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An investment is an asset or item that is purchased with the hope that it will generate

income or will appreciate in the future. In an economic sense, an investment is the purchase of
goods that are not consumed today but are used in the future to create wealth. In finance, an
investment is a monetary asset purchased with the idea that the asset will provide income in the
future or will be sold at a higher price for a profit.

The Agreement on Trade-Related Investment Measures (TRIMs) are rules that apply to
the domestic regulations a country applies to foreign investors, often as part of an industrial

The agreement, concluded in 1994, was negotiated under the WTO's predecessor,
the General Agreement on Tariffs and Trade (GATT), and came into force in 1995. The
agreement was agreed upon by all members of the World Trade Organization. Trade-Related
Investment Measures is one of the four principal legal agreements of the WTO trade treaty.

TRIMs are rules that restrict preference of domestic firms and thereby enable
international firms to operate more easily within foreign markets. Policies such as local content
requirements and trade balancing rules that have traditionally been used to both promote the
interests of domestic industries and combat restrictive business practices are now banned.

The History

In the late 1980s, there was a significant increase in foreign direct investment throughout
the world. However, some of the countries receiving foreign investment imposed numerous

restrictions on that investment designed to protect and foster domestic industries, and to prevent
the outflow of foreign exchange reserves.

Examples of these restrictions include local content requirements (which require that
locally produced goods be purchased or used), manufacturing requirements (which require the
domestic manufacturing of certain components), trade balancing requirements, domestic sales
requirements, technology transfer requirements, export performance requirements (which require
the export of a specified percentage of production volume), local equity restrictions, foreign
exchange restrictions, remittance restrictions, licensing requirements, and employment

Until the completion of the Uruguay Round negotiations, which produced a well-rounded
Agreement on Trade-Related Investment Measures (hereinafter the "TRIMs Agreement"), the
few international agreements providing disciplines for measures restricting foreign investment
provided only limited guidance in terms of content and country coverage. The OECD Code
on Liberalization of Capital Movements, for example, requires members to liberalize restrictions
on direct investment in a range of areas. The OECD Code's efficacy, however, is limited by the
numerous reservations made by each of the members.

In addition, there are other international treaties, bilateral and multilateral, under which
signatories extend most-favored-nation treatment to direct investment. Only a few such treaties,
however, provide national treatment for direct investment. The Asia-Pacific Economic
Cooperation Investment Principles adopted in November 1994 are general rules for investment
but they are non-binding.

The Systemic Values in the WTO

The establishment of the WTO at the end of the Uruguay Round of Trade Negotiations
was hailed as a new era for international trade because it envisaged a shift from the regulation of
international trade on a so-called trade policy basiswhere each nation-state sought to achieve
or project its interests in global trade using its political and economic powerto a rules-based

This shift is reflected in the make-up of the WTO, which consists of two parts:

The first is comprised of a number of WTO agreements that contain a wide range of
substantive obligations that constrain nation-states in how they can treat foreign traders,
products, and service suppliers within their territory; the second part comprises the
organizational element of the WTO, which is made up of a number of decision-making bodies,
the WTO Ministerial Conference, General Council, WTO Dispute Settlement Body, and the

The WTO as an organization possesses a separate legal personality under international

law from WTO Member States. This separate personality gives the organization the capacity to
develop its own interest by reference to the WTO systemwhat I call the systemic interest
that is independent from that of WTO Members. Because the WTO Ministerial Conference,
General Council, and Dispute Settlement Body are comprised of WTO Member States, the main
WTO organs that are able to develop and seek the implementation of a systemic interest are the
WTO judiciary (Appellate Body and Panels) and the Secretariat.

There are three main areas of work in the WTO on trade and investment:

1. Working Group on the relationship between trade and investment

The Working Group on the Relationship between Trade and Investment was established
during the 1996 Ministerial Conference in Singapore to examine the relationship between trade
and investment. There is no negotiation of new rules or commitments.

The Role of WTO

Work in the WTO on investment and competition policy issues originally took the form
of specific responses to specific trade policy issues, rather than a look at the broad picture.

Decisions reached at the 1996 Ministerial Conference in Singapore changed the
perspective. The ministers decided to set up two working groups to look more generally at how
trade relates to investment and competition policies.

The working groups tasks were analytical and exploratory. They would not negotiate
new rules or commitments without a clear consensus decision.

The ministers also recognized the work underway in the UN Conference on Trade and
Development (UNCTAD) and other international organizations. The working groups were to
cooperate with these organizations so as to make best use of available resources and to ensure
that development issues are fully taken into account.

2. Agreement on Trade-Related Investment Measures (TRIMs)

One of the Multilateral Agreements on Trade in Goods, prohibits trade-related investment

measures, such as local content requirements, that are inconsistent with basic provisions of
GATT 1994.

This Agreement, negotiated during the Uruguay Round, applies only to measures that
affect trade in goods. Recognizing that certain investment measures can have trade-restrictive
and distorting effects, it states that no Member shall apply a measure that is prohibited by the
provisions of GATT Article III (national treatment) or Article XI (quantitative restrictions).

`The content of paragraph GATT Article III (national treatment) or Article XI (quantitative
restrictions) is

- 2(a) of the Illustrative List covers measures which limit the importation by an enterprise of
products used in its local production, generally or to an amount related to the volume or
value of local production exported by the enterprise. There is a conceptual similarity
between this paragraph and paragraph 1(b) in that they both cover trade-balancing measures.
The difference is that paragraph 1(b) deals with internal measures that affect products after
they have been imported, while paragraph 2(a) deals with border measures affecting the
importation of products.

- 2(b) of the list involve a restriction of imports in the form of a foreign exchange balancing
requirement. Importation by an enterprise of products used in or related to local production
is limited by restricting the enterprise's access to foreign exchange to an amount related to
the foreign exchange inflows attributable to the enterprise.

- 2(c) covers measures involving restrictions on the exportation of or sale for export by an
enterprise, whether specified in terms of particular products, volume or value of products or
in terms of a proportion of volume or value of its local production.

Since paragraph 2 applies the provisions of Article XI:1 of GATT 1994, it deals only
with measures that restrict exports. Other measures relating to exports, such as export
incentives and export performance requirements, are therefore not covered by the TRIMs

3. The General Agreement on Trade in Services addresses foreign investment in

services as one of four modes of supply of services.

The General Agreement on Trade in Services (GATS) Four Modes of Supply comprises:

Mode 1 Cross border trade, which is defined as delivery of a service from the territory of one
country into the territory of other country;
Mode 2 Consumption abroad - this mode covers supply of a service of one country to the
service consumer of any other country;
Mode 3 Commercial presence - which covers services provided by a service supplier of one
country in the territory of any other country, i.e., foreign direct investment undertaken by a
service provider;
Mode 4 Presence of natural persons - which covers services provided by a service supplier
of one country through the presence of natural persons in the territory another economy.

Statistics which correspondent to the GATS Four Modes of Supply comprise quantitative data

Trade in services, which is defined as delivery of a service from the territory of one country
into the territory of other country, specific disaggregation as per GATS Four Modes of
Supply may not apply, i.e., this depends on decisions taken by each country;

Foreign direct investment (FDI) Cross-border foreign investment as per International
Monetary Fund guidelines. Roughly correspondent to Mode 3
Foreign Affiliate Trade Statistics (FATS) Statistics, or corporate data detailing the
operations of foreign direct investment-based enterprises, including sales, expenditures,
profits, value-added, inter- and intra-firm trade, exports and imports; Roughly correspondent
to Mode 3

Statistics which detail commercial services trade taking place under the GATS are in a state of
development in most countries. Most countries don't have information which details trade as per
the GATS Four Modes of Supply, which makes trade negotiations in this realm difficult,
especially for developing country WTO members. The United States Bureau of Economic
analysis produces rich statistics in this area, but they do not address the GATS Four Modes of
Supply directly, rather, they address only cross-border services, generally defined, and statistics
related to FDI. FATS, are collected by the United States BEA, and several other OECD

The close relationships between trade and investment and competition policy have long
been recognized. One of the intentions, when GATT was drafted in the late 1940s, was for rules
on investment and competition policy to exist alongside those for trade in goods.

Over the years, GATT and the WTO have increasingly dealt with specific aspects of the
relationships. For example, one type of trade covered by the General Agreement on Trade in
Services (GATS) is the supply of services by a foreign company setting up operations in a host
country i.e. through foreign investment. The Trade-Related Investment Measures
Agreement says investors right to use imported goods as inputs should not depend on their
export performance.

The same goes for competition policy. GATT and GATS contain rules on monopolies
and exclusive service suppliers. The principles have been elaborated considerably in the rules
and commitments on telecommunications. The agreements on intellectual property and services
both recognize governments rights to act against anti-competitive practices, and their rights to
work together to limit these practices.

Issues of Legal Regulation of Investment Activities within the Frameworkof the WTO and
National Investment Legislation

The report of the working group on the Accession of the russian Federation to the wto, which
was published in November 2011, noted that the policy of the russian government was to
establish conditions for the growth of national and foreign investments as well as transparent and
sustainable rules for implementation of economic activities. These formed the basis
forinvestment legislation in the russian Federation after accession to the wto.within the
framework of the wto, which details conditions for development of investment activities, is
compliance of national legislation with the WTO norms. this feature is reflected in Art. II(2) of
the wto Agreementwhich provides that agreements and associated legal documents constitute an
integral part of this agreement and are obligatory for every member. At present, the legal acts
regulating investment activities in the russian Federation are: Federal Law No. 160-FZ of July 9,
1999, on Foreign Investments in the russian Federation[hereinafter Federal Law No. 160-FZ]
(aimed at raising and efficient use in the russian economy of foreign material and financial
resources, cutting-edge equipment and processes, managerial experience, sustainable conditions
for activities of foreign investors and compliance of the legal regime with foreign investment
norms of international laws and international practice of investment cooperation); rsFsr Law No.
1488-I of June 26, 1991, on Investment Activities in the rsFsr(aimed at efficient functioning of
the state economy of the russian Federation and equal protection of the rights, interests and
property of subjects of investment activities regardless of the ownership forms); and Federal Law
No. 39-FZ of February 25, 1999, on Investment Activities in the russian Federation in the Form
of Capital Investments[hereinafter Federal Law No. 39-FZ] (defining legal and economic basis
for investment activities in the form of capital investments within the russian Federation, as well
as providing guarantees of equal protection of rights, interests and property of subjects of
investment activities in the form of capital investments regardless of the ownership forms). In
our view, given the conditions imposed on the russian Federation as a wto member, Federal Law
No. 160-FZ should be cancelled. this is due to the fact that the wto agreements are aimed at
application of the national regime to all agents involved in economic activities regardless of
nationality. Federal Law No. 160-FZ is also questionable due to the norm provisioned in Art. 10

which states that disputes involving foreign investors that arise from implementation of
investment and entrepreneurial activities within the russian Federation are to be settled in
accordance with international treaties of the russian Federation and federal laws in the court or
by international arbitration (mediation court). however, Federal Law No. 160-FZ says nothing
about investment disputes (there is no definition of investment dispute in the law).Article 8 of
Federal Law No. 39-FZ provides that connections between subjects of investment activities are
based on a contract and / or state contract between the same in accordance with the Civil Code of
the russian Federation. however, such a contract is not named in accordance in the Civil Code of
the russian Federation. According to legal scientists, the list of named contracts in the legislation
of any state always lags behind the needs of turnover, especially in the russian economy which is
undergoing significant changes.Lack of legal regulation of investment contracts at federal level
promoted the development of investment legislation of subjects of the russian Federation. At
present, almost all subjects of the russian Federation have regulatory legal documents regulating
a contract in the area of investment. Legal regulation of investments at the

level of subjects is provisioned due to the need for the establishment of favorable conditions for
investment raising, and thus the social and economic development of regions. this situation is a
significant factor affecting the investment climate in russia in general. Its complex system of
regional legislation means that russia was number 101 in the global rating of investment appeal
in 2014. Analysis of the legislation of subjects of the russian Federation allows for theconclusion
that special legal regulation is required for investment agreements with the participation of
public legal entities. According to A.g. Bogatyrev, the presence of the said public legal aspect in
contractual liaisons results in disputes with regard to the legal nature of investment contracts. A
complex approach also exists for determining the legal nature of investment contracts, according
to which, due to complexity of regulation, it is impossible to classify investment agreements /
contracts as agreements / contracts with an international public legal nature or administrative
and civil nature in national law directly. In our view, given the specific features of investment
agreements, such obligations fall in the area of private legal regulation that is implemented by
the russian Federation according to the Constitution of the russian Federation. thus, at present,
federal standardization of the legislation on investment agreements is acute, which would
promote an improvement in russias investment appeal as well as the development of civil
turnover. A specific characteristic of legal regulation of investment activities within the

framework of the wto is that the wto package contains no multilateral investment agreement
aimed at regulation of investments. The wto norms regulating investments are provisioned in
gAts and trIMs, as well as in the trIPs. GAts mainly regulates trade liaisons in the area of
services. Article I provides forms of service rendering, including establishment of representative
offices in foreign states, which is a type of foreign investment protected by international
investment agreements. Article II sets out the most favorable regime, which is also an important
rule of international investment law. Another document that regulates particular investment
activities is trIMs. In this agreement, investment measures mainly include an obligation on the
state to insert into national legislation privileges required for the implementation of investment
measures pertaining to trade. For example, trIMs provides for an obligation on service providers
to purchase products of national manufacturers and a limitation on their ability to buy or use
imported products. A brief analysis of the wto norms that regulate investment activities reveal
that within the framework of the wto, legal regulation of investment activities mainly concerns
access to the national markets and liberalization of the regime for foreign investments and not
protection of the rights of foreign investors. the wto norms also provide for the right of member
states to independently select sectors of the economy that they may withdraw from the national
regime or the most favorable regime, which may also potentially reduce the rights of foreign
investors. on this basis, one may conclude that signing an investment agreement is required
within the framework of the wto to provide for a legal mechanism (based on the norms of
international investment law) to protect rights of foreign investors acting within the framework
of the wto.

Wikipedia. (n.d.). Retrieved 05 11, 2017, from Agreement on Trade-Related Investment Measures:

World Trade Organization. (n.d.). Retrieved 05 11, 2017, from Trade and Investment :