Pact between Hong Kong, ASEAN offers investment protection

investment protection

The agreement on investment among the governments of the Hong Kong Special Administrative Region and member states of the Association of Southeast Asian Nations (ASEAN) introduces investment protection and transfer guarantees for investments between Vietnam, Laos, Myanmar, Singapore, Thailand and Hong Kong from 17 June 2019.

Hong Kong and ASEAN cross-border investors will enjoy investment safeguards in the form of fair and equitable treatment and full protection and security, compensation for expropriation, and compensation for losses and damages relating to armed conflict, civil strife, revolution, or a state of emergency.

Cross-border transfers related to covered investments will be allowed “freely and without delay”. In order to take advantage of the so-called AHK-IA agreement, party investors must receive investment approval from the appropriate authority for their investment. Covered investments include property, shares, stocks, bonds and debentures, intellectual property rights, claims to money or to any contractual performance, and business concessions with financial value.

Investment protection

The AHK-IA protects investments from discriminatory treatment as well as
providing fair and equitable access to legal or administrative proceedings, and full physical protection and security. Investors may be eligible for compensation where investments are expropriated or damaged by armed conflict, civil strife, revolution, or a state of emergency.

Guarantee on transfers and returns

Cross-border transfers related to investments are to be made “freely and without delay” and include:

  1. Contributions to capital;
  2. Profits, capital gains, dividends, royalties, licence fees, technical assistance, technical and management fees, and interest;
  3. Proceeds from total or partial sale, or liquidation;
  4. Remuneration of personnel engaged from abroad;
  5. Payments made under a contract, including a loan agreement; and
  6. Other payments including expropriation payments, compensations for losses and damages relating to armed conflict, civil strife, revolution, or a state of emergency; or payments arising out of the settlement of a dispute.

Transfers shall be allowed in a freely usable currency, at the market exchange rate. However, freedom to transfer may be limited in cases involving bankruptcy or insolvency, securities trading, criminal offences, financial regulatory oversight, ongoing adjudication, taxation and social insurance, and employee severance entitlements.

Next steps

Some terms of the AHK-IA remain undecided, in particular guidelines applicable to investor-state dispute settlements will be determined by the parties by 17 June 2020, unless otherwise extended.

The AHK-IA will enter into force for the remaining signatories – Brunei Darussalam, Cambodia, Indonesia, Malaysia and the Philippines – at a later date, following their respective domestic ratification process.

The AHK-IA is part of a wider process of economic integration and trade liberalization between Hong Kong and ASEAN, as initiated by the ASEAN-Hong Kong, China Free Trade Agreement (AHK FTA). The AHK FTA entered into force on 11 June 2019 for Hong Kong, Vietnam, Laos, Myanmar, Singapore and Thailand, and will reduce or eliminate customs duties across various industries, as well as permit greater market access for services.

Hong Kong is the leading foreign investor into Vietnam for 2019 with US$5.08 billion invested from January through to May of this year. This number is expected to grow as investors take advantage of the AHK-IA and the AHK FTA in years to come.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by emailing Danian Zhang at