CONFIDENTIAL DAFFE/MAI(97 ) I /REV2
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.
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CONFIDENTIAL DAE;FE/MAI(97) 1/REV2
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 Pany 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 Pany 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.
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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;
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 authorization, or other written agreement between the Contracting
Party and an investor or investment of another Contracting Party5
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[4.6. Notwithstanding Articles 4.1 to 4.5, a Contracting Party may require reports of transfers of
currency or other monetary instruments and ensure the satisfaction of judgements in civil, administrative
and criminal proceedings through the equitable. non-discriminatory, and good faith application of its laws
and regulations. Such requirements shall not unreasonably impair or derogate from the free and undelayed
transfer ensured by this Agreement.]
or
[4.6. Notwithstanding Articles 4.1 to 4.5, a Contracting Party may prevent a transfer through the
equitable, non-discriminatory and good faith application of measures to protect the rights of creditors,
relating to or ensuring compliance with laws and regulations on the issuing, trading and dealing in
securities, futures and derivatives, reports or records of transfers, or 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.](6)
5. SUBROGATION
If a Contracting Party or its designated agency makes a payment under an indemnity, guarantee
or contract of insurance(7) 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.(8)
6. 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.]
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1. Sweden 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."
2. DG 3 identified four options for calculating compensation which are set out in the commentary. The
Negotiating Group Chairman noted [DAFFE/MAI(97)2] 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 pan of a Contracting
Party, any exchange rate loss arising from this delay should be borne by the host country.
3. As defined in the Article on definitions.
4. US 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. Canada has difficulties with the obligations referred to in the second sentence.
6. Text recommended by most EG5 delegations