INVESTMENT PROVISIONS IN THE KOREA FTA: A RADICAL SHIFT OF POWER TO FOREIGN INVESTORS

The report by the Center for International Environmental Law (CIEL) contends that the Korea-U.S. FTA violates the Trade Act of 2002 by providing foreign investors with greater substantive rights than U.S. investors. It specifically criticizes new expropriation tests, the classification of all contract rights as property rights, and the use of secretive investor-state dispute settlement mechanisms. CIEL warns that these provisions allow ad hoc arbitral tribunals to override good faith public interest regulations, particularly in emerging technology sectors like biotechnology and nanotechnology, while lacking a general environmental exception.

• The Korea FTA introduces two new tests for indirect expropriation—whether a regulatory action is "extremely severe" or "disproportionate in light of its purpose of effect"—which the author claims have no precedent in U.S. or international investment law.
• The agreement's language regarding investment-backed expectations may lead to unwarranted findings of expropriation in heavily regulated sectors, potentially impacting regulations on emerging technologies such as biotechnology or nanotechnology.
• The Korea FTA includes a "special sacrifice" concept, described as a Korean legal concept based on German law, which the author argues increases the risk that good faith regulatory measures will be deemed compensable expropriations.
• A Confirming Letter associated with the FTA establishes that all contract rights are property rights, making them eligible for investor-State arbitration and potentially removing contract disputes from the U.S. judicial system.
• The report asserts that the Korea FTA violates the Trade Act of 2002, which mandates that foreign investors not be accorded greater substantive rights than U.S. investors in the United States.
• The dispute settlement mechanism is criticized for relying on UNCITRAL rules, which the author claims are inconsistent with transparency and public participation compared to ICSID rules.
• The document highlights a lack of a general environmental exception in the investment chapter, noting that while tax laws have a carve-out from expropriation provisions, environmental and public health regulations do not.

APA

Center for International Environmental Law (n.d.). INVESTMENT PROVISIONS IN THE KOREA FTA: A RADICAL SHIFT OF POWER TO FOREIGN INVESTORS. https://www.ciel.org/wp-content/uploads/2015/06/Korean_FTA_17Mar2009.pdf

Chicago

Center for International Environmental Law. INVESTMENT PROVISIONS IN THE KOREA FTA: A RADICAL SHIFT OF POWER TO FOREIGN INVESTORS. n.d. https://www.ciel.org/wp-content/uploads/2015/06/Korean_FTA_17Mar2009.pdf.

Wikipedia

{{cite report |author=Center for International Environmental Law |title=INVESTMENT PROVISIONS IN THE KOREA FTA: A RADICAL SHIFT OF POWER TO FOREIGN INVESTORS |url=https://www.ciel.org/wp-content/uploads/2015/06/Korean_FTA_17Mar2009.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{centerforinternationalenvironmentallawndinvestment, author = {{Center for International Environmental Law}}, title = {{INVESTMENT PROVISIONS IN THE KOREA FTA: A RADICAL SHIFT OF POWER TO FOREIGN INVESTORS}}, institution = {Center for International Environmental Law}, url = {https://www.ciel.org/wp-content/uploads/2015/06/Korean_FTA_17Mar2009.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }