Report on Jail Visit
and Interview
Submitted by:
Elmond O Monteron
IV- Arellano
Submitted to:
Atty Vivien Ines-Mostrales
Public Attorneys Office
3 June 2019
Introduction
In the advent of technology, business and other organizations
develop international trade relations through bilateral agreements
which can help in trade and economic growth. Philippines
strategically position itself in the global arena by entering into
these bilateral trade agreements. Two of these Agreements are between
Philippines and United Kingdom and Philippines and Australia which
entered into force on 2 January 1981 and 25 January 1995, respectively.
Both Agreements are entered into for the promotion and protection
of investments. As expressly stipulated in the preface, both
agreements intend with all the generally accepted international
principles of mutual benefit for the furtherance of their investments.
It may be gleaned in the prefatory statements that the purpose and
intent of the Agreements is to promote and protect investments,
however, the agreements failed to refer on the issue on sustainable
development and cover other social investment aspects such as human
rights, labor and poverty reduction.
Definition of Terms
In the bilateral trade agreements signed and entered into force,
there is a list of definitions within which should be referred from
time to time by the contracting parties for the proper application
and implementation of the agreements.
In the case between Philippines and United Kingdom and
Philippines and Australia, they defined investment as ‘‘every kind of
asset’’. The definition also enumerates a list of assets that can be
classified as an investment. For it to be considered as an asset, it
must first fit the definition of an asset which is further defined as
a resource controlled by an entity by which future economic benefits
are expected to flow to the entity. It cannot be considered as an
asset if in the first place it will not add value to the entity as a
whole.
Both Agreements in their definition of investments include the
following: (i) movable and immovable property and any other property
rights such as mortgages, liens and pledges; (ii) shares, stocks and
debentures of companies or interests in the property of such
companies; (iii) claims to money or to any performance under contract
having financial value; (iv) intellectual property rights and
goodwill; and (v) business concessions conferred by law or under
contract. However, in the Agreement between the Philippines and
Australia it included the purchase and sale of foreign exchange as an
investment. Further, their definition of investment is not exclusive
and does not exclude other specific assets. The absence of the required
characteristic of an investment is also lacking in the definitions in
both Trade Agreements.
In terms of revenue recognition, the Agreement with Australia
used the term ‘’return’’ which includes revenue generated from
management or technical assistance fee, payments in connection with
intellectual property rights and other lawful income. On the other
hand, the Agreement with United Kingdom used ‘’earning’’ and do not
include gross income from intellectual property rights.
In defining who shall be considered as investors for the purpose
of the Agreements, both agreements includes permanent residents, does
not exclude dual national, includes requirement of substantial
business activity and does not define ownership and control of legal
entities.
Consequently, denial of benefits clause is included in the
Agreement between Philippines and Australia but not with the Agreement
with United Kingdom. Denial of benefit clauses are generally designed
to exclude from treaty protections nationals of third States which,
through mailbox or shell companies, seek to benefit from provisions
that the State parties to the treaty did not intend to grant
them. However, the denial of benefit clause thus not provide
‘‘substantive business operations’’ criterion and does not apply to
investors from States with no diplomatic relations or under economic
or trade restrictions.
Scope of the Treaty
The application of the Agreements specifically provides for
the territorial and citizen requirements that should be met to be
covered by the bilateral trade agreements.
Standards of Treatment
As provided in the Sustainability Toolkit for Trade Negotiators,
most investment treaties, states commit to providing FET or MST to
foreign investors. It has become a controversial provision, as it can
become a “catch-all” clause for investors, allowing them to succeed
where their expropriation, non-discrimination and other claims have
failed. Typically the wording of the treaty does not offer detailed
guidance on how dispute settlement bodies should interpret these
provisions, resulting in widely differing interpretations—some of
which are expansive—and lack of legal security for host states. A
particular problem in this respect is the notion of investors’
“legitimate expectations,” pursuant to which several tribunals have
struck down the denial of environmental permits, arguing that the
investor had a legitimate expectation to be granted such a permit.
Both investment agreements includes unqualified fair and
equitable treatment (FET) clause. Such a formulation would not modify
the interpretation of the FET standard; it merely lists both standards
of treatment in the same provision. The unqualified approach has given
rise to the question of whether the FET clause formulated in this way
can be interpreted in the light of the minimum standard of treatment
of aliens under customary law or whether it refers to an unqualified
autonomous standard that can be interpreted on a case-by-case basis
by reference to general notions of fairness and equity. On the one
hand, there is evidence suggesting that even an unqualified FET
obligation should be equated to the minimum standard of treatment
under customary law.
