· Area of Law： Taiwan Affairs

· Level of Authority： Group Provisions

· Date issued：08-09-2012

· Effective Date：08-09-2012

· Status： Effective

· Issuing Authority： Association for Relations Across the Taiwan Straits Straits Exchange Foundation

Cross-strait Investment Protection and Promotion Agreement
(Jointly issued by the Association for Relations Across the Taiwan Straits and the Straits Exchange Foundation on August 9, 2012)
To protect the rights and interests of investors across the straits, promote mutual investment, create a fair investment environment and enhance cross-strait economic prosperity, in accordance with the provisions of Article 5 of the Cross-strait Economic Cooperation Framework Agreement (hereinafter referred to as the “ECFA”), the Association for Relations Across the Taiwan Straits (“ARATS”) and the Straits Exchange Foundation (“SEF”) reached an agreement as follows upon equal negotiations:
Article 1 Definitions
For the purpose of this Agreement,
1. The term “investment” means various assets with investment characteristics that an investor of one side invests in the other side in accordance with the provisions of the other side, including but not limited to:
(1) movables, immovables and other property rights;
(2) shares or capital contributions and other forms of shares of an enterprise;
(3) claims to money or other claims of performance with an economic value;
(4) intellectual property rights, corporate names, trade names and goodwill;
(5) turn-key, engineering construction, management, production, income distribution, and other similar contractual rights;
(6) franchise rights, including franchise rights of cultivation and farming, as well as franchise rights of exploration, mining, refining or development of natural resources;
(7) a variety of secured bonds, debentures, loans and other forms of debts.
The term “investment characteristics” means the investment of capital or other resources and the expectation of proceeds or profits and assumption of risks. Where the assets as investment undergo any formal change which complies with the relevant provisions of the locality of investment, such change shall not affect their characteristics as investment.
II. The term “investor” means a natural person or enterprise of one side that makes investment in the other side:
(1) a natural person of one side means a natural person holding an identity certificate issued by one side;
(2) an enterprise of one side means an entity formed in one side according to the provisions of the side, including a company, trust, trading company, partnership or any other organization; and
(3) any entity which is formed according to the relevant provisions of a third party, but is owned or controlled by an investor as prescribed in (2) or (3) of this paragraph is also an enterprise of one side.
III. The term “proceeds” means the income arising from investments, including profits, dividends, interest, capital gains, commissions and other legitimate income.
IV. The term “measures” means any provisions, policies or other administrative acts that affect investors or their investments.
V. The term “cross-strait investment dispute settlement bodies” means arbitration bodies, mediation centers and other mediation bodies confirmed and notified in writing by both sides after this Agreement becomes effective.
Article 2 Application scope and exceptions
I. This Agreement shall apply to the measures taken or maintained by one side on the investors of the other side and their investments.
II. This Agreement shall be applicable to the investments that the investors of one side make in the other side before or after this Agreement becomes effective, but shall not be applicable to the “investment disputes” as mentioned in paragraph 1 of Article 13 of this Agreement which have been settled before this Agreement becomes effective.
III. This Agreement shall be applicable to the measures taken or maintained by the competent authorities at all levels of any side and the bodies authorized by such authorities to exercise administrative functions and powers.
IV. Any side may take, maintain or implement any measures it deems necessary to ensure its major security interests.
V. Any side may, based on the principle of non-arbitary and non-unjustifiable discrimination, and without constituting a disguised restriction on trade or investment, take or maintain measures of restriction on investment under any of the following circumstances:
(1) necessary measures taken to comply with the provisions which are not inconsistent with this Agreement;
(2) necessary measures taken to protect the life or health of human beings, animals or plants; or
(3) necessary measures taken to protect exhaustible natural resources.
VI. Any side may, based on prudential reasons, take or maintain measures related to financial services, including but not limited to:
(1) measures taken to protect investors, depositors and policyholders or persons to whom financial service providers bear the duty of loyalty; and
(2) measures taken to ensure the operation and stability of financial systems.
VII. This Agreement shall not be applicable to:
(1) public procurement; and
(2) subsidies or allowances provided by one side.
VIII. Except for the following circumstances, this Agreement shall not be applicable to the tax measures of any side:
(1) If an investor of one side claims to the competent tax authority of the other side in writing that the tax measures of the other side involve the provisions of Article 7 of this Agreement, the competent tax authorities of both sides shall, within six months, jointly decide whether the measures constitute expropriation. If the tax measures constitute expropriation, this Agreement shall be applicable to such measures.
(2) If the competent tax authorities of both sides fail to unanimously determine that the tax measures do not constitute expropriation within six months, the investor of one side may seek resolution in accordance with the provisions of Article 13 of this Agreement and the Annex thereto.
Article 3 Investment treatment
I. One side shall ensure that it offers just and fair treatment to the investors of the other side and their investments, and provide full protection and security:
(1) The term “just and fair treatment” means that the measures taken by one side shall be in compliance with the principle of due process, and one side shall neither refuse just and fair trials requested by the investors of the other side, nor implement evident discriminatory or arbitrary measures.
(2) The term “full protection and security” means that one side shall take reasonable and necessary measures to protect the safety of the investors of the other side and their investments.
The violation of other clauses of this Agreement by one side does not constitute a violation of this paragraph.
II. Both sides shall strengthen personal freedom and security guarantee of investors and relevant personnel in investment, fulfill the notification obligations relevant to personal freedom according to the time limits respectively prescribed by them, and improve the existing notification mechanisms.
III. The treatment offered by one side to the investors of the other side in terms of operation, management, maintenance, enjoyment, use, sale or other disposals with respect to their investments shall not be lower than the treatment offered to the investors of this side itself and their investments under similar circumstances.
IV. The treatment offered by one side to the investors of the other side in terms of establishment, expansion, operation, management, maintenance, enjoyment, use, sale or other disposals with respect to their investments shall not be lower than the treatment offered to the investors of any third party and their investments under similar circumstances.
V. Paragraphs 3 and 4 of this Article shall not be applicable to the existing non-conforming measures of one side and their modifications, but this side shall gradually reduce or eliminate such non-conforming measures, and any modifications or changes to these non-conforming measures shall not increase the restrictions on investors of the other side and their investments.
VI. No investor of the other side may invoke the provisions of paragraph 4 of this Article to ask for the application of dispute settlement procedures beyond this Agreement.
Article 4 Transparency
I. One side shall, in accordance with its provisions, publish in a timely manner or use other means to make the public aware of the relevant investment provisions, measures, procedures and so on which are generally applicable or specially provided for the other side.
II. Upon the request of the other side, one side shall, in accordance with its provisions, provide information on the changes to the provisions, measures or procedures which have been published and affect the investors of the other side.
Article 5 Gradually reducing investment restrictions
I. Both sides agree to accept and protect mutual investments based on the principle of mutual benefit and reciprocity.
II. Both sides agree to gradually reduce or eliminate restrictions on mutual investments, so as to create a fair investment environment and make efforts to promote mutual investments.
Article 6 Investment facilitation
I. Both sides agree to gradually simplify the investment application documents and review procedures.
II. Both sides agree to provide investment facilitation to each other, including:
(1) One side shall provide facilitation for the investors of the other side to obtain investment information and relevant business operating licenses, and for personnel entry and exit, operation management and so on of the investors of the other side; and
(2) One side shall provide facilitation for the other side and its investors to hold explanation meetings and seminars and carry out other activities conducive to investment.
Article 7 Expropriation
I. Except that all the following conditions are met, one side shall not expropriate (including directly expropriate and indirectly expropriate) the investment or proceeds made by the investors of the other side in or from it:
(1) being based on public interest;
(2) complying with the provisions of one side and due process;
(3) being non-discriminatory and non-arbitrary; and
(4) making compensation in accordance with paragraph 4 of this Article.
II. The term “indirect expropriation” means measures of which the effects are equivalent to direct expropriation. To determine whether one or a series of measures constitute indirect expropriation, a case-by-case assessment shall be conducted based on the facts and the following factors shall be considered:
(1) economic impacts of the measures on investment, but it is insufficient to infer constitution of indirect expropriation if the measures only have negative impacts on the economic value of the investment;
(2) the extent of discrimination of the measures on the investors of the other side and their investments in terms of scope or application;
(3) the extent of intervention of the measures on the obvious and reasonable investment expectations of the investors of the other side; and
(4) whether the measures are taken in good faith and for the purpose of public interest and whether the measures and the purposes are in compliance with the principle of proportionality.
III. The non-discriminatory regulatory measures taken by both sides to protect public health and safety, the environment and other legitimate public welfare do not constitute indirect expropriation.
IV. The term “compensation” as mentioned in paragraph 1 of this Article shall be based on the fair market value of the expropriated investment or proceeds at the time of expropriation or at the time when the public is aware of the expropriation (whichever is earlier), plus the interest calculated at a reasonable commercial rate from the date of expropriation to the date of payment of compensation. The compensation shall be paid without delay and be effectively realizable, convertible and freely transferable.
VIII. Loss compensation
Where the investments or proceeds made by the investors of one side in or from the other side suffer losses due to any armed conflict, state of emergency or any other similar event that occurred in the other side, the treatment offered by the other side such as restitution, compensation or any other solution shall not be lower than the optimal treatment offered to the investors of the other side or investors of any third-party under similar conditions.
Article 9 Subrogation
I. After a body designated by one side makes payment to an investor of one side according to the non-commercial risk security, guarantee or insurance contract with respect to currency exchange, expropriation and so on related to investment, it may subrogate the investor to exercise the investor's rights and claims within the scope identical with that of the investor, and assume the investor's obligations corresponding to the investment.
II. One side shall inform the other side of the body it designates in accordance with paragraph 1 of this Article and the change thereof.
Article 10 Transfer
I. One side shall, in accordance with its relevant provisions, allow the investors of the other side to transfer their investments and proceeds, including but not limited to:
(1) capital for establishing, maintaining and expanding investment;
(2) profits, dividends, interests, capital gains, commissions, and other fees related to intellectual property;
(3) payments related to investment contracts, including relevant payments arising from loan agreements;
(4) the sum of money obtained from the sale or liquidation of all or part of the investment;
(5) the income and remuneration of investors as natural persons which are related to the investment;
(6) the sum of money obtained in accordance with Articles 7 and 8; and
(7) compensation obtained in accordance with paragraph 3 of the Annex to this Agreement.
II. Unless it is otherwise provided for in this Agreement, both sides shall ensure that the transfer as mentioned in paragraph 1 of this Article is conducted in a freely convertible currency or a currency which both sides agree on and which is convertible according to the current provisions and at a market exchange rate of the date of transfer without delay.
III. Based on the principles of fairness, justice and non-discrimination, one side may, under any of the following circumstances, apply the relevant provisions in good faith to prevent or delay the transfer without being restricted by paragraphs 1 and 2 of this Article:
(1) bankruptcy, insolvency or protection of the interests of creditors;
(2) issuance, trading, transaction and disposal of securities, futures, options and other derivatives;
(3) necessary preservation measures in the investigation of a criminal offense or the survey of administrative penalty;
(4) necessary declaration for the transfer of cash or other monetary instruments; or
(5) ensurance of the enforcement of a judicial judgment or a decision on administrative penalty.
IV. In case of occurrence or possible occurrence of serious imbalance in the foreign receipts and payments of any side, such side may, according to the relevant provisions or practices, temporarily restrict transfer, but shall observe the principles of fairness, non-discrimination and good faith when conducting such restrictions.
Article 11 Refusal to grant interests
Where an enterprise of one side which is owned or controlled by a natural person or enterprise of a third party is not engaged in substantive business operations in this side, the other side shall have the right to refuse to grant the enterprise the interests under this Agreement.
Article 12 Settlement of disputes between both sides of this Agreement
The disputes between both sides over the interpretation, implementation and application of this Agreement shall be handled in accordance with the provisions of Article 10 of the ECFA.
Article 13 Settlement of disputes between an investor and the side at the locality of investment
I. A dispute (hereinafter referred to as the “investment dispute”) arising from the situation that an investor of one side claims that he or she has suffered losses due to a breach of the obligations as prescribed in this Agreement by the relevant department or body of the other side may be settled through the following ways:
(1) being settled through friendly negotiations between both disputing parties;
(2) being settled through the reconciliation mechanism of the side at the locality of investment or its superior;
(3) being settled through the investment dispute settlement assistance mechanism as mentioned in Article 15 of this Agreement;
(4) for disputes over investment compensation between investors and the side at the locality of investment arising from this Agreement, the investors may submit the disputes to cross-strait investment dispute settlement bodies for settlement through mediation, and the cross-strait dispute settlement bodies shall inform the disposal of the disputes over investment compensation to the Investment Working Team as prescribed in Article 15 of this Agreement every six months; or
(5) being settled through administrative reconsideration or judicial procedures of the side at the locality of investment.
II. The provisions of the Annex to this Agreement shall be applicable to the settlement of disputes over investment compensation by investors in accordance with paragraph 1 (4) of this Article.
III. After this Agreement becomes effective, both sides shall exchange and publish the list of cross-strait investment dispute settlement bodies as prescribed in paragraph 1 (4) of this Article as soon as possible. Both sides may adjust the list of the bodies upon negotiations.
IV. Where an investor has chosen to settle an investment dispute according to paragraph 1 (5) of this Article, unless the relevant provisions of the side at the locality of investment are met, the investor shall not submit the same dispute to a cross-strait investment dispute settlement body for mediation.
V. The mediation procedures as prescribed in paragraph 1 (4) of this Article shall not be applicable to an “investment dispute” as mentioned in paragraph 1 of this Article which has been under judicial process before this Agreement becomes effective, unless both sides agree upon it and it complies with the relevant provisions of the side at the locality of investment.
Article 14 Commercial disputes over investment
I. Both sides confirm that, when an investor of one side enters into a commercial contract with a natural person, legal person or any other organization of the other side in accordance with the relevant provisions and the principle of party autonomy, they may stipulate ways and means for the settlement of commercial disputes.
II. When an investor of one side enters into a commercial contract with a natural person of the other side, they may conclude an arbitration clause with respect to the commercial disputes arising from the relevant investment. If they fail to conclude the arbitration clause, they may negotiate about submitting the dispute for arbitration after the dispute occurs.
III. When an investor of one side enters into a commercial contract with a legal person or any other organization of the other side, they may conclude an arbitration clause with respect to the commercial disputes arising from the relevant investment. If they fail to conclude the arbitration clause, they may negotiate about submitting the dispute for arbitration after the dispute occurs.
IV. Both parties to a commercial dispute may select any arbitral body across the straits and the place of arbitration that both parties agree on. If no arbitration clause is stipulated in a commercial contract, the parties may, after occurrence of a dispute, negotiate about submitting the dispute to an arbitral body across the straits, and settle the dispute at the place of arbitration where both parties agree on.
V. Both sides confirm that, the parties to a commercial contract may apply for the recognition and enforcement of an arbitral award in accordance with the relevant provisions.
Article 15 Liaison mechanisms
I. Both parties agree that the Investment Working Team of the Cross-strait Economic Cooperation Committee shall be responsible for dealing with the matters related to this Agreement and the contact persons respectively designated by the competent business authorities of both sides shall be responsible for liaison.
II. The Investment Working Team shall set up the following working mechanisms to deal with specific matters related to this Agreement:
(1) investment dispute settlement assistance mechanism: to assist in handling investment disputes between investors and the side at the locality of investment, and inform each other of the handling situation;
(2) investment consulting mechanism: to exchange investment information, conduct investment promotion, promote investment facilitation, and provide consultation of dispute settlement and matters related to this Agreement; and
(3) other working mechanisms related to this Agreement that both sides agree on.
Article 16 Document formats
Business contacts based on this Agreement shall adopt the document formats that both sides agree on.
Article 17 Amendments
The amendments to this Agreement shall be agreed on by both sides through negotiations and be confirmed in writing.
Article 18 Effectiveness
Upon signature of this Agreement, both sides shall complete the relevant procedures respectively and notify each other in writing. This Agreement shall come into force from the next day after both sides receive the notice from the other side.
This Agreement was signed on August 9 in quadruplicate with each side holding two. The Annex to this Agreement constitutes a part of this Agreement. The different terms of the corresponding expression in the four texts have the same meaning, and the four texts shall have equal force.
Association for Relations Across the Taiwan Straits
Chen Yunlin, President
Straits Exchange Foundation
Chiang Pin-kung, Chairman
Annex:
Investment Compensation Dispute Mediation Procedures
I. Mediation principles and procedures
(1) After an investor of one side files a mediation application in accordance with paragraph 1 (4) of Article 13 of this Agreement, the cross-strait investment dispute settlement body shall, based on its rules, accept the application and initiate the mediation procedures. The cross-strait investment dispute settlement body shall settle investment compensation disputes in an objective, impartial, fair and reasonable manner. Both disputing parties shall actively and honestly participate in the mediation without undue delay.
(2) Unless it is otherwise stipulated by both disputing parties, the mediation process shall be in camera.
(3) Except for the matters that both disputing parties agree to open, the cross-strait investment dispute settlement bodies and their staff members and mediators shall keep confidential the cases about investment disputes.
II. Success of mediation
(1) The mediators shall remain neutral and promote the disputing parties to reach a mutual assent.
(2) After both disputing parties reach a mutual assent through mediation, the mediators shall prepare a mediation agreement according to the content of the mutual assent, which shall be affixed with the signatures or seals of both disputing parties and the mediators, and affixed with the seal of the cross-strait investment dispute settlement body.
(3) Both sides shall ensure the establishment and improvement of the rules relevant to the enforcement of mediation agreements. An investor may, in accordance with the relevant provisions of the side at the locality of enforcement, apply for the enforcement of a mediation agreement.
III. Compensation ways
The compensation ways for investment compensation disputes shall be limited to the following types:
(1) pecuniary compensation and appropriate interests;
(2) return of property, or money compensation and corresponding interests thereon instead of return of property; and
(3) other legal compensation ways that both disputing parties agree on.
IV. Extinction of the claim for mediation
Where an investor does not exercise the claim for mediation within three years from the date when it, he or she knows or should know that the other party has breached the obligations under this Agreement, such claim shall be extincted. However, the delay due to any force majeure shall not be included in the aforesaid three-year period.
V. Restrictions on the use of mediation information
Where an investment compensation dispute is still unable to be settled according to the procedures as prescribed in paragraph 1 (4) of Article 13 of this Agreement, unless it is otherwise stipulated by both disputing parties, neither party may invoke any statement, recognition or concession made by the other party or mediators in the aforesaid procedures in the subsequent administrative or judicial process conducted on the same dispute as information or evidence not conducive to the other party.
VI. Notification of mediation rules
The mediation rules of the cross-strait investment dispute settlement bodies shall be notified to the Investment Working Team as prescribed in Article 15 of this Agreement.