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Bilateral trade and investment agreements

Bilateral trade and investment agreements

H ISTORICALLY, the most common form of treaty between two countries has been a Treaty

of Friendship, Commerce and Navigation (FCN). These were comprehensive treaties providing

for national treatment for trade, property ownership and transfer, access to courts,

intellectual property rights and employment rights. In the past, these treaties were

important to opening ports to the ships of each signatory country.

Another more recent type of bilateral agreement is simply the Trade Agreement. These

agreements affirm that each country commits itself to encouraging trade in goods

and services, affirms commitments to multilateral intellectual property treaties

and agrees not to encourage barter and counter-trade. This type of agreement is more

one of encouragement than legalities, as is the case with FCN.

These sorts of bilateral agreements have a particularly important role where no regional

agreement is in place. Now that Cambodia will be admitted to ASEAN the role of these

agreements with other ASEAN members may be superseded by ASEAN requirements.

In the past two years, before Cambodia could know when it would be admitted to ASEAN,

it entered into investment agreements in which it pledged to protect the investments

of nationals from those countries with whom it has made the agreement. To date, these

countries are Switzerland, the Republic of Korea (South Korea), Malaysia, Thailand

and Singapore.

This means that, in addition to the protections accorded investors in the 1994 Investment

Law, additional protections for investors from these selected countries have now

been developed.

The agreements with each country are substantially similar, with only minor variations

between them. But to nationals of these countries, the protections guaranteed can

be of assistance if their investment becomes problematic for reasons covered in these

agreements. At that time, the investor could seek the assistance of his or her embassy

in an attempt to resolve the problem areas.

The stated reason for each agreement is to create favorable conditions for investments

and to protect those investments. A foreign "investor" can be either a

national of that country or, if it is a company, one which is either registered in

that country or more than 50% owned or controlled by nationals of that country. For

example, if a company registered in Sweden was actually owned by two Swiss nationals,

then the protections of the agreement with Switzerland would protect a company registered

in Sweden.

An "investment" which is protected by the Agreement includes almost any

type of asset invested in Cambodia, including movable property, mortgages, shares

in another company, claims to money or performance under a commercial contract and

concessions for natural resources.

In these investment agreements, formally known as agreements on "The Promotion

and Protection of Investments", Cambodia promises not to treat these foreign

investments in a discriminatory manner and to accord equally favorable treatment

to foreign investments as it does to investments made by its own nationals. However,

if more favorable treatment is accorded an investor from another country because

of a free trade area, common market or something of a similar nature, then this agreement

does not require other investors to be accorded that treatment.

Investors are specifically allowed the free transfer of returns on their investment.

The exact types of returns which may be freely transferred varies from one agreement

to another but generally includes profits, capital gains, proceeds from a sale or

liquidation, earnings of nationals allowed to work in connection with the investment,

amounts spent for investment management and other funds as specified in the particular

agreement. Some items, such as license fees or technical assistance, may appear in

one agreement but not in another.

Disputes arising under the agreement are settled by negotiation and then arbitration.

The specifics of the arbitration procedure are detailed in the agreements and vary

among the different agreements.

- This column is provided by the Mekong Law Group, a group of Cambodian attorneys

associated exclusively with Dirksen Flipse Doran & Le, an international law firm

with offices in Cambodia, Vietnam and Laos.

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