(b) the continuation or prompt renewal of any non-conforming measure referred to in subparagraph (a) ; or
(c) an amendment to any non-conforming measure referred to in subparagraph (a) to the extent that the amendment does not decrease the conformity of the measure, as it existed immediately before the amendment, with Articles 11.03,11.04 and 11.06.
2. Articles 11.03, 11.04 and 11.06 do not apply to any measure that a Party adopts or maintains with respect to sectors, sub-sectors or activities, as set out in its Schedule to Annex II.
Article 11.09. Quantitative Restrictions
1. Each Party shall set out in its Schedule to Annex V any quantitative restriction that it maintains.
2. Each Party shall notify the other Party of any quantitative restriction that it adopts, other than at the local government level, after the date of entry into force of this Agreement and shall set out the restriction in its Schedule as referred to in paragraph 1.
3. Regularly, at least every 2 years, the Parties shall endeavour to negotiate with the aim of liberalizing or eliminating:
(a) existing quantitati ve restrictions maintained by a Party, according to the list referred to in paragraph 1; or
(b) quantitative restrictions adopted by a Party after the entry into force of this Agreement.
Article 11.10. Denial of Benefits
Subject to prior notification and consultation in accordance with Articles 17.04 (Provision of Information) and 19.06 (Consultations), a Party may deny the benefits of this Chapter to a service provider of the other Party where the Party decides, according to its effective law that the service is being provided by an enterprise that is owned or controlled by persons of a non-Party having no substantial business activities in the territory of the other Party.
Article 11.11. Future Liberalization
The Parties, through future negotiations to be convened by the Commission, shall deepen the liberalization reached in different service sectors, with the aim of eliminating the remaining restrictions listed under Article 11.08(1) and (2).
Article 11.12. Procedures
The Parties shall establish procedures for:
(a) a Party to notify and include in its relevant Schedule
(i) amendments of measures referred to in Article 11.08(1) and (2), and
(ii) quantitative restrictions in accordance with Article 11.09; and
(b) consultations on reservations or quantitative restrictions for further liberalization, if any.
Article 11.13. Disclosure of Confidential Information
No provision in this Chapter may be construed as imposing on the Parties the obligation to provide confidential information of which the disclosure may be an obstacle to the observance of laws or otherwise be damaging to the public interest, or that may injure legitimate trade interests of state and private enterprises.
Article 11.14. Committee on Investment and Cross-border Trade In Services
1. The Parties hereby establish the Committee on Investment and Cross-border Trade in Services, as set out in Annex 11.14.
2. The Committee shall hear matters relating to this Chapter and Chapter 10 (Investment) and, without prejudice to the provisions of Article 18.05(2)(Committees), shall have the following functions:
(a) supervising the implementation and administration of Chapters 10 (Investment) and 11 (Cross-border Trade in Services);
(b) discussing matters relating to investment and cross-border trade in services presented by a Party;
(c) analyzing matters that are discussed in other international fora;
(d) facilitating the exchange of information between the Parties and cooperating in giving advice on investment and cross-border trade in services; and
(e) establishing working groups or convening panels of experts on matters of interest to the Parties.
3. The Committee shall meet when necessary or at any other time at the request of either Party. Representatives of other institutions may also take part in its meetings if the relevant authorities deem it appropriate.
Chapter 12. FINANCIAL SERVICES
Article 12.01. Definitions
For purposes of this Chapter, the following terms shall be understood as:
cross-border provision of financial services or cross-border trade of financial services: the provision of a financial service:
(a) from the territory of a Party to the territory of the other Party;
(b) in the territory of a Party to a consumer of services of the other Party; or
(c) by a service provider of a Party through the presence of natural persons of a Party in the territory of the other Party;
disputing investor: an investor that submits to arbitration a claim under Article 12.19 and Section B of Chapter 10 (Investment);
enterprise: “enterprise” defined in Chapter 2 (General Definitions);
financial institution: any financial intermediary or other enterprise that is authorized to do financial service business and regulated or supervised as a financial institution under the law of the Party in whose territory it is located;
financial institution of the other Party: a financial institution, including a branch, established under the existing law located in the territory of a Party that is owned or controlled by persons of the other Party;
financial service: a service of a financial nature, including bank, insurance, reinsurance, securities, futures, and a service related or auxiliary to a service of a financial nature;
investment: any kind of goods or rights of any nature acquired or used with the purpose of obtaining an economic profit or other business objective, acquired with resources transferred or reinvested by an investor, and including:
(a) an enterprise, shares in an enterprise, shares in the capital of an enterprise that allow the owner to participate in its income or profits. Debt instruments of an enterprise and loans to an enterprise where:
(i) the enterprise is an affiliate of the investor, or
(ii) the date of maturity of the debt instrument or loan is at least 3 years;
(b) a stake in an enterprise that grants to the owner the right to participate in the assets of this enterprise in a liquidation, provided that they do not arise from a debt instrument or a loan excluded under subparagraph (a);
(c) real estate or other properties, tangible or intangible, including rights in the intellectual property field, as well as any other proprietary right (such as mortgages, liens, usufruct and similar rights), acquired with the expectation of or used with the purpose of obtaining an economic benefit or other business objectives;
(d) share or benefits arising from the allocation of capital or other resources to the developing of an economic activity in the territory of a Party according, inter alia, to:
(i) contracts that involve the presence of the propriety of an investor in the territory of a Party, including concessions and construction and turnkey contracts, or
(ii) contracts where remuneration substantially depends on the production, income or profits of an enterprise, and
(e) a loan granted by a provider of cross-border financial services or a debt instrument owned by the provider, except a loan to a financial institution or a debt instrument issued by it,
but investment does not include:
(f) a payment obligation or a credit granted by the State or a state enterprise;
(g) monetary claims exclusively derived from:
(i) commercial contracts for the sale of goods or services by a national or an enterprise in the territory of a Party to an enterprise in the territory of the other Party, or
(ii) a credit granted in relation to a commercial transaction, of which expiration date is less than 3 years, such as trade financing, except a loan covered by the provisions of subparagraph (a);
(h) any other monetary claim that does not involve the kinds of interests as set out in subparagraphs (a) through (e); or
(i) a loan to a financial institution or a debt instrument issued by a financial institution, except if it is a loan to or a debt instrument issued by a financial institution treated as capital for regulatory purposes by a Party in whose territory the financial institution is located;
investment of an investor of a Party: an investment owned or directly controlled by an investor of the Party. In the case of an enterprise, an investment is property of an investor of a Party if this investor holds more than fifty per cent (50%) of it equity interest. An investment is controlled by an investor of a Party if the investor has the power to:
(a) designate a majority of directors; or
(b) legally manage its operations in any other way;
investor of a Party: a Party or a state enterprise thereof, or a national or enterprise of the Party, that seeks to make, makes or has made an investment in the territory of the other Party. The intention of trying to realize an investment may demonstrate, among other forms, by means of juridical acts tending to materialize the investment, or being in process of compromising the necessary resources to realize it;
new financial service: a financial service not provided in the territory of a Party that is provided within the territory of the other Party, and includes any new form of delivery of a financial service or the sale of a financial product that is not sold in the territory of a Party;
provider of cross-border financial services of a Party: a person authorized by a Party who undertakes the business of providing financial services in its territory and who tries to conduct or conducts cross-border financial services;
provider of financial services of a Party: a person of a Party who undertakes the business of providing some financial service in the territory of the other Party;
public entity: a central bank or monetary authority of a Party, or any financial institution of public nature owned or controlled by a Party, and does not have commercial functions;
regulatory authorities: any governmental body that exercises a supervising authority over providers of financial services or financial institutions; and
self-regulatory organization: any non-governmental body, including any securities or futures exchange or market, clearing agency, or other organization or association, that
exercises its own or delegated regulatory or supervisory authority over financial service providers or financial institutions.
Article 12.02. Scope and Coverage
1. This Chapter applies to measures adopted or maintained by a Party relating to:
(a) financial institutions of the other Party;
(b) investors of the other Party, and investments of such investors, in financial institutions in the territory of the Party; and
(c) cross-border trade in financial services.
2. Nothing in this Chapter shall be construed to prevent a Party, or its public entities, from exclusively conducting or providing in its territory:
(a) activities conducted by the monetary authorities or by any other public institution with the aim of implementing monetary or exchange policies;
(b) activities or services forming part of a public retirement plan or statutory system of social security; or
(c) other activities or services for the account or with the guarantee or using the financial resources of the Party, or its public entities.
3. The provisions of this Chapter shall prevail upon those of other Chapters, except where there is an explicit reference to these Chapters.
4. Article 10.11 (Expropriation and Compensation) forms a part of this Chapter.
Article 12.03. Self-regulatory Organizations
Where a Party requires a financial institution or a cross-border financial service provider of the other Party to be a member of, participate in, or have access to, a self- regulatory organization to provide a financial service in or into the territory of that Party, the Party shall ensure observance of the obligations of this Chapter by such self- regulatory organization.
Article 12.04. Right of Establishment
1. The Parties recognize the principle that investors of a Party shall be permitted to establish a financial institution in the territory of the other Party through any forms of establishment and operation that the law of that Party permits.
2. Each Party may impose terms and conditions on establishment of a financial institution that are consistent with Article 12.06.
Article 12.05. Cross-border Trade
1. No Party may adopt any measure restricting any type of cross-border trade in financial services by cross-border financial service providers of the other Party that the Party permits on the date of entry into force of this Agreement, except to the extent set out in Section B of the Schedule to Annex VIof the Party.
2. Each Party shall permit persons located in its territory, and its nationals wherever located, to purchase financial services from cross-border financial service providers of the other Party located in the territory of that other Party. This obligation does not require a Party to permit such providers to do business or solicit in its territory. The Parties may define "solicitation" and "doing business" for purposes of this obligation.
3. Without prejudice to other means of prudential regulation of cross-border trade in financial services, a Party may require the registration of cross-border financial service providers of the other Party and of financial instruments.
Article 12.06. National Treatment
1. Each Party shall accord to investors of the other Party treatment no less favorable than that it accords to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of similar financial institutions and investments in similar financial institutions in its territory.
2. Each Party shall accord to financial institutions of the other Party and to investments of investors of the other Party in financial institutions treatment no less favorable than that it accords to its own similar financial institutions and to investments of its own investors in similar financial institutions, with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of financial institutions and investments.
3. Subject to Article 12.05, where a Party permits the cross-border provision of a financial service it shall accord to the cross-border financial service providers of the other Party treatment no less favorable than that it accords to its own similar financial service providers, with respect to the provision of such service.
4. A Party's treatment of similar financial institutions and similar cross-border financial service providers of the other Party, whether different or identical to that accorded to its own institutions or providers in like circumstances, is consistent with paragraphs 1 through 3 if the treatment affords equal competitive opportunities.
5. A Party's treatment does not afford equal competitive opportunities if it disadvantages similar financial institutions and similar cross-border financial service providers of the other Party in their ability to provide financial services as compared with the ability of the Party's own financial institutions and similar financial service providers to provide such services.
Article 12.07. Most-Favored-Nation Treatment
Each Party shall accord to investors, financial institutions, investments of investors in financial institutions and cross-border financial service providers of the other Party treatment no less favorable than that it accords in similar circumstances to the investors, financial institutions, investments of investors in financial institutions and cross-border financial service providers of a ny non-Parties.
Article 12.08. Recognition and Harmonization
1. Where a Party applies measures included in this Chapter it may recognize the prudential measures of the other Party or of a non-Party. This recognition may be:
(a) unilaterally granted;
(b) reached through harmonization or other means; or
(c) based on an agreement or arrangement with the other Party or with the non-Party.
2. The Party that grants the recognition of prudential measures according to paragraph 1, shall give the other Party appropriate opportunities to show the existence of circumstances in which there are or shall be equivalent regulations, supervision and implementation of regulations and, as appropriate, procedures to share information between the Parties.
3. Where a Party grants recognition to the prudential measures according to paragraph 1(c) and the circumstances of paragraph 2 exist, this Party shall give appropriate opportunities to the other Party to negotiate the accession to the agreement or arrangement, or to negotiate a similar agreement or arrangement.
4. No provision of this Article shall be construed as the application of a mandatory procedure of review of the financial system or the prudential measures of a Party by the other Party.
Article 12.09. Exceptions
1. Nothing in this Chapter shall be construed to prevent a Party from adopting or maintaining prudential measures such as:
(a) the protection of fund administrators, investors, depositors, financial market participants, policyholders, policy claimants, or persons to whom a fiduciary duty is owed by a financial institution or cross-border financial service provider;
(b) the maintenance of the safety, soundness, integrity or financial responsibility of financial institutions or cross-border financial service providers;, and
(c) ensuring the integrity and stability of the financial system of a Party.
2. Nothing in this Chapter applies to non-discriminatory measures of general application taken by any public entity in pursuit of monetary and related credit policies or exchange rate policies. This paragraph shall not affect a Party's obligations of Investment Performance Requirements with respect to measures covered by Chapter 10 (Investment) or Article 12.17.
3. Article 12.06 shall not apply to the granting by a Party to a financial institution of an exclusive right to provide a financial service referred to in Article 12.02 paragraph 2(b).
4. Notwithstanding Article 12.17(1), (2) and (3), a Party may prevent or limit transfers by a financial institution or cross-border financial service provider to, or for the benefit of, an affiliate of or person related to such institution or service provider, through the equitable, and non-discriminatory application of measures relating to maintenance of the safety, soundness, integrity or financial responsibility of financial institutions or cross-border financial service providers. This paragraph does not prejudice any other provision of this Agreement that permits a Party to restrict transfers.
Article 12.10. Transparency
In addition to the Article 17.03 (Publication), each Party shall undertake the following:
1. Each Party's regulatory authorities shall make available to interested persons all related information for completing applications relating to the provision of financial services.
2. On the request of an applicant, the regulatory authorities shall inform the applicant of the status of its application. If such authorities require additional information from the applicant, they shall notify the applicant without undue delay.
3. Each regulatory authority shall make an administrative decision on a completed application of an investor in a fina ncial institution, a financial institution or a cross-border financial service provider of the other Party relating to the provision of a financial service within 120 days. The authority shall promptly notify the applicant of the decision. An application shall not be considered complete until all relevant hearings are held and all necessary information is received. Where it is not practicable for a decision to be made within 120 days, the regulatory authority shall notify the applicant without undue delay and shall endeavor to make the decision within 60 days thereafter.
4. Nothing in this Chapter requires a Party to disclose or allow access to:
(a) information related to the financial affairs and accounts of individual customers of financial institutions or cross-border financial service providers; or
(b) any confidential information, the disclosure of which would impede law enforcement or otherwise be contrary to the public interest or prejudice legitimate commercial interests of particular enterprises.
Article 12.11. Committee on Financial Services
1. The Parties hereby establish the Committee on Financial Services, as set out in Annex 12.11.
2. The Committee shall hear matters relating to this Chapter and, without prejudice to the provisions of Article 18.05(2) (Committees), shall have the following functions:
(a) supervising the implementation of this Chapter and its further elaboration;
(b) considering issues regarding financial services that are referred to it by a Party;
(c) participating in the dispute settlement procedures in accordance with Articles 12.18 and 12.19; and
(d) facilitating the exchange of information between the supervising authorities, cooperating on advising about prudential regulation and endeavoring to harmonize the normative frameworks for regulations as well as the other policies, if it considers appropriate.
3. The Committee shall meet as necessary or by request of either Party to assess the implementation of this Chapter.
Article 12.12. Consultations
1. Without prejudice to Article 19.06 (Consultations), a Party may request consultations with the other Party regarding any matter arising under this Agreement that affects financial services. The other Party shall give sympathetic consideration to the request. The consulting Parties shall report the results of their consultations to the Committee at its meeting.
2. Consultations under this Article shall include officials of the authorities specified in Annex 12.11.
3. A Party may request that regulatory authorities of the other Party participate in consultations under this Article regarding measures of general application of that other Party which may affect the operations of financial institutions or cross-border financial service providers in the territory of the requesting Party.
4. Nothing in this Article shall be construed to require regulatory authorities participating in consultations under paragraph 3 to disclose information or take any action that would interfere with individual regulatory, supervisory, administrative or enforcement matters.
5. Where a Party requires information for supervisory purposes concerning a financial institution in the territory of the other Party or a cross-border financial service provider in the territory of the other Party, the Party may approach the competent regulatory authority of the other Party to seek the information.
Article 12.13. New Financial Services and Data Processing
1. Each Party shall allow a financial institution of the other Party to provide any new financial service of a type similar to those that the Party allows to its own financial institutions according to its law. The Party may decide the institutional and juridical forms through which this service shall be offered and may require authorization for the provision of the service. Where an authorization is required, the relevant dispositions shall be issued in a reasonable period of time and may only be denied for prudential reasons, provided that the reasons are not contrary to the law of the Party, and to Articles 12.06 and 12.07.
2. Each Party shall allow the financial institutions of the other Party to transfer information for processing into or out of the territory of the Party, using any means authorized within it, if this is necessary to conduct regular business activities in these institutions.
3. Each Party commits itself to respecting the confidentiality of the information processed within its territory and originating in a financial institution located in the other Party.
Article 12.14. Senior Management and Board of Directors
1. No Party may require financial institutions of the other Party to engage individuals of any particular nationality as senior managerial or other essential personnel.
2. No Party may require that the board of directors or administrative council of a financial institution of the other Party be composed of nationals of the Party, persons residing in the territory of the Party, or a combination thereof.
Article 12.15. Reservations and Specific Commitments
1. Articles12.04 through 12.07, 12.13 and 12.14 do not apply to:
(a) any existing non-conforming measure that is maintained by a Party at the national level, as set out in Section A of its Schedule to Annex VI;
(b) the continuation or prompt renewal of any non-conforming measure referred to in subparagraph (a); or
(c) an amendment to any non-conforming measure referred to in subparagraph (a) to the extent that the amendment does not decrease the conformity of the measure, as it existed immediately before the amendment, with Articles 12.04 through 12.07, 12.13 and 12.14.
2. Articles 12.04 through 12.07, 12.13 and 12.14 do not apply to any non-
conforming measure that a Party adopts or maintains in accordance with Section B of its Schedule to Annex VI.
3. Section C of each Party's Schedule to Annex VI sets out certain specific commitments by that Party.
4. In Chapters 10 (Investment) and 11 (Cross-border Trade in Services) a reservation on matters relating to local presence, national treatment, most-favored- nation treatment, senior management and board of directors and administrative council shall be deemed to constitute a reservation from Article 12.04 through 12.07, 12.13 and 12.14, as the case may be, to the extent that the measure, sector, sub-sector or activity set out in the reservation is covered by this Chapter.
Article 12.16. Denial of Benefits
A Party may partially or wholly deny the benefits arising from this Chapter to a provider of financial services of the other Party or to a provider of cross-border financial services of the other Party, upon notification and consultations, according to Articles 12.10 and 12.12, if the Party determines that the service is being provided by an enterprise that does not conduct substantial trade activities in the territory of the other Party and is owned by persons of a non-Party or is under their control.