[2025] CPTPP Investment Chapter Overview: A Handbook for Investors

The Investment Chapter of the CPTPP focuses on two main groups of content, creating a solid legal framework for investment activities:

I. Two Main Content Groups of the Investment Chapter:

This Chapter includes 02 main groups of contents:

• General principles on the treatment by a host country in the CPTPP towards investors from other CPTPP countries: These principles (codes of conduct) can be classified into 02 groups: firstly, the principles of openness and investment protection in general, and secondly, the principles of ensuring the fundamental rights of investors. This Chapter also outlines exceptions to these principles (including restrictions on market opening).
• Commitments related to investment dispute settlement procedures between Foreign Investors and the Host State in the CPTPP

To better understand the scope and subjects of the Investment Chapter, we need to consider the specific provisions regarding the scope of the application:

II. Scope of Application of the CPTPP Investment Chapter:

Scope of application

The commitments in the Investment Chapter (except for a few commitments with clearly defined scopes) all apply only to investors and Investments of investors from other CPTPP Member countries. For Vietnam, this scope is understood as follows:

CPTPP investors are understood as investors (States, enterprises, or citizens) of another CPTPP country who are currently making or have made investments in the territory of Vietnam. However, CPTPP investors falling into the following cases will be excluded and will not be entitled to rights under the CPTPP:

• owned or controlled by a State, organization or individual of a non-CPTPP member country
• owned or controlled by Vietnamese organizations or individuals
• does not have substantial business activities in any CPTPP country other than Vietnam  
   

Investment of CPTPP investors is understood as any asset that a CPTPP investor owns or controls directly or indirectly, of an investment nature (including characteristics such as a commitment of capital, with the aim of generating profits and speculation of risk) in Vietnam.

This investment must exist at or after the time the CPTPP takes effect for Vietnam. Thus, investments of CPTPP investors that have been made but have ended or terminated before the CPTPP takes effect for Vietnam will not be entitled to rights under the CPTPP.

III. Investment Liberalization:

A special feature of the CPTPP is the "choose-and-drop" mechanism for investment market opening, which is different from the WTO's "choose-in" approach:

Commitments to open the investment market using the "choose-and-drop" method:

In the CPTPP, Members commit to open investment in the "choose-and-drop" method (different from the "choose-in" method in the WTO). According to Chapter 9, Members commit to open investment sectors in accordance with the principles stated in Chapter 9, except for restrictions on investment in the sectors listed in the Lists of Non-Conforming Measures, specified in Annex I and Annex II of the CPTPP (each country will have its own List). These Lists are essentially exceptions/reservations that allow CPTPP countries not to comply with certain obligations in the Chapters on Cross-Border Services and Investment in the CPTPP. Each List has its own mechanism/principles of application.

Annex I: includes non-conforming measures currently applied at the time the CPTPP takes effect that each CPTPP country will continue to apply; in case of amendments, the amendment must meet the following two principles:

• Amendment in a direction not less favorable than that measure at the time the Agreement takes effect (standstill principle)
• Once amended to a new, more favorable level, subsequent amendments shall not be less favorable than this new level (ratchet principle).

However, specifically for Vietnam, the “ratchet” principle for this service is reserved to be complied with only after 3 years from the date the CPTPP takes effect.

Annex II: includes non-conforming measures that the CPTPP Member country is allowed to apply without any restrictions on time (current or future) and manner (more or less favorable).

IV. Investment Principles:

The CPTPP Investment Chapter is built upon principles of fair treatment and investor protection and is divided into two main groups:  

Investment principles in the CPTPP:

Investment principles:

(i) Group of principles on opening markets, removing investment barriers, This group includes 03 basic principles, which are quite common in many recent FTAs, including:

• Principles on Non-Discrimination (National Treatment – NT and Most Favored-Nation Treatment – MFN)

The NT and MFN principles require the host State to treat investors from CPTPP countries no less favorably than it treats its own domestic investors (called “national treatment” – NT) and no less favorably than it treats investors from any other country (called “most-favored-nation treatment” – MFN).

However, the CPTPP still allows countries to set out separate and different procedures/regulations for foreign investors (compared to domestic investors), provided that these procedures do not significantly affect the level of investor protection under the CPTPP principles.

For example, Vietnam can still maintain regulations in the 2014 Investment Law with separate investment registration procedures for foreign investors that are different from the procedures applied to domestic investors.

• Principles related to “Performance Requirements.”

This principle prohibits the host State from imposing mandatory requirements related to:

• The establishment, acquisition, expansion, management, operation/operation of investment (such as having to export a certain percentage of produced products; having to achieve a certain localization rate; having to buy, use products for a designated entity; must ensure a certain ratio between export turnover/value and foreign currency transferred; must transfer specific technology, processes or knowledge to a domestic entity, etc.);
• The price, royalty value under a licensing contract, or mandatory term for this contract.

The State is also prohibited from using the above requirements as conditions to consider granting or not granting incentives for investors.

However, countries are allowed to set requirements on the use of domestic labor in investment projects of CPTPP investors.

Note: Unlike other principles in the Investment chapter of the CPTPP that only apply to measures of a CPTPP country that affect investors and investments of investors from other CPTPP countries, the principle of “Performance Requirements” must apply to all foreign investments in the territory of that CPTPP country, regardless of whether the investment is from investors from CPTPP countries or investors from non-CPTPP countries.

• Principles related to “Senior Management Personnel and Board of Directors”

This principle does not allow the host State to set out mandatory nationality requirements for senior management personnel or the Board of Directors.

However, the State still has the right to require a majority of members of the Board of Directors of foreign-invested enterprises from CPTPP to be nationals of one country or to reside in its territory.

(ii) Group of principles to ensure the fundamental rights of investors This group includes 04 principles to ensure a number of fundamental rights of investors, including:

• Principle of “Minimum Standard of Treatment” (MST)

“Minimum Standard of Treatment” is understood in common terms as fair and equitable treatment, safe and full protection in accordance with international practice. However, due to this rather general content, the “minimum standard of treatment” has become a principle that has caused considerable controversy in investment lawsuits when investors often rely on this principle to object to any new regulations of the host country that are unfavorable to them.

In the CPTPP, some efforts have been made to limit the scope of this principle. Specifically, the CPTPP requires the “minimum standard of treatment” to be principles consistent with “customary international law”, which is understood as international principles on foreign investment protection that have become common practices widely and continuously applied by countries and considered as their mandatory obligations.

In particular, the CPTPP affirms that the State having a policy, law or procedure measure that is different from the expectations/expectations of the CPTPP investor will not be considered a violation of the “minimum standard of treatment”, even if the State’s action causes damage to the CPTPP investor. This provision aims to limit the situation where investors sue the State for compensation just because a new policy of the State makes the investor’s business profits not as expected before.

• Principle of Protection of Investors’ Assets against Expropriation, Compulsory Purchase, Nationalization

With this principle, the State is only allowed to expropriate, compulsorily purchase or nationalize (collectively referred to as deprivation of ownership) investments of CPTPP investors for public purposes. At the same time, these measures must be implemented in a non-discriminatory manner, comply with procedures and ensure prompt, accurate, effective compensation at fair market value immediately before the expropriation/compulsory purchase/nationalization.

It is noted that management activities implemented in a non-discriminatory manner, with the aim of protecting legitimate public welfare such as public health, safety and the environment, will not be considered indirect expropriation measures except in rare cases.

In addition, the CPTPP also clarifies that decisions not to issue, renew, or maintain a subsidy/grant, or decisions to adjust or reduce a subsidy/grant will not be considered a form of “expropriation” if previously the State agency had no specific commitment in law or contract on this matter and this is done in accordance with the relevant terms and conditions previously.

• Principle of Guaranteeing Free Transfer of Capital

The host State must allow investors to freely transfer capital related to investment (e.g., initial capital contribution, profits, shares, interest, royalties, contract value, dispute compensation, etc.).

However, this principle will not apply in certain exceptions (for example, if it is to protect domestic creditors in case a CPTPP investor goes bankrupt; if it relates to criminal offenses or court proceedings, etc.).

V. Reservations:

However, to ensure flexibility and national sovereignty, the CPTPP also provides for certain exceptions and reservations:

Reservations and exceptions in the CPTPP Investment Chapter:

Reservations and exceptions recognized by the CPTPP in the treatment of foreign investors Although setting out many general principles on investment, the Investment Chapter of the CPTPP still has many exceptions/reservations, allowing all countries or some countries not to comply with the above general principles. These exceptions include general exceptions (applied to all countries) and specific exceptions (applied only to each country).

• Group of general exceptions of the Investment Chapter

This group includes exceptions in cases listed in Article 9.12 (government procurement, subsidies and state support, exceptions in TRIPS of WTO, etc.).

• Group of specific exceptions/reservations of each country

  • Lists of Reservations of each CPTPP country These Lists are also known as Lists of Non-Conforming Measures (See Question 47 of Annexes I and II of the CPTPP. Regarding content, this list is a reservation against the principles of market opening in Investment (National Treatment, Most Favored-Nation Treatment, Performance Requirements, and Senior Management Personnel and Board of Directors). These Lists do not have any reservations regarding obligations under the group of ensuring fundamental rights of investors.
  • Other Specific Reservations Countries may have specific reservations regarding the List of Non-Conforming Measures (see presentation in the Investment Liberalization section below) and other obligations (specifically stated in the Agreement).

VI. Investment Liberalization under NCM Lists

Although CPTPP countries have the right to issue reservation measures in the NCM List, because CPTPP is a high-standard agreement, CPTPP countries are only allowed to maintain a limited number of reservation measures. Vietnam is allowed to maintain quite a few reservation measures based on commitments in the WTO and a number of signed FTAs. However, Vietnam also agreed to open a number of additional sectors to achieve balanced results during negotiations. The main contents of commitments in the NCM List are as follows:

Commitments in Annex I

Vietnam is more open than WTO in the following sectors:

Legal consulting services: Allows foreign law firms to provide legal documentation and certification services for commercial contracts and company charters. However, this must be performed by Vietnamese lawyers working in foreign law firms.

Advertising services: Allows foreign service suppliers to establish 100% foreign-owned companies.

Other business services: No restrictions on foreign service suppliers providing real estate services on a fee or contract basis or including owned or leased assets, advisory services to support saltwater, freshwater and hatchery fisheries, midwifery and nursing services, medical doctors, therapists and paramedical personnel, research and development services for social sciences, humanities and multidisciplinary fields.

In addition, we allow foreign service suppliers to establish joint ventures with unlimited capital contributions to provide portrait and special photography services (except aerial photography).

For packaging services, we allow joint ventures with foreign capital contributions not exceeding 49%.

Distribution services: Economic Needs Test (ENT) is not applied to retail stores with an area of ​​less than 500m2 established in areas planned for commercial activities and have completed infrastructure construction. After 5 years from the date the Agreement takes effect, ENT will be abolished.

Regarding product lines, foreign distributors are allowed to distribute rice, sugar and beet sugar.

Telecommunications services:

• For basic and value-added services without network infrastructure: After 5 years from the date the Agreement takes effect, foreign telecommunications service suppliers are allowed to establish 100% foreign-owned companies and abolish the requirements for establishment and capital contribution in joint ventures.
• For value-added services associated with network infrastructure: After 5 years from the date the Agreement takes effect, foreign telecommunications service suppliers are allowed to increase the capital contribution ratio in joint ventures from 51% to 65%.
• Selling capacity of submarine fiber optic cables through landing stations: allows foreign service suppliers to own up to 100% of the transmission capacity of submarine cables at the landing station of cable systems licensed in Vietnam, and can sell to telecommunications service suppliers, including licensed internet service providers (ISPs) in Vietnam.

Education services:

Foreign service suppliers are allowed to provide training in all subjects except subjects on defense, security, politics, religion, Vietnamese culture and subjects necessary to protect social ethics of Vietnam for higher education services (CPC 923), adult education (CPC 924) and other education (CPC 929 including foreign language training services).

Environmental services:

No restrictions on foreign service suppliers providing sanitation services (CPC 9403), nature and landscape protection services (CPC 9406).

Entertainment services (bands, theaters, circuses): After 3 years from the date the Agreement takes effect, foreign service suppliers are allowed to establish joint ventures with capital contributions in joint ventures of 51%.

Online game services: After 2 years from the date the Agreement takes effect, foreign service suppliers are allowed to establish joint ventures to provide online game services provided via the internet with capital contributions in joint ventures of 51%. 5 years after the Agreement takes effect, 100% foreign-owned companies are allowed to be established.

Foreign service suppliers may provide cross-border services but must comply with Vietnamese laws, including regulations on licensing and registration.

Customs clearance services and support services for other modes of transport: Allows foreign service suppliers to establish 100% foreign-owned companies immediately when the Agreement takes effect.

VII. Conclusion:

The CPTPP Investment Chapter is a crucial part of the agreement, creating an international legal framework to protect and encourage investment among member countries. Mastering the provisions of this chapter is key for CPTPP investors to maximize investment opportunities in Vietnam, as well as for Vietnam to attract high-quality investment capital from partner countries. To better understand and receive specific advice on investment issues under the CPTPP, investors should seek support from legal experts and reputable investment promotion organizations.

 

Article Data Sources:

• Comprehensive and Progressive Agreement for Trans-Pacific Partnership - Summary of Chapter 9 - Investment;
• Comprehensive and Progressive Agreement for Trans-Pacific Partnership - Insider Commentary - Thanh Nien Publishing House;
• VCCI's translation of the main chapters of the CPTPP.