively from the territory of the Party] the goods that it produces or the services that it provides to a specific regional [market] or [to the] world market.] 

[This paragraph does not apply to any requirement other than those indicated herein.] 

[1. No Party may unilaterally stipulate, as a condition for the establishment, expansion, or maintenance of investments, performance requirements which require or demand commitments to export goods, which specify that certain goods or services shall be acquired locally, or which impose any other similar requirement.] 

[1. No Contracting Party shall establish performance requirements through the adoption of investment-related measures that are incompatible with the prevailing disciplines in the framework of the WTO Agreement on Trade-Related Investment Measures and any subsequent developments of those disciplines.] 

[1. The Parties may not impose any performance requirements incompatible with the disciplines of the Agreement on Trade-Related Investment Measures of the World Trade Organization, as a condition for establishing, expanding or maintaining investments.] 

[2. A measure that requires an investment to use a technology to meet generally applicable health, [environmental or safety] [safety or environmental] requirements shall not be construed to be inconsistent with paragraph 1 (f). For greater certainty, [Articles ___ (National Treatment) and ___ (Most-Favored-Nation Treatment)] [the provisions on National Treatment and Most-Favored-Nation Treatment] shall apply to the measure.] 

[3. [Performance Incentives:] No Party may condition the receipt or continued receipt of [an incentive or advantage] [an advantage] [a benefit], in connection with [the establishment, acquisition, expansion, management, conduct, operation, sale or other disposition of] an investment in its territory of an investor of a Party, [or of a non-Party] on compliance with any of the following requirements: 

a) to purchase, use or accord a preference to goods produced in its territory, or to purchase goods from [producers] [persons] in its territory; 

b) to achieve a given level or percentage of domestic content; [o,] 

c) 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[.] [; or]] 

d) [to restrict sales of goods or services in its territory that such investment produces or provides by relating such sales in any way to the volume or value of its exports or foreign exchange earnings.] 

[This paragraph does not apply to any other requirement other than those indicated herein.] 

[3. This Article shall not apply, however, to those performance requirements contingent upon the granting of an advantage or benefit by the Party receiving the investment.] 

[4. [Exceptions and Exclusions:] 

[1. The provisions of: 

a) paragraphs (1)(a), (b) and (c), and paragraphs (3)(a) and (b) [of Article ___ (Performance Requirements)] do not apply to qualification requirements for goods [or services] [and services] with respect to export promotion and [domestic] [foreign] aid programs; 

b) paragraphs [(1)(b) and (c)] [(1)(b), (c), and (f)] [(1)(b), (c), (f), and (g)] and paragraphs (3)(a) and (b) [of Article ___ (Performance Requirements)] do not apply to procurement by a Party or a state enterprise; and 

c) paragraphs (3)(a) and (b) [of Article ___ (Performance Requirements)] 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.] 

[2. The provisions of paragraph 1(f) do not apply: 

a) to measures relating to the transfer of intellectual property rights as set forth in and that are consistent with the provisions of Articles XXX (CITE TO SPECIFIC ARTICLES) of Chapter XX (Intellectual Property Rights) or 

b) 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. This exception will be conformed to the language of the Intellectual Property Chapter.]

[3. [Nothing in paragraph 3] [The provisions of paragraph 3] [Nothing in this article] shall [not] be construed to prevent a Party [from imposing,] [in connection with an investment of an investor of a Party], [or of an investor of a non-Party] [in its territory] [requirements pertaining to the geographic location of production units, the employment or training of workers, or the carrying out of research and development activities.] [from conditioning the receipt or continued receipt of [an incentive or advantage] [an advantage] [a benefit]] [in connection with an investment in its territory of an investor of a Party [or of a non-Party], on compliance with a requirement to locate production [units], provide a service, train or employ workers, construct or expand [particular facilities] [certain installations] or carry out research and development activities[, in its territory].]] 

[4. Provided that such measures are not applied in an arbitrary or unjustifiable manner, or do not constitute a disguised restriction on international trade or investment, nothing in paragraphs 1(b) or (c) or 3(a) or (b)] [The provisions of paragraphs 1(b), 1(c), 1(f), 3(a), and 3(b)] shall [not] be construed to prevent any Party from adopting or maintaining measures [, including environmental measures, that are:] [necessary to:]

a) [necessary to] ensure 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; or 

c) [related to] the conservation of living or non-living exhaustible natural resources. 

[provided that such measures are not applied in an arbitrary or unjustifiable manner, and provided that such measures do not constitute a disguised restriction on trade or investment.]]⁴ ] 

[5. Notwithstanding the provisions hereinabove, the Contracting Parties may adopt or maintain the measures necessary to attain the following objectives, among others: 

a) the enforcement of laws and regulations that are not inconsistent with the provisions of this Agreement; 

b) the reduction of regional imbalances; 

c) the carrying out of activities related to research and development and the adoption of new technologies.] 

[6. If, in the opinion of a Party, the imposition by another Party of any other requirement not established in paragraph 1 adversely affects the trade flow, or represents a significant barrier to the investment, the matter shall be considered by the Investment Committee, to be provided for in this Agreement. If the Committee considers that the requirement in question adversely affects the trade flow, it shall recommend to the Commission that practice in question be suspended.] 

[7. This article does not preclude the application of any commitment, undertaking or requirement between private parties.] 

Article 8: KEY PERSONNEL 

[[Senior Management] [and Boards of Directors] [and Directors]] [Administration, Entry of Personnel and Key Personnel] [Entry and Sojourn of Key Personnel] 

[1. No Party may require that an enterprise of that Party [that is an investment of an investor of another Party] appoint to senior management positions [of that company] individuals of any particular nationality [without prejudice to provisions of its legislation].] 

[1. The number and proportion of foreign personnel that can work in a company or perform executive, administrative, or managerial duties is subject to the provisions of the laws of Contracting Parties and shall not, in any way, hamper or prevent the exercise by an investor of his investment.] 

[1. Investors may request Parties to admit to their territories, in accordance with national laws, regulations and procedures, top management personnel, persons possessing specialized technical knowledge, or other key personnel by mutual consent required to ensure the security, control or orderly administration of an investment. Such persons shall not practice a profession without meeting any and all national requirements.] 

[1. [Ability to engage top managerial personnel: Each Party shall permit covered investments to engage top managerial personnel of their choice, regardless of nationality.⁵ ] [Each Contracting Party, subject to that Party’s domestic legislation on the entry and stay of foreigners,] [Subject to its laws relating to the entry and sojourn of aliens, each Party] shall permit to enter and to remain in its territory [investors of one of the Parties, as well as such persons as are hired by them to occupy top management positions, or for their special skills,] [nationals, as defined by that Party, of another Party] for the purpose of establishing, developing, administering, [or advising on] [advising or providing essential services to]the operation of an investment to which [the investors] [they, or a company of the other Party that employs them,] have committed [or are in the process of committing a substantial amount of] capital or other resources. [Pursuant to its domestic legislation in this area, each Contracting Party shall permit investors of one of the Parties, to recruit the management and technical personnel of their choice.]] 

[1. For the purposes of this agreement, key personnel shall mean senior management staff or staff with specialized technical expertise considered indispensable to guarantee the proper control, administration and operation of an investment. The States Parties shall not require investors of another State Party to appoint key personnel of a specific nationality. The State Party receiving the investment shall grant temporary entry permits to such key personnel subject to its laws, regulations and policies on entry of foreign personnel, in particular the labor and migration laws. All the legal requirements shall be met for the practice of a profession regulated in the State Party receiving the investment.] 

[2. Neither Party shall, in granting entry under paragraph l, require a labor certification test or other procedures of similar effect, or apply any numerical restriction.] 

[3. A Party may require that a majority of the board of directors of an enterprise of that Party be of a particular nationality, or resident in the territory of the Party, provided that the requirement does not materially impair the ability of the investor to exercise control over its investment.] 

1 [One delegation has omitted a provision on substantive scope. They believe that the substantive scope of the chapter is comprehensively addressed through the discipline and the definition of key terms in the chapter. They also believe that a substantive scope provision could lead to conflicting interpretations.] 

2 [One delegation reserves the right to make reservations to national treatment and most favored nation treatment in connection with specific matters and sectors later.] 

3 [One delegation considers that commitments should be undertaken to guarantee fair and equitable treatment, however, this issue should be studied in depth, pursuant to international law. Particular attention should be given to the phrases: “fair and equitable,” “full security,” and “juridical security.”] 

4 [In the interest of greater clarity, several delegations wish to state that references to environment-related issues in this paragraph are made solely with respect to the article on Performance Requirements, without such references implying that there is a possibility of including discussion thereof as a new issue in the Chapter on Investment. ] 

5 [This sentence is not intended to interfere with a party’s anti-discrimination law.]