Japan’s favourable stance towards FTAs and treaty succession, by José Ángel Rueda

March 2013 will be remembered as a month in which relevant FTA negotiations were launched or reinforced by accessions of powerful States.[1] One of the most prominent actors in this period has no doubt been Japan as in just a couple of weeks it decided to join[2] existing FTA talks for the Trans-Pacific Partnership (TPP)[3] and launch FTA negotiations with the European Union (EU).[4] 

According to the website of Japan’s Ministry of Foreign Affairs,[5] as of December 2012 Japan has already concluded Economic Partnership Agreements (EPAs) with Singapore, Mexico, Malaysia, Chile, Thailand, Indonesia, Brunei, the Philippines, Switzerland, Vietnam, India and Peru, as well as a “Comprehensive EPA or CEPA” with the Association of Southeast Asian Nations (ASEAN).[6] At the same time, Japan is currently negotiating EPAs with Australia, Canada, Mongolia and Colombia and an FTA with China and the Republic of Korea as a bloc.[7] According to the same source, negotiations for an FTA with the Gulf Cooperation Council (GCC)[8] have been postponed.

Leaving apart the debate about the pros and cons of such treaties for the economic development of signatory countries, in particular for developing countries (we hereby invite readers to send contributions thereon), it is clear that this policy of entering into simultaneous or successive negotiations leading to various treaties may cause overlapping between them, thus decreasing the effect of legal certainty these treaties are looking for.

For example, Japan and Vietnam are currently linked by a bilateral EPA[9] and the ASEAN-Japan CEPA.[10] An EPA, according to Japan’s Ministry of Economy, Trade and Industry, “is an international treaty to deregulate regulations for investments and for immigration control in addition to the contents of an FTA” (emphasis added).[11] In addition, Japan and Vietnam are also parties to a BIT[12] that is expressly incorporated into the EPA.[13] Now Japan and Vietnam are taking part in the TPP talks to become members thereto and we understand the TPP will contain an investment chapter. Will it be completely clear which treaty shall prevail in every situation? We hope so.

Another example is the relation among Japan, China and the Republic of Korea. There are already BITs between Japan and China,[14] Japan and the Republic of Korea[15] and China and the Republic of Korea.[16] Notwithstanding this, in May 2012 the three States signed in Beijing a Trilateral Investment Treaty (TIT)[17] which, as far as we know, has not yet entered into force. When in force, Article 25 thereto will give foreign investors the power to choose between the particular BIT and the TIT in order to pursue a claim against the host State under the agreement they perceive as more favourable:

Nothing in this Agreement shall affect the rights and obligations of a Contracting Party, including those relating to treatment accorded to investors of another Contracting Party, under any bilateral investment agreement between those two Contracting Parties existing on the date of entry into force of this Agreement, so long as such a bilateral agreement is in force.

Note: It is confirmed that, when an issue arises between an investor of a Contracting Party and another Contracting Party, nothing in this Agreement shall be construed so as to prevent the investor from relying on the bilateral investment agreement between those two Contracting Parties which is considered by the investor to be more favorable than this Agreement.”

However, the use of open-ended terms in BITs, TITs and investment chapters of FTAs makes it very difficult the task of assessing the more favourability of the provisions of such agreements. Is protection against expropriation more favourable under the BIT or the TIT? If the investor-State dispute settlement clause is identical in both treaties any prudent investor would invoke both, thus undermining the relevance of Article 25.

Treaty negotiators, whether dealing with developed or developing countries, must pay special attention to provisions for the abrogation of previous treaties between the same parties in order to avoid situations that, we admit, sometimes are difficult to foresee during the negotiations of the treaties but are typically an additional obstacle when an investment treaty dispute has arisen.

[1] See a number of posts published on this blog during March 2013.

[2] See “Abe declares Japan will join TPP free-trade process”, Japan Times, 16 March 2013, available at http://www.japantimes.co.jp/news/2013/03/16/business/abe-declares-japan-will-join-tpp-free-trade-process/#.UVg0cBfTqSo.

[3] Alongside Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States of America and Vietnam.

[4] See the Joint statement by President of the European Council, Herman Van Rompuy, President of the European Commission, José Manuel Barroso and Prime Minister of Japan, Shinzo Abe, Tokyo/Brussels, 25 March 2013, available at http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/136491.pdf. The EU consists of Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. Croatia will join on 1 July 2013.

[6] ASEAN consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

[7] See supra footnote 5.

[8] The Gulf Cooperation Council consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

[13] Article 9(4) of the EPA. See supra footnote 9.

[14] Done at Beijing on 27 August 1988. Available at http://unctad.org/sections/dite/iia/docs/bits/china_japan.pdf.

[15] Done at Seoul on 22 March 2002. Available at http://unctad.org/sections/dite/iia/docs/bits/korea_japan.pdf.

[16] Done at Beijing on 30 September 1002. Available at http://unctad.org/sections/dite/iia/docs/bits/korea_china.pdf.

[17] “Agreement among the Government of Japan, the Government of the Republic of Korea and the Government of the People’s Republic of China for the Promotion, Facilitation and Protection of Investment”. Available at http://www.meti.go.jp/press/2012/05/20120513001/20120513001-3.pdf.


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