III.1. Investment

“Investment” is a rather controversial term for academia and international arbitration (^{Manciaux, 2008}, p. 804), as its meaning is unclear, broad (^{Amarasinha & Kokott, 2008}, p. 138), and sometimes vague (Manciaux, 2008, p. 802). It is important to bear in mind that not even the Washington Convention on the Settlement of Investment Disputes Between States and Nationals of other States provides precise and clear provisions on the meaning of the term “investment”. This term is used indistinctively in article 25 of the Convention, when referring to the jurisdiction of the International Centre for Settlement of Investment Disputes (ICSID), which has led, through disputes over the issue of jurisdiction, to its jurisprudential development in trying to find a more precise meaning (^{Manciaux, 2008}, p. 804). Some scholars argue that the absence of a definition for the notion of investment in the Washington Convention is "the result of choice" (^{Manciaux, 2008}, p. 804). Not providing a specific definition for the term could also be desirable, as it makes the concept of investment more flexible and functional (^{Manciaux, 2008}, p. 805). However, we disagree on the desirability of lacking a definition, as it may not only generate flexibility, but also ambiguity. States and investors will not understand its notion and scope, nor other concepts founded on or associated with "investment".

Articles 10.1 PA-AP, 9.1 TPP and 14.1 USMCA define “investment” as “every asset that an investor owns” and contemplate several types of asset-based investments. This follows the 2004 and 2012 US Model BIT (^{Nottage, 2016}, pp. 331, 346). Thus, they explicitly depart from article 1139 NAFTA, as its definition was primordially based on “enterprise” (^{UNCTAD, 2004}, p. 90).

Similarly, it’s interesting how these agreements restrict the definition to “the characteristics of an investment” understood as “the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk”. Such characteristics have been jurisprudentially developed, particularly in Salini v. Morocco.³ Later tribunals referred to the characteristics an investment should have as the “Salini Test”: duration, profits and returns, risks, a contribution to the economic development of the host-State, and substantive contribution (^{Manciaux, 2008}, pp. 801-802, 815, 823-824). We believe these PA, CPTPP and USMCA rules successfully restrict investments to cases where the investor has made a real contribution of capital, obtained profit and assumed risk. These rules protect States against investors who submit frivolous claims.

The term “investment” also includes an extensive list (also used in the 2004 and 2012 US Model BITs) of forms an investment may adopt, such as an enterprise, shares, stock and other forms of equity participation in an enterprise, bonds, debentures, other debt instruments, intellectual property rights, licenses, authorizations, permits and similar rights, turnkey, construction, management, production, concession, revenue-sharing and other similar contracts, and other tangible or intangible, movable or immovable property, and related property rights, such as leases, mortgages, liens and pledges. This list includes investment forms not included in NAFTA such as intellectual property rights, licenses, authorizations or permits, rights related to property or financial products such as futures, options and other derivatives. Thus, these agreements include assets and transactions where investors may acquire brand licenses, patents or industrial designs not previously considered a form of investment.

A substantial difference is that the PA excludes debt instruments issued by the State parties in the Agreement and/or by their State enterprises (sovereign bonds) as a form of investment. The CPTPP and the USMCA do not exclude such debt instruments, which means an investor could possibly invest in these types of public debt instruments. This needs to be considered when thinking of a unified investment regime for these agreements.

III.2. Investor

The PA, CPTPP and USMCA also define "investor". They exclusively refer to "investor of a party" and "investor of a non-party". Thus, neither treaty uses the term "foreign investor". Hence, an investor means an enterprise of a party that attempts to make, is making, or has made an investment in the territory of another State party. On the other hand, "investor of a non-party" means, with respect to a party, an investor that attempts to make, is making, or has made an investment in the territory of that party, that is not an investor of a State party. The purpose of this distinction is to determine who benefits from the treaty, and it sets a limit for those considered non-investors.

Australia, Canada, Singapore and New Zealand are CPTPP members and they are currently negotiating to become PA associate States. This would grant them the benefits of PA rules for investors of a party, laying the foundations for an environment that attracts investments in the Asia-Pacific region.

III.3. Covered Investment

The term "covered investment" is almost identical in these three regimes. It means the investment made in the territory of a State party to the agreement, by an investor of another party as of the date of entry into force of the agreement or established, acquired, or expanded thereafter. This concept is decisive in preventing future investor-State disputes, and especially in finding the time in which the investment was made in the territory of another State party to the agreement.

Two terms related to the concept of “covered investment” in the TPP were suspended in the CPTPP. They are “investment agreement” and “investment authorization” and they were included in the 2012 US Model BIT. Almost certainly these terms reflected US interests and the remaining CPTPP parties decided to suspend them after the United States withdrew from the TPP. By contrast, the PA-AP and the USMCA do not include these concepts, as additional charges are imposed to investors and parties in terms of signing written agreements containing rights and obligations on covered investments, which falls into the category of a performance requirement. It also becomes an obstacle for investments, as a foreign investment authority (which does not exist in all countries) is required to approve such covered investment within that territory. In this sense, we deem it beneficial for CPTPP countries to have agreed upon suspending those provisions.

III.4. Other definitions

Finally, the respective articles on definitions includes other terms, mostly relating to international arbitration, such as "claimant", "respondent", "disputing party", "non-disputing party", references to the ICSID Convention, ICSID Additional Facility Rules, and United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules. These terms are included in these three regimes; however, for example, London Court of International Arbitration Rules and International Chamber of Commerce (ICC) Arbitration Rules are only included in the TPP investment chapter.

These terms serve as the framework for initiating arbitration procedures, as contemplated in section B of the investment chapters. Investors and State parties of these agreements can use either arbitration system. This represents a significant progress in terms of an eventual common regime for these agreements.

V.1. National Treatment (NT)

These agreements define NT almost identically as the obligation of each State party to the agreement to accord investments and covered investments treatment no less favorable than that which it accords, in like circumstances, to its own investors or to investments in the territory of their own investors (articles 10.4.1 PA-AP, 9.4.1 TPP and 14.4.1 USMCA).

This obligation covers every investment stage, from its establishment, acquisition, expansion, management, conduct, and operation, to its sale or other disposition. The extension from the pre-establishment to the post-establishment stage (^{Herreros & García-Millán, 2017}, p. 26; ^{Nottage, 2016}, p. 323) is similar to that of articles 1102 NAFTA and 3 US Model BIT 2012, but not identical, as NAFTA prohibited States parties from imposing on an investor from another State the requirement of having a minimum level of shareholding in a company established in its territory and that of requiring an investor of another State party to sell or dispose of an investment in the territory of a party by virtue of its nationality.

Articles 9.4.3 TPP and 14.4.3 USMCA regulate NT regarding non-central government. The PA-AP does not include an analogous rule.

The TPP and USMCA clarify that whether NT or MFN treatment is granted in “like circumstances” “depends on the totality of the circumstances, including whether the relevant treatment distinguishes between investors or investments on the basis of legitimate public welfare objectives” (footnote 14 to chapter 9 TPP, articles 14.4 and 15.4 USMCA). The PA-AP does not include a similar disposition.

V.2. Most Favored Nation (MFN) Treatment

The MFN principle is enshrined in articles 20.5 PA-AP, 9.5 TPP and 14.5 USMCA. Parties to these agreements shall accord investors and covered investments a treatment no less favorable than that which they accord, in like circumstances, to investors and investments of any non-State party to the Agreement (articles 10.5.1 and 10.5.2 PA-AP, 9.5.1 and 9.5.2 TPP, 14.5.1 and 14.5.2 USMCA). Benefits have to be accorded from the pre-establishment until the post-establishment phase (^{Nottage, 2016}, p. 318).

Pursuant to footnote 6 to chapter 10 PA-AP and article 9.5.3 TPP, MFN treatment does not encompass international dispute resolution procedures or mechanisms. The USMCA does not include an analogous rule.

Article 14.5.3 USMCA refers to NT regarding non-central government, analogous to article 14.4.3. The PA-AP and the TPP do not include a similar rule.

Footnote 14 to chapter 9 TPP and article 14.5.4 USMCA clarify the meaning of “like circumstances”, as mentioned in the section on NT. The PA-AP does not.

VI.1. International Minimum Standard of Treatment

Each State party to the agreement shall accord to covered investments in its territory a treatment in accordance with applicable customary law, including fair and equitable treatment, and full protection and security (articles 10.6.1 PA-AP, 9.6.1 TPP and 14.6.1 USMCA). Annex 10.6 PA-AP, annex 9-A TPP and annex 14-A USMCA almost identically express that customary international law results from a general and consistent practice of States that they follow from a sense of legal obligation.

These annexes, however, include different definitions of "customary international law minimum standard of treatment of aliens”: while annex 10.6 PA-AP refers to “economic rights of aliens”, annex 9-A TPP and annex 14-A USMCA refer to “investments of aliens”. This substantial difference may lead to different protections of assets. Investment protection pursuant to the PA-AP may include any economic right accorded to a foreigner, while according to the CPTPP and the USMCA it would arguably be restricted to investments. Hence, the CPTPP and the USMCA would arguably not protect an investor’s economic interest that is not yet classified as "investment", in contrast to the PA. On the other hand, the broadness of the term "economic rights" could be problematic for PA parties, as it may lead to claims by investors considering the protection of the minimum level of treatment for any economic right, even if it does not meet the definition of investment pursuant to the PA-AP.

VI.2. Fair and Equitable Treatment

“Fair and equitable treatment” is enshrined in identical terms in articles 10.6.2(a) PA-AP and 9.6.2(a) TPP, and with minor differences in article 14.6.2(a) USMCA. It includes the obligation not to deny justice in criminal, civil or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the main legal systems of the world.

This principle is one of the absolute treatment standards found in international agreements on the promotion and protection of foreign investment (^{UNCTAD, 2004}, p. 73). It has been criticized because its definition and scope are not precise (^{Dolzer & Schreuer, 2012}, p. 133; ^{Herreros & García-Millán, 2017}, p. 20). That same criticism is valid regarding the PA-AP, CPTPP and USMCA, as they do not clearly define fair and equitable treatment, but only refer to it in an abstract and broad sense.

Because of this imprecision, tribunals in investment arbitrations have followed different interpretation strands of this principle, most notably Neer v. Mexico (1926), ELSI (United States of America v. Italy) (1989), and Glamis Gold v. United States of America (2009). Other tribunals, such as Mondev v United States (2002), para. 118, and Waste Management v Mexico (2004), para. 99, have undertaken a case-to-case approach and stated that it is not possible to agree upon what fair and equitable treatment ultimately means, as it all depends on the specific situations of each case (see also ^{Dolzer & Schreuer, 2012}, p. 139).

We contend that this same imprecision and vagueness may have negative effects if investment tribunals were to apply the definition of “fair and equitable treatment” pursuant to the PA-AP, CPTPP and USMCA. It will arguably have negative effects not only for State parties, but also for investors who claim a violation of this protection standard. There are no criteria to clearly establish if a violation did or did not occur, and that means that the outcome of arbitral judgements is difficult to predict. Thus, we argue that parties to the PA, the CPTPP and the USMCA should more clearly define such a provision in a convergent manner. Ideally, they should consider a unified regulation for investments. We believe that the PA Free Trade Commission, the Trans-Pacific Partnership Commission and the USMCA Free Trade Commission should jointly issue binding authentic interpretations (see below section on authentic interpretations) in order to unify the definition of “fair and equitable treatment” and force investment tribunals to interpret this principle in a convergent manner.

VI.3. Full Protection and Security

The principle of full protection and security in articles 10.6.2(b) PA-AP, 9.6.2(b) TPP and 14.6.2 USMCA requires each party to provide the level of police protection required under customary international law. This principle means a positive obligation for investment-receiving States to establish an internal regulatory framework that ensures and protects the foreign investments against possible conflicts with third parties (^{Schreuer, 2010}, p. 354; ^{Schill S. , 2016}, p. 66). Thus, the host State must guarantee physical protection and security for investors and investments against the forceful interference of privates (such as employees, commercial partners or protesters) or State organs (such as the police and armed forces) (^{Schreuer, 2010}, pp. 353-354, 368).

Article 1105 NAFTA required parties to accord full protection and security in accordance with international law, instead of customary international law. On 31 July 2001 the NAFTA Free Trade Commission issued an interpretation pursuant to articles 1131.2 and 2001.2(c) NAFTA and stated that “[t]he concepts of ‘fair and equitable treatment’ and ‘full protection and security’ do not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens” (^{NAFTA Free Trade Commission, 2001}). Interestingly, the above-mentioned PA-AP, CPTPP and USMCA rules do not follow the NAFTA text, but the NAFTA Free Trade Commission interpretation. Thus, there is a discernible trend in terms of incorporating the customary international law standard.

VII.1. Expropriation

Protection against direct or indirect expropriation is one of the bases of international investment law, as “protection against uncompensated expropriation ensures respect for property rights as a fundamental institution for market transactions” (^{Schill S. , 2016}, p. 66). This rule, which has become an investment protection standard, is contained in articles 10.12 PA-AP, 9.8 TPP and 14.8 USMCA. They follow article 1110 NAFTA and article 6 US Model BIT 2012 (^{Herreros & García-Millán, 2017}, p. 27; ^{Polanco Lazo, 2015}, p. 179). This rule is based on the “legality of expropriation” principle. It affirms that a State may expropriate foreign properties by implementing public, non-discriminatory measures that accord investors a prompt, adequate and effective compensation (^{Dolzer & Schreuer, 2012}, p. 99). The PA-AP, CPTPP and USMCA prescribe that no party shall expropriate or nationalize a covered investment either directly or indirectly through measures equivalent to expropriation or nationalization, except for non-discriminatory measures that serve a public purpose and contemplate a prompt, adequate and effective compensation in accordance with due process of law. The reference to “due process of law”, while not included in all investment treaties, expresses the minimum standard of treatment of aliens in accordance with customary international law and the principle of fair and equitable treatment (^{Dolzer & Schreuer, 2012}, p. 100), as previously mentioned. Article 10.12.1(d) PA-AP links due process of law to the minimum standard of treatment (article 10.6), whereas the CPTPP and USMCA do not.

Footnote 18 to article 10.12 PA-AP and footnote 17 to article 9.8 TPP define the scope of “public purpose” as referring to a concept of customary international law and add that domestic law may express this or a similar concept using different terms, such as “public necessity”, “public interest”, or “public use”, while the PA-AP adds “social interest”. The USMCA does not include an analogous rule.

Annexes 10.12 PA-AP, 9-B and 9-C TPP, and 14-B USMCA regulate the interpretation of articles 10.12 PA-AP, 9.8 TPP and 14.8 USMCA. Such annexes are fairly common in investment agreements in order to narrow down the spectrum of possible interpretations that arbitral tribunals may adopt, for instance regarding the controversial term “indirect expropriation” (^{Nottage, 2016}, p. 318).

VII.2. Compensation

Articles 9.8.1(c) TPP and 14.8.1(c) USMCA state that expropriation must include prompt, adequate and effective compensation, whereas article 10.12.1(c) PA-AP does not. Articles 10.12.2 to 10.12.4 PA-AP, 9.8.2 to 9.8.4 TPP and 14.8.2 to 14.8.4 USMCA are virtually identical, as they specify the requirements for a compensation and whether compensation is denominated in a freely usable or non-freely usable currency. Articles 10.12.5 PA-AP, 9.8.5 TPP and 14.8.6 USMCA exclude the application of these rules to certain intellectual property rights, albeit in slightly different terms due to the fact that the PA-AP does not include a chapter on intellectual property.

In contrast to articles 10.12 PA-AP and 14.8 USMCA, article 9.8.6 TPP adds that, subject to certain requirements, a State’s decision on subsidies and grants in general does not constitute an expropriation. Thus, article 14.8 USMCA follows article 10.12 PA-AP more closely than article 9.8 TPP.

Article 14.8.5 USMCA includes an interpretation rule to determine if an action constitutes an expropriation, whereas the PA-AP and TPP do not.

Article 1110.2 NAFTA included valuation criteria for compensation. Somewhat surprisingly, the PA-AP, CPTPP and USMCA do not. Hence, arbitral tribunals will have to decide a valuation method for themselves.

There are still some gaps. Most importantly, the PA-AP, CPTPP and USMCA do not set a timeframe for determining when a compensation is paid “without delay”, they do not define who will assess those investments or how to assess them, among other issues. Parties to these agreements should answer such questions for these provisions to work properly and for these agreements to become an investment protection standard. If they do not, legal uncertainties and gaps may lead to disputes between States and investors. This, in turn, will most probably hinder investments in the Asia-Pacific region.

VII.3. Transfers

Another investment protection rule relates to transfers. Protection guarantees for capital transfers safeguards investors so that they freely transfer resources required for an investment and capital revenues from and to the host State territory. A transfer guarantee ensures “the free flow of capital and contributes to an efficient allocation of resources in a global capital market” (^{Schill S. , 2016}, p. 66).

Articles 10.11 PA-AP, 9.9 TPP and 14.9 USMCA include this protection rule in similar terms. Articles 1109 NAFTA and 6 US Model BIT 2012 also include this standard clause. Articles 10.11.1 to 10.11.3 PA-AP, 9.9.1 to 9.9.3 TPP and 14.9.1, 14.9.2 and 14.9.4 USMCA contain almost identical example lists of covered transfers, rules on currency and rules on written agreements. Pursuant to articles 10.11.4 PA-AP and 19.4.3 USMCA, States may not require investors to make transfers, nor impose sanctions if investors do not make transfers; the CPTPP does not include an analogous provision. Articles 10.11.5 PA-AP, 9.9.5 TPP and 14.9.6 USMCA contain almost identical rules on transfers in kind, while articles 10.11.6 PA-AP, 9.9.4 TPP and 9.14.5 USMCA show some differences regarding transfer restrictions.

It is important to stress that investors will have to consider the domestic rules of PA and CPTPP parties, for example as stated in annex 10.11 PA-AP and annexes 9-E and 9-F TPP (there is no analogous USMCA annex). In our view, Chile’s reserved rights about restrictions or limitations on payments and transfers are compatible with the obligation to permit transfers “to be made freely and without delay into and out of its territory” according to articles 10.11.1 PA-AP and 9.9.1 TPP. However, we contend that, by analogy with articles 10.11.6 PA-AP and 9.9.4 TPP, those laws should be applied in good faith and in an equitable and non-discriminatory manner. We think that this interpretation is consistent with a discernible trend in these treaties towards respecting the States’ regulatory space. However, we concede that it would also be plausible to argue that those reservations are “incompatible with the object and purpose of the treaty”, according to article 19(c) Vienna Convention on the Law of Treaties.

IX.1. Consultation and Negotiation

A dispute settlement starts with the claimant’s written request for consultations (articles 10.15.2 PA-AP and 9.18.2 TPP). The USMCA does not specify how the dispute starts, but article 14.D.2.1 implies that the claimant requests consultations.

The consultation and negotiation phase is mandatory pursuant to article 10.15 1 PA-AP and optional according to article 14.D.2.1 USMCA. Despite the Spanish version using an indicative verb (“deben”), this phase is not mandatory pursuant to article 9.18.2 TPP, as the English version uses a conditional verb (“should”) and the English text prevails (article 30.8 TPP).

Consultations and negotiations are important as they provide investors with alternative dispute settlement mechanisms, including non-binding, third party procedures, such as good offices, conciliation or mediation.

IX.2. Submission of a Claim to Arbitration

Article 14.D.3.1 USMCA allows claims regarding breaches of NT or MFN treatment (with certain exceptions), or rules on direct expropriation (defined in annex 14-B, section 2), that have caused loss or damage to the claimant, thus excluding absolute standards and indirect expropriation. For Mexico and the US, full ISDS protection is only available pursuant to annex 14-E, i.e., regarding certain sectors including oil and natural gas, power generation, telecommunications and transportation services, and certain physical infrastructures. Article 10.16.1 PA-AP allows claims for breaches of any substantive obligations that have caused loss or damage to the claimant. Article 9.19.1 TPP allows claims for breaches of substantive obligations, an investment authorization or agreement, that have caused loss or damage to the claimant. Thus, the scope under USMCA is the narrowest, and under CPTPP the broadest.

Article 9.19.2 TPP allows States to make counterclaims, whereas PA-AP and USMCA do not.

The agreements have very similar rules on the next procedural steps (articles 10.16.2 to 10.16.7 PA-AP, 9.19.3 to 9.19.7 TPP, and 14.D.3.2 to 14.D.3.6 USMCA). The claimant has to deliver to the respondent a written notice of their intention to submit a claim to arbitration 90 days before submitting the claim. The claimant may choose arbitration under ICSID or UNCITRAL and, if both parties agree, any other arbitration institution and rules. The agreements include rules on when a claim is deemed submitted to arbitration, on temporal validity of procedural rules, and on arbitrator appointment.

IX.3. Consent to Arbitration and its Limitations

Rules on consent to arbitration are virtually identical (articles 10.17 PA-AP, 9.20 TPP and 14.D.4 USMCA).

Rules on consent limitation include different time limits. No claim shall be submitted to arbitration if more than three years (article 10.18.1 PA-AP), three years and six months (article 9.21.1 CPTPP), or four years (article 14.D.5.1(c) USMCA), have elapsed from the date on which the claimant first acquired or should have acquired knowledge of the alleged breach and the loss or damage.

Rules on the consent to the procedures, waiver submission and interim injunctive relief are virtually identical (articles 10.18.2 to 10.18.3 PA-AP, 9.21.2 9.21.3 TPP and 14.D.5.1(d) and (e) to 14.D.5.2 USMCA).

One of the more striking disparities relates to ISDS and national proceedings. Article 10.18.4 PA-AP adds an exclusionary rule on forum choice. If the claimant has previously submitted their claim to any other tribunal (including national tribunals), it will preclude an arbitration under the PA-AP. Annex 9-J TPP includes an analogous rule, but only applicable to certain parties including Chile, Mexico and Peru. Thus, in this regard annex 9-J TPP guarantees normative convergence for the three States that are parties both to the PA and the CPTPP. In contrast, article 14.D.5.1 USMCA requires the investor to first initiate a proceeding before national courts or administrative tribunals of the responding State, to obtain a final decision from a court of last resort of the respondent (unless such recourse is obviously futile) or wait for 30 months from the date the proceeding was initiated. Thus, there is a lack of normative convergence for Mexico regarding these agreements.

The claimant has four years (48 months) from the time they knew or should have known of the alleged infringement and the loss or damage. Proceedings before a national court may take 30 months at the most. Therefore, it follows from Article 14.D.5.1 USMCA that a diligent claimant should initiate a proceeding before national courts or tribunals no later than 18 months after they knew or should have known of the alleged infringement and the loss or damage. That is arguably a strict timeframe.

IX.4. Selection of Arbitrators

Articles 10.19.1 and 10.19.3 to 10.19.5 PA-AP, 9.22.1 to 9.22.4 TPP and 14.D.6.1 to 14.D.6.4 USMCA contain similar rules for selecting arbitrators, albeit the PA-AP includes a longer period before the Secretary General appoints the arbitrator. Professional requirements for arbitrators differ (articles 10.19.2 PA-AP, 9.22.5 TPP and 14.D.6.5 USMCA), but all agreements stress that arbitrators shall be independent (articles 10.19.2 PA-AP, 9.22.6 TPP and 14.D.6.5(b) USMCA).

Article 9.22.6 TPP elaborates on a code of conduct and conflicts of interest, while article 14.D.6.6 USMCA refers to challenges to arbitrators.

IX.5. Conduct of the Arbitration

The agreements contain several very similar rules con the conduct of the arbitration. Article 14.D.7.10 USMCA makes clear that arbitrations shall be expeditious and cost-effective.