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

This report by the Center for International Environmental Law (CIEL) argues that the investment provisions of the Korea-U.S. Free Trade Agreement (Korea FTA) grant foreign investors substantive rights exceeding those of U.S. investors, thereby violating the Trade Act of 2002. The author contends that new tests for indirect expropriation and the expansion of arbitral jurisdiction over contract rights threaten the ability of governments to regulate for public health, safety, and the environment.

• The Korea FTA introduces new tests for indirect expropriation that the author claims are unprecedented in U.S. or international law and provide arbitrators excessive discretion to invalidate good faith regulations. These tests determine if a regulatory action is "extremely severe" or "disproportionate in light of its purpose of effect."
• The agreement includes a 'Confirming Letter' that expands the scope of investor-State arbitration by declaring that all contract rights are property rights. The author argues this removes contract disputes from the U.S. judicial system and allows challenges to the granting or refusal of environmental, health, and safety permits.
• The report asserts that the Korea FTA violates the Trade Act of 2002, which mandates that foreign investors not be granted greater substantive rights than U.S. investors. The author cites the new expropriation tests and the introduction of the 'special sacrifice' concept—a Korean legal concept based on German law—as evidence of this violation.
• The author identifies a lack of a general environmental exception in the investment chapter, which they argue threatens the public interest. While the agreement provides a carve-out for tax laws under Article X.3, it does not provide a similar mechanism for environmental or public health regulations.
• The report criticizes the dispute settlement mechanisms for lacking transparency and public participation, specifically noting that references to UNCITRAL rules are inconsistent with these values. The author suggests that the International Centre for Settlement of Investment Disputes (ICSID) would be a more transparent alternative.
• The Investment Chapter subjects investment authorizations and agreements to compulsory arbitral jurisdiction, which the author claims undermines domestic legal systems. This includes disputes over public assets and services such as water treatment, power generation, and natural resources like oil, gas, and timber.

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} }