Multilateral Agreement on Investment
Draft, Distributed January 13, 1997

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PART ONE:

CONSOLIDATED TEXTS

I. GENERAL PROVISIONS

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 proprietorshipl,2, joint venture.association or organisation.

2. Investment means:

(a) Every kind of asset owned or controlled[,] directly [or indirectly,] by an investor, including3:

(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 to and other form of debt [of an enterprise]4; and rights derived therefrom;5


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1One delegation has proposed to delete this term from paragraph (ii) considering that a sole proprietorship would be covered by the term natural person" in paragraph (i).

2Taking account of the advice by EGS on Financial Matters, DG3 considered that branches should be deleted from the definition of investor. France and the United States requested some time to verify that deletion of branches does not pose a problem for non-financial sectors.

3Pending final determination of the scope and content of the agreement, Canada reserves its position as to whether the positive list should be open or closed.

4Some delegations proposed to retain "of an enterprise" in order to clarify that debts of an enterprise are covered. DG3 agreed to retain this in brackets pending clarification of whether natural persons are to be included or excluded. If it decides to include natural persons it can do so explicitly by adding "and of a natural person" after the words "of an enterprise" or it can do so implicitly by deleting any reference to enterprise. If DG3 decides to exclude natural persons it might wish to reflect this on the negative list. Concerns relating to public debt would also be addressed via the negative list.

5Korea reserves its position item (iii).

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(iv) rights under contracts, including turnkey, construction, management, production or revenue sharing contracts;

(v) claims to money and claims to performance6,7;

(vi) intellectual property rights8;

(vii) rights conferred pursuant to law or contract [such as] or [by virtue of]9 concessions10, licenses, authorisations11, and permits12.

(viii) any other tangible and intangible, movable and immovable property, and any related property rights, such as leases, mortgages, liens and pledges, [unless such assets lack the characteristics of an investment.]

(b) "Investment" does not include13,14:

[(i) public debt;] [debt securities of and loans to a state enterprise or Contracting Party;]


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6Some delegations wish to verify the consequences of omitting the words "pursuant to a contract" at the end of item (v).

7Some delegations wish to verify the consequences of omitting from item (v) the words "having an economic value" to determine the possible need to retain these words in the definition.

8Several delegations have concerns relating to this item. France proposed that literary and artistic works should not be included in the definition of investment.

9If the words "such as" are retained, Norway would wish to add the following two elements to the negative list:

-- the granting of authorisations, licences and concessions for the prospection, exploration and production of hydrocarbons;

-- the licensing of fishermen, fishing vessels and equipment.

10France proposed that the term "concessions" may need to be defined, taking account of the substantive obligations to be agreed.

11Canada reserves its position on the inclusion of the word "authorisations".

12Mexico reserves its position on item (vii).

13Some delegations wish to retain for further consideration the idea that the negative list would not apply for purposes of expropriation and compensation and protection from strife and transfers.

14A formula needs to be found to deal with the relationship between the MAI and obligations concerning international trade in goods and services. In this regard, Canada referred to paragraph 34 of the Commentary on the Consolidated Texts [DAFFE/MAI(96)16/REV1]. Mexico and Denmark prefer to retain on the negative list"claims to money that arise solely from commercial transactions including the extension of credit for the sale of goods and services".

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[(ii) financial assets;]

[unless the transactions [to which such debt or other assets relate] otherwise have the characteristics of an investment; or]

[unless the respective claims are assets of an enterprise mentioned in paragraph (a) (i); or]

[unless such assets are acquired for the purpose of establishing lasting economic relations with an enterprise; or]

[(iii) derivatives where the underlying asset is not regarded as an investment],

[(iv) real estate or other property, tangible or intangible, not acquired in the expectation or used for the purpose of economic benefit or other business purposes]15,

[(v) moveable or immovable property, and any related rights, acquired for personal use].


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15Australia wants a broader exclusion of real estate and proposes to replace this text by "real estate or rights associated with land".

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GEOGRAPHICAL SCOPE OF APPLICATION16

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.17

APPLICATION TO OVERSEAS TERRITORIES

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.18 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.

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.


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16A number of 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.

17EG1 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."

18In 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.

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