On September 22 2011 Japan's Interchange Association and Taiwan's Association of East Asian Relations executed the Agreement between the Interchange Association and Association of East Asian Relations for the Mutual Cooperation on the Liberalisation, Promotion and Protection of Investment. The agreement includes a number of provisions that will facilitate mutual investment between the countries. Taiwanese investors eyeing the Japanese market and Japanese investors which are interested in the Taiwanese market or seeking a route into the Chinese market through Taiwan would do well to note the provisions of the agreement.

The agreement addresses investment promotion, protection and liberalisation. With regard to investment promotion, the agreement permits unfettered inward and outward remittances of the parties' funds, and there can be no mandatory ratio of local raw materials or quotas on local directors and managers. With regard to trade protection, under the agreement disputes between investors and the local government may be submitted to international arbitration. In relation to trade liberalisation, the agreement includes national treatment and most-favoured nation provisions under which investment from one party may enjoy treatment no less favourable than that afforded to local investors or to foreign investors by the other party.

Taiwanese industries that are closed to foreign investment (eg, telecommunications, finance and marine transport) remain closed to Japanese investment under the agreement. In addition, in order to discourage exploitation of the agreement by allowing indirect investment from China (Chinese investment is subject to strict restrictions), the agreement includes mechanisms to deny benefits to certain enterprises and prevent indirect investments from certain areas.

For further information on this topic please contact Jason Chou at Lee and Li Attorneys at Law by telephone (+886 2 2715 3300), fax (+886 2 2713 3966) or email ([email protected]).