The Multilateral Agreement on Investment
The MAI Negotiating Text
(as of 14 February 1998)

This document consolidates the text of the agreement considered in the course of the MAI negotiations so far. The text reproduced here results mainly from the work of expert groups and has not yet been adopted by the MAI Negotiating Group. It is presented with footnotes and proposals that are still under consideration. The final text will be accompanied by country specific exceptions which will form an integral part of the agreement. Commentary to this text will be issued at a later date
DIRECTORATE FOR FINANCIAL, FISCAL AND ENTERPRISE AFFAIRS

GENERAL PROVISIONS
PREAMBLE
The Contracting Parties to this Agreement, 1, 2
Desiring to strengthen their ties of friendship and to promote greater economic co-operation between them; Considering that international investment has assumed great importance in the world economy and has considerably contributed to the development of their countries; Recognising that agreement upon the treatment to be accorded to investors and their investments will contribute to the efficient utilisation of economic resources, the creation of employment opportunities and the improvement of living standards; Emphasising that fair, transparent and predictable investment regimes complement and benefit the world trading system; 3
[Wishing that this Agreement enhances international co-operation with respect to investment and the development of world-wide rules on foreign direct investment in the framework of the world trading system as embodied in the World Trade Organization;] 4
Wishing to establish a broad multilateral framework for international investment with high standards for the liberalisation of investment regimes and investment protection and with effective dispute settlement procedures; [Recognising that investment, as an engine of economic growth, can play a key role in ensuring that economic growth is sustainable, when accompanied by appropriate environmental policies to ensure it takes place in an environmentally sound manner] [Recognising that appropriate environmental
 1. One delegation proposed that the Preamble include the following language on taxation: "aware of the importance of taxation for investments and investors, emphasising that double taxation agreements cover most OECD countries in a satisfactory manner, and that tax policy considerations shall be taken into account in the process of accession of new Contracting Parties, in particular the existence of a network of bilateral tax treaties;". This proposal was not discussed. It may need to be revisited in the light of further consideration of taxation matters by the Negotiating Group
2. One delegation, with the support of another delegation, proposed that the Preamble include the following language on natural resources: "Reaffirming the sovereignty and sovereign rights of States over natural resources within the limits of national jurisdiction"
3. Some delegations proposed an explicit reference to the World Trade Organisation. One delegation proposed the addition immediately after the words "world trading system" of: "encompassing multilateral and bilateral investment instruments as well as agreements of the World Trade Organisation". This proposal would need some refinement to ensure that it does not limit the scope of the phrase "world trading system" by excluding, for example, regional agreements
4. One delegation proposed this language. Some delegations oppose the inclusion of such language because they believe that it would prejudge, and be prejudicial to, future work on investment in the World Trade Organisation 8 policies can play a key role in ensuring that economic development, to which investment contributes, is sustainable] 5 , and resolving to [desiring to] 6 implement this agreement [in accordance with international environmental law and] 7 in a manner consistent with sustainable development, as reflected in the Rio Declaration on Environment and Development and Agenda 21, [including the protection and preservation of the environment and principles of the polluter pays and the precautionary approach;] 8, 9, 10, 11, 12
5. There is about even support for each "recognising" formulation
6. Four delegations object to "resolving to" and would prefer "desiring to"
7. This phrase raises the questions whether the MAI intends to set a presumption that multilateral environmental agreements have precedence and over it, and, if so, whether a preambular reference establishes that presumption. One delegation is strongly opposed to the inclusion of this phrase because it is impossible to define precisely
8. While a majority favour explicit mention of these two principles, a number of delegations prefer a more general reference to Rio Declaration and Agenda 21 principles without specifics. One delegation would explicitly mention two additional principles: "public participation and the right of communities to have access to information, and the avoidance of relocation and transfer of activities causing severe environmental degradation or found to be harmful to human health"
9. It was the strong feeling of many delegations that preambular reference to the environment be limited to one paragraph and that it be as short as possible. Similarly, it was the feeling of many delegations that preambular reference to labour be limited to one paragraph and that it be as short as possible. One delegation is willing to consider preambular language on the environment as part of the entire package on labour and environment. One delegation opposes any reference to the environment unless its concerns are met
10. One delegation proposed additional language: "and recognising that such environmental policies shall not constitute a means of disguised restriction on international trade and investment;". Some delegations supported this proposal in concept but wondered if it belonged in the Preamble or in a more general anti-abuse clause in the MAI
11. One delegation, supported by another delegation, would insert four additional tirets from its alternative for the Preamble (DAFFE/MAI/DG3(97)18, Annex, pp. 6-7): Convinced of the need for optimal use of the world’s resources in accordance with the objective of sustainable development; Recognising that investment can result in changes in the scale and structure of economic activity within countries, with potential effects on health and the environment; Recognising the interdependent nature of their environments; Encouraging the protection, conservation, preservation and enhancement of the environment;
12. One delegation believes that the proposal for two paragraphs of preambular language on the environment reflected broadly shared ideas of substance and was prepared to continue work on the basis of that text Bracketed text in that proposal related primarily to nuance. The paragraph now contained in the text has lost or weakened at least two concepts that had been broadly shared by the group. This delegation would like to know why a number of delegations appear to find it a preferred basis on which to continue work The two key concepts that have been lost and the substance of the delegation’s concern are set out below:
1. The commitment (or desire) of Parties to implement the agreement in a manner consistent with environmental protection and conservation has been omitted. In the current text this idea is expressed only as a subsidiary notion to the Rio declaration when in fact environmental protection and conservation should be a generally affirmed principle that is not limited to the provisions of Rio
2. A clear statement of reaffirmation of commitment to the Rio Declaration, writ large, is not clearly made. In the current text, parties resolve to implement the agreement in a manner consistent only with 9 Renewing their commitment to the Copenhagen Declaration of the World Summit on Social Development 13 and to observance of internationally recognised core labour standards, i.e. freedom of association, the right to organise and bargain collectively, prohibition of forced labour, the elimination of exploitative forms of child labour, and non-discrimination in employment, and noting that the International Labour Organisation is the competent body to set and deal with core labour standards world-wide 14, 15, 16 Affirming their decision to create a free-standing Agreement open to accession by all countries; 17 specific ideals (sustainable development and/or international environmental law) as reflected in the Rio Declaration; they do not reaffirm a commitment to the Rio Declaration as a whole. Furthermore, the new text adds the idea of implementing the agreement in accordance with the specified concepts of Rio; this is an idea that has not been explicitly discussed by the group Therefore, in addition to the position set out in footnote 8 above, the proposal by one delegation is: Resolving to implement this agreement in a manner consistent with environmental protection and conservation;
Reaffirming their commitment to the RIO Declaration on Environment and Development and Agenda 21, including to sustainable development as reflected therein, and recognising that investment, as an engine of economic growth, can play a key role in ensuring that growth is sustainable, when accompanied by appropriate environmental policies to ensure it takes place in an environmental sound manner; Noting that the Rio Declaration principles of relevance to investment include, inter alia, the polluter pays, the precautionary approach, public participation and the right of communities to have access to information, and the avoidance of relocation and transfer of activities causing severe environmental degradation or found to be harmful to human health;
13. A number of delegations maintain a scrutiny reserve to consider whether there should also be explicit mention of the Singapore WTO Ministerial
14 Three delegations continue to oppose any reference to labour in the Preamble
15. One delegation could not support a reference to labour in the preamble if it included explicit statement of basic principles of core labour standards
16. One delegation would insert three additional tirets from its alternative for the Preamble: Recognising that development of economic and business ties can promote respect for core labour standards; Resolved to foster investment with due regard for the importance of labour laws and core labour standards; Noting that, as members of the International Labour Organisation, they have endorsed the Tripartite Declaration of Principles concerning Multilateral Enterprises and Social Policy, and agreeing to renew their support for that voluntary instrument
17. Some delegations proposed that the statement that the Agreement is open to accession by all countries be strengthened 10 [Noting] [Affirming their support for] the OECD Guidelines for Multinational Enterprises and emphasising that implementation of the Guidelines, which are non-binding and which are observed on a voluntary basis, will promote mutual confidence between enterprises and host countries and contribute to a favourable climate for investment; 18 HAVE AGREED AS FOLLOWS:
18. One delegation proposed that the Preamble state that the Guidelines include, in particular, recommendations on employment and industrial relations and environmental protection; other delegations were of the view that the text introducing the Guidelines as an annex should specify the eight subject areas, including those just mentioned, on which the Guidelines make recommendations (see Section III below). In addition, one delegation would like to add words to the effect that the Contracting Parties consider the Guidelines to be "a valuable part of the framework for the consideration of issues of investment and multilateral enterprises."
11 II. SCOPE AND APPLICATION
DEFINITIONS
1. Investor means:
(i) a natural person having the nationality of, or who is permanently residing in, a Contracting Party in
accordance with its applicable law; or
(ii) a legal person or any other entity constituted or organised under the applicable law of a Contracting
Party, whether or not for profit, and whether private or government owned or controlled, and includes
a corporation, trust, partnership, sole proprietorship, joint venture, association or organisation
2. Investment means:
Every kind of asset owned or controlled, directly or indirectly, by an investor, including:
1, 2
(i) an enterprise (being a legal person or any other entity constituted or organised under the applicable
law of the Contracting Party, whether or not for profit, and whether private or government owned or
controlled, and includes a corporation, trust, partnership, sole proprietorship, branch, joint venture,
association or organisation);
(ii) shares, stocks or other forms of equity participation in an enterprise, and rights derived therefrom;
(iii) bonds, debentures, loans and other forms of debt, and rights derived therefrom;
(iv) rights under contracts, including turnkey, construction, management, production or revenue-sharing
contracts;
(v) claims to money and claims to performance;
(vi) intellectual property rights;
(vii) rights conferred pursuant to law or contract such as concessions, licenses, authorisations, and permits;
(viii) any other tangible and intangible, movable and immovable property, and any related property rights,
such as leases, mortgages, liens and pledges
1. The Negotiating Group agreed that this broad definition of investment calls for further work on appropriate
safeguard provisions. In addition, the following issues require further work to determine their appropriate
treatment in the MAI: indirect investment, intellectual property, concessions, public debt and real estate
2. For greater certainty, an interpretative note will be required to indicate that, in order to qualify as an
investment under the MAI, an asset must have the characteristics of an investment, such as the commitment
of capital or other resources, the expectation of gain or profit, or the assumption of risk
12 GEOGRAPHICAL SCOPE OF APPLICATION
3
This Agreement shall apply in:
(a) the land territory, internal waters, and the territorial sea of a Contracting Party, and, in the case of a
Contracting Party which is an archipelagic state, its archipelagic waters; and
(b) the maritime areas beyond the territorial sea with respect to which a Contracting Party exercises
sovereign rights or jurisdiction in accordance with international law, as reflected particularly in the 1982
United Nations Convention on the Law of the Sea
4
APPLICATION TO OVERSEAS TERRITORIES
1. A State may at any time declare in writing to the Depositary that this Agreement shall apply to all or to one
or more of the territories for the international relations of which it is responsible
5
Such declaration, made prior to or
upon ratification, accession or acceptance, shall take effect upon entry into force of this Agreement for that State. A
subsequent declaration shall take effect with respect to the territory or territories concerned on the ninetieth day
following receipt of the declaration by the Depositary
2. A Party may at any time declare in writing to the Depositary, that this Agreement shall cease to apply to all
or to one or more of the territories for the international relations of which it is responsible. Such declaration shall take
effect upon the expiry of one year from the date of receipt of the declaration by the Depositary, with the same effect
regarding existing investment as withdrawal of a Party
3. A number of EG1 delegations were of the view that rather than an article on geographical scope, an article
should define the "territory" or "area" of a Contracting Party to which the MAI would be applicable and in
that case, it could be included in a general definitions part of the agreement. Some delegations had serious
misgivings about the feasibility of embarking on this approach
4. EG1 agreed that an alternative text of subparagraph (b) illustrating the "functional" approach supported by
some delegations should be included in order to preserve the approach for future consideration if the
Negotiating Group were to decide to pursue that option further. An alternative subparagraph (b), could read:
".................investments beyond the territorial sea under the jurisdiction of a Contracting Party in
accordance with international law as reflected in the 1982 United Nations Convention on the Law of the
Sea."
5. In case such a declaration of application were to be accompanied by reservations or exceptions beyond
those of the declaring state, these would be subject to acceptance of the other Parties
13 III. TREATMENT OF INVESTORS AND INVESTMENTS
NATIONAL TREATMENT AND MOST FAVOURED NATION TREATMENT
1. Each Contracting Party shall accord to investors of another Contracting Party and to their investments, treatment no less favourable than the treatment it accords [in like circumstances] to its own investors and their investments with respect to the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment and sale or other disposition of investments
2. Each Contracting Party shall accord to investors of another Contracting Party and to their investments, treatment no less favourable than the treatment it accords [in like circumstances] to investors of any other Contracting Party or of a non-Contracting Party, and to the investments of investors of any other Contracting Party or of a non-Contracting Party, with respect to the establishment, acquisition, expansion, operation, management, maintenance, use, enjoyment, and sale or other disposition of investments
3. Each Contracting Party shall accord to investors of another Contracting Party and to their investments the better of the treatment required by Articles 1.1 and 1.2, whichever is the more favourable to those investors or investments
TRANSPARENCY
1. Each Contracting Party shall promptly publish, or otherwise make publicly available, its laws, regulations, procedures and administrative rulings and judicial decisions of general application as well as international agreements which may affect the operation of the Agreement. Where a Contracting Party establishes policies which are not expressed in laws or regulations or by other means listed in this paragraph but which may affect the operation of the Agreement, that Contracting Party shall promptly publish them or otherwise make them publicly available
1
2. Each Contracting Party shall promptly respond to specific questions and provide, upon request, information to other Contracting Parties on matters referred to in Article 2.1
3. Nothing in this Agreement shall prevent a Contracting Party from requiring an investor of another Contracting Party, or its investment, to provide routine information concerning that investment solely for information or statistical purposes. Nothing in this Agreement requires a Contracting Party to furnish or allow access to: a) information related to the financial affairs and accounts of individual customers of particular investors or investments, or 1. The Chairman of the Negotiating Group proposed to keep this sentence without brackets, noting that several
delegations could go along with this proposal provided that there was a satisfactory explanatory statement
in the commentary
14 b) any confidential or proprietary information, including information concerning particular investors or investments, the disclosure of which would impede law enforcement or be contrary to its laws 2
protecting confidentiality or prejudice legitimate commercial interests of particular enterprises
2. Two delegations propose to insert after "laws", the terms "policies, or practices". One delegation can only
support the proposed text for paragraph 3 of the Transparency article if these terms are inserted
15 TEMPORARY ENTRY, STAY AND WORK OF INVESTORS AND KEY PERSONNEL
3
1. Subject to the application of Contracting Parties’ national laws, regulations and procedures affecting the entry, stay and work of natural persons: (a) Each Contracting Party shall grant temporary entry, stay and authorisation to work 4
and provide any necessary confirming documentation to a natural person of another Contracting Party who is: (i) an investor who seeks to establish, develop, administer or provide advice or essential technical services to the operation of an enterprise 5
in the territory of the former Contracting Party to which the investor has committed, or is in the process of committing, a substantial amount of capital, or (ii) an employee employed by an enterprise referred to in (i) above, or by an investor 6
, [who may be required to have been employed for a specified minimum period, for example one year] 7
in a capacity of executive, manager or specialist and who is essential to the enterprise; so long as that person continues to meet the requirements of this Article; 8
(b) (i) Each Contracting Party shall grant temporary entry and stay and provide any necessary confirming documentation to the spouse and minor children of a natural person who has been granted temporary entry, stay and authorisation to work in accordance with subparagraph (a) above. The spouse and minor children shall be admitted for the period of the stay of that person
(ii) Each Contracting Party is encouraged 9
to grant authorisation to work to the spouse of the person who has been granted temporary entry, stay and authorisation to work in accordance with subparagraph (a) above
3. Whether there should be an anti-abuse clause, its precise wording, as well as its specific placement is to be
decided
4. Interpretative note: "The granting of an "authorisation to work" may imply that a natural person may have
to meet specific professional qualifications required in order to carry out particular activities. Professional
qualification criteria that may be applicable are outside the scope of this Article."
5. "Enterprise" under this Article would have the same meaning as under the MAI definition of "investment"
6. It is recalled that the MAI definition of an "investor" includes both natural and legal persons. It is
understood that the national authorities may impose on investors some requirements under domestic
immigration laws regulations and procedures given the content of the chapeau of paragraph 1
7. The phrase "who may be required to have been employed for a specified minimum period, for example one
year" reproduces an amendment proposed by one delegation. It is generally agreed, however, that legally
speaking, it is not necessary to clarify in the text that specific minimum periods, for example one year, are
allowed by the chapeau of paragraph 1. Some delegations consider, however, the retention of this language
to be a political necessity
8. Interpretative note: "It is understood that the national authorities may periodically verify continued
eligibility under this paragraph"
9. Some countries prefer "shall endeavour" and may need to refer to capitals before agreeing to deletion
16 2. No Contracting Party may deny entry and stay as provided for by this Article, or authorisation to work as provided for by paragraph 1(a) of this Article, for reasons relating to labour market or other economic needs tests or numerical restrictions in national laws, regulations, and procedures
10
3. For the purposes of this Article: Natural person of another Contracting Party means a natural person having the nationality of [or who is permanently residing in] 11
another Contracting Party in accordance with its applicable law; Executive means a natural person who primarily directs the management of an enterprise or establishes goals and policies for the enterprise or a major component or function of the enterprise, exercises wide latitude in decision-making and receives only general supervision or direction from higher-level executives, the board of directors, or stockholders of the enterprise; Manager means a natural person who directs the management of an enterprise, or department, or subdivision of the enterprise, supervises and controls the work of other supervisory, professional or managerial employees, has the authority to hire and fire or recommend hiring, firing, or other personnel actions and exercises discretionary authority over day-to-day operations at a senior level; and Specialist means a natural person who possesses knowledge at an advanced level of expertise and who may be required to possess specific or proprietary knowledge of the enterprise’s product, service, research equipment, techniques, or management
10. There is no substantive disagreement about making it clear in an interpretative note that "numerical
restrictions referred to in this paragraph are restrictions on the maximum number of natural persons who
can enter, stay or work in the Contracting Party." A number of delegations maintain a scrutiny reserve on
the wording of this interpretative note
11. Several delegations have concerns with extending the benefits of the MAI Key Personnel provisions to
permanent residents of another Contracting Party. As a result of the Negotiating Group discussion on 23-25
April 1997, the Chairman proposed that at least for the purposes of investors, nationals and permanent
residents should be covered. Delegations should reflect further on the inclusion of permanent residents as
concerns the categories of executive, manager, or specialist
17 NATIONALITY REQUIREMENTS FOR EXECUTIVES, MANAGERS AND MEMBERS OF
BOARDS OF DIRECTORS
No Contracting Party may require that an enterprise of that Contracting Party that is an investment of an investor of another Contracting Party appoint as executives, managers 12
and members of boards of directors 13
individuals of any particular nationality
EMPLOYMENT REQUIREMENTS
14
A Contracting Party shall permit investors of another Contracting Party and their investments to employ any natural person of the investor’s or the investment’s choice regardless of nationality and citizenship provided that such person is holding a valid permit of sejour and work delivered by the competent authorities of the former Contracting Party and that the employment concerned conforms to the terms, conditions and time limits of the permission granted to such person
12. The definitions of "Executive" and "Manager" are the same as those provided by the article on Temporary
Entry, Stay and Work of Investors and Key Personnel. The placement of these definitions in the Agreement
could be considered at a later stage. It is understood that technical differences between MAI definitions and
national definitions of these terms could be highlighted in country specific exceptions
13. Three delegations reserve on the coverage of membership in boards of directors. Given the diversity of
corporate governance rules across countries, it is proposed that the MAI rely on national definitions
14. It is understood that this article would not interfere with domestic anti-discrimination and labour laws
18 PERFORMANCE REQUIREMENTS
15
1. A Contracting Party shall not, in connection with the establishment, acquisition, expansion, management, operation, maintenance, use, enjoyment, sale or other disposition 16
of an investment in its territory of an investor of a Contracting Party or of a non-Contracting Party, impose, enforce or maintain 17
any of the following requirements, or enforce any commitment or undertaking: 18
(a) to export a given level or percentage of goods or services; (b) to achieve a given level or percentage of domestic content; 15. One delegation reserves its position on all obligations on performance requirements that go beyond those in
the TRIMS Agreement and the Energy Charter Treaty. Another maintains a reserve on the prohibition of
requirements listed in paragraph 1(a) through (e), when linked to an advantage. Another delegation
maintains a reserve on the scope of the article. Another delegation reserves its position on the scope of
paragraphs 3 to 5 of this article
16. A large majority of delegations consider that the enumeration of activities in the chapeau should closely
follow the list of activities in the National Treatment/MFN articles to avoid any confusion over the meaning
of any differences in the lists. They consider furthermore that there are no substantive grounds for the
deletion of the terms "maintenance, use, enjoyment" since the implications for intellectual property rights
are taken care of by the proposed carve-out in paragraph 1(f) and the consequences of keeping them as
regards land assets are immaterial. It is noted that these are also arguments for not mentioning these terms
in the chapeau. One delegation favours the deletion of these terms. Two delegations question the relevancy
of the terms "sale or other disposition"
17. One delegation reserves its position on the inclusion of the word "maintain". One delegation suggests that
the use of this word could oblige Contracting Parties to undertake the burdensome task of having to
expunge all possible non-conforming requirements from existing laws, regulations, contracts, etc. It should
be sufficient, and less burdensome, for a Contracting Party to be obliged not to "impose" and "enforce"
such requirements
18. One delegation presented an explanatory note on the formulation of NAFTA article 1106 which, in its view,
is significantly clearer than the proposed MAI article on Performance Requirements. In order to improve
on the MAI articles, the delegation proposes that the following phrase be added at the end of the chapeau of
this paragraph: "or condition the receipt or continued receipt of an advantage on compliance with any of the
following requirements". This addition is intended to make clear that the performance requirements article
applies in two basic circumstances: i) when linked to the establishment, expansion, etc. of an investment;
and ii) when linked to the granting of an advantage
According to one delegation, unless expressly stated (as proposed) in paragraph 1, there may always be
some uncertainty as to whether the article would apply in cases of granting an advantage. This delegation
considers this addition necessary to provide greater certainty. As was the intention in the development of a
"one list" approach in the MAI article, the proposed addition would, in the second case (linked to an
advantage), limit prohibitions to "requirements" imposed by governments. Extending the prohibitions to
only certain (but not all) "commitments and undertakings" would, according to this delegation, unduly
interfere with government practices regarding "voluntary" commitments in exchange for an advantage and
could result in a significant burden on Contracting Parties on lodging reservations for government-firm
agreements containing "prohibited" voluntary undertakings
The other delegations feel, however, that there is no need to modify the structure of the Article
19 (c) to purchase, use or accord a preference to goods produced or services 19
provided in its territory, or to purchase goods or services from persons in its territory; (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 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 to the volume or value of its exports or foreign exchange earnings; (f) to transfer technology, a production process or other proprietary knowledge to a natural or legal person in its territory, except 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, or -- concerns the transfer of intellectual property and is undertaken in a manner not inconsistent with the TRIPS Agreement; 20
(g) to locate its headquarters for a specific region or the world market in the territory of that Contracting Party; 21
19. It is understood that item (c) is not meant to cover the provision of cross-border services as defined under
the GATS. It is felt that this understanding could be recorded by using the following language: "This
provision does not obligate a Contracting Party to permit cross-border trade in services beyond the
obligations it has undertaken pursuant to GATS." This understanding could also be part of a general
provision in the Agreement concerning the relationship between the MAI and the GATS. One delegation
reserves its position on the inclusion of "services" in 1(c) with respect to requirements associated with the
granting of an advantage. It is noted that the relationship between the MAI and the GATS is an issue that
could be addressed in a number of ways, including by way of individual footnotes
20. The wording of this tiret is being elaborated in consultations with intellectual property experts, (See Article
on Intellectual Property, Section III below). These experts have not agreed whether the current wording
covers future IPRs and moral rights. It remains to be seen how the article will relate to other agreements
such as the Rome and Berne Conventions. Paragraphs 1(b) and 1(c) may also have implications for IPRs
Some delegations note that a general provision for interpreting MAI obligations in a manner consistent with
other obligations under international agreements would avoid the need for specific language for IPRs. It is
understood that the concept of "proprietary knowledge" has a broader coverage than that of "trade secrets"
or "undisclosed information" (see TRIPS Article 39) and can include information collected by an investor
from publicly available sources by "the sweat of the brow"
21. One delegation reserves its position on paragraph (g) and notes that the inclusion of (g) may inadvertently
oblige Contracting Parties to lodge exceptions in respect of basic business incorporation laws in so far as
such laws oblige the establishment and/or maintenance of representative or head offices for legal purposes
It is noted that the prohibition is intented to apply to head offices or headquarters and not to the
establishment of other offices
20 (h) to supply one or more of the goods that it produces or the services that it provides to a specific region or the world market exclusively from the territory of that Contracting Party; (i) to achieve a given level or value of research and development in its territory; 22
(j) to hire a given level of nationals; 23
(k) to establish a joint venture with domestic participation; 24
or (l) to achieve a minimum level of domestic equity participation other than nominal qualifying shares for directors or incorporators of corporations
25
22. Two delegations maintain a scrutiny reserve on this paragraph while two other delegations maintain the
view that paragraph (i) should be deleted
23. There is wide agreement to retain paragraph (j) with the inclusion of the following footnote with the same
legal standing as the paragraph itself:
"Nothing in this paragraph shall be construed as interfering with programmes targeted at disadvantaged
regions/persons or other equally legitimate employment policy programmes. It is also understood that
permanent residency requirements are not inconsistent with this paragraph."
It is confirmed that this provision will not overlap with the MAI article on Employment Requirements since
it is meant to cover specific performance requirements expressed in terms of given numbers or percentages
of employees while the article on employment requirements addresses problems of discrimination among
natural persons holding a valid permit of sejour and work in a given Contracting Party
Two delegations continue to favour the deletion of paragraph (j)
24. Paragraph (k) includes joint ventures even if not covered by paragraph 1(l) because they do not involve
equity participation. It allows, however, joint venture requirements not involving a requirement of
domestic participation which may be motivated by an economic concern to spread risk
Some delegations maintain a scrutiny reserve on paragraph (k) and (l) on the basis that they are covered by
the National Treatment provision of the MAI. Some delegations point out to the difficulty of defining
"joint-ventures". Some delegations consider that the scope of (k) and (l) needs to be defined in particular
with reference to whether the paragraphs would cover a Contracting Party when it establishes a joint
venture in which it is a participant. It is noted that Paragraph 2 of the Privatisation article states that
"Nothing in this Agreement" shall be construed as imposing an obligation to privatise
25. The phrase "other than nominal qualifying shares for directors or incorporators of corporations" clarifies
that this performance requirement will not be breached merely because members of boards of directors and
those who establish a corporation (incorporators) may be required by domestic law, as a condition of that
position, to hold a small equity participation in the corporation
21 2. A Contracting Party is not precluded by paragraph 1 from conditioning the receipt or continued receipt of an advantage, in connection with an investment in its territory of a Contracting Party or of a non-Contracting Party, on compliance with any of the requirements, commitments or undertakings set forth in paragraphs 1(f) through 1(l)
26
3. [ ] 27
26. It is understood that the receipt or continued receipt of an advantage with respect to paragraphs (k) and (l)
will need to be granted on a non-discriminatory basis (provided that no country reservation has been
lodged)
Several delegations consider that the concerns that paragraph 5(abis) intends to cover in respect of rights
and obligations under the WTO agreements would better be addressed by the reinsertion of paragraph 1(a)
in paragraph 2. This would avoid, in particular, confusion and overlap with respect to the dispute settlement
provision of the MAI and the WTO. In that regard, some delegations note, in particular, a concern that if the
extent of paragraph 1(a)’s disciplines were defined, [as proposed in one of the alternatives to paragraph,
5(abis) (see footnote)], by reference to WTO Disciplines, then if paragraph 1(a) were to become a subject
of MAI dispute settlement, the MAI arbital panel would have to determine whether a WTO violation had
occurred, which would be an inappropriate role for it to undertake. two delegations would also support a
reference to paragraphs 1(b) and 1(c) in paragraph 2 to exclude the coverage of advantages associated with
services from paragraph 1. Some delegations view adding paragraphs 1(b) and 1(c) to paragraph 2 as an
undesirable "TRIMs-minus" solution because TRIMs covers paragraphs 1(b) and 1(c) with respect to goods
in all circumstances. Other delegations consider that the reinsertion of any of these items would result in too
much of a carve-out from paragraph 1 because this carve-out would apply across the board to all sectors or
economic activities and not limited to the exclusions allowed under the WTO provisions. They favour
instead a solution in the context of paragraph 5(abis)
27. It is agreed to transform the previous paragraph 3 in DAFFE/MAI/ST(97)14 into a footnote to paragraph 1
with the same legal standing and which reads:
"For the avoidance of doubt, nothing in paragraphs 1(a), 1(b), 1(c), 1(d) and 1(e) shall be construed to
prevent a Contracting Party from conditioning the receipt or continued receipt of an advantage, in
connection with an investment in its territory of an investor of a Contracting Party or of a non-Contracting
Party, on compliance with a requirement, commitment or undertaking to locate production, provide
particular services, train or employ personnel, construct or expand particular facilities, or carry out
research and development in its territory."
One delegation notes that the question of the status of footnotes and interpretative notes for the MAI
remains to be determined
22 4
28
[Provided that such measures are not applied in an arbitrary or unjustifiable manner, or do not constitute a disguised restriction on investment, nothing in paragraphs 1(b) and 1(c) shall be construed to prevent any Contracting Party from adopting or maintaining measures, including environmental measures: (a) necessary to secure 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; (c) necessary for the conservation of living or non-living exhaustible natural resources.] 29, 30
28. A majority of delegations see no need for paragraph 4. They consider that the proposed text is too broad,
especially that of paragraph 4(a). Some delegations also wonder whether there is a need for an interpretative
note. If there is such a need, a majority of delegations consider that it should be along the line proposed by
one delegation which reads as follows:
"Provided that such measures are not applied in an arbitrary or unjustifiable manner, or do not constitute a
disguised restriction on investment, nothing in paragraphs 1(b) and 1(c) shall be construed to prevent any
Contracting Party from adopting or maintaining measures necessary to secure compliance with
environmental [laws and regulations] [that are not otherwise inconsistent with the provisions of this
Agreement and] that are necessary for the conservation of living or non-living resources, [or that are
necessary to protect human, animal or plant life or health.]"
See proposed "Additional Clause on Labour and Environment" and footnote, Section III, below
29. One delegation would like the words "within its jurisdiction" to be added to paragraph 4(c) to make it clear
that this provision has no extra-territorial ramifications
30. One delegation believes that paragraph 4 is properly framed and that its scope should not be limited to
environmental measures, which would be the consequence of another delegation’s proposal. It suggests
replacing the words "necessary for" by "relating to", which are used in article XX of GATT 1994. It also
withdraws the example it provided in footnote 29 in DAFFE/MAI/ST(97)14; the example did not describe a
situation that would be disciplined by this article
One delegation favours the retention of paragraph 4
It is confirmed that no other general exceptions covered by Article XX of GATT 1994 would need to be
covered by the proposed paragraph 4. The same confirmation is given with respect to Article XI of GATT
1994 on the General Elimination of Quantitative Restrictions
23 5
31
(a) Paragraphs 1(a), 1(b), and 1(c) do not apply to qualification requirements for goods or services with respect to export promotion 32
and foreign aid programmes; [(abis) Paragraph 1(a), 1(b), and 1(c) do not apply to: 33
31. One delegation favours the inclusion of the following header to paragraph 5: "Without prejudice to rights
and obligations under the WTO" to ensure that the latter are not modified by the provision
32. One delegation suggests adding the word "and investment" after the word "export". It also suggests
clarifying by means of an interpretative note the meaning of "promotion" for the purposes of this article
33. The obligations of the Performance Requirements article relate to requirements, undertakings and
commitments that are directly imposed on or made by investors and their investments. In addition, they are
not intended to discipline "advantages" as such. It is recognised that the performance requirement article
raises questions about the relationship with the WTO Agreements, notably relating to agriculture, services
and government procurement
In this connection, it is agreed that the performance requirements article should not undo or undermine the
Contracting Parties obligations under any WTO Agreements. It is also generally recognised that this article
should not interfere with WTO rights and obligations in the agricultural sector. Some delegations consider
in addition that the MAI should not attempt to discipline subsidies relating to services since this matter is
presently being addressed in the WTO
Paragraph 5(abis) is proposed as a way of addressing these concerns. Discussions on this proposal focused
on: a) the need of specific reference to measures covered by WTO Agreements; b) the coverage of such a
reference; and c) whether it could be a viable alternative to the inclusion of a reference of paragraph 1(a),
and possibly paragraphs 1(b) and 1(c) in paragraph 2
One delegation proposes to add the following phrase after "agriculture sector": "covered by and consistent
with rights and obligations under the WTO Agreements". Another delegation questions excluding this
sector in respect to export performance requirements not linked to an advantage. It also wondered whether
paragraph 5(abis) would provide an exception for duty drawback programs outside the agriculture sector
(e.g. chemicals)
Two delegations propose the following language as a possible alternative to paragraph 5(abis):
"Paragraphs 1(a), 1(b) and 1(c) do not apply to measures consistent with rights and obligations under the
WTO Agreements." One delegation also proposes to limit the scope of this wording by adding the phrase "if
linked to an advantage" at the end of this sentence
While some delegations recognise that the proposals of two delegations could provide a technical solution,
several delegations remain concerned about the reference to WTO disciplines which, as noted in footnote
of the paragraph 2, could lead a MAI panel to pass judgement on WTO provisions. There is general
agreement that a MAI panel should not be put in a situation of interpreting WTO disciplines. One
delegation notes that under the safeguard provisions of the MAI, the IMF would be consulted in any MAI
dispute settlement case involving a measure that the IMF approved or found to be consistent with the MAI
It suggests that a similar solution could be found in the dispute settlement provisions of the MAI where it
could be stated that WTO provisions can only be interpreted by WTO
The following examples were provided to focus discussion on which cases should or should not be covered
by the Performance Requirements article, so that the article’s exclusions (paragraph 2) and exceptions
(paragraph 5) can be drafted appropriately
1. A Contracting Party screens investments:
(a) In connection with the establishment of a widget manufacturing plant, a Contracting Party imposes a
requirement that the investor export 100 per cent of the widgets produced
24 - [measures] [advantages] related to the production, processing and trade of agricultural and processed agricultural products; - advantages related to trade in services;] b) Paragraphs 1(b), 1(c), 1(f), and 1(h) do not apply to procurement by a Contracting Party or an entity that is owned or controlled by a Contracting Party
34
[c) paragraphs 1(b) and 1(c) 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
35
] [c) Paragraphs 1(a), 1(b), 1(c) and 1(d) do not apply to customs duties, exemptions from such duties and preferential tariffs or to any trade measure regulating imports and exports provided that such measures are not applied in an arbitrary or unjustified manner, and do not constitute a disguised restriction on investment
36
] (b) Same as 1(a), but the investor receives an advantage: no customs duties are imposed on manufacturing
equipment or materials
2. A Contracting Party allows any investor to establish a widget manufacturing plant:
(a) Any widget manufacturer may operate in an "export processing zone" but if it does so, it is required to
export 100 per cent of the widgets produced in the zone. No customs duties are imposed on manufacturing
equipment or materials that enter the zone
(b) Any widget manufacturer may operate in an "export processing zone". No customs duties are imposed
on manufacturing equipment or materials that enter the zone. Customs duties are imposed on any products
produced in the zone that are sold within a Contracting Party’s territory
34. It is agreed to add the following interpretative note:
"The Performance Requirements article does not affect any obligations that may exist under the WTO
Government Procurement Agreement."
Two delegations consider that a reference to paragraph 1(i) may be needed if that paragraph is retained
35. Discussion regarding this subparagraph focused on the following example provided by one delegation,
which others found useful and requested to be recorded:
"A French manufacturer of textiles located in the US manufactures and cuts cloth for garments in the US,
sends it to a country eligible for the special programme (e.g., Jamaica), to be assembled into finished
garments, and then re-imports the garments into the US for retail sale. The tariff rate on the re-imported
garments is lower than on garments from other countries. Without the subparagraph 5(c) exception,
subparagraphs 1(b) and 1(c) would prevent the US from offering the special access programme, which is
consistent with existing international obligations. Many MAI countries have similar programmes."
Several delegations believe that customs tariff issues fall outside the scope of this Article and thus there is
no need for the proposed general carve-out. This issue should be discussed further; there may be also a link
with the issues raised with respect to paragraph (a). one delegation agrees to circulate any relevant material
in advance of the next round of consultations. Another delegation believes that there is no need for the
proposed carve-out if the interpretative note in the footnote of 1(j) is accepted
36. Given the understandings noted at the beginning of the footnote of the paragraph 5(abis), one delegation
considers that the need for paragraph 5(c) may be limited only to the case of duty exemptions
25 PRIVATISATION
37
Paragraph 1 (Application of National Treatment/MFN)
The obligation on a Contracting Party to accord National Treatment and MFN treatment as defined in Paragraph XX (NT/MFN) applies to: a) all kinds of privatisation, irrespective of the method of privatisation (whether by public offering, direct sale or other method) 38
; and b) subsequent transactions involving a privatised asset
39
[Paragraph 1a (voucher schemes)
Notwithstanding paragraph 1, arrangements under which natural persons of a Contracting Party are granted exclusive rights as regards the initial privatisation are acceptable as a method of privatisation under this Agreement provided that the exclusive right as regards the initial privatisation is limited to natural persons only and provided that there is no restriction on subsequent sales]
40
Paragraph 2 (Right to privatise)
Nothing in this Agreement shall be construed as imposing an obligation on a Contracting Party to privatise
41
37. Four delegations reserve their position on all privatisation obligations
38. One delegation reserves its position
39. Four delegations reserve their position on sub-paragraph (b) as it goes beyond the scope of a privatisation
article. Delegations agree that this provision does not apply to the behaviour of private entities (corporate
practices). It is understood that the meaning of that provision is to prevent Contracting Parties from
imposing rules on such secondary transactions which are inconsistent with NT/MFN. In the light of this,
some delegations propose to include language along the lines of "b) measures governing subsequent ...". It
is felt useful that legal experts examine the ultimate formulation of this provision on the basis of this
understanding
40. One delegation is ready to withdraw this proposal if reference to vouchers schemes under paragraph 3,
alternative 2, letter d, is deleted
41. Two delegations propose to insert "prejudice Contracting Parties’ rules governing the system of property
ownership or" between the words "shall" and "be"
26 Paragraph 3 (Special share arrangements)
42, 43
Alternative 1 Contracting Parties acknowledge that special share arrangements are compatible with Paragraph 1, unless they explicitly or intentionally favour investors or investments of a Contracting Party or discriminate against investors or investments of another Contracting Party on the grounds of their nationality or permanent residency
44
Alternative 2 45
[Special share holding arrangements including, inter alia, a) the retention of "golden shares" by Contracting Parties, b) stable shareholder groups assembled by a Contracting Party, c) management/employee buyouts, and d) voucher schemes for members of the public, hold strong potential for discrimination against foreign investors and are, in fact, inconsistent with National Treatment and MFN treatment obligations in many instances.] Alternative 3 46
Footnote to paragraph 1 Special share arrangements which explicitly discriminate (i.e. de jure) against foreign investors and their investment are contrary to obligations on National Treatment/MFN Treatment. It is also understood that when, in their application, special share arrangements lead to de facto discrimination they are also contrary to National Treatment/MFN Treatment
42. Work on paragraph 3 has been based on alternative 1, which is supported by a large number of delegations
However, one delegation maintains its preference for alternative 2. It cannot accept the phrase "are
compatible with paragraph 1" (Alternative 1, paragraph 3) on the grounds of the implication that such
special rules, regardless of how they are exercised, necessarily conform with NT/MFN. The use, application
or exercise of such relevant measures under the tirets (alternative 1) may in fact not conform with
NT/MFN. One delegation proposes the deletion of paragraph 3
43. It was recalled that the issue of providing the possibility for lodging exceptions after the entry into force of
the MAI concerning privatisations is under consideration in the Negotiating Group
44. One delegation would still prefer the inclusion of an illustrative list
45. Proposal of one delegation, together with the following note: "As with other measures contrary to
obligations on National Treatment and MFN treatment, use of special share arrangements should be subject
to listing as exceptions. Recognising that Contracting Parties may privatise assets in the future, Contracting
Parties will be permitted to take precautionary exceptions for the use of special share arrangements in those
sectors where Contracting Parties generally have state-owned enterprises or government restrictions." This
proposal was not discussed by the delegations
46. This language is put forward as a compromise. A number of delegations supporting alternative 1 state their
willingness to accept this compromise pending the outcome of the discussions in the Negotiating Group on
how to handle de facto discrimination in the context of lodging country specific exceptions. One delegation
suggests the insertion, after "investments" on the second line, of the words "on the ground of nationality";
of the word "intentionally" after "arrangements" on the third line; and, "on the ground of nationality", after
"discrimination" on the same line. It also suggests the inclusion of an illustrative list
27 [Alternative 4 47
Nothing in this Agreement shall prevent Contracting Parties from using special methods of privatisation or having special rules as regards ownership, management or control of privatised assets such as: -- a Contracting Party or any person designated by the Contracting Party maintaining special shareholder rights to influence or veto any decision concerning such assets after the privatisation, -- arrangements under which managers or other employees of an enterprise are granted special treatment as regards the acquisition of shares of that enterprise, -- arrangements under which shareholders are required to maintain their share in the capital of the enterprise during a certain period of time, -- arrangements under which locals of a certain community are granted special treatment as regards the acquisition of this community’s property, unless they explicitly or intentionally favour investors or investments of a Contracting Party or discriminate against investors or investments of another Contracting Party on the grounds of their nationality or permanent residency.] 47. This proposal by one delegation has not been discussed
28 Paragraph 4 (Transparency)
48
For the purposes of this Article, each Contracting Party or its designated agency shall promptly publish or otherwise make publicly available the essential features and procedures for participation in each prospective privatisation 49
.* *Footnote
This footnote confirms the application of the Transparency Article YY. This footnote also confirms that the obligations to accord National Treatment and MFN Treatment prohibit discrimination against investors and investments of other Contracting Parties with respect to all arrangements for making public information about a privatisation operation. It is also understood that there can be variance in the methods used to make information available, including in the case of small scale privatisations
48. One delegation reserves its position on the Transparency article. It considers that a principle of parallelism
should guide the treatment of privatisation and that of concessions, which are two connected fields. It also
considers the transparency obligations should apply to all levels of government. This delegation therefore
conditions its agreement concerning the insertion of a transparency clause for privatisation to the inclusion
of a similar clause for concessions
49. It is understood that the obligation of this article will be met wherever the information on a privatisation
operation is made available. One delegation notes that there is a need for discussion of the potential
implications of the proposed transparency provision for legitimate financial market transactions. It also
proposes the addition of the following interpretative note: "It is understood that paragraph 4 does not place
any obligation on a Contracting Party to take actions that could prejudice respect for, or compliance with,
the requirements of securities and exchange laws." While several delegations did not need this clarification,
they did not oppose that it be added to the Agreement as an interpretative note
29 Paragraph 5 (Definition)
Privatisation means the sale by a Contracting Party, in part or in full, of its equity interests 50
in any entity 51
or other disposal having substantially the same effect.* * This definition: - does not cover transactions between different levels or entities of the same Contracting Party; - excludes transactions in the normal conduct of business
52
50. One delegation considered that the sale of the assets of a state company such as the sale of a division of an
entity are to be covered by the definition. It also felt that it was necessary to replace the term "equity
interests" by "ownership interests" to clarify the scope of the definition. Another delegation would have
preferred to return to the previous definition but could accept the alternative wording "equity or other
interests". Another delegation reserved on the phrase "or other disposal having substantially the same
effect"
51. One delegation is of the view that the word "entity" should be qualified by the addition of "it owns or
controls through ownership interests."
52. It is understood that transactions by entities created for the purpose of the sale or other disposal of a
Contracting Party’s equity interests in an entity are captured by the revised definition in accordance with the
MAI Article on entities with delegated governmental authority
30 MONOPOLIES/STATE ENTERPRISES/CONCESSIONS
A. Article on Monopolies
53
1. Nothing in this Agreement shall be construed to prevent a Contracting Party from maintaining, designating or eliminating a monopoly
54
2. Each Contracting Party shall [endeavour to] 55
accord non-discriminatory treatment when designating a monopoly
3. Each Contracting Party shall ensure that any privately-owned monopoly that its national [or subnational] governments [maintain] 56
or designate and any public monopoly that its national [or subnational] governme

ts maintain or designate: a) provides non-discriminatory treatment to investments of investors of another Contracting Party in its supply of the monopoly good or service in the relevant market ;
53. One delegation reserves its position on all obligations on monopolies that go beyond those of the GATT and
GATS
54. It is understood that paragraph 1 is without prejudice to the article on Expropriation and Compensation. One
delegation maintains a scrutiny reserve on this question. Another delegation continues to believe that
"Agreement" should be replaced with "Article" but will consider this proposal for an interpretative note that
would be an integral part of the Agreement
55. Delegations remain divided on the desirability of removing these brackets. The issue is linked to the
inclusion of provisions in the Agreement on concessions. Some delegations are willing to drop the contents
of the brackets if there would be satisfactory provisions in the MAI on concessions
56. One delegation considers that all the provisions of the Monopoly article should not apply to monopolies at
subnational levels of government. It also has difficulties with the inclusion of the term "maintains" since
this could create disciplines with respect to existing contracts between the government and such privately-owned
monopolies and have general ramifications on the rights of existing shareholders. This delegation
considers that the disciplines of paragraph 3 should not apply to monopolies designated by subnational
authorities. Other delegations consider it essential that monopolies designated by subnational authorities
should be covered by the disciplines. They recognise that the reference to national and subnational
governments is also related to the coverage of the monopoly definition and more broadly to the solution
found for the general treatment of subnational entities under the MAI
31 b) provides non-discriminatory treatment to investments of investors of another Contracting Party in its purchase of the monopoly good or service in the relevant market. This paragraph does not apply to procurement by governmental agencies of goods or services for government purposes and not with a view to commercial resale or with a view to use in the production of goods or services for commercial sale; 57
Subparagraph c)
Alternative 1 58
c) does not abuse its monopoly position, in a non-monopolised market in its territory, to engage, either directly or indirectly, including through its dealing with its parent company, its subsidiary or other enterprise with common ownership, in anticompetitive practices that adversely affect [an investor or] 59
an investment by an investor of another Contracting Party, including through the discriminatory provision of the monopoly good or service, cross-subsidisation or predatory conduct
60
Alternative 2: zero option 61
57. One delegation raises the issue of the treatment of sub-contracting of monopoly activities. Another
delegation remains concerned about the broad scope of the carve-out implied by the second sentence and
favours its deletion, noting that much, if not all, of the core business of government is not involved in
producing goods and services for commercial sale
58. This draft article originally proposed by one delegation is supported by several delegations. One delegation
notes that the reference to "anti-competitive practices" should not be problematic since the GATS contains
obligations with respect to anti-competitive practices as an integral part of the GATS agreement on basic
telecommunications (cf. GATS Telecoms Reference Paper)
59. The inclusion of the term "investor" would confirm the application of subparagraph (c) to the pre-establishment
phase. Some delegations indicate that their support for Alternative 1 is conditional upon the
coverage of the pre-establishment phase. A number of delegations note, however, that this coverage could
also create problems with respect to the dispute settlement provisions of the MAI and consider that it should
not be retained
60. One delegation could agree to the deletion of the phrase "in particular through the abusive use of prices" on
the understanding that this practice was covered by the terms "predatory conduct". Another delegation
considers that the term "abusive use of prices" has a broader coverage than the concept of anti-competitive
practices
61. The zero option is supported by some delegations to avoid undue intrusion into the competition policy field
A number of these delegations support, as a fallback position, the inclusion of a subparagraph (c) based on
article VIII of the GATS which reads as follows:
"c) which competes, either directly or indirectly, or through an affiliated company, in an economic activity
outside the scope of its monopoly rights does not abuse its monopoly position in that activity to act in a
manner inconsistent with the obligations of this Agreement;"
One delegation considers that this proposal adds little in substance to the Monopoly article and could even
be politically counterproductive
32 [d) Except to comply with any terms of its designation that are not inconsistent with subparagraph (a) or (b), acts solely in accordance with commercial considerations in its purchase or sale of the monopoly good or service in the relevant market, including with regard to price, quality, availability, marketability, transportation and other terms and conditions of purchase or sale.] 62
[Nothing in Article A shall be construed to prevent a monopoly from charging different prices in different geographic markets, where such differences are based on normal commercial considerations, such as taking account of supply and demand conditions in those markets
63
Article A, paragraphs 3(c) and 3(d) differences in pricing between classes of customers, between affiliated and non-affiliated firms, and cross-subsidisation are not in themselves inconsistent with this provision; rather, they are subject to this subparagraph when they are used as instruments of anti-competitive behaviour by the monopoly firm]
64
62. A large majority of delegations are in favour of the deletion of subparagraph (d) and the following two
paragraphs. One delegation is prepared to accept the removal of subparagraph (d) provided that these two
paragraphs are maintained as interpretative notes. Two other delegations, which are proponents of
subparagraph (d) in its entirety, wish to maintain their position for inclusion in the article
One delegation provides a number of explanations in favour of the inclusion of subparagraph (d). In its
view, sub-paragraph (d) would present the advantage of increasing transparency: non-commercial
considerations must be both non-discriminatory [as indicated in (a), and (b)] and must be clearly stated in
terms of its designation. (Note, however, that if a government wants to continue to pursue social and other
non-economic objectives, it can still do so through the designation.) Sub-paragraph (d) would also clarify
that outside the terms of a monopoly’s designation, a monopoly should act in accordance with commercial
considerations just like any other enterprise (i.e. that it not use its monopoly power to influence the market)
This is particularly important given the potential power of monopolies over markets in the context of
accession. Finally, the proposed language in the two notes would make it clear that charging different
prices to different customers, for example, might be justified on the basis of commercial considerations
Consideration could be given to a definition of "commercial considerations" along the lines of the accepted
wording in GATT Article XVII
Many delegations remain sceptical, however, about the feasibility and desirability of requiring monopolies
to act in accordance with "commercial considerations"
63. Delegations discussed whether this paragraph should be maintained as an interpretative note, particularly in
case subparagraph (d) is deleted. One delegation considers that this clarification has a bearing on all the
provisions of paragraph 3, particularly subparagraph 3(a). Another delegation is of the view that the only
relevant link with other subparagraphs, with the exception of subparagraph d), is to subparagraph (a). In this
context, subparagraph (d) is not necessary because of the general understanding that the non-discrimination
principle in subparagraph (a) is limited to "like circumstances" thereby allowing for differentiation on the
basis of commercial considerations. While other delegations did not exclude a possible link to other
subparagraphs, for example subparagraph (b), they support its deletion
64. A large majority are of the view that the clarification intended by this paragraph is not necessary, especially
if subparagraph d) is deleted. One delegation considers that this explanatory paragraph is also relevant to
subparagraph 3(c)
33 [4. Each Contracting Party is allowed to lodge an exception to the Agreement concerning an activity previously monopolised at the moment of the elimination of the monopoly.] 65
5. Each Contracting Party shall notify 66
to the Parties Group any existing designated monopoly within [60] 67
days after the entry into force of the Agreement, any newly designated monopoly within [60] days after its creation, and any elimination of a designated monopoly [and related new exception to the Agreement] 68
within [60] days after its elimination
[6. Neither investors of another Contracting Party nor their investments may have recourse to investor-state arbitration for any matter arising out of paragraph 3 of this Article.] 69
65. Proposal by one delegation. Some delegations are opposed to the principle of lodging country exceptions
after entry into force of the MAI. Another delegation proposes that such reservations be made the subject
of scrutiny by the "Parties Group" to ensure that they do not negatively affect the level of liberalisation
under the MAI
66. One delegation suggests that the concept of prior notification found in Article VIII.4 of the GATS should
also be examined and that the Parties Group should have a role in examining all notifications resulting from
this article
67. It is suggested that the period of three months, which is the notification period for monopolies under
paragraph VIII.4 of the GATS, could be an alternative. The length of the notification period could also be
decided in light of other notification requirements that might arise under the Agreement. One delegation
points out to the difficulty it would have in notifying the very large number of monopolies designated by
subnational authorities. It is agreed that a solution needs to be found to the practical problem that the
Contracting Parties may encounter with respect to the designation of every single monopoly designated at a
subnational level authority. It is suggested that the alternative approach found in the Energy Charter to
notify a summary of the types of monopolies under the jurisdiction of subnational levels of government
could be considered. Another delegation does not agree that this paragraph applies with respect to
subnational governments
68. The issue of notification of monopolies is also linked to the question dealt with under paragraph 4 of this
Article
69. Several delegations point to the novelty and complexity of the proposed provisions on monopolies, which
argue in favour of limiting the dispute settlement procedures to state-to-state disputes. They also believe
that most governments do not even allow private "anti-trust" actions in their own courts by their citizens;
thus it would be a leap to suggest that there be privately-initiated scrutiny of monopolies’ anti-competitive
actions pursuant to 3(c). These delegations consider that state-to-state dispute settlement should provide a
useful procedural compromise. Many delegations consider, however, this paragraph should be deleted as
they believe that Contracting Parties should only sign up to commitments that they would be prepared to
defend against individual investors
34 [B. Article on [state enterprises][entities with which a Government has a specific relationshi p]
i) Option 1: zero option
70
ii) Additional provisions
a. Proposal byTwo Delegations 71
[1. Each Contracting Party shall ensure that any state enterprise that it maintains or establishes accords non-discriminatory treatment in the sale, in the Contracting Party’s territory, of its goods or services to investors of another Contracting Party and their investments
2. Neither investors of another Contracting Party nor their investments may have recourse to investor-state arbitration for any matter arising out of paragraph 3 of this Article
72
] b. Proposal by One Delegation 73
[ Each Contracting Party shall ensure that any entity that a national or a subnational government owns or controls through ownership interest or which a national or subnational governments authority has a relationship with through any specific legislative, regulatory or administrative act, any contracts, or any practices related to some of its activities acts in a manner that is not inconsistent with the Contracting Party's obligations under this Agreement in connection with these activities.] 70. A large majority of delegations support this option, particularly since the anti-circumvention clause in
Section VIII is intended to cover all enterprises, i.e. both state and private enterprises, to which authority
has been granted
A number of delegations underline the legal and practical difficulties that governments would encounter in
ensuring the conformity of the behaviour of state enterprises and all their affiliates with the obligations of
additional provisions, such as those proposed by two delegations
71. Two delegations believe that the need for such provisions is predicated by the fact that state enterprises are
different from private enterprises because of the links with governmental authorities. They felt that the
term "state enterprise" could be replaced by "an enterprise that it owns or controls"
One delegation points out that under its existing legislation the state as a shareholder has no special
privilege in comparison with any other shareholder. This would require legislative action
72. Some delegations point out that this paragraph would be needed whichever alternative is chosen. Other
delegations consider that any additional disciplines that might be adopted would need to be subject to both
state-to-state and investor-to-state dispute settlement. One delegation would like this paragraph to apply to
both paragraph 1 and the article on Entities with Delegated Governmental Authority
73. This proposal is offered as a compromise by one delegation which favours, nevertheless, no additional
provisions as its first option. It is meant to cover all possible avenues for exercising influence other than
government ownership (such as through the granting of contracts to private enterprises). This proposal did
not receive broad support
35 C. Definitions Related to Articles on Monopolies [and State Enterprises]
1. "Delegation" means a legislative grant, and a government order, directive or other act transferring to the monopoly or state enterprise, or authorising the exercise by the monopoly or state enterprise of, governmental authority
2. "Designate" means to establish or authorise, or to expand the scope of a monopoly
74
3. "Monopoly" means any person or entity designated by a [national [or subnational] 75
government authority] [Contracting Party] as the sole supplier or buyer of a good or service in a relevant market in the territory of a Contracting Party. It does not include a person or entity that has an exclusive intellectual property right solely by reason of such right or the exercise of such right 76
[nor does it include a person or entity that has an exclusive right such as a concession, license, authorisation or permit]
77
74. One delegation maintains a scrutiny reserve on this paragraph which is also related to the coverage of the
chapeau of paragraph 3 of the article on monopolies
75. A large majority of delegations consider that, in substance, the MAI disciplines on monopolies should apply
to all levels of governments. This could be achieved in a number of ways. The preferred option by most
delegations holding this view is the second bracketed text "Contracting Party". This would present the
advantage of ensuring consistency with the coverage of this term across the Agreement. Other delegations
remain of the opinion, however, that the most secure way to capture all designated monopolies would be to
have a specific reference to subnational authorities in the definition. One delegation suggests the alternative
wording of "the competent authority of a Contracting Party"; this language is considered to be a promising
compromise for delegations supporting the broadest definition of monopolies and should be discussed
further. Another delegation could accept the deletion of the reference to "national or subnational
government" on the understanding that a reference would be made in paragraph 3 in Section A that it does
no apply to subnational monopolies. Another delegation favours a definition limited to monopolies
designated by national governments and suggests the deletion of the reference to "subnational" authorities"
76. There is agreement that the definition of monopolies should explicitly exclude exclusive rights derived from
intellectual property rights. Intellectual Property experts would also like to add at the end of the second
sentence the following bracketed text. Such an addition would read "[nor does it include an entity charged
with the collective management of intellectual property rights]". This phrase would exclude royalty
collection agencies (which usually have a legal monopoly). See also the Article on Intellectual Property,
Section III, below
Some delegations reserve their position pending the outcome, inter alia, of the discussion on the
relationship between monopolies and concessions, authorisations, etc
77. There is a broad consensus that, in conformity with item (vii) of the MAI definition of "investment", any
rights conferred pursuant to law or contract such as concessions, licenses, authorisations, and permits are to
be covered fully by the obligations of the MAI. One delegation underlines, however, that because the
proposed definition of "monopoly" in paragraph 3 is so inadvertently broad, it encompasses these rights
and, as a result, these rights are, in practice, "carved out" from the MAI obligations. The addition of the
bracketed text could be one way to address this problem. Most delegations believe it would carve out too
much of the definition of monopolies
One delegation made additional remarks on the matter. Monopolies and concessions are two different legal
entities and have two opposite economic effects, namely, in the first case, to subtract an economic activity
from competition and in the second case, to organise competition with respect to a particular economic
activity. These differences call for a different treatment of MAI obligations with respect to the designation
of monopolies ("a best endeavour obligation"), for instance to provide a public good or service, and the
granting of concessions (full National Treatment/MFN obligations)
36 4. "Relevant market" means the geographic and product market for a good or service in the territory of the Contracting Party
78
5. "Non-discriminatory treatment" means the better of national treatment and most favoured nation treatment, as set out in the relevant provisions of this Agreement
79
[6. "State enterprises" means, [subject to Annex ...., ] an enterprise owned, or controlled through ownership interest, by a Contracting Party.] 80
This does not prevent the MAI, however, from imposing a non-discriminatory obligation on the behaviour
of persons or entities which have been conferred "monopoly rights". This could be done, for instance, by
making it clear in an additional provision that "any person or entity which acquires monopoly rights as a
result of the implementation of such law or contract must fulfil the obligations of paragraph 3 of the
Monopoly article in the exercise of such rights"
A lot of interest was expressed in this proposal. Delegations agreed to give it further consideration
See also the discussion below on Intellectual Property
78. Some delegations propose the inclusion of the word "commercial" before "goods and services" to clarify, in
particular, that the "relevant markets" for monopolies would not include government services such as the
delivery of passports or driving licenses. A majority of delegations also recognises that the inclusion of the
terms "in the territory of the Contracting Party" at the end of the paragraph presents the advantage of giving
greater precision to the concept of "relevant market", also used in paragraphs 3(a) and 3(b) of article A on
monopolies. The inclusion of these terms would also do away with the need for making a similar reference
in paragraph 3 on the definition of "Monopoly"
One delegation is of the view that the proposed definition needs to be improved for greater precision and
clarity. Another delegation draws the attention to the fact that the concept of "relevant market" has been
discussed in the OECD Competition Policy Committee and that the result of this work should be taken into
account
One delegation proposes the insertion at the end of the definition of the words "that includes all its close
substitutes". This would narrow the coverage of "relevant market". It argues that this definition will be
useful to narrow down the definition of monopoly and will exclude from it those firms that although have
been granted exclusive rights compete in the market against other firms producing close substitutes. Other
delegations point out that the notion of close substitutes is normally included in national competition
policies and consider the addition by this delegation unnecessary. However this delegation considers that
the extended definition of "relevant market" should be included in the MAI for the sake of clarity
79. Several delegations question the need for this definition
80. A number of delegations question the need for a definition of state enterprises
37 [D. Article on Concessions
81, 82
Transparency
1. All concessions are granted subject to a tender procedure designed to guarantee competition between competing offers
2. The tender procedure must be published as follows: (a) a notice must be inserted in a journal of official notices and in a publication related to the sector concerned; (b) this notice must describe the purpose of the contract, the tender conditions and the tender deadline; (c) publication must be made in due time, and no less than 30 days before the tender deadline, so as to enable tenderers to submit an offer and to accomplish the formalities required by qualifying evaluations
3. The reasons for the rejection of an offer in the tender procedure will be made known to the tenderer upon request
4. This article applies to the delegations concerning an amount equal or superior to XX (amount to be decided)
81. New proposal by one delegation. It is recognised that there is a link between the issue of concessions and
monopolies [paragraph 2 of the article on monopolies (see Section A)]. Those delegations favouring the
inclusion of provisions on concessions into the MAI are ready to drop their opposition to the inclusion of
"best endeavour" in paragraph 2 if the suggested provision on concessions is included in the MAI
One delegation is opposed to this proposal. Several delegations continue to question the need for this article
Some delegations note that the introduction of such an article would require a definition on concessions, the
elaboration of which could be rather difficult given the different coverage of this concept in national
legislations. Some see some parallelism with the Transparency article envisaged for Privatisation (section
V) and are prepared to discuss the proposal under this light. Some delegations feel that further work is
required to clarify the issues
82. One delegation provided a background note on natural resources and concessions in the context of the MAI
38 Definition
1. A concession is any delegation, direct or indirect, which entails a transferring of operation of activities, carried out by a government authority, national or subnational, or any public or para-public authority, to a distinct and independent legal entity
2. The delegation shall be realised either by any laws, regulations, administrative rulings or established policies, or by any private or public contract. The aim of the delegation is to entrust to a distinct and independent legal body with the operation of public services, including the operation of networks or infrastructures, or the exploitation of natural resources 83
and if needed with the construction of all or part of networks or infrastructures
3. [If necessary: The legal act of delegation includes the modes of payment to the investor. These modes of payment can consist of any price paid by consumers, any royalty, tax licence, subsidy or contribution from the delegatory authority, or any combination of the modes.] 83. One delegation proposes the deletion of the reference to natural resources
39 [GRANTING OF AUTHORISATIONS FOR THE PROSPECTION, EXPLOITATION AND PRODUCTION OF MINERALS, INCLUDING HYDROCARBONS 84, 85
"(1) For the purpose of the present Article, "authorisation" means any law, regulation, administrative or contractual provision or instrument issued thereunder by which the competent authorities of a Contracting Party entitle any investor or a group of investors to exercise, on its own behalf and on its own risk, the exclusive right to prospect or explore for or produce minerals, including hydrocarbons, in a geographical area
84 Proposal by one delegation. This delegation also proposes to add to paragraph (vii) of the current definition
of "investment" in the MAI, the following language with respect to mineral resources, including
hydrocarbons resources:
"-- Rights conferred pursuant to law or contract regarding property ownership over mineral resources,
including hydrocarbon resources;
-- rights conferred pursuant to any law, regulation, administrative or contractual provision or instrument
issued thereunder by which the competent authorities of a Contracting Party entitle an investor or a group of
investors to exercise, on its own behalf and at its own risk, the exclusive right to prospect for or explore for
or produce minerals, including hydrocarbons, in a geographical area."
85. There is general agreement that the MAI obligations (NT, MFN, Performance Requirements...) should
apply fully to the granting of authorisations for the prospection, exploitation and production of minerals,
including hydrocarbons . This is also valid for any rights granted in connection with the prospection,
exploitation and production of any other natural resources. Views differ, however, as to whether additional
language, along the lines that proposed by one delegation or another formulation, need to be incorporated
into the MAI to confirm this understanding
Some delegations are prepared to work on the basis of the text of one delegation provided some
amendments are made to it. One delegation suggests replacing the word " authorisation" by the word
"concessions" which would correspond more accurately to its legal situation as well to that of other
countries. Some delegations consider that the words "To the extent that the measures are consistent with the
Agreement" would convey greater certainty as to the consistency of the proposed article with other MAI
provisions that the words "Consistent with the present Agreement," appearing at the beginning of
paragraph 2. Some delegations wonder if the reference to state participation in sup-paragraph 2(c) is all that
necessary; some other delegations consider, that other conditions or requirements may need to be
mentioned. Several delegations are of the view that paragraph 3 could create confusion as the applicability
of the National Treatment/MFN obligations and support its deletion. In their view, the operative part of the
article should be limited to the paragraph 2. Other delegations see value in referring specifically to the these
obligations in the paragraph to avoid potential problems of interpretation of the MAI obligations to the
granting of authorisations, concessions, etc. in the future. One delegation suggests the addition of the words
" when granting the authorisation s" at the end of paragraph 3
Drawing on the approach elaborated under the draft privatisation article, some propose a two -pronged
alternative solution which would a) recognise the sovereign rights of the State over the country’s natural
resources while b) confirming the full applicability of the MAI obligations at the time of the granting to
MAI investors and their investments of any specific right under a concession, license, authorisation or
permit concerning the prospection, exploitation or production of all natural resources, including
hydrocarbons or minerals
40 (2) Consistent with the present Agreement, the Contracting Parties may establish: (a) procedures to be followed for the granting of authorisations according to which all interested investors may submit applications pursuant to this article; (b) criteria on the basis of which authorisations are granted; (c) conditions and requirements, including requirement of state participation, concerning the exercise or termination of the activities of prospecting, exploring for and producing minerals, including hydrocarbons, whether contained in the authorisation or to be accepted prior to the grant of the authorisation
(3) The Contracting Parties shall apply such procedures, criteria, conditions and requirements as referred to in paragraph (2) above in a transparent and objective manner and in a way which ensures that there is no discrimination on grounds of nationality between investors as regards access to and exercise of the activities of prospecting, exploring for and producing minerals, including hydrocarbons. ] 41 ENTITIES WITH DELEGATED GOVERNMENTAL AUTHORITY 86
Each Contracting Party shall ensure that any entity to which it has delegated a regulatory, administrative or other governmental authority acts in a manner that is not inconsistent with the Contracting Party’s obligations under this Agreement wherever such entity exercises that delegated authority
86. This article covers all entities, including monopolies and state enterprises, with respect to the exercise of
any delegated regulatory, administrative or other governmental authority. This provision renders the need
for a provision on this subject under the Monopolies article unnecessary. One delegation can only consider
this provision if its concern relating to the chapeau of the Monopoly Article (see footnote subparagraph c,
alternative 1) could be adequately covered and, secondly, points out that the Vienna Convention of the Law
of Treaties may, in its view, make this provision redundant
Several delegations consider it essential that the proposed anti-circumvention clause apply to monopolies
designated by subnational authorities. It is recognised, however, that this matter is linked to the treatment
of subnational entities generally under the MAI
42 INVESTMENT INCENTIVES
Alternative 1 Several delegations believe that no additional text is necessary. They consider that the current draft articles in the MAI are sufficient to cover investment incentives at this time
Alternative 2 Many delegations, however, would favour specific provisions on incentives in the MAI although they hold different views as to their nature and scope. Some proposed a built-in agenda for future work
Discussion of possible provisions focused on the following draft article which is regarded as a compromise text by those who would still prefer more far-reaching disciplines
43 Article
87
1. The Contracting Parties confirm that Article XX (on NT and MFN) and Article XX (Transparency) applies to [the granting of] 88
investment incentives
89
2. [The Contracting Parties acknowledge that[, in certain circumstances,] even if applied on a non-discriminatory basis, investment incentives may have distorting effects on the flow of capital and investment decisions
90
[Any Contracting Party which considers that its investors or their investments are adversely affected by an investment incentive adopted by another Contracting Party and having a distorting effect, may request consultations with that Contracting Party.] [The former Contracting Party may also bring the incentive before the Parties Group for its consideration.]] 91, 92
87. With respect to the treatment of tax incentives see separate Article on Taxation in this Consolidated Text
88. Some delegations favour the deletion of "the granting of"
89. While it is agreed that investment incentives should be subject to NT and MFN obligations, there are
different views on the desirability of making this explicit. Consequently, some delegations consider this
paragraph to be unnecessary. One delegation maintains a pre-scrutiny reservation on the text of this draft
article. The dispute settlement mechanism would, in particular, apply to this article. One delegation raises
the possibility of taking reservations with regard to NT
90. Several delegations point out that not all investment incentives are bad -- the problem arises in drawing a
line between good and bad incentives. It is suggested that the distorting effects of investment incentives on
investment decisions and capital flows should be balanced against their possible benefits in achieving
legitimate social objectives. Other delegations note that these concerns were addressed in paragraph 3 of the
draft article
91. Some Delegations remain unconvinced by the need for special consultation procedures for non-discriminatory
investment incentives as defined in paragraph 2, although final judgement would need to
await the decisions taken on the coverage of the MAI. The presumption is that, as with other agreements,
consultations would be the first procedural step of the dispute settlement mechanism of the MAI. It should
be possible to revisit the adequacy of the provisions on dispute settlement and the role of the Parties Group
when their configuration is better known. One delegation questions whether the dispute settlement
mechanism of the MAI could apply to investment distorting investment incentives or to investment
incentives granted illegally. These questions would also deserve further attention. Some delegations
question the role of the Parties Group in any consultation process
92. One delegation suggests the first sentence of paragraph 3 could be added to paragraph 4, and the rest of
paragraph 3 deleted
44 3
93
[In order to further avoid and minimise such distorting effects and to avoid undue competition between Contracting Parties in order to attract or retain investments, the Contracting Parties [shall] enter into negotiations with a view to establishing additional MAI disciplines [within three years] after the signature of this Agreement
94
These negotiations shall recognise the role of investment incentives with regard to the aims of policies, such as regional, structural, social, environmental or R&D policies of the Contracting Parties, and other work of a similar nature undertaken in other fora. These negotiations shall, in particular, address the issues of positive discrimination, 95
[transparency 96
], standstill and rollback 97
.] 4. [For the purpose of this Article, an "investment incentive" means: The grant of a specific advantage arising from public expenditure [a financial contribution] in connection with the establishment, acquisition, expansion, management, operation or conduct of an investment of a Contracting Party or a non-Contracting Party in its territory]
93. The form and placement of this text would have to be decided
94. Some delegations feel that the MAI should include additional disciplines on investment incentives from the
time it enters into force. Another delegation cautions that additional disciplines could have far-reaching
implications for other multilateral agreements as well as for national tax laws and regulatory regimes
95. Some delegations express the view that positive discrimination should be prohibited and this should be
placed in the text
96. One delegation considers the transparency Article of the MAI would already be sufficient
97. Some delegations consider it very difficult to recommend future negotiations without agreement on their
nature and scope
45 RECOGNITION ARRANGEMENTS 98
1. A Contracting Party may recognise prudential measures in financial services of another country, or standards or criteria for the authorisation, licensing or certification of investors of another country and their investments. On the basis of such recognition, a Contracting Party may accord to investors of another country and their investments more favourable treatment than it accords to investors of any other country and its investments. Such recognition, which may be achieved through harmonisation or otherwise, may be based on an agreement or arrangement with any other Contracting Party or non-Contracting Party concerned or may be accorded autonomously
2. A Contracting Party that is a party to an agreement or arrangement referred to in paragraph 1, whether future or existing, shall afford adequate opportunity for other interested Contracting Parties to negotiate their accession to such agreements or arrangements, or to negotiate comparable ones with it, under circumstances in which there would be equivalent regulation, oversight and implementation of such regulation, and, if appropriate, procedures concerning the sharing of information between parties to the agreement or arrangement. Where a Contracting Party accords recognition autonomously, it shall afford adequate opportunity for any other Contracting Party to demonstrate that these circumstances exist
3. A Contracting Party shall not accord recognition in a manner which would constitute a means of avoiding the Contracting Party’s commitments or obligations under the Agreement
AUTHORISATION PROCEDURES 99
1. Each Contracting Party’s regulatory authorities shall make available to interested persons their requirements for completing applications relating to an investment
2. On the request of an applicant, the regulatory authority shall inform the applicant of the status of its application. If such authority requires additional information from the applicant, it shall notify the applicant without undue delay
3. A regulatory authority shall make an administrative decision on a completed application of an investor or an investment of an investor of another Contracting Party within a reasonable period of time, and shall promptly notify the applicant of the decision. An application shall not be considered complete until [all relevant hearings are held and] all necessary information is received
98. DG3 is divided as to the desirability of a generalised text on recognition arrangements and has referred it to
the Negotiating Group for decision
99. DG3 is not convinced of the value of a generalisation of the financial services text concerning authorisation
procedures
46 INTELLECTUAL PROPERTY Intellectual property issues are being examined by intellectual property experts. The results of these discussions are contained in reports DAFFE/MAI(97)32, DAFFE/MAI/IP(97)2. The most recent status of discussions [DAFFE/MAI/IP(98)1] is reproduced here
Transfers
100
Agreed: text on collective management charges should be added to the first sentence in paragraph 2 of the Commentary on Transfers (DAFFE/MAI(97)1/REV2, p. 125) after "purposes": ", or any authorised deduction by an entity charged with collective management of intellectual property rights. " Not agreed: whether the modified paragraph should remain in the Commentary or be placed in the text of the Agreement
Monopolies
101
Agreed: the definition of "monopoly" should be amended to refine the definition’s treatment of intellectual property rights: "Monopoly" means any person or entity designated by a [national [or subnational] government authority] [Contracting Party] as the sole supplier or buyer of a good or service in a relevant market in the territory of a Contracting Party, but does not include a person or entity that has an exclusive intellectual property right, concession, licence authorisation or permit solely by reason of such right or exercise of such right [nor does it include an entity charged with the collective management of intellectual property rights]
Not agreed: as indicated by the final bracketed phrase, whether entities charged with collective management of IPRs should also be excluded from the definition
Performance Requirements
102
Agreed: paragraph 1(f) in the Article on Performance Requirements requires explicit reference to the transfer of IPRs. Not agreed: (a) whether the current wording of paragraph 1(f) adequately covers future IPRs and moral rights; and (b) whether paragraphs 1(b) and (c) of the Article on Performance Requirements have an impact on IPRs
100. See Section IV, below
101. See Section III, above
102. See Section III, above
47 Expropriation
103
Agreed: text is needed to ensure that certain IP management and legal provisions do not constitute expropriation
Not agreed: flowing from proposed text: "The creation, limitation, revocation, annulment, statutory licensing, compulsory licensing and compulsory collective management of IPRs, the withholding of authorised deductions by an entity charged with the collective management of IPRs, and the sharing of remuneration between different holders of IPRs are not expropriation within the terms of this agreement, to the extent that they are not inconsistent with specialised IPR conventions." (a) whether there should be a specific IP text or reliance on a general text clarifying that expropriation does not include normal government regulatory activity; (b) whether and how the statement should be qualified; (c) whether that list of actions should be exhaustive or illustrative; (d) whether the current wording adequately covers future rights; (e) whether the question of consistency with IPR agreements should be worded positively; (f) whether a specific IP text should be in the text of the Agreement, in an interpretative footnote or in the Commentary; and (g) whether the word "creation" adequately covers the intended concept
National Treatment and MFN Treatment
104
and General Treatment
105
Agreed: MAI obligations should not extend NT/MFN obligations in existing IP agreements
Not agreed: (a) whether there should be a NT/MFN exception through a link to existing IP agreements; (b) whether there should be a NT/MFN exception to MAI obligations for IPRs; (c) whether the eventual solution should also be applied to the General Treatment articles; and (d) the applicability of the MAI obligations with respect to future IPRs
103. See Section IV, below
104. See Section III, above
105. See Section IV, below
48 Definitions of "Investment" and "Investor" 106
Agreed: there needs to be clarification of the definition of "investment". The required clarification is tied to the resolution of the eventual substantial MAI obligations for IPRs
Not agreed: (a) whether the definition of "investment" should be limited to those IPRs included in the TRIPS Agreement; (b) whether it should exclude copyrights and related rights; (c) whether it should include future IPRs; (d) whether it should include only the "economic aspects" of IPRs; (e) whether it should include only those rights provided domestically; and (f) what implications the definition of "investor" has for an IP "rightsholder"
Dispute Settlement
107
Agreed: IP experts wish to limit forum shopping and conflicting jurisprudence with the WTO
Not agreed: (a) how to achieve these goals; (b) the desirability of applying investor-state dispute settlement to IPRs; and (c) whether the existing MFN obligations in the TRIPS Agreement create the risk of "free-riders"
Information Transfers and Data Processing
108
Agreed: there are concerns that the text of the generalisation of financial services (see Information Transfer and Data Processing, page 57) has implications for IPRs, and may have to be amended or deleted to take these concerns into account
Exhaustion of Rights
Not agreed: whether there needs to be any language on this issue to ensure that the MAI does not create new obligations in this area
106. See Section II, above
107. See Section V, below
108. See Section IV, below
49 PUBLIC DEBT
109
"The [rescheduling] of the debts of a Contracting Party or its appropriate institutions [owed to another Contracting Party or its appropriate institutions and the related [rescheduling] of its debts owed to [private] creditors will not be subject to [the provisions of this Agreement]." 110
CORPORATE PRACTICES
111
TECHNOLOGY R&D
112
109. The majority of delegations remained of the view that public debt should be covered by the MAI
disciplines. However, there was general agreement that public debt rescheduling should fall outside the
MAI disciplines
110. One delegation proposed alternative language to this text, which reads as follows:
"Reorganisation of debts due by a Contracting Party to another Contracting Party or its
appropriate institutions, including the related obligations of comparability of treatment between
all creditors, whether public or private, shall prevail over the terms of this Agreement."
Under a third proposal, one delegation suggested that " there might be an alternative approach to the current
text’s sweeping exclusion of rescheduled public debt. This approach would add an interpretative note to the
definition of "investment" that would make clear that:
-- consistent with international law and practice, particularly as related to treaties with
provisions on investment, MAI obligations (e.g., on expropriation, transfers, treatment)
do not apply to a government’s failure to pay on government debt or government-guaranteed
debt;
-- breach of a debt agreement does not in itself constitute a breach of any of the provisions
of the MAI (e.g., expropriation, transfers, treatment); and
-- public debt does not include government obligations to pay for goods and services
purchased from an investor
The interpretative note would provide guidance for tribunals in both state-to-state and investor-to-state
arbitration. The interpretative note would be accompanied by an express exclusion of public debt and
government-guaranteed debt from the "investment agreement" provision of investor-to-state dispute
settlement. "
111. The Chairman concluded that there is full agreement that government-imposed discriminatory practices
would be covered by the MAI. In view of the views expressed by a clear majority of delegations, the MAI
should not contain disciplines on non-government imposed discriminatory corporate practices. However,
Contracting Parties to the MAI should follow future developments in this area and could take up the matter
again if the need arises
112. See Commentary
50 NOT LOWERING STANDARDS
113
[Alternative 1
The Parties recognise that it is inappropriate to encourage investment by lowering [domestic] health, safety or environmental [standards] [measures] 114
or relaxing [domestic] [core] 115
labour standards
116
Accordingly, a Party should not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such [standards] [measures] as an encouragement for the establishment, acquisition, expansion or retention in its territory of an investment of an investor. If a Party considers that another Party has offered such an encouragement, it may request consultations with the other Party and the two Parties shall consult with a view to avoiding any such encouragement
Alternative 2
A Contracting Party [shall] [should] 117
not waive or otherwise derogate from, or offer to waive or otherwise derogate from [domestic] health, safety or environmental [measures] [standards] or [domestic] [core] labour standards as an encouragement for the establishment, acquisition, expansion or retention of an investment of an investor.] 113. Three delegations oppose any provision on labour. One delegation thinks the issue of "not lowering
standards" in the environmental area would be more appropriately dealt with in the context of a general
article on investment incentives
114. If "measure" is preferred, then the word "lowering" should be replaced by "relaxing". In either case, the
term selected should be defined. For reference purposes, delegations mentioned the definition of "measure"
in NAFTA or to be found in the Transparency Article of the MAI and the definition of "standard" in
NAFTA and in the WTO Agreement on Technical Barriers to Trade
115. Delegations noted that no universally accepted definitions existed for "core" or "domestic" standards. Most
delegations preferred "domestic" which was recognised to be wider in scope
116. A major difference of view as between Alternative 1 and Alternative 2 concerns the first sentence of
Alternative 1. This sentence is part of a difference of approach as to whether the provision should refer to
respect for universal standards or only to the relaxation of domestic standards. Views differ on whether this
sentence is useful or necessary
117. If "should" were preferred, it might be desirable to add the last sentence of Alternative 1. Those preferring
"should" argued that use of the word "shall" would prevent the authorities offering necessary waivers under
domestic law, for example, to help resolve a specific case of damage to the environment and might prevent
resolution of particular cases through consultations and persuasion. They also expressed concern that
"shall" might expose the authorities to dispute settlement challenge. One delegation expressed concern over
the use of the broader phrase "domestic labour" standards with recourse to dispute settlement in that it
could create disputes under the MAI over changes in programmes relating to minimum wages or retirement
qualifications; this delegation questioned if this was what was intended by this provision. Those preferring
"shall" argued that the purpose of this Article is to prohibit a waiver or derogation only if used as an
encouragement to an investment
51 PROPOSED "ADDITIONAL CLAUSE" ON LABOUR AND ENVIRONMENT
118
118. One delegation proposes to delete paragraph 4 of the existing text on performance requirements and add a
general exception article:
Subject to the requirement that such measures are not applied in a manner which would constitute a
means of arbitrary or unjustifiable discrimination or a disguised restriction on investment, nothing in
this agreement shall be construed to prevent the adoption, maintaining or enforcement by any
Contracting party of measures:
(a) necessary to protect human, animal or plant life or health
(b) relating to the conservation of living or non-living exhaustible natural resources
One delegation proposed as a general article the text of NAFTA Article 1114(1) with a second paragraph to
address investment outflows:
Nothing in this agreement shall be construed to prevent a Contracting Party from adopting, maintaining
or enforcing any measure otherwise consistent with this Agreement that it considers appropriate to
ensure that investment activity in its territory is undertaken in a manner sensitive to environmental
concerns
Likewise, no Contracting party shall adopt, maintain or enforce any environmental measure in a manner
which would constitute a disguised restriction for investment outflows from that Contracting Party to
another Contracting party, or for investment among Contracting parties
The "Package of Additional Environmental Proposals" presented to the Negotiating Group on 14 January
also proposes the language of NAFTA Article 1114(1)
52 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
1. One delegation 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."
53 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 Party 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 Party 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
2. DG3 identified four options for calculating compensation which are set out in the commentary. The
Negotiating Group Chairman noted 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 part of a Contracting Party, any exchange rate loss arising
from this delay should be borne by the host country
54 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; 3
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 authorisation, or other written agreement between the Contracting Party and an investor or investment of another Contracting Party
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3. As defined in the Article on definitions
4. The 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. One delegation has difficulties with the obligations referred to in the second sentence
55 4.6
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Notwithstanding paragraphs 1 to 5 of this Article, a Contracting Party may delay or prevent a transfer through the equitable, non-discriminatory and good faith application of measures: (a) to protect the rights of creditors, (b) relating to or ensuring compliance with laws and regulations (i) on the issuing, trading and dealing in securities, futures and derivatives, (ii) concerning reports or records of transfers, or (c) 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
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6. This version of paragraph 4.6 was refined by DG3 taking account of earlier proposals by financial experts
7. Some DG3 delegations consider that if the footer were to be deleted and included in a MAI general anti-abuse
clause, the need to re-introduce a more specific footer, such as the one proposed by one delegation,
"provided that such measures and their application shall not unreasonably impair the free and undelayed
transfer ensured by this Agreement", may have to be considered
56 5. INFORMATION TRANSFER AND DATA PROCESSING
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1. No Contracting Party shall take measures that prevent transfers of information or the processing of information outside the territory of a Contracting Party, including transfers of data by electronic means, where such transfer of information or processing of information is: a) necessary for the conduct of the ordinary business of an enterprise located in a Contracting Party that is the investment of an investor of another Contracting Party; or b) in connection with the purchase or sale by an enterprise located in a Contracting Party that is the investment of an investor of another Contracting Party of: i) data processing services; or ii) information, including information provided to or by third parties
2. Nothing in paragraph 1: a) affects the enterprise’s obligation to comply with any record keeping and reporting requirements; or b) restricts the right of a Contracting Party to protect privacy, including the protection of personal data, intellectual and industrial property, and the confidentiality of individual records and accounts, so long as such right is not used to circumvent the provisions of the Agreement
6. SUBROGATION
If a Contracting Party or its designated agency makes a payment under an indemnity, guarantee or contract of insurance 9
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
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8. DG3 recommends adoption of this generalised text after taking account of the text earlier by financial
experts
9. Two delegations cannot agree to deletion of the words "non-commercial risks" at this stage
10. One delegation has difficulties with the obligations in this paragraph
57 7. 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.] 58 V. DISPUTE SETTLEMENT
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STATE-STATE PROCEDURES
A. GENERAL PROVISIONS 1. The rules and procedures set out in Articles A-C shall apply to the avoidance of conflicts and the resolution of disputes between Contracting Parties regarding the interpretation or application of the Agreement unless the disputing parties agree to apply other rules or procedures. However, the disputing parties may not depart from any obligation regarding notification of the Parties Group and the right of Parties to present views, under Article B, paragraphs 1.a and 4.c, and Article C, paragraphs 1.a, 4, and 6.e
2. Contracting Parties and other participants in proceedings shall protect any confidential or proprietary information which may be revealed in the course of proceedings under Articles B and C and which is designated as such by the Party providing the information. Contracting Parties and other participants in the proceedings may not reveal such information without written authorisation from the Party which provided it
3. [EC or Contracting Party REIO text being developed for possible inclusion] B. CONSULTATION, CONCILIATION AND MEDIATION 1. Consultations
a. One or more Contracting Parties may request any other Contracting Party to enter into consultations regarding any dispute between them about the interpretation or application of the Agreement. The request shall be submitted in writing and shall provide sufficient information to understand the basis for the request, including identification of any actions at issue. The requested Party shall enter into consultations within thirty days of receipt of the request. The requesting Contracting Party shall provide the Parties Group with a cop