The Free Trade Agreement (FTA) between the Maldives and China, which came into effect on 1 January 2025, includes a comprehensive investment chapter designed to attract and safeguard foreign investment in the Maldives. The provisions create a stable and secure environment for investors by addressing key concerns such as treatment, dispute resolution, and the free transfer of funds.
Investment Protections and Guarantees
The FTA provides robust protections for foreign investors, ensuring that they are treated fairly and equitably under internationally recognised standards. These include:
- National Treatment: Chinese investors are guaranteed treatment no less favourable than that granted to domestic investors in similar circumstances. This ensures a level playing field for foreign and local businesses.
- Most-Favoured-Nation (MFN) Treatment: Investors from China benefit from treatment that is no less favourable than that provided to investors from any other country, ensuring equal opportunities.
- Protection Against Expropriation: The agreement safeguards covered investments from expropriation unless it is for a public purpose, carried out in a non-discriminatory manner, and accompanied by fair compensation. Compensation must reflect the market value of the investment immediately before the expropriation and must be freely transferable.
- Compensation for Losses: Investors are entitled to compensation for losses caused by armed conflict, civil strife, or other extraordinary events.
- Free Transfer of Funds: Investors can freely transfer capital, profits, dividends, and other payments in a usable currency at the prevailing market rate.
These provisions aim to mitigate risks for foreign investors, ensuring a stable and predictable investment climate.
Dispute Settlement Mechanism
The FTA includes an Investor-State Dispute Settlement (ISDS) mechanism, offering investors recourse if they believe their rights under the agreement have been violated. Key features include:
- Consultations First: Investors must attempt to resolve disputes through consultations with the respondent Party.
- Arbitration Options: If consultations fail, disputes can be submitted to arbitration under either the ICSID Convention or the UNCITRAL Arbitration Rules.
- Binding Decisions: Arbitration decisions are based on the terms of the FTA and international law, ensuring clarity and fairness in resolving disputes.
This mechanism provides an added layer of security for investors, demonstrating the Maldives’ commitment to upholding the agreement’s terms.
Promoting and Facilitating Investment
To encourage investment, the FTA includes measures to promote and facilitate cross-border investments. The agreement establishes a Committee on Investment to oversee its implementation and recommend initiatives to enhance investment flows. The Parties also agreed to:
- Host investment promotion activities such as business matching events, seminars, and briefings.
- Establish one-stop investment centres to simplify procedures and provide advisory services for investors.
- Exchange information to facilitate smoother investment processes.
By reducing bureaucratic hurdles and fostering cooperation, these provisions aim to make the Maldives an attractive destination for Chinese investors.
Additional Provisions
The FTA also incorporates specific provisions to further enhance investor confidence:
- Subrogation: Allows a Party that provides insurance or guarantees for an investment to assume the rights of the investor in certain cases.
- Non-Conforming Measures: While existing non-conforming measures are exempt, the Parties commit to working towards reducing such measures over time.
- Essential Security: The agreement allows each Party to take measures necessary to protect its security interests.
A Gateway for Investment
With its robust protections and mechanisms, the Maldives-China FTA positions the Maldives as a more attractive investment destination for Chinese businesses. The agreement’s emphasis on fairness, transparency, and facilitation reflects the Maldives’ commitment to fostering a secure and competitive environment for foreign investment.
As both nations continue to deepen their economic ties, the FTA provides a framework for growth, encouraging businesses to explore opportunities and contribute to the Maldives’ development.
