Investment

Investment between New Zealand and ASEAN is increasing. Up until now, New Zealand has only had FTAs containing Investment Chapters with two ASEAN member countries - namely, Singapore and Thailand. For the remaining eight ASEAN members, no treaty-level framework has existed to effectively safeguard New Zealand investors' interests.

At a time when New Zealand is increasingly focused on the potential gains to the wider economy of increased outward investment, the ASEAN FTA provides a credible regional legal framework for investments.

The ASEAN FTA contains a range of investment protection provisions. These include obligations on National Treatment, fair and equitable treatment and full protection and security; and compensation for losses related to armed conflict, civil strife, or state of emergency. The Treaty's provisions apply to both citizens and permanent residents of the Parties.

Some of the key benefits to New Zealand include:

• Provisions that enable the free transfer of all payments relating to an investment, including capital necessary for establishing the investment, and the returns generated from that investment, between ASEAN countries and New Zealand. These are a significant addition to existing protections available to current and prospective investors.
• Commitments to provide protection from arbitrary expropriation. This significantly builds on existing rules in the region. Neither party may expropriate or nationalise the investments of investors of the other Party, unless such an action is done for a public purpose; in a non-discriminatory manner; on payment of compensation; and in accordance with due process of law. Such expropriation provisions are a key protection for New Zealand investors. They minimise the risk of arbitrary government action to expropriate established investments, and ensure that any expropriation actions are appropriately compensated in the event that they occur.
• Provisions to enhance transparency of investment regimes, including by requiring the publication of a country's international investment agreements and domestic investment measures. Access to such information, and communications between the Parties on any matter covered by the Investment Chapter, is facilitated by a provision that requires each Party to designate specific contact points. This will be a useful mechanism for keeping New Zealand (and New Zealand investors) abreast of developments in investment policy in the other Parties, particularly those countries where gaining information on policy settings has - in the past - been difficult.

The ASEAN FTA also provides for the compulsory settlement of disputes between foreign investors and the country in which the investment is made. Compulsory Investor/State Dispute Settlement (CISDS) enhances the protection for New Zealand investments in ASEAN by giving investors recourse to international procedures beyond the domestic legal system. These procedures can be accessed only if a dispute cannot be settled through consultation and negotiation, and unless to the parties to the dispute agree otherwise.

There are also safeguards to preserve the government's legitimate regulatory prerogatives and to minimise the government's exposure to inappropriate expropriation claims.

As the ASEAN FTA is the first ASEAN-wide FTA to include a chapter on investment, New Zealand investors will also be the first (with Australia) to benefit from standardised CISDS provisions across the region.

The ASEAN FTA does not contain any up-front commitments on market access, but outlines a work programme for these to be negotiated within five years of the entry into force of Agreement. At this time the National Treatment obligation (whereby ASEAN Partners have committed to providing New Zealand investments approved and established in their countries the same level of post-establishment treatment and protection as they provide nationals of their own countries) will apply subject to those market access commitments. The negotiation of an MFN provision is also included in the ASEAN FTA forward work agenda.

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