New Pak-German Treaty to Promote and Protect Investment

New Pak-German Treaty to promote

And Protect Investment

(By Shahid A. Kamal)

          The Federal Republic of Germany and the Islamic Republic of Pakistan signed an “Agreement of the Encouragement and Reciprocal Protection of Investments” on December 01, 2009 to enhance bilateral relations in the economic, trade and investment fields. The new Agreement has replaced the old version of the Bilateral Investment Treaty (BIT) signed fifty years back in November, 1959 by both countries. Pakistan was the first country with whom the Federal Republic of Germany signed Bilateral Investment Treaty (BIT) after the 2^nd World War. This BIT was also the first one in the world that provided an adequate mechanism of reciprocal protection of investments, setting the precedent to be followed by other countries.

          Both the countries felt the need of reviewing this 50 years old treaty with a view to update and rewrite its various clauses bringing them in line with modern day requirements. After detailed review and deliberations, the new Treaty was finalized and signed by the respective Federal Ministers of both the countries on the eve of Prime Minister Syed Yousuf Raza Gilani’s official visit to Germanyfrom November 30 to December 03, 2009.

The modern version of the investment treaty has opened a new chapter in the bilateral economic relationship. The agreement provides legal protection for investment in both countries including non-discriminatory treatment, respect for private property, transparency and the international arbitration of disputes. It would strengthen bilateral engagement in area of investment and would give confidence to German investors to look towards Pakistan as a destination to make profitable investments and expand their business.

Some of the important features of the treaty pertain to providing fair and equitable treatment to the investment by investors of the other contracting state and shall provide full protection and security in accordance with customary international law. Returns on investment and re-investment shall enjoy the same

protection as the investment. Both the countries shall facilitate the investors of each

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other countries with regard to their entry, sojourn and employment pertaining to their investments within the framework of their respective national legislation.

 The agreement binds both the countries to respect and protect intellectual property rights of the investors of each other in accordance with their national legislation, rules and regulations. Both the countries shall not accord less favourable treatment to the investors and the investments of each other countries than that they accord to their own investors and their investment or to investors and investments of any third state in their respective countries.

       Investment by investors of either state shall not be expropriated, nationalized or subjected to any other measure tantamounting to expropriation or nationalization in the territory of the other state except for the public benefit and against compensation. Investors of either state shall enjoy most-favoured-nation treatment in the territory of other state with regard to investment losses and compensation, indemnification and restitution thereof owing to war or other armed conflict, revolution, a state of national emergency or revolt.

The investors of each other country shall also not be accorded treatment less favourable than the treatment to be accorded to the contracting state’s own investors as regards to restitution, indemnification, compensation or other valuable consideration in case of investment losses due to war, armed conflict or revolt. Both the countries shall guarantee all transfers relating to an investment to be made freely and without delay into and out of its territory with applicable rate of exchange on the day of transfer.

 The German Government has already restored extending investment guarantees to German investors for Pakistan, which it stopped a few years back, and now this agreement, has restored the confidence of German Investors. One hopes that these positive developments will promote active partnership between the two countries and contribute to the enhancement of bilateral economic relations. 

(The writer is Ambassador of Pakistan to Germany)

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