INVESTMENT PROTECTION AND
DISPUTE SETTLEMENT IN ASEAN
COMPREHENSIVE INVESTMENT
AGREEMENT (ACIA)
Dr Le Quoc Phuong
Deputy General Director
Vietnam Industry and Trade Information Center
(Ministry of Industry and Trade of Vietnam)
b) ACIA=IGA+AIA
Abbreviations
ACIA
ASEAN
Comprehensive
Agreement
c) New enhanced provisions
Investment
d) ACIA’s pillars
AEC
ASEAN Economic Community
AIA
Framework Agreement
Investment Area
AMS
ASEAN Member State
on
e) ACIA’s benefits
ASEAN
ASEAN Association of South East Asian Nations
2. INVESTMENT PROTECTION AND DISPUTE
SETTLEMENT MECHANISM IN ACIA
1.1 Broad definition of investment and investor
a) Definition of investment
FDI
Foreign direct investment
FTA
Free trade area
IGA
ASEAN
Investment
Guarantee
Agreement (aka ASEAN Agreement for
Promotion
and
Protection
of
Investments)
b) Definition of investor
1.2 Substantive investment protection
1.3 Alternative dispute settlement mechanisms
a) Causes of action
ICSID
International Center for Settlement of
Investment Disputes
b) Forums
ISDS
Investor-state dispute settlement
c) Alternative dispute resolution mechanisms
UNCITRAL
United Nations Commission
International Trade Law
on
Abstract
Contents
1. ACIA: OVERVIEW
1.1 ASEAN main target: ASEAN Community by
2015
a) ASEAN Community
b) ASEAN Economic Community (AEC)
1.2 ACIA as a means to build ASEAN integrated
investment area
a) ACIA’s main objective
ASEAN
Comprehensive
Investment
Agreement (ACIA) was signed by ASEAN Member
States (AMS) on 26 February 2009, to be effective
29 March 2012. The main objective of ACIA was
to
enhance
ASEAN’s
attractiveness
as
an
investment destination, to create ASEAN free,
open and integrated investment area. This, in turn,
helps speed up the establishment of ASEAN
Economic
Community
(AEC)
and
ASEAN
Community by 2015. This paper first reviews the
42
INVESTMENT PROTECTION AND DISPUTE SETTLEMENT IN ASEAN
COMPREHENSIVE INVESTMENT AGREEMENT (ACIA)
evolution of ASEAN investment framework, from
ASEAN Investment Guarantee Agreement (IGA
1987)
to
Framework
Agreement
on
ASEAN
Investment Area (AIA 1998) to ACIA 2009. The
author then focuses on the enhanced provisio ns of
ACIA, in particular those regarding investment
protection and dispute settlement. The purpose is
43
1. ASEAN COMPREHENSIVE
INVESTMENT
AGREEMENT: OVERVIEW
1.1 ASEAN main target:
ASEAN Community by
2015
a) ASEAN Community
to provide readers, especially potential investors,
In 2003, ASEAN leaders resolved that ASEAN
with the explanation in some depth of these
Community shall be established by 2020. In 2007,
important issues.
the leaders agreed to accelerate its establishment
by 2015. The ASEAN Community realisation
procedure comprises three pillars: (i) ASEAN
Economic
Community
Political-Security
(AEC);
Community;
(ii)
ASEAN
(iii)
ASEAN
Socio-Cultural Community (Figure 1).
Figure 1: ASEAN Community based on three pillars
•
b) ASEAN Economic Community (AEC)
focus on (i) development of small and medium
As one of ASEAN Community’s three pillars,
enterprises (SME); (ii) initiatives for ASEAN
AEC is aimed to create (Figure 2):
•
•
Region of equitable economic development, with
integration. These aim at bridging the development
Single market and production base, which aims to
gap at the SME level and enhancing economic
enable free flow of goods, services, investment,
integration of Cambodia, Laos, Myanmar and
capital and skilled labour.
Vietnam to enable all AMS to move forward in a
Highly competitive economic region with the
unified manner and to benefit from the integration
following
process.
consumer
core
elements:
protection,
competition
IPR,
development, taxation, e-commerce.
policy,
infrastructure
•
Region fully integrated into the global economy. To
enable
ASEAN
businesses
to
compete
internationally, to make ASEAN a dynamic and
44
東 協瞭 望 010
mainstream global supplier and ASEAN internal
economy: (i) Coherent approach towards external
market attractive for foreign investment, ASEAN
economic relations through FTA and CEP; (ii)
adopts two approaches in integrating with the global
Enhanced participation in global supply networks.
Figure 2: AEC’s key elements
1.2 ACIA as a means to
build ASEAN
integrated investment
area
a) ACIA’s main objective

To
enhance
ASEAN’s
attractiveness
as
an
investment destination

To create a free, open investment regime and to
build ASEAN integrated investment area.

To encourage further development of intra-ASEAN
investment,
especially
among
multi-national
companies based in ASEAN through expansion,
On 26 February 2009, ASEAN Comprehensive
Investment Agreement (ACIA) was signed by AMS,
industrial
to have been effective 29 March 2012.
contributing to enhanced economic integration.
ACIA
cooperation
and
specialisation,
consists of 49 articles, 2 annexes and 1 schedule
This, in turn, facilitates the establishment of
(the reservation list of AMS).
AEC and ASEAN Community (Figure 3).
The main objective of ACIA was:
Figure 3: ACIA as a means to establish AEC and ASEAN Community
Guarantee Agreement – IGA 1987), which covers
Previously, AMS have signed two ASEAN
mainly protection of investments
investment agreements:
•
•
ASEAN Agreement for Promotion and Protection
of
Investments
(also
known
as
Investment
Framework Agreement on ASEAN Investment Area
(AIA 1998), which covers market access.
INVESTMENT PROTECTION AND DISPUTE SETTLEMENT IN ASEAN
COMPREHENSIVE INVESTMENT AGREEMENT (ACIA)
b) ACIA=IGA+AIA
ACIA 2009 is a merger of IGA 1987 and AIA
45

Preserves AIA preferential treatment

Reaffirms the relevant provisions of AIA and IGA,
such as national treatment and most-favoured-nation
1998 (Figure 4). As such, ACIA
treatment.
Figure 4: ACIA=IGA+AIA
•
c) New enhanced provisions
New article on “Prohibition of Performance
Requirements”, with provision for joint assessment
But more than just merging the two previous
ASEAN investment agreements, ACIA offers new
forward-looking provisions:
•
Provisions
for
transparent
a
liberal,
competitive
facilitative,
Terms for senior management and board of
d) ACIA’s pillars
Further improvements to existing AIA and IGA
provisions such as disputes between an investor and
a member state, fund transfers
managerial and senior management personnel.
investment
environment based on international best practices;
•
•
directors, which facilitate inflow of key foreign
more
and
to consider additional commitments.
and treatment of
investments;
ACIA
ACIA
offers
many
potential
benefits
ASEAN investors (Figure 6) as described below.
to
comprehensive
investment
provisions on four pillars: liberalisation, protection,
facilitation and promotion of investment (Figure 5)
Figure 5: ACIA’s pillars
e) ACIA’s benefits
contains
46
東 協瞭 望 010
Figure 6: Benefits for investors
Investment liberalization. ACIA promotes
progressive lberalization of investment in ASEAN,
and board of directors, irrespective of their
nationality.
beginning with 5 sectors as follow:
Transparency. Under ACIA, investors can

Manufacturing
expect more transparent and predictable i nvestment

Agriculture
regulations including:

Fishery


Harmonized investment polices of AMS,
Forestry


Simplified procedures for investment application
Mining and Quarrying
and
and services incidental to these 5 sectors.

Dissemination of information on rules, regulations,
policies affecting investors and their investments.
Investors will have opportunity to invest in all
liberalized sectors and expand markets for their
products and services in all AMS.
Investment
comprehensive
Non-discrimination. By adopting principles
of national treatment (Article 5) and MFN (Article
6), AMS agree not to treat ASEAN investors less
favorably than local or foreign competitors.
Further, under Article 7, ACIA prohibits AMS
protection.
provisions
provide
ACIA’s
enhanced
protection of investment and improve investors’
confidence in investing in the region
Dispute settlement mechanism. In case of
any conflict with host governments, investors are
given
option
of
resolving
disputes
through
from imposing any performance requirements
alternative dispute settlement mechanisms.
(such as production quota, export target).
2. Investment protection
and dispute settlement
mechanism in ACIA
Under
Article
8,
ACIA
grants
ASEAN
investors freedom to appoint senior management
INVESTMENT PROTECTION AND DISPUTE SETTLEMENT IN ASEAN
COMPREHENSIVE INVESTMENT AGREEMENT (ACIA)
The issues of investment protection and
owned and controlled by an investor (Figure 7).
dispute settlement in ACIA are significantly
This includes:
enhanced compared to those found in IGA and AIA.

The enhancement includes broad definition of
investment and investor, substantive investment
protection
and
alternative
dispute
47
Moveable, immovable property and other property
rights (mortgages, liens, pledges);

settlement
Shares,
stocks,
bonds,
debentures
(portfolio
investment);
mechanism.

IPRs;
2.1 Broad definition of
investment and
investor

Claims to money;

Rights under contracts (turnkey, construction,
management, production)

a) Definition of investment
Business concessions required to conduct economic
activities
Article
4
offers
a
broad
definition
of

“investment”, which covers any kind of assest,
Amounts yielded by investments (profits, interest,
capital gain, dividend, royalties, fees).
Figure 7: Broad definition of “investment”
b) Definition of investor

A natural person must be a national, citizen or
permanent resident of AMS
Artcle 4 also offers a broad definition of
“investor” covering both domestic (ASEAN) and

A juridical person can be any legal entity
constituted under the law of an AMS.
international (non-ASEAN) investors (Figure 8).
An ASEAN investor can be either natural or
juridical person.
An investor from outside ASEAN may become
an ASEAN investor by setting up a juridica l entity
in any AMS, from which it then makes investment
in another AMS.
48
東 協瞭 望 010
Figure 8: Definition of “investor”
2.2 Substantive investment
protection
ACIA provides comprehensive protection to
investors and their investments through various
forms as follow (Figure 9).
Figure 9: Investment protection
Fair and equitable treatment of investment
Also under Article 11, a host AMS will have to
Under Article 11, the host AMS will make
provide full protection and security to ASEAN
decisions in line with its laws. The host country is
investor’s investment. Such protection must be
not allowed to make arbitrary decisions. In case
given at all times, including during riots or
that any legal action is taken by AMS against an
insurgency which may occur.
investor, the investor has the right to defend itself
Compensation in cases of strife
through access to lawyers. The investor also has
the right to appeal any adverse decisions/outcomes.
Under Article 12, a host AMS shall accord to
investors of any other AMS in relation to their
Full protection and security
INVESTMENT PROTECTION AND DISPUTE SETTLEMENT IN ASEAN
COMPREHENSIVE INVESTMENT AGREEMENT (ACIA)
Under
covered investment which suffered losses due to
Article
14,
a
host
AMS
49
that
armed conflict/civil strife/ emergency state.
expropriates an investment, directly or indirectly,
Freedom to transfer funds
is required to provide proper compensatio n to the
affected investors.
Article 13 grants investors the right to make
A
all transfers relating to covered investment free ly
host
AMS
may
only
expropriate
or
and without delay, in a freely convertible currency
nationalize an investment, directly or indirectly, if:
at market rate, into and out of its territory.

Expropriation/nationalization
is undertaken
for
public purposes;
Transfers include contributions to capital;

profit, capital gain, dividends, royalties, license
fees,
technical
assistance,
technical
and
management fees, interest, other income from
investment.
Expropriation/nationalization
is
done
in
non-discriminatory manner;

Affected investors provided with prompt, adequate,
effective compensation, in line with due process of
law.
However, a host AMS may limit the investor's
right to transfer payments only "through the
equitable,
non-discriminatory,
and
good
faith
application of its laws and regulations” relating to
bankruptcy, insolvency, protection of creditor’s
right;
issuing/trading/dealing
futures, options, derivatives.
No unlawful expropriation
with
securities,
2.3 Alternative dispute
settlement mechanisms
Under ACIA (Articles 28 through 41), ASEAN
investors
can
Investor-State
benefit
Dispute
from
access
Settlement
to
the
(ISDS)
mechanism. This mechanism is applicable to
claims by investor for damage or loss by reason of
alleged breach of any rights (Figure 10).
Figure 10: Investor-State Dispute Settlement (ISDS) mechanisms
50
東 協瞭 望 010
a)
Causes of action
Additional Facility Rules, UNCITRAL (United
Nations Commission on International Trade Law)
Under the ISDS, the disputing investor may
file an action based on any of the following causes:
Arbitration Rules, or
•
To Regional Center for Arbitration at Kuala
•
NT (Art.5)
Lumpur or any other regional center for arbitration
•
MFN (Art.6)
in ASEAN, or
•
Senior management and board of directors (Art.8)
•
Treatment of investment (Art.11)
•
Compensation in case of strife (Art.12)
•
Fund transfers (Art.13)
•
Expropriation and compensation (Art.14)
b)
Forums
•
c)
To any other arbitration institution.
Alternative dispute resolution mechanisms
Although ACIA provides for resolution of
disputes through either local court or regional or
international arbitration, it encourages prompt
management of conflicts through other techniques
Disputing investors may submit claim to any
of the following institutions at choice:
•
To domestic courts of the host country, or
•
Under variuos forms of international arbitration,
such as:
•
Meditation
•
Conciliation, which may run concureently with
arbitration may begin and be terminated at the
such as ICSID (International Center for Settlement
of Investment Disputes) Convention, ICSID Rules
of Procedure for Arbitration Proceedings, ICSID
request of investors at any time.
•
Consultations and negotiations, which may be used
by disputing parties prior to seeking arbitration.