HO CHI MINH CITY UNIVERSITY OF LAW MANAGING BOARD OF SPECIAL TRAINING PROGRAMS BACHELOR’S THESIS INTERNATIONAL LAW MAJOR THE TENTATIVE INVESTMENT CHAPTER OF TRANS – PACIFIC PARTNERSHIP AGREEMENT: AN ANALYSIS OF THEORY AND PRACTICE Student : VÕ THỊ HỒNG HẠNH Student ID : 1055010085 Class : CLC35 Supervisor : Dr. LÊ THỊ ÁNH NGUYỆT HO CHI MINH CITY, 2014 AFFIRMATION I hereby declare that this thesis is my own work. The figures used in the thesis are authentic. The research results have not been published in any other work.
Ho Chi Minh City, July 2014 Võ Thị Hồng Hạnh TABLE OF CONTENTS ABBREVIATION. 1 CHAPTER 1: TRANS – PACIFIC PARTNERSHIP AGREEMENT AND ITS TENTATIVE INVESTMENT CHAPTER. Overview of the negotiation of Trans – Pacific Partnership Agreement. Features of Trans – Pacific Partnership Agreement as an International investment agreement.
International investment agreement. Form of international investment agreement. Features of Trans – Pacific Partnership Agreement. Tentative investment chapter.
Tentative substantive provisions. Terminology of investment. Minimum standard of treatment. Investor – state dispute settlement mechanism.
Who can be an investor?. Whose measures constitute to be conducts of State?. Admissible arbitration forum. 25 CHAPTER 2: DISPUTES BETWEEN NATIONALS OF TPP NEGOTIATING PARTIES V.
OTHER COUNTRIES, AND OTHERS BETWEEN TPP NEGOTIATING PARTIES V. NATIONALS OF OTHER COUNTRIES: CASE ANALYSIS. Cases between nationals of negotiating parties and other countries. ICSID case: Metalclad v.
UNCITRAL case: Saluka v. Cases between negotiating countries and nationals of other countries. ICSID case: Tecmed v. UNCITRAL case: Philip Morris v.
Other case: CSOB v. ABBREVIATION BIT Bilateral Investment Treaty GATS General Agreement on Trade in Services ICSID International Centre for Settlement of Investment Disputes IIA International Investment Agreement ISDS Investor – State Dispute Settlement JBIT Japan – Vietnam Bilateral Investment Treaty NAFTA North American Free Trade Agreement OCED Organization for Economic Cooperation and Development TPP Trans – Pacific Partnership Agreement TRIMs Agreement on Trade – Related Investment Measures UBTA U.S – Vietnam Bilateral Trade Agreement UNCITRAL United Nations Commission on International Trade Law Rules of Arbitration UNCTAD United Nations Conference on Trade and Development WTO World Trade Organization 1 INTRODUCTION 1. The necessity of the thesis ―Trans – Pacific Partnership Agreement, in term of the ―21st century agreement‖ is now one of the most important regional trade agreements that Vietnam has joined the negotiation since 2008. Accordingly, Vietnam will have to commit deeper in all trade and trade – related issues in the agreement, including but not limiting to the investment sector.
On the other hand, since better market access will be provided and Vietnam is still regarded as a potential environment, it is predictable that Vietnam will receive large capital from foreign investors of 11 negotiating parties, for instance, U.S and Japan – two largest economies in the world. Nevertheless, the foreign investment issue in the agreement will definitely bring more challenges for Vietnam. In June, 2012, the leaked investment chapter shows that negotiating parties have agreed on including the investor – state dispute settlement mechanism which grants the foreign investors the right to directly sue host state to international arbitration. This will possibly pose more risks to Vietnam in two aspects: (i) as a host state, Vietnam will be exposed to becoming Respondent being sued and (ii) domestic investors will have to compete more against foreign investors.
In practice, Vietnam has already been Respondent in international investment disputes. In 2013, we have won first investment case against Michael McKenzie, a U.S national that invested in Binh Thuan province through a project named South Fork. With this winning, Vietnam did not have to pay $3.7 billion which was the amount that the Claimant had requested. However, previously in 2007, we lost our first case against Trinh Vinh Binh, a Dutch investor and had to pay damages.
Although the exact number is not public, it is reported that the Claimant requested us to compensate him $100 million. These cases show us how great this mechanism may 2 affect to Vietnam‘s responsibility in future when Vietnam breaches an obligation in the Trans – Pacific Partnership Agreement. With all of the reasons above, the author chose to study about the investment issue in Trans – Pacific Partnership Agreement, particularly the tentative investment chapter. The name of the thesis is thus ―The tentative investment chapter in Trans – Pacific Partnership Agreement: An analysis of theory and practice‖.
Purpose and Delimitation of the Thesis The purpose of the thesis is to analyze features of the Trans – Pacific Agreement - as a regional investment agreement, to study the important contents of the tentative investment chapter, and to study how these investment obligations may be interpreted in practice through cases resolved by the arbitral tribunals. Because of time and limited material, the author will only analyze the commitments to investment in the investment chapter. Besides, the scope of the study on substantive provisions in the tentative chapter will be limited to three particular articles on the terminology of investment, minimum standard of treatment and expropriation. Thus, the analysis on practice will also extend to interpreting these obligations.
The status of the study Since the topic is new and the negotiation has not yet been completed, there is limited number of academic studies regards the tentative investment chapters. In foreign language, C. Lim, Deborah Kay Elms and Patrick Low wrote the Chapter ―Trans - Pacific Partnership Agreement towards Innovations in Investment Rule - Making‖ in the book “The Trans – Pacific Partnership: A request for a Twenty – first Century Trade Agreement” and published in 2012. Leon E Trakman wrote the journal article ―Resolving Investor-State Disputes under a Transpacific Partnership Agreement - What Lies Ahead?‖ and published in Transnational Dispute 3 Management Journal in 2012.
The organization Public Citizen also wrote the article ―Public Interest Analysis of Leaked Trans-Pacific Partnership (TPP) Investment Text‖ and published on its website in June 2012. These articles mostly discussed various concerns about a comprehensive investment chapter, especially in the effectiveness of the questionable investor – state dispute settlement. In Vietnam, the most relevant study is the article ―Suggestion on negotiating Investment Chapter of TPP‖ of the WTO Center – Chamber of Commerce and Industry of Vietnam in January, 2013. There is hardly any thorough study about this investment chapter.
Based on my research, some old studies only concern about the investor – state dispute settlement mechanism. For instance, the scientific research on “Settling investment dispute in accordance with ICSID – experience for Vietnam” at Ministry level in 2012 (Dr. Nguyen Minh Hang is the monitor) analyzed mostly on the ICSID mechanism and its practice of settlement. Methods In this thesis, the author has adopted mostly the method of analysis and synthesis in different parts to achieve the purpose.
Besides, the comparative method and data collection are also utilized in some parts to emphasize important issues. Structure of the thesis The thesis contains two following chapters: Chapter 1: Trans – Pacific Partnership Agreement and its tentative investment chapter Chapter 2: Disputes between nationals of TPP negotiating parties v. other countries, and others between TPP negotiating countries v. nationals of other countries: case analysis 4 CHAPTER 1: TRANS – PACIFIC PARTNERSHIP AGREEMENT AND ITS TENTATIVE INVESTMENT CHAPTER ―Know yourself, know your enemy‖ is a famous quotation telling people the method to survive in every battle: to know the positions of you and your enemy.
In this negotiation, the same is true; if we do not want to be a small fish in a big pond, we have to have a minimum insight of the Trans – Pacific Partnership Agreement – the big playing field that Vietnam is participating. From that perspective, this chapter will answer what features this trade agreement, particularly the tentative investment chapter may have. To be more specific, the contents of this tentative chapter, i. the substantive provisions and the investor – state dispute settlement mechanism will also be discussed.
Overview of the negotiation of Trans – Pacific Partnership Agreement The current Trans – Pacific Partnership Agreement (hereinafter ―TPP‖) is developed from the original Trans - Pacific Strategic Economic Partnership (P4 Agreement) which was concluded between Brunei, Chile, New Zealand and Singapore in 2005. Interestingly, this Agreement includes a provision that allows the joining of other countries1. Thus, in 2009, the United States officially participated in all aspects of TPP negotiations. From that time, the TPP negotiating parties are expanding to 12 countries throughout the Asia - Pacific region (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam), making TPP one of the most prominent agreements that will account for 40% GDP of the world.
Furthermore, the parties aim at creating TPP as a ―21st century agreement‖ that will announce all of the problems of modern era, 1 Trans-Pacific Strategic Economic Partnership, Article 20.6 Clause 1 says that ―This Agreement is open to accession on terms to be agreed among the Parties, by any APEC Economy or other State‖. The terms of such accession shall take into account the circumstances of that APEC Economy or other State, in particular with respect to timetables for liberalization‖. The text is available at <http://www.nz/downloads/trade- agreement/transpacific/main-agreement. 5 including the promotion of innovation, economic growth and development as well as support the creation and retention of jobs.
Up till now, 20 formal rounds of negotiations have been held, in which the latest round is in July, 20142. The TPP is expected to be an ambitious agreement that governs a wide range of trade and trade – related issues, including industrial goods, agriculture, textiles, services, investment, intellectual property, the environment, small-and medium-sized enterprises and others. Although the wrap up of negotiation was intended in 2012, such controversial issues like agriculture, intellectual property, services and investments have made that impossible. Indeed, such a high - standard ―21st century‖ agreement has both benefits as well as stakes; therefore, a further thorough negotiation to balance the divergence in the level of development of parties is necessary.
Features of Trans – Pacific Partnership Agreement as an International investment agreement It is interesting that all 12 countries of TPP are also members of World Trade Organization – the largest multilateral trade agreement - and other regional trade agreements. Thus, there will be interactions between those treaties, especially when negotiating parties aim at creating TPP as a model for future free trade agreements with higher integration level. To do so, it must have features of the recent regional trade agreement that also includes an investment chapter, i. to be a regional investment agreement and to have a ―ratchet‖ mechanism that ensures more liberalization in investment.
To that extent, it is said that TPP is a comprehensive WTO – plus commitment. International investment agreement International investment agreement (hereinafter ―IIA‖) can be generally referred as treaty with the aim of protecting, promoting, and liberalizing cross – border 2 See more at <http://en.org/wiki/Trans-Pacific_Partnership#Negotiations>. Currently, we can found IIAs concluded at bilateral or regional level. By the end of 2012, approximately 3196 IIAs are signed, most of which are in form of Bilateral Investment Treaty (hereinafter ―BIT‖)4.
The negotiations of IIAs have experienced many opinions. During 1970s – 1980s, IIAs were opposed strongly by newly created developing countries after decolonization. However, from 1990s, there were two main reasons that made those countries change their minds: (i) the increase in the political commitment to economic liberalism by governments in developing and developed countries, and (ii) the developing state‘s alternative methods to foreign direct investment (e. the international lending and aid) became increasingly rare5.
Hence, with a more positive view on IIAs, it is not uncommon that the number of IIAs will increase in the future. Form of international investment agreement The first form of IIAs was concluded at bilateral level.