Scope of Chapter 9 –
Investment in CPTPP Agreement
CPTPP is a
new-generation FTA covering many aspects in addition to the traditional areas
such as trade of goods, services. Non-traditional areas such as labor,
environment, intellectual property, etc. all have significant commitments and
are specified in each chapter. Enterprises of state member must meet certain
conditions applicable to each area to enjoy respective benefits. As for foreign
investment, the host country has the right to refuse to apply benefits to
foreign investors or its investment if they do not meet the requirements of the
CPTPP.
For avoidance of doubt,
investment means every asset that an investor owns or controls, directly or
indirectly, that has the characteristics of an investment, including such
characteristics as the commitment of capital or other resources, the
expectation of gain or profit, or the assumption of risk. Forms that an
investment may take include: enterprise, forms of equity participation in an
enterprise, debt instruments and loans, intellectual property rights, etc.
Requirements for enjoying foreign investment benefits are provided indirectly
in the way of permitting State Members deny of benefits under some
circumstances as stipulated in Article 9.15:
“Article 9.15: Denial
of Benefits
1.A Party may deny the
benefits of this Chapter to an investor of another Party that is an enterprise
of that other Party and to investments of that investor if the enterprise:
(a) is owned or
controlled by a person of a non-Party or of the denying Party; and
(b) has no substantial
business activities in the territory of any Party other than the denying Party.
2.A Party may deny the
benefits of this Chapter to an investor of another Party that is an enterprise
of that other Party and to investments of that investor if persons of a
non-Party own or control the enterprise and the denying Party adopts or
maintains measures with respect to the non-Party or a person of the non-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.”
Most commitments in the
Investment Chapter apply to only investors and its investment that come from
CPTPP Member States. However, Vietnam may deny the benefits to an investor of
State Member that is an enterprise and to investments of that investor if the
enterprise:
-Is owned or controlled
by an individual or enterprise of a Non- State Member.
-Is owned or controlled
by an individual or enterprise of Vietnam.
-Has no substantial
business activities in the territory of any State Member other than Vietnam.
By the above permitted
denial, the CPTPP applies investment benefits selectively, restricts individual
or enterprise of a Non-State Member to taking advantage of benefits from CPTPP.
When performing investment licensing procedures in Vietnam, foreign enterprises
that come from State Member must present internal documents indicating the
owner or controller to demonstrate that their business is out of permitted
denial. Besides, these investors must have substantial business activities in
the territory of any State Member other than Vietnam. It is necessary to wait
for more guidance from the competent state authorities on implementation of
CPTPP.
The CPTPP Agreement restricts investment under its protection. CPTPP protects investment which is
in its territory of an investor of CPTPP State Member in existence as of the
date of entry into force of CPTPP for those State Members or established,
acquired, or expanded thereafter. Therefore, the investments ended or
terminated prior to the effective date of CPTPP in Vietnam and host country
will not gain the benefits under CPTPP.
In the meantime, the
investor could also challenge the denial decision of the host country through
the dispute settlement mechanism between investor and state (ISDS).
Vietnam has ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – CPTPP on Jan 14th, 2019. This Agreement include 11 countries New Zealand, Canada, Japan, Mexico, Singapore, Brunei, Chile, Malaysia, Peru, Australia and Vietnam.
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