FTAA - Free Trade Area of the Americas

Draft Agreement

Chapter on Investment

(Continuation)

Article 16:  BASIC DEFINITIONS 

[1. For the purpose of this chapter, the following definitions shall apply:] 

2. Investment 

[Investment means: [every kind of asset and rights of any nature acquired with resources transferred to the territory of a Party or reinvested therein by investors of another Party, and shall include, in particular, although not exclusively:] 

[a) an enterprise;] 

b) the shares of an enterprise; 

c) the debt instruments of an enterprise 

i) where the enterprise is an affiliate of the investor, or 

ii) where the original maturity of the debt instrument is at least three years, 

but does not include a debt instrument of a State enterprise, regardless of original maturity; 

d) a loan to an enterprise: 

i) where the enterprise is an affiliate of the investor, or 

ii) where the original maturity of the loan is at least three years, 

but does not include a loan, regardless of original maturity, to a State enterprise; 

e) an interest in an enterprise that entitles the owner to share in income or profits of the enterprise; 

f) an interest in an enterprise that entitles the owner to share in the assets of that enterprise on dissolution, other than a debt instrument or a loan excluded under subparagraphs c) or d) supra; 

g) real estate or other property, tangible or intangible, acquired or used for the purpose of economic benefit or other business purposes; and 

h) interests arising from the commitment of capital or other resources to the development of economic activity in the territory of another Party, such as under: 

i) contracts involving the presence of an investor's property in the territory of another Party, including concessions, or construction or turnkey contracts, or 

ii) contracts where remuneration depends substantially on the production, revenues or profits of an enterprise; 

but investment does not mean: 

i) a debt instrument of the State; 

j) claims to money that arise solely from: 

i) commercial contracts for the sale of goods or services by a national or enterprise in the territory of a Party to an enterprise in the territory of another Party, or 

ii) the extension of credit in connection with a commercial transaction, such as trade financing, other than a loan covered by subparagraph d) supra; or

 k) any other claims to money, that do not involve the kinds of interests set out in subparagraphs a) through h) supra;] 

[Investment: every kind of asset and rights of any nature acquired with resources transferred to the territory of a Party, or reinvested therein [, by investors of another Party,] such as [but no limited to]: 

- shares and [any] other form of participation in the capital stock of firms constituted or organized pursuant to the legislation of another Party; 

- rights derived from [any type of] contributions made for the purpose of creating economic value (or bonds, claims to money and claims to performance having economic value); 

- movable and immovable property and other property rights such as mortgages, lien, usufruct, and [similar rights]; 

- intellectual property rights; and, 

- rights conferred by law or contract to carry out economic and commercial activities, 

[but does not include: 

- a payment obligation of the State or a State enterprise and the granting of such credit to the State or a State enterprise; nor 

- claims to money derived exclusively from: 

a) commercial contracts for the sale of goods and services by a national or enterprise in the territory of a Party to a national or enterprise in the territory of another Party; or 

b) the granting of credit in relation to a commercial transaction, whose period of maturity is less than three years, such as financing of trade]]⁸

[Investment means: 

every asset owned or controlled, directly or indirectly, by an investor, that has the characteristics of an investment. Forms that an investment may take include, but are not limited to⁹ : 

(a) a company; 

(b) shares, stock, and other forms of equity participation in a company; 

(c) bonds, debentures, other debt instruments, and loans¹⁰ ; 

(d) futures, options, and other derivatives; 

(e) turnkey, construction, management, production, concession, revenue-sharing, and other similar contracts; 

(f) money in bank and other similar accounts¹¹ ; 

(g) intellectual property rights; 

(h) concessions, licenses, authorizations, permits, and similar rights conferred pursuant to applicable domestic law^{12 13} ; 

(i) other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens, and pledges.] 

[“Investment” shall be understood as meaning resources coming from abroad into the national territory of a Contracting Party, or resources reinvested in that territory, by an investor from another Contracting Party, including assets such as: 

a) Shares, or other type of participation in a company, and any other type of joint ventures, in accordance with domestic legislation; 

b) Movable and immovable property, property rights and other property rights such as leases, mortgages, liens and other privileges, acquired or used for the purpose of obtaining economic benefit, or for other business purposes; 

c) Supplementary contributions to the capital assigned to branches by the head office; 

d) Intellectual property rights such as copyrights and related rights, patents, trademarks, trade names, appellations of origin, geographical indications, industrial designs, utility models, layout designs (topographies) of integrated circuits, trade secrets, and protection of plant varieties;¹⁴

e) Licenses, permits and other rights obtained under public law, including concessions granted by law, administrative act or contract to carry out an economic activity, such as the exploration and exploitation of natural resources, or the construction, conservation and maintenance of public works; 

f) The reinvestment of profits, which refers to the investment of same in the enterprise that generates them; 

g) Investments made with local currency which may be transferred abroad. 

The present definition does not include: 

a) Tangible or intangible property that is not directly linked to the production investment; and 

b) Loans and other operations resulting in debt, as well as flows of capital related strictly to a commercial transaction. 

Any change in the form of the investment does not affect its character as such, provided said change is not a loan or other operation resulting in debt, and is in compliance with the legislation of the Contracting Party in whose territory it has been made.] 

[The term “investment” means any kind of asset substantially owned or effectively controlled by an investor of one Contracting Party in the territory of the other Contracting Party in accordance with the latter’s laws, and, in particular, though not exclusively, includes: moveable and immovable property as well as any other property rights such as mortgages, liens and pledges; rights in companies; goodwill; monetary claims and claims to performance; intellectual property rights; concessions and other similar rights. 

The term “investment” does not mean real estate or other property, tangible or intangible, not acquired in the expectation or used for the purpose of economic benefit or other business purposes. The term also does not imply stocks or shares (portfolio investment) of companies in one Party acquired for speculative purposes and held for a short-term by nationals of the other Party.] 

[The term “investment” refers to every kind of asset or related rights, provided it has been made pursuant to all the laws and regulations of the Contracting Party in whose territory it was done, and shall include, in particular, although not exclusively: 

a) Movable and immovable property and any related property rights, as well as all other property rights such as easement (servitudes), mortgages, usufruct and liens; 

b) Shares, and any other kind of economic participation in companies; 

c) Monetary claims or any other benefit of economic value; 

d) Intellectual property rights, including copyright, industrial property rights, such as patents, technical processes, trademarks; trade names, industrial designs, know-how, corporate names, and turnkey; 

e) Concessions conferred by law, an administrative act or under a contract, including concessions to explore, cultivate, extract or exploit natural resources. 

Any change relative in the way assets are reinvested shall not affect their nature as an investment, provided such modification is made pursuant to the legislation of the Contracting Party in whose territory the investment was made. 

Investment shall not be construed to mean external public debt instruments.] 

[The term “investment” shall refer to every kind of asset invested directly or indirectly by investors from one of the Contracting Parties in the territory of another Contracting Party, in accordance with the laws and regulations of the latter.¹⁵ In particular, the following shall be included: 

a) movable and immovable property, as well as other property rights such as mortgages, liens and pledges; 

b) shares, stock, and any other form of participation in a company; 

c) claims to money and claims to performance having an economic value; loans shall be included only when they are directly linked to a specific investment; 

d) intellectual or intangible property rights, including in particular, copyrights, patents, industrial designs, trademarks, trade names, technical procedures, know-how and goodwill; 

e) state economic concessions conferred by law or under contract, including concessions to search for, cultivate, extract or exploit natural resources. 

The Parties may establish exceptions and reservations with respect to sectors and regulations of the investment policy that will be included in an annex and will be part of the present Agreement.] 

[Investment: every kind of asset and rights of any nature, other than foreign loans, acquired or used for the purpose of: 

a) establishing an enterprise of another Party, or to increase the capital of an existing enterprise of another Party, for the purpose of producing an additional flow of goods and services, not including merely financial flows; or 

b) participating in the ownership of an enterprise of another Party, and for the purpose of participating in its management, not including investments of a merely financial nature intended only to gain indirect access to the financial market of the other Party.] 

3. Investor 

[investor of a Party: [means] a Party or an enterprise of a Party [or a natural or juridical person] [or a national or an enterprise] of [this] [a] Party, [that carries out [juridical] [material] acts designed to make an investment, [being in the process of committing a [major] amount of capital] [involving a commitment of capital] [[or else] is making or has made an investment in the territory of another Party] [that seeks to make, is making or has made an investment];]

[Investor means: 

(a) a natural person who is a national of a Party in accordance with its applicable law; or 

(b) a company of a Party 

that seeks to make, is making, or has made an investment. 

A dual national shall be deemed to be exclusively a national of the State of his/her dominant and effective nationality.] 

[For the purposes of the present Agreement, an investor is: 

a) The natural person who, in compliance with domestic legislation, is considered a citizen of a Contracting Party and has made investments in the territory of another Contracting Party; and

b) The public or private, non-profit or for profit, juridical person, enterprise or entity constituted, established or domiciled, in compliance with the domestic legislation of a Contracting Party, which has made investments in the territory of another Contracting Party.

The present Agreement shall not apply to the investments made by natural persons who, simultaneously, have the nationality of the Contracting Party in which the investment is made and the nationality of the other Contracting Party.] 

[“Investor” means any natural person who is a national of a Party, in accordance with its laws. “Investor” means any legal person constituted in accordance with the laws and regulations of a Party, and having its seat in the territory of that Party.] 

[The term “investor” shall refer to the following subjects that have made investments in the territory of a Contracting Party, pursuant to this Chapter: 

a) A natural person or individual who, under the legislation of the Contracting Party, are considered nationals of that country; 

b) Legal entities, including companies, corporations, commercial associations or any other entity constituted under the legislation of that Contracting Party, that has its seat, as well as effective economic activities, in the territory of said Contracting Party; 

c) The legal entities constituted under the legislation of any country, that are directly or indirectly controlled by nationals of a Contracting Party, in the territory of the Contracting Party where the legal entity conducts effective economic activities.] 

[The term “investor” shall refer to: 

a) Any natural person who is a citizen of one of the Contracting Parties, is a permanent resident thereof, or is domiciled in the territory of same, in accordance with its legislation. The provisions of the Agreement shall not apply to investments made by natural persons who are citizens of one of the Contracting Parties in the territory of another Contracting Party, if said persons, at the time of the investment, are permanent residents of or are domiciled in the latter Contracting Party, unless it is proven that the resources connected with these investments originate abroad. 

b) Any juridical person constituted under the laws and regulations of a Contracting Party, and having its seat in the territory of said Contracting Party; 

c) Those juridical persons constituted in the territory of the host country, and effectively controlled by natural or juridical persons as defined in a) and b).] 

4. [Other Terms] 

[capital shares or debt instruments include shares with or without voting rights, bonds or convertible debt instruments, stock options and warrants;] 

[Company means: 
an entity constituted or organized under applicable law, whether or not for profit, and whether privately or governmentally owned or controlled. Forms that a company may take include a corporation, trust, partnership, sole proprietorship, branch, joint venture, association, or similar organization.] 

[A company or other legal entity is: 

1) substantially owned if more than 50 per cent of the equity interest therein is beneficially owned by nationals of a Party; 

2) effectively controlled if nationals of a Party have the poser to name a majority of its directors or otherwise legally to direct its actions.] 

[Company of a Party means: a company organized or constituted under the laws of that Party.] 

[Covered investment means: 
an investment of an investor of a Party in the territory of another Party. Covered investments shall include those existing at the date of entry into force of this agreement as well as to those established or acquired thereafter.] 

[Dispute settlement-related terms] 

[disputing investor: n investor who makes a claim under [section C] [section XX (Dispute Settlement between a Party and an Investor of another Party) of this chapter]]; 

[disputing Party: a Party against which a claim is made under section [C] [XX (Dispute Settlement between a Party and an Investor of another Party) of this chapter];] 

[disputing party: the disputing investor or the disputing Party;] 

[disputing parties: the disputing investor and the disputing Party;] 

[ICSID: International Centre for the Settlement of Investment Disputes;] 

[Secretary-General: Secretary-General of ICSID;] 

[ICSID Convention: Convention on the Settlement of Investment Disputes between States and Nationals of other States, done in Washington, D.C. on March 18, 1958;] 

[UNCITRAL Arbitration Rules: the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), approved by the United Nations General Assembly on December 15, 1976;] 

[New York Convention: United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York on June 10, 1958;] 

[Inter-American Convention: Inter-American Convention on International Commercial Arbitration, done at Panama on January 30, 1975;] 

[claim: a petition submitted by a disputing investor against a Party on the basis of a presumed violation of the provisions of this chapter;] 

[tribunal: an arbitration tribunal established pursuant to Article [xx.xx] [… (Section on settlement of disputes between a Party and an investor of another Party); or an arbitration tribunal established pursuant to Article … (Section on settlement of disputes between a Party and an investor of another Party)];] 

[consolidation tribunal: an arbitration tribunal established pursuant to article x.xx.] 

[Earnings and related terms] 

[[Earnings shall be understood to mean] [The term “earnings” refers to all] the sums [obtained from or] produced by an investment, such as profits, income, dividends, [interest,] royalties and [any other net income] [other current incomes].] 

[“Investment revenues” refers to the returns produced by an investment or associated with it, and include profits, dividends and interest, appreciation, fees and in-kind income.]

[enterprise: [means] [any] [an] entity constituted or organized under applicable legislation [or legislation in force] in one of the Parties, whether or not for profit, and whether privately-owned or governmentally-owned, including foundations, companies, [branches], trusts, partnerships, sole proprietorships, joint ventures or other associations.] 

[enterprise of a Party: [means] an enterprise constituted or organized under the law of a Party and a branch located in the territory of a Party that carries out business activities in that territory.] 

[financial institution: any financial intermediary or other enterprise, duly authorized to do business, and regulated or supervised as a financial institution under the legislation of the Party in whose territory it is located;] 

[freely usable currency: A currency that the International Monetary Fund has determined is widely used to make payments for international transactions and widely traded in the principal exchange markets;] 

[government services or functions: any service provided by a public institution, that is not provided under commercial conditions or in competition with one or more service providers;] 

[Investment Authorization¹⁶ means: an authorization granted by the foreign investment authority of a Party to a covered investment or an investor of another Party.] 

[investment of an investor of a Party: the investment owned or directly or indirectly controlled by an investor of a Party [undertaken] in the territory of another Party;] 

[investor of a non-Party: [means] an investor other than an investor of a Party [that seeks to make, is making or has made an investment]] 

[juridical person of a Party: any legal entity duly constituted or organized in another manner pursuant to the applicable legislation of that Party, whether for profit or not for profit, and whether privately owned or publicly owned, including any corporation, trust, partnership, joint venture, sole proprietorship or association] 

[juridical person owned or directly controlled by an investor: If the investor has full ownership of more than fifty percent (50%) of its capital stock or has the power to appoint the majority of its directors or to legally direct, in some other manner, the operations thereof.]

[national: a natural person who is a citizen of a Party under its law;] 

[“National” of a Party means a natural person who is a national or permanent resident of that Party under its applicable law.] 

[natural person of a Party: a natural person that is a national of that Party, pursuant to its legislation.] 

[Party: FTAA member country;] 

[person: a national or an enterprise;] 

[person of a Party: a national or an enterprise of a Party, not including a branch of an enterprise of a non-Party;] 

[State enterprise: [an enterprise] [a company] owned or controlled through ownership interests by a Party;] 

[State enterprise: a juridical person owned or directly controlled by a Party.] 

[Territory: the land, maritime or air space of each Party, as well as its exclusive economic zone and its continental shelf, over which it exercises sovereign rights and jurisdiction, in accordance with its legislation and international law.] 

[The term “territory” comprises, in addition to the land, maritime and air space over which each Contracting Party has sovereignty, the marine and submarine zones over which they exercise sovereign rights and jurisdiction, in accordance with their respective legislation and international law.] 

[The term “territory” shall refer to the national territory of each Contracting Party, including those maritime zones adjacent to the outer limit of its territorial waters over which the Contracting Party involved can, under international law, enforce sovereign rights and exercise jurisdiction.] 

[transfers: international [transfers] [remittances] and payments;] 

[Others] 

[goods: the domestic products or merchandise, whether or not originating, as they are understood in the GATT 1994;] 

[Comission: the commission established pursuant to article X.XX] 

[existing: in effect [on the date of entry into force of this Agreement];[on April 19, 1998]] 

[existing measure: any law, regulation, rule, procedure, provision or administrative practice in effect as of the date of the entry into force of this Agreement;] 

[GATT 1994: the 1994 General Agreement on Tariffs and Trade, which forms part of the Marrakesh Agreement by which the World Trade Organization was established;] 

[measure: any law, regulation, rule, procedure, provision or administrative practice, among others;] 

[Article 17: TRANSPARENCY 

1. Each Party shall ensure that its laws, regulations, administrative practices and procedures of general application, and adjudicatory decisions, that affect or pertain to covered investments or investors are promptly published or otherwise made publicly available. Where a Party establishes policies that affect or pertain to covered investments or investors, which are not expressed in laws or regulations or by other means listed in this paragraph, that Party shall promptly publish them or otherwise make them publicly available. 

2. To the extent practicable, each Party shall: 

(a) publish in advance any laws, regulations, administrative practices and procedures of general application that it proposes to adopt; and 

(b) provide interested persons and Parties a reasonable opportunity to comment on such proposed measures. 

3. On the request of another Party, a Party shall promptly provide information and respond to questions pertaining to any actual or proposed laws, regulations, administrative practices and procedures of general application, or pertaining to any adjudicatory decision. 

4. Nothing in this Article requires a Party to furnish or allow access to any confidential or proprietary information, including information concerning particular investors or investments, the disclosure of which would impede law enforcement, be contrary to its laws protecting confidentiality, or prejudice legitimate commercial interests of particular companies.]

[Article 18: COMMITMENT NOT TO RELAX DOMESTIC LABOR LAWS TO ATTRACT INVESTMENT 

The Parties recognize that it is inappropriate to encourage investment by relaxing domestic labor laws. Accordingly, each Party shall strive to ensure that it does not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such laws as encouragement for the establishment, acquisition, expansion or retention of an investment of an investor in its territory.] 

[Article 19: COMMITMENT NOT TO RELAX DOMESTIC ENVIRONMENTAL LAWS TO ATTRACT INVESTMENT

  The Parties recognize that it is inappropriate to encourage investment by relaxing domestic environmental laws. Accordingly, each Party shall strive to ensure that it does not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such laws as encouragement for the establishment, acquisition, expansion or retention of an investment of an investor in its territory. ]

8 [One delegation considers that the definition of investment should be broad, comprehensive, and in accordance with bilateral investment agreements in the Hemisphere. This definition should include foreign direct investment and portfolio investment. Any investment whose equity capital is constituted by domestic and foreign partners, with the foreign portion representing the majority, maybe considered foreign investment. Tangible and intangible property for the personal use of the investor are not considered foreign investment. ]

9 [Where an asset lacks the characteristics of an investment, that asset is not an investment regardless of the form it may take.]

10 [Some forms of debt, such as bonds, debentures, and long-term notes, are more likely to have the characteristics of an investment, while other forms of debt, such as claims to payment that are immediately due and result from the sale of goods or services, are less likely to have such characteristics.]

11 [Some bank accounts, such as those established and maintained in connection with the conduct of commercial activities, are more likely to have the characteristics of an investment, while other bank accounts, such as personal checking accounts, are less likely to have such characteristics. ]

12 [Whether a particular type of permit, license, authorization, concession or similar instrument has the characteristics of an investment depends upon such factors as the nature and extent of the rights that the holder has under the domestic law of the Party. Among the permits, licenses, authorizations, concessions and similar instruments that do not have the characteristics of an investment are those that do not create any rights protected by domestic law. ]

13 [The term “investment” does not include an order entered in a judicial or administrative action.]

14 [Subparagraph d) is without prejudice to the provisions of the chapter on Intellectual Property.]

15 [One delegation does not recognize the phases preceding the effective realization of an investment as giving rise to rights and obligations in the terms of this Agreement.]

16 [This definition is needed to give content to investment dispute settlement provisions later in the chapter. Actions taken by an agency of a Party to enforce laws of general application such as competition law do not come within this definition.]