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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

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


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


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.