CONFIDENTIAL DAFFE/MAI(97 ) I /REV2
   
   IV. INVESTMENT PROTECTION
   
   1. GENERAL TREATMENT[1](1)
   
   1.1. Each Contracting Party shall accord to investments in its
   territory of~investors of another
   
   Contracting Party fair and equitable treatment and full and constant
   protection and security. In no case
   
   shall a Contracting Party accord treatment less favourable than that
   required by international law.
   
   1.2. A Contracting Party shall not impair by [unreasonable or
   discriminatory] [unreasonable and
   
   discriminatory] measures the operation, management, maintenance, use,
   enjoyment or disposal of
   
   investments in its territory of investors of another Contracting
   Party.
   
   2. EXPROPRIATION AND COMPENSATION
   
   2.1. A Contracting Party shall not expropriate or nationalise directly
   or indirectly an investment in its
   
   territory of an investor of another Contracting Party or take any
   measure or measures having equivalent
   
   effect (hereinafter referred to as "expropriation") except:
   
   a) for a purpose which is in the public interest,
   
   b) on a non-discriminatory basis,
   
   c) in accordance with due process of law, and
   
   d) accompanied by payment of prompt, adequate and effective
   compensation in accordance
   
   with Articles 2.2 to 2.5 below.
   
   2.2. Compensation shall be paid without delay.
   
   2.3. Compensation shall be equivalent to the fair market value of the
   expropriated investment
   
   immediately before the expropriation occurred. The fair market value
   shall not reflect any change in value
   
   occurring because the expropriation had become publicly known earlier.
   
   2.4 Compensation shall be fully realisable and freely transferable.
   
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   CONFIDENTIAL DAE;FE/MAI(97) 1/REV2
   
   2.5. [Compensation shall include interest at a commercial rate
   established on a market basis for the
   
   currency of payment from the date of expropriation until the date of
   actual payment.][2](2)
   
   2.6. Due process of law includes, in particular, the right of an
   investor of a Contracting Party which
   
   claims to be affected by expropriation by another Contracting Pany to
   prompt review of its case, including
   
   the valuation of its investment and the payment of compensation in
   accordance with the provisions of this
   
   article, by a judicial authority or another competent and independent
   authority of the latter Contracting
   
   Party.
   
   3. PROTECTION FROM STRIFE
   
   3.1. An investor of a Contracting Party which has suffered losses
   relating to its investment in the
   
   territory of another Contracting Party due to war or to other armed
   conflict, state of emergency, revolution,
   
   insurrection, civil disturbance, or any other similar event in the
   territory of the latter Contracting Party,
   
   shall be accorded by the latter Contracting Party, as regards
   restitution, indemnification, compensation or
   
   any other settlement, treatment no less favourable than that which it
   accords to its own investors or to
   
   investors of any third State, whichever is most favourable to the
   investor.
   
   3.2. Notwithstanding Article 3.1, an investor of a Contracting Party
   which, in any of the situations
   
   referred to in that paragraph, suffers a loss in the territory of
   another Contracting Pany resulting from
   
   (a) requisitioning of its investment or part thereof by the latter's
   forces or authorities, or
   
   (b) destruction of its investment or part thereof by the latter's
   forces or authorities, which was
   
   not required by the necessity of the situation, shall be accorded by
   the latter Contracting Party restitution or compensation which in
   either case shall be prompt, adequate and effective and, with respect
   to compensation, shall be in accordance with Articles 2.1 to 2.5.
   
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   CONFIDENTIAL DAFFE/MAI(97) 1/REV2
   
   4. TRANSFERS
   
   4.1. Each Contracting Party shall ensure that all payments relating to
   an investment in its territory of
   
   an investor of another Contracting Party may be freely transferred
   into and out of its territory without
   
   delay. Such transfers shall include, in particular, though not
   exclusively:
   
   a) the initial capital and additional amounts to maintain or increase
   an investment;
   
   b) returns;
   
   c) payments made under a contract including a loan agreement;
   
   d) proceeds from the sale or liquidation of all or any part of an
   investment;
   
   e) payments of compensation under Articles 2 and 3;
   
   f) payments arising out of the settlement of a dispute;
   
   g) earnings and other remuneration of personnel engaged from abroad in
   connection with an
   
   investment.
   
   4.2. Each Contracting Party shall further ensure that such transfers
   may be made in a freely
   
   convertible[3](4) currency. [Freely convertible currency means a
   currency which is widely traded in
   
   international foreign exchange markets and widely used in
   international transactions.] or [Freely
   
   convertible currency means a currency which is' in fact, widely used
   to make payments for international
   
   transactions and is widely traded in the principal exchange markets].
   
   4.3. Each Contracting Party shall also further ensure that such
   transfers may be made at the market
   
   rate of exchange prevailing on the date of transfer.
   
   [4.4. In the absence of a market for foreign exchange, the rate to be
   used shall be the most recent
   
   exchange rate for conversion of currencies into Special Drawing
   Rights.]
   
   4.5. Notwithstanding Article 4.1(b) above, a Contracting Party may
   restrict the transfer of a return in
   
   kind in circumstances where the Contracting Party is permitted under
   the GATT 1994 to restrict or
   
   prohibit the exportation or the sale for export of the product
   constituting the return in kind. Nevertheless,
   
   a Contracting Party shall ensure that transfers of returns in kind may
   be effected as authorised or specified
   
   in an investment agreement, investment authorization, or other written
   agreement between the Contracting
   
   Party and an investor or investment of another Contracting Party5
   
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   [4.6. Notwithstanding Articles 4.1 to 4.5, a Contracting Party may
   require reports of transfers of
   
   currency or other monetary instruments and ensure the satisfaction of
   judgements in civil, administrative
   
   and criminal proceedings through the equitable. non-discriminatory,
   and good faith application of its laws
   
   and regulations. Such requirements shall not unreasonably impair or
   derogate from the free and undelayed
   
   transfer ensured by this Agreement.]
   
   or
   
   [4.6. Notwithstanding Articles 4.1 to 4.5, a Contracting Party may
   prevent a transfer through the
   
   equitable, non-discriminatory and good faith application of measures
   to protect the rights of creditors,
   
   relating to or ensuring compliance with laws and regulations on the
   issuing, trading and dealing in
   
   securities, futures and derivatives, reports or records of transfers,
   or in connection with criminal offences
   
   and orders or judgements in administrative and adjudicatory
   proceedings, provided that such measures and
   
   their application shall not be used as a means of avoiding the
   Contracting Party's commitments or
   
   obligations under the Agreement.][4](6)
   
   5. SUBROGATION
   
   If a Contracting Party or its designated agency makes a payment under
   an indemnity, guarantee
   
   or contract of insurance[5](7) given in respect of an investment of an
   investor in the territory of another
   
   Contracting Party, the latter Contracting Party shall recognise the
   assignment of any right or claim of such
   
   investor to the former Contracting Party or its designated agency and
   the right of the former Contracting
   
   Party or its designated agency to exercise by virtue of subrogation
   any such right and claim to the same
   
   extent as its predecessor in title.[6](8)
   
   6. PROTECTING EXISTING INVESTMENTS
   
   [This Agreement shall apply to investments made prior to its entry
   into force for the Contracting
   
   Parties concerned [consistent with the legislation of the Contracting
   Party in whose territory it was made]
   
   as well as investments made thereafter. This Agreement shall not apply
   to claims arising out of events
   
   which occurred, or to claims which had been settled, prior to its
   entry into force.] or [This Agreement shall
   
   apply to investments existing at the time of entry into force as well
   as to those established or acquired
   
   thereafter.]
   
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   1. Sweden proposed to delete article 1.2 and revise Article 1.1 as
   follows:
   
   "Each Contracting Party shall accord to investments in its territory
   of investors of another Contracting
   
   Party fair and equitable treatment and full and constant protection
   and security. Such treatment shall also
   
   apply to the operation, management, maintenance, use, enjoyment or
   disposal of such investments. In no
   
   such case shall a Contracting Party accord treatment less favourable
   than that required by international
   
   law." 
   
   2. DG 3 identified four options for calculating compensation which are
   set out in the commentary. The 
   
   Negotiating Group Chairman noted [DAFFE/MAI(97)2] that a large
   majority were in favour of having no 
   
   explicit provision in the MAI addressing this issue. However, to
   respond to the concerns of some 
   
   countries that this approach might lead to uncertainty, the MAI could
   contain an interpretative note 
   
   providing that in the case of undue delay in the payment of
   compensation on the pan of a Contracting 
   
   Party, any exchange rate loss arising from this delay should be borne
   by the host country. 
   
   3. As defined in the Article on definitions. 
   
   4. US agreement in Article 4.2 on the deletion of "usable" and
   acceptance of the word "convertible" 
   
   supposes agreement on its definition and on Article 4.6. 
   
   5. Canada has difficulties with the obligations referred to in the
   second sentence. 
   
   6. Text recommended by most EG5 delegations

References

   1. http://www.citizen.org/pctrade/maitext4.htm#N_1_
   2. http://www.citizen.org/pctrade/maitext4.htm#N_2_
   3. http://www.citizen.org/pctrade/maitext4.htm#N_4_
   4. http://www.citizen.org/pctrade/maitext4.htm#N_6_
   5. http://www.citizen.org/pctrade/maitext4.htm#N_7_
   6. http://www.citizen.org/pctrade/maitext4.htm#N_8_