3. Paragraphs 1(b) and 1(c) and paragraphs 2(b) and 2(c) do not preclude a state-owned enterprise or designated monopoly from:
(a) purchasing or selling goods or services on different terms or conditions including those relating to price; or
(b) refusing to purchase or sell goods or services,
provided that this differential treatment or refusal is undertaken in accordance with commercial considerations.
Article 22.5. Courts and Administrative Bodies
1. Each Party shall provide its courts with jurisdiction over civil claims against an enterprise owned or controlled through ownership interests by a foreign government based on a commercial activity carried on in its territory. (12) This shall not be construed to require a Party to provide jurisdiction over those claims if it does not provide jurisdiction over similar claims against enterprises that are not owned or controlled through ownership interests by a foreign government.
2. Each Party shall ensure that any administrative body that the Party establishes or maintains that regulates a state-owned enterprise exercises its regulatory discretion in an impartial manner with respect to enterprises that it regulates, including enterprises that are not state-owned enterprises.
Article 22.6. Non-Commercial Assistance
1. The following forms of non-commercial assistance, if provided to a state-owned enterprise primarily engaged in the production or sale of goods other than electricity, are prohibited: (13)
(a) loans or loan guarantees provided by a state enterprise or state-owned enterprise of a Party to an uncreditworthy state-owned enterprise of that Party; (14)
(b) non-commercial assistance provided by a Party or a state enterprise or state-owned enterprise of a Party to a state-owned enterprise of that Party, in circumstances where the recipient is insolvent (15) or on the brink of insolvency, (16) without a credible restructuring plan designed to return the state-owned enterprise within a reasonable period of time to long-term viability; or
(c) conversion by a Party or a state enterprise or state-owned enterprise of a Party of the outstanding debt of a state-owned enterprise of that Party to equity, in circumstances where this would be inconsistent with the usual investment practice of a private investor (17)
2. No Party shall provide, either directly or indirectly, (18) non-commercial assistance referred to in paragraphs 1(b) and 1(c).
3. Each Party shall ensure that its state enterprises and state-owned enterprises do not provide, either directly or indirectly, non-commercial assistance referred to in paragraphs 1(a), 1(b), and 1(c).
4. No Party shall cause (19) adverse effects to the interests of another Party through the use of non-commercial assistance that it provides, either directly or indirectly, to its state-owned enterprises with respect to:
(a) the production and sale of a good by the state-owned enterprise;
(b) the supply of a service by the state-owned enterprise from the territory of the Party into the territory of another Party; or
(c) the supply of a service in the territory of another Party through an enterprise that is a covered investment in the territory of that other Party or any other Party.
5. Each Party shall ensure that its state enterprises and state-owned enterprises do not cause adverse effects to the interests of another Party through the use of non-commercial assistance that the state enterprise or state-owned enterprise provides to a state-owned enterprise of the Party with respect to:
(a) the production and sale of a good by the state-owned enterprise;
(b) the supply of a service by the state-owned enterprise from the territory of the Party into the territory of another Party; or
(c) the supply of a service in the territory of another Party through an enterprise that is a covered investment in the territory of that other Party or any other Party.
6. No Party shall cause injury to a domestic industry (20) of another Party through the use of non-commercial assistance that it provides, either directly or indirectly, to any of its state-owned enterprises that is a covered investment in the territory of that other Party in circumstances in which:
(a) the non-commercial assistance is provided with respect to the production and sale of a good by the state-owned enterprise in the territory of the other Party; and
(b) a like good is produced and sold in the territory of the other Party by the domestic industry of that other Party. (21)
7. A service supplied by a state-owned enterprise of a Party within that Party's territory shall be deemed not to cause adverse effects. (22)
Article 22.7. Adverse Effects
1. For the purposes of Article 22.6.4 and Article 22.6.5 (Non-Commercial Assistance), adverse effects arise if the effect of the non-commercial assistance is:
(a) that the production and sale of a good by a Party's state-owned enterprise that has received the non-commercial assistance displaces or impedes from the Party's market imports of a like good of another Party or sales of a like good produced by an enterprise that is a covered investment in the territory of the Party;
(b) that the production and sale of a good by a Party's state-owned enterprise that has received the non-commercial assistance displaces or impedes from:
(i) the market of another Party sales of a like good produced by an enterprise that is a covered investment in the territory of that other Party, or imports of a like good of any other Party, or
(ii) the market of a non-Party imports of a like good of another Party;
(c) a significant price undercutting by a good produced by a Party's state-owned enterprise that has received the non-commercial assistance and sold by the enterprise in:
(i) the market of a Party as compared with the price in the same market of imports of a like good of another Party or a like good that is produced by an enterprise that is a covered investment in the territory of the Party, or significant price suppression, price depression or lost sales in the same market, or
(ii) the market of a non-Party as compared with the price in the same market of imports of a like good of another Party, or significant price suppression, price depression or lost sales in the same market.
(d) that services supplied by a Party's state-owned enterprise that has received the non- commercial assistance displace or impede from the market of another Party a like service supplied by a service supplier of that other Party or any other Party; or
(e) a significant price undercutting by a service supplied in the market of another Party by a Party's state-owned enterprise that has received the non-commercial assistance as compared with the price in the same market of a like service supplied by a service supplier of that other Party or any other Party, or significant price suppression, price depression or lost sales in the same market. (23)
2. For the purposes of paragraphs 1(a), 1(b), and 1 (d), the displacing or impeding of a good or service includes a case in which it has been demonstrated that there has been a significant change in relative shares of the market to the disadvantage of the like good or like service. "Significant change in relative shares of the market" includes the following situations:
(a) there is a significant increase in the market share of the good or service of the Party's state-owned enterprise;
(b) the market share of the good or service of the Party's state-owned enterprise remains constant in circumstances in which, in the absence of the non-commercial assistance, it would have declined significantly; or
(c) the market share of the good or service of the Party's state-owned enterprise declines, but at a significantly slower rate than would have been the case in the absence of the non-commercial assistance.
The change must manifest itself over an appropriately representative period sufficient to demonstrate clear trends in the development of the market for the good or service concerned, which, in normal circumstances, is at least one year.
3. For the purposes of paragraphs l(c) and 1(e), price undercutting includes a case in which such price undercutting has been demonstrated through a comparison of the prices of the good or service of the state-owned enterprise with the prices of the like good or service.
4. Comparisons of the prices in paragraph 3 must be made at the same level of trade and at comparable times, and due account must be taken for factors affecting price comparability. If a direct comparison of transactions is not possible, the existence of price undercutting may be demonstrated on some other reasonable basis, such as, in the case of goods, a comparison of unit values.
5. Non-commercial assistance that a Party provides before the signing of this Agreement shall be deemed not to cause adverse effects.
Article 22.8. Injury
1. For the purposes of Article 22.6.6 (Non-Commercial Assistance), the term "injury" means material injury to a domestic industry, threat of material injury to a domestic industry, or material retardation of the establishment of such an industry. A determination of material injury shall be based on positive evidence and involve an objective examination of the relevant factors, including the volume of production by the covered investment that has received non-commercial assistance, the effect of that production on prices for like goods produced and sold by the domestic industry, and the effect of that production on the domestic industry producing like goods. (24)
2. With regard to the volume of production by the covered investment that has received non- commercial assistance, consideration shall be given as to whether there has been a significant increase in the volume of production, either in absolute terms or relative to production or consumption in the territory of the Party in which injury is alleged to have occurred. With regard to the effect of the production by the covered investment on prices, consideration shall be given as to whether there has been a significant price undercutting by the goods produced and sold by the covered investment as compared with the price of like goods produced and sold by the domestic industry, or whether the effect of production by the covered investment is otherwise to depress prices to a significant degree or to prevent price increases, which otherwise would have occurred, to a significant degree. No one or several of these factors can necessarily give decisive guidance.
3. The examination of the impact on the domestic industry of the goods produced and sold by the covered investment that received the non-commercial assistance must include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry, such as actual and potential decline in output, sales, market share, profits, productivity, return on investments, or utilization of capacity; factors affecting domestic prices; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments and, in the case of agriculture, whether there has been an increased burden on government support programs. This list is not exhaustive, nor can one or several of these factors necessarily give decisive guidance.
4. It must be demonstrated that the goods produced and sold by the covered investment are, through the effects of the non-commercial assistance, set out in paragraphs 2 and 3, causing injury within the meaning of this Article. The demonstration of a causal relationship between the goods produced and sold by the covered investment and the injury to the domestic industry shall be based on an examination of all relevant evidence. Any known factors other than the goods produced by the covered investment which at the same time are injuring the domestic industry must be examined, and the injuries caused by these other factors must not be attributed to the goods produced and sold by the covered investment that has received non-commercial assistance. Factors that may be relevant in this respect include the volumes and prices of other like goods in the market in question, contraction in demand or changes in the patterns of consumption, and developments in technology and the export performance and productivity of the domestic industry.
5. A determination of a threat of material injury shall be based on facts and not merely on allegation, conjecture or remote possibility and shall be considered with special care. The change in circumstances that would create a situation in which non- commercial assistance to the covered investment would cause injury must be clearly foreseen and imminent. In making a determination regarding the existence of a threat of material injury, there should be consideration of relevant factors (25) and of whether the totality of the factors considered lead to the conclusion that further availability of goods produced by the covered investment is imminent and that, unless protective action is taken, material injury would occur.
Article 22.9. Party-Specific Annexes
1. Article 22.4 (Non-Discriminatory Treatment and Commercial Considerations) and Article 22.6 (Non-Commercial Assistance) do not apply with respect to the non-conforming activities of state-owned enterprises or designated monopolies that a Party lists in its Schedule to Annex IV in accordance with the terms of the Party's Schedule.
2. Article 22.4 (Non-Discriminatory Treatment and Commercial Considerations), Article 22.5 (Courts and Administrative Bodies), Article 22.6 (Non-Commercial Assistance), and Article 22.10 (Transparency) do not apply to a Party's state-owned enterprises or designated monopolies as set out in Annex 22-D (Application to Sub-Central State-Owned Enterprises and Designated Monopolies).
Article 22.10. Transparency
1. Each Party shall provide to the other Parties or publish on an official website a list of its state-owned enterprises no later than six months after the date of entry into force of this Agreement, and thereafter shall update the list annually.
2. Each Party shall promptly notify the other Parties or publish on an official website the designation of a monopoly or expansion of the scope of an existing monopoly and the terms of its designation.
3. On the written request of another Party, a Party shall promptly provide the following information in writing concerning a state-owned enterprise or a government monopoly, provided that the request includes a reasoned explanation of how the activites of the entity affect or could affect trade or investment between the Parties:
(a) the percentage of shares that the Party, its state enterprises, state-owned enterprises, or designated monopolies cumulatively own, and the percentage of votes that they cumulatively hold, in the entity;
(b) a description of any special shares or special voting or other rights that the Party, its state enterprises, state-owned enterprises, or designated monopolies hold, to the extent these rights are different from the rights attached to the general common shares of the entity;
(c) the government titles of any government official serving as an officer or member of the entity's board of directors;
(d) the entity's annual revenue and total assets over the most recent three year period for which information is available;
(e) any exemptions and immunities from which the entity benefits under the Party's law; and
(f) any additional information regarding the entity that is publicly available, including annual financial reports and third-party audits, and that is sought in the written request.
4. On the written request of another Party, a Party shall promptly provide, in writing, information regarding any policy or program that the Party has adopted or maintains that provides for the provision of either non-commercial assistance or any equity capital (regardless of whether the equity infusion also constitutes non-commercial assistance) to its state-owned enterprises.
5. When a Party provides a response pursuant to paragraph 4, the information it provides must be sufficiently specific to enable the requesting Party to understand the operation of the policy or program and evaluate its effects or potential effects on trade or investment between the Parties. The Party responding to a request shall ensure that the response that it provides contains the following information:
(a) the form of the non-commercial assistance provided under the policy or program, for example, grant or loan;
(b) the names of the government agencies, state enterprises, or state-owned enterprises providing the non-commercial assistance or equity capital and the names of the state-owned enterprises that have received or are eligible to receive the non- commercial assistance;
(c) the legal basis and policy objective of the policy or program providing for the non- commercial assistance or equity infusion;
(d) with respect to goods, the amount per unit of the non-commercial assistance or, in cases if it is not possible to provide a per unit amount, the total amount of or the annual amount budgeted for the non-commercial assistance, indicating, if possible, the average amount per unit in the previous year;
(e) with respect to services, the total amount of or the annual amount budgeted for the non-commercial assistance, indicating, if possible, the total amount in the previous year;
(f) with respect to policies or programs providing for non-commercial assistance in the form of loans or loan guarantees, the amount of the loan or amount of the loan guaranteed, interest rates, and fees charged;
(g) with respect to policies or programs providing for non-commercial assistance in the form of the provision of goods or the supply of services, the prices charged, if any, for those goods and services;
(h) with respect to policies or programs for the provision of equity capital, the amount invested, the number and a description of the shares received, and any assessment of the enterprise's financial health and prospects that is conducted with respect to the underlying investment decision;
(i) duration of the policy or program or any other time-limits attached to it; and
(j) statistical data permitting an assessment of the effects of the non-commercial assistance on trade or investment between the Parties.
6. In response to a request made pursuant to paragraph 4, if a Party considers that it has not adopted or does not maintain any policies or programs referred to in paragraph 4, it shall promptly provide a reasoned explanation of this in writing to the requesting Party.
7. If any relevant points in paragraph 5 have not been addressed in the written response, that Party shall provide a reasoned explanation of this in the written response.
8. The Parties recognize that the provision of information under paragraphs 5 and 7 does not prejudge the legal status of the assistance that was the subject of the request under paragraph 4 or the effects of that assistance under this Agreement.
9. When a Party responds to a request for information under this Article, and informs the requesting Party that it considers certain information to be confidential, the Party shall provide a reasoned explanation for its determination. The requesting Party shall not disclose this information without the prior consent of the Party that provided it. To the maximum extent possible under its law, the Party should not consider the amount of the financial contribution associated with the non- commercial assistance or equity capital to be confidential.
Article 22.11. Technical Cooperation
The Parties shall, if appropriate and subject to available resources, engage in mutually decided upon technical cooperation activities, including:
(a) exchanging information regarding Parties' experiences in improving the corporate governance and operation of their state-owned enterprises;
(b) sharing best practices on policy approaches to ensure a level playing field between state-owned and privately owned enterprises, including policies related to competitive neutrality; and
(c) organizing international seminars, workshops or any other appropriate forum for sharing technical information and expertise related to the governance and operations of state-owned enterprises.
Article 22.12. Committee on State-Owned Enterprises and Designated Monopolies
1. The Parties hereby establish a Committee on State-owned Enterprises and Designated Monopolies (SOE Committee), composed of government representatives of each Party.
2. The SOE Committee's functions include:
(a) reviewing and considering the operation and implementation of this Chapter;
(b) at a Party's request, consulting on a matter arising under this Chapter;
(c) developing cooperative efforts, as appropriate, to promote the principles underlying the disciplines contained in this Chapter in the free trade area and to contribute to the development of similar disciplines in other regional and multilateral institutions in which two or more Parties participate; and
(d) undertaking other activities as the SOE Committee may decide.
3. The SOE Committee shall meet within one year after the date of entry into force of this Agreement, and at least annually thereafter, unless the Parties decide otherwise.
Article 22.13. Exceptions
1. Nothing in Article 22.4 (Non-Discriminatory Treatment and Commercial Considerations) or Article 22.6 (Non-Commercial Assistance) shall be construed to:
(a) prevent the adoption or enforcement by a Party of measures to respond temporarily to a national or global economic emergency; or
(b) apply to a state-owned enterprise with respect to which a Party has adopted or enforced measures on a temporary basis in response to a national or global economic emergency, for the duration of that emergency.
2. Article 22.4.1 (Non-Discriminatory Treatment and Commercial Considerations) does not apply to the supply of financial services by a state-owned enterprise pursuant to a government mandate if that supply of financial services:
(a) supports exports or imports, provided that these services are:
(i) not intended to displace commercial financing, or
(ii) offered on terms no more favorable than those that could be obtained for comparable financial services in the commercial market; (26)
(b) supports private investment outside the territory of the Party, provided that these services are:
(i) not intended to displace commercial financing, or
(ii) offered on terms no more favorable than those that could be obtained for comparable financial services in the commercial market; or
(c) is offered on terms consistent with the Arrangement, provided that it falls within the scope of the Arrangement.
3. The supply of financial services by a state-owned enterprise pursuant to a government mandate shall be deemed not to give rise to adverse effects under Article 22.6.4(b) (Non- Commercial Assistance) or Article 22.6.5(b), or under Article 22.6.4(c) or Article 22.6.5(c) if the Party in which the financial service is supplied requires a local presence in order to supply those services, if that supply of financial services: (27)
(a) supports exports or imports, provided that these services are: @ not intended to displace commercial financing, or
(ii) offered on terms no more favorable than those that could be obtained for comparable financial services in the commercial market;
(b) supports private investment outside the territory of the Party, provided that these services are:
(i) not intended to displace commercial financing, or
(ii) offered on terms no more favorable than those that could be obtained for comparable financial services in the commercial market; or
(c) is offered on terms consistent with the Arrangement, provided that it falls within the scope of the Arrangement.
4. Article 22.6 (Non-Commercial Assistance) does not apply with respect to an enterprise located outside the territory of a Party over which a state-owned enterprise of that Party has assumed temporary ownership as a consequence of foreclosure or a similar action in connection with defaulted debt, or payment of an insurance claim by the state-owned enterprise, associated with the supply of the financial services referred to in paragraphs 2 and 3, provided that any support the Party, a state enterprise, or state-owned enterprise of the Party provides to the enterprise during the period of temporary ownership is provided in order to recoup the state-owned enterprise's investment in accordance with a restructuring or liquidation plan that will result in the ultimate divestiture from the enterprise.
5. Article 22.4 (Non-Discriminatory Treatment and Commercial Considerations), Article 22.6 (Non-Commercial Assistance), Article 22.10 (Transparency), and Article 22.12 (Committee on State-Owned Enterprises and Designated Monopolies) do not apply with respect to a state- owned enterprise or designated monopoly if in any one of the three previous consecutive fiscal years, the annual revenue derived from the commercial activities of the state-owned enterprise or designated monopoly was less than a threshold amount which shall be calculated in accordance with Annex 22-A (Threshold Calculation). (28)
Article 22.14. Further Negotiations
Within six months of the date of entry into force of this Agreement, the Parties shall begin further negotiations so as to extend the application of the disciplines in this Chapter in accordance with Annex 22-C (Further Negotiations).
Article 22.15. Process for Developing Information
Annex 22-B (Process for Developing Information Concerning State-Owned Enterprises and Designated Monopolies) applies in any dispute under Chapter 31 (Dispute Settlement) regarding a Party's conformity with Article 22.4 (Non-Discriminatory Treatment and Commercial Considerations) or Article 22.6 (Non-Commercial Assistance).
Chapter 23. LABOR
Article 23.1. Definitions
For the purposes of this Chapter:
ILO Declaration on Rights at Work means the International Labor Organization (ILO) Declaration on Fundamental Principles and Rights at Work and its Follow-Up (1998);
labor laws means statutes and regulations, or provisions of statutes and regulations, of a Party that are directly related to the following internationally recognized labor rights:
(a) freedom of association and the effective recognition of the right to collective bargaining;
(b) the elimination of all forms of forced or compulsory labor;
(c) the effective abolition of child labor, a prohibition on the worst forms of child labor, and other labor protections for children and minors;
(d) the elimination of discrimination in respect of employment and occupation; and
(e) acceptable conditions of work with respect to minimum wages, (1) hours of work, and occupational safety and health;
statutes and regulations and statutes or regulations means: (2)
(a) for Mexico, Acts of Congress or regulations and provisions promulgated pursuant to Acts of Congress and, for the purposes of this Chapter, includes the Constitution of the United Mexican States; and
(b) for the United States, Acts of Congress or regulations promulgated pursuant to Acts of Congress and, for the purposes of this Chapter, includes the Constitution of the United States.