U.S.-Korea Free Trade Agreement: Potential Economy-wide ... - USITC

them significantly more competitive. 22 The services section of this report (see chapter 4 of
this report) provides additional discussion of the impact of the FTA on telecommunications,
broadcasting, and financial services.
Summary of Provisions
The two principal objectives of the FTA investment chapter are to create a welcoming
environment for investors from each party by outlining the rights of investors and the rules
that govern new cross-border investment, and to provide a clear outline of the investor-state
dispute settlement process. Section A of the chapter outlines the rules that would govern new
investments, and would set forth the types of investments to which these rules apply. 23
Specifically, the FTA would require each party to give national and MFN treatment to
investors and covered investments of the other party. The treatment of investors under the
FTA must comply with but need not go beyond customary international law. Other
provisions include:
1. Expropriation could be only for a public purpose; it must be
nondiscriminatory and accompanied by payment of prompt,
adequate, and effective compensation in accordance with due
process of law.
2. All financial transfers relating to covered investments,
including, but not limited to, contributions to capital, payment
of interest, and payments under contracts, could cover the full
value of the investment and must be permitted freely and
without delay.
3. Neither party could impose or enforce performance
requirements as a condition of investment. 24
4. Neither party could require that senior management or boards
of directors be of any particular nationality.
The benefits of this chapter could only be denied in limited, delineated instances involving
persons of a nonparty to the FTA. This section of the chapter also deals with NCMs, and
special formalities and information requirements.
Section B of this chapter would provide for consultation and negotiation of disputes under
the investor-state dispute settlement process, and provides detailed information and
procedures for pursuing dispute settlement, including submission of claims to arbitration,
selection of arbitrators, conduct of the arbitration, transparency of the arbitral proceedings,
governing law, and awards of monetary damages (not including punitive damages) or
restitution. Under the terms of the provisions of Section B, each party would consent to
claims being submitted to arbitration under specified rules according to the process outlined
22 Ibid., 73–74.
23 Investment related to financial services is covered separately in the financial services chapter (FTA
chap. 13).
24 Such provisions may include requirements to export a given level or percentage of goods or services, to
purchase goods produced in a party’s territory, or to transfer a certain technology or other proprietary
information.
6-7