"The Agreement between Japan and the State of Kuwait for the Promotion and Protection of Investment" (Japan-Kuwait Investment Agreement) was signed between the governments of Japan and Kuwait today. This is the "first investment agreement" concluded between Japan and a member state of the Cooperation Council for the Arab States of the Gulf (GCC).

(1) Protection of investment and improvement of the investment environment

The Agreement provides for rules concerning the protection of investments and the improvement of the investment environment. It is expected to increase the legal stability of the investment environment in Kuwait and consequently facilitate Japanese companies' investment activities there.

(2) Stronger bilateral relations

Kuwait is Japan's fifth largest source of crude oil imports, and Japan is Kuwait's largest destination of crude oil exports. The two countries have maintained good relations mainly in the energy field. The bilateral relations have even deepened as Kuwait donated 5 million barrels of crude oil to Japan last year to support the country's recovery from the Great East Japan Earthquake.

(3) Stronger relations with GCC member states

This Agreement is the "first investment agreement" concluded between Japan and a GCC member state. It is expected to help Japan tighten relations with the region. This is Japan's 18th investment agreement signed (or the 28th if investment chapters of bilateral economic partnership agreements [EPAs] are included).

1. National treatment and most-favored-nation treatment (including the pre-establishment phase of investment)
   *Reservations by Kuwait are limited to national treatment in five fields where the entry of foreign capital is prohibited or restricted: oil and gas mining, oil refining, publication of newspapers and magazines, land acquisition and ownership, and real estate business."
2. Extensive prohibition of performance requirements
   (Prohibition of export restrictions, prohibition of export requirements, prohibition of local content requirements, and general prohibition of technology transfer requirements)
3. Obligation to observe any contracts concluded by the signatory state with investors (commonly called the "umbrella clause")
   *For example, if the country cancels an investment contract related to oil, gas or other natural resources without legitimate reasons, the investor may file a complaint with an international arbitration body.
4. Investment protection provisions, including compensation for expropriations, protection from strife, and freedom of remittance
5. Settlement of investment disputes between investors and the signatory state
   *If an investor sustains losses due to the investment receiving country's violation of any obligations under the Agreement, the investor may submit the dispute with that country to an international arbitration body for settlement.

<Reference 1> Past negotiations

Kuwait expressed its desire to start negotiations for investment agreement in the joint statement issued during Prime Minister Nasser's visit to Japan in July 2008. The two countries decided to commence negotiations in August 2009. Three negotiation sessions had been held before substantial agreement was reached in November 2010.
1st - April 2010 in Tokyo
2nd - July 2010 in Kuwait
3rd - November 2010 in Tokyo

<Reference 2> The text of the Agreement will be posted on the websites of METI and the Ministry of Foreign Affairs.

• [METI website: Economic Partnership Agreement (EPA)/Free Trade Agreement (FTA) - “Investment Agreement”] (in Japanese)

March 22, 2012

• <Country overview>
  Middle East and Africa Division, Trade Policy Bureau
• <Agreement overview>
  Economic Partnership Division, Trade Policy Bureau