Title
China - EU Comprehensive Agreement on Investment (CAI)
Preamble
Preamble
NOTING with satisfaction the continuous expansion of exchanges and cooperation between China and the EU since the establishment of diplomatic relations in 1975, notably through the EU-China Trade and Cooperation Agreement of 1985, and the establishment of the China-EU Comprehensive Strategic Partnership in 2003;
CONFIRMING the importance of the EU-China High Level Economic and Trade Dialogue started in 2007 as the strategic forum for all matters relating to the bilateral trade and investment relationship;
COMITTED to building their economic relationship based on openness, reciprocity and mutual benefit, ensuring non-discrimination, a level playing field, transparency, and a predictable and rule-based investment environment;
SEEKING to establish clear and mutually advantageous rules governing their investment and to reduce or eliminate the barriers to mutual investment;
RECOGNIZING the right of the Parties to adopt and enforce measures to achieve legitimate public policy objectives;
REAFFIRMING their commitment to the Charter of the United Nations, signed in San Francisco on 26 June 1945, and having regard to the principles articulated in the Universal Declaration of Human Rights, adopted by the General Assembly of the United Nations on 10 December 1948;
DETERMINED to strengthen their economic, trade and investment relations in accordance with the objective of sustainable development, and to promote investment in a manner supporting high levels of environmental and labour rights' protection, including fighting against climate change and forced labour, taking into account the relevant international standards and agreements;
COMMITTED to encourage enterprises to respect corporate social responsibility or responsible business conduct;
RECOGNISING the importance of transparency in international investment to the benefit of all stakeholders;
BUILDING on their respective rights and obligations under the WTO Agreement and other multilateral, regional and bilateral agreements and arrangements to which they are party,
Body
Section I. OBJECTIVES AND GENERAL DEFINITIONS
Article 1. Objectives
1. The Parties, reaffirming their respective commitments under the WTO Agreement and their commitment to create a better climate to facilitate and develop trade and investment between the Parties, hereby lay down the necessary arrangements for the liberalisation of investment.
2. The Parties reaffirm the right to regulate within their territories to achieve legitimate policy objectives, such as the protection of public health, social services, public education, safety, the environment, including the fight against climate change, public morals, social security or consumer protection, privacy and data protection or the promotion and protection of cultural diversity.
Article 2. Definitions
For the purposes of this Agreement:
'activities performed in the exercise of governmental authority' means activities which are performed neither on a commercial basis nor in competition with one or more economic operators;
'commercial considerations' means price, quality, availability, marketability, transportation, and other terms and conditions of purchase or sale, or other factors that would normally be taken into account in the commercial decisions of an enterprise, in the relevant business or industry, that are profit-based, and disciplined by market forces;
'covered enterprise' means an enterprise set up in the territory of a Party through establishment, as defined in this Article, by an investor of the other Party, and which is in existence as of the date of entry into force of this Agreement or made thereafter in accordance with applicable laws;
'economic activities' include activities of an industrial, commercial and professional character and activities of craftsmen, but do not include activities performed in the exercise of governmental authority;
'establishment' means the setting up, including the acquisition (1), of an enterprise in China or in the EU respectively with a view to establishing or maintaining lasting economic links;
'existing' means in effect on the date of entry into force of this Agreement;
'freely convertible currency' means a currency that can be freely exchanged against currencies that are widely traded in international foreign exchange markets and widely used in international transactions;
'freely usable currency' means a currency that is determined as freely usable by the International Monetary Fund under its Articles of Agreement.
'investor of a Party' means a Party, a natural person or an enterprise of a Party, other than a branch or a representative office, that seeks to make, is making, or has made an investment in the territory of the other Party;
Notwithstanding the preceding paragraph, shipping companies established outside the EU or China and controlled by nationals of a Member State of the EU or of China, respectively, shall also be beneficiaries of the provisions of this Agreement, if their vessels are registered in accordance with their respective legislation, in that Member State or in China and fly the flag of a Member State or of China.
'investor of a non-Party' means, with respect to a Party, an investor that seeks to make, is making, or has made an investment in the territory of that Party, that is not an investor of either Party.
'enterprise' means any entity constituted or otherwise organised under the applicable laws, whether or not for profit, and whether privately or governmentally owned or controlled, including a corporation, trust, partnership, joint venture, sole proprietorship, association or similar organisation and a branch or representative office of an enterprise;
'enterprise of a Party' means:
(a) an enterprise constituted or otherwise organised under the laws of that Party, and engaged in substantive business operations (2) in the territory of that Party; or
(b) an enterprise that is constituted or otherwise organised under the laws of that Party and is directly or indirectly owned or controlled by a natural person of that Party or by an enterprise mentioned under (a);
'government procurement' means the process by which a procuring entity obtains the use of or acquires goods or services, or any combination thereof, for governmental purposes and not with a view to commercial sale or resale, or use in the production or supply of goods or services for commercial sale or resale.
'measure' means any measure by a Party, whether in the form of a law, regulation, rule, procedure, decision, administrative action, requirement, practice or any other form of a measure by a Party (3);
'measures by a Party' or 'treatment by a Party' means measures or treatment (4) by:
(i) central, regional or local governments and authorities; and
(ii) non-governmental bodies in the exercise of powers delegated by central, regional or local governments or authorities.
'natural person' means:
(i) For the People's Republic of China, a natural person who is a national of the People's Republic of China as defined in the Nationality Law of the People's Republic of China; and
(ii) In the case of the EU, a natural person having the nationality of one of the Member States of the EU according to their respective legislation (5);
'operation' of an enterprise includes the conduct, management, maintenance, use, enjoyment, sale or other form of disposal of the enterprise;
'services' include any service in any sector except services supplied in the exercise of governmental authority;
'subsidiary' of an enterprise of a Party means an enterprise, other than a branch or a representative office, which is controlled by another enterprise of that Party.
'TRIPS Agreement' means the Agreement on Trade-Related Aspects of Intellectual Property Rights, contained in Annex 1C to the WTO Agreement.
'WTO Agreement' means the Marrakesh Agreement Establishing the World Trade Organization, done on April 15, 1994.
'aircraft repair and maintenance services' means such activities when undertaken on an aircraft or a part thereof while it is withdrawn from service and do not include so-called line maintenance.
'selling and marketing of air transport services' means opportunities for the air carrier concerned to sell and market freely its air transport services including all aspects of marketing such as market research, advertising and distribution. These activities do not include the pricing of air transport services nor the applicable conditions.
'computer reservation system (CRS) services' means services provided by computerized systems that contain information about air carriers' schedules, availability, fares and fare tules, through which reservations can be made or tickets may be issued.
'Ground handling services' means the supply at an airport, on a fee or contract basis, of the following: airline representation, administration and supervision; passenger handling; baggage handling; ramp services; catering; air cargo and mail handling; fueling of an aircraft; aircraft servicing and cleaning; line maintenance; surface transport; flight operations, crew administration and flight planning. Ground handling services do not include self-handling; security; aircraft repair and maintenance; or management or operation of essential centralised airport infrastructure such as de-icing facilities, fuel distribution systems, baggage handling systems, and fixed intra-airport transport systems.
Section II. LIBERALISATION OF INVESTMENT
Article 1. Scope of Application
1. This Section applies to measures or treatment adopted or maintained by a Party affecting the establishment of an enterprise or the operation of a covered enterprise by an investor of the other Party in its territory. For the purpose of Article 3 [Performance Requirements], it applies with respect to the establishment and operation of all enterprises in the territory of the Party which adopts or maintains the measure or treatment.
2. This Section does not apply to:
(a) audio-visual services;
(b) air transport services and auxiliary air services other than:
(i) aircraft repair and maintenance services;
(ii) the selling and marketing of air transport services;
(iii) computer reservation systems (CRS) services;
(iv) ground handling services;
(c) activities supplied in the exercise of governmental authority.
3. This [Section] does not apply to any measure of a Party with respect to government procurement of a good or service purchased for governmental purposes, and not with a view to commercial resale or with a view to use in the supply of a good or service for commercial sale.
4. Articles [National Treatment], [Most-Favored-Nation Treatment] and [Senior Management, Boards of Directors and Entry of Personnel] do not apply to subsidies or grants provided by the Parties, including government-supported loans, guarantees, and insurance.
Article 2. Market Access
1. In sectors or subsectors where market access commitments are undertaken and subject to the terms, limitations and conditions specified in [Annex], neither Party shall adopt or maintain with regard to market access through constitution, acquisition (1) or maintenance of an enterprise by an investor of a Party, either on the basis of its entire territory or on the basis of a regional subdivision measures that:
(a) impose limitations on:
(i) the number of enterprises that may carry out a specific economic activity whether in the form of numerical quotas, monopolies, exclusive rights or the requirement of an economic needs test;
(ii) the total value of transactions or assets in the form of numerical quotas or the requirement of an economic needs test;
(iii) the total number of operations or the total quantity of output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test (2);
(iv) the total number of natural persons that may be employed in a particular sector or subsector, or that an enterprise may employ and who are necessary for, and directly related to, the performance of economic activity in the form of numerical quotas or the requirement of an economic needs test.
(b) restrict or require a specific type of legal entity or joint venture through which an enterprise may carry out an economic activity.
Article 3. Performance Requirements
1. Neither Party may, in connection with the establishment or the operation of all enterprises in its territory, impose or enforce any requirement or enforce any commitment or undertaking: (3)
(a) to export a given level or percentage of goods or services;
(b) to achieve a given level or percentage of domestic content of goods or services;
(c) to purchase, use or accord a preference to goods produced or services provided in its territory, or to purchase goods or services from natural persons or enterprises in its territory (4),
(d) to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with such enterprise;
(e) to restrict sales of goods or services in its territory that such enterprise produces or supplies by relating such sales in any way to the volume or value of its exports or foreign exchange earnings;
(f) to transfers technology, a production process, or other proprietary knowledge to a natural person or an enterprise in its territory;
(g) to supply exclusively from the territory of the Party a good produced or a service provided by the enterprise to a specific regional or the world market;
(h) to locate the headquarters of that investor for a specific region or the world market in its territory;
(i) to achieve a given percentage or value of research and development in its territory; or
(j) to use or favour technology that is owned by or licensed to a natural person or an enterprise of the Party.
2. Neither Party may condition the receipt or continued receipt of an advantage, in connection with the establishment or operation of all enterprises in its territory, on compliance with any requirement:
(a) to achieve a given level or percentage of domestic content of goods or services;
(b) to purchase, use, or accord a preference to goods produced in its territory, or to purchase goods from natural persons or enterprises in its territory;
(c) to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with such enterprise; or
(d) to restrict sales of goods or services in its territory that such enterprise produces or supplies by relating such sales in any way to the volume or value of its exports or foreign exchange earnings;
(e) to use or favour technology that is owned by or licensed to a natural person or an enterprise of the Party; or
(f) to transfer (4bis) technology, a production process or other proprietary knowledge to a natural person or an enterprise in its territory.
3. Neither Party shall directly or indirectly require, force, pressure or otherwise interfere with the transfer or licensing of technology between natural persons and enterprises of a Party and those of the other Party. Such transfer or licencing of technology shall be based on market terms that are voluntary and reflect mutual agreement.
4. Nothing in paragraph 2 shall be construed to prevent a Party from conditioning the receipt or continued receipt of an advantage, in connection with the establishment or operation of any enterprise in its territory, on compliance with a requirement to locate production, provide a service, train or employ workers, construct or expand particular facilities, or carry out research and development in its territory.
5. Subparagraphs 1(f), 2(f) and 3 do not apply when:
(i) the requirement is imposed or enforced, or the commitment or undertaking is enforced by a court or administrative tribunal, or by a competition authority pursuant to the Parties' competition laws to prevent or remedy a restriction or a distortion of competition; or
(ii) a Party authorises the use of an intellectual property right in accordance with Article 31 or Article 31bis of the TRIPS Agreement, or adopts or maintains measures requiring the disclosure of data or proprietary information that fall within the scope of, and are consistent with, paragraph 3 of Article 39 of the TRIPS Agreement.
6. Subparagraphs 1(a), (b) and (c), and 2(a) and (b), do not apply to qualification requirements for goods or services with respect to participation in export promotion and foreign aid programs.
7. Subparagraphs 2(a) and (b) do not apply to requirements imposed by an importing Party relating to the content of goods necessary to qualify for preferential tariffs or preferential quotas.
8. This Article is without prejudice to the obligations of a Party under the WTO Agreement.
Article 3bis. Covered Entities
1. Covered entity means, at all levels of government, the following entities (5). (a) Enterprise in which a Party directly or indirectly,
i. owns more than 50 per cent of the share capital;
ii. controls, through ownership interests the exercise of more than 50 per cent of the voting rights;
iii. holds the power to appoint a majority of members of the board of directors or any other equivalent management body; or
iv. holds the power to control the decisions of the enterprise through any other ownership interest, including minority ownership;
(b) Enterprise in which a Party has the power to legally direct the actions or otherwise exercise an equivalent level of control in accordance with its laws and regulations;
(c) Any entity, public or private, including where relevant any subsidiary thereof, or a consortium, which in a relevant market in the territory of a Party is authorized or established formally or in effect by that Party as the sole supplier or purchaser of a good or service, but does not include an entity that has been granted an exclusive intellectual property right solely by reason of such grant;
(d) Two or a small number of enterprises, public or private, including where relevant any subsidiary thereof, designated by a Party, formally or in effect, as the only suppliers or purchasers of a particular good or service in a relevant market in the territory of that Party (6).
2. Scope
(a) Nothing in this Article shall be construed to prevent a Party from establishing or maintaining the covered entities.
(b) This Article does not apply to situations where the covered entities act as procuring entities of goods or services purchased for governmental purposes (7) and not with a view to commercial resale, or use in the supply of a good or service for commercial sale or resale.
(c) This Article does not apply to the activities in sectors or subsectors reserved pursuant to the non-conforming measures maintained by China as set out in Entries 1.21 to 1.26 of China's schedule in Annex I.
(d) Paragraph 3 (Non-discriminatory Treatment and Commercial Considerations) and Paragraph 4 (Transparency) shall not apply with respect to a covered entity if in any one of the three previous consecutive fiscal years, the annual revenue derived from the commercial activities of such covered entity was less than 200 million Special Drawing Rights.
(e) For greater certainty, this Article does not apply to the activities conducted in the exercise of governmental authority, including those for national defence or public security, pursuant to Article 1(2) (c) of this Sub-Section.
(f) For greater certainty, the Parties acknowledge that this Article does not apply to non- commercial activities conducted by covered entities to support the development of poverty areas or to deal with natural disasters.
3. Non-discriminatory Treatment and Commercial Considerations
(a) Each Party shall ensure that its covered entities when engaging in commercial activities (8):
(i) act in accordance with commercial considerations in their purchases or sales of goods or services in the territory of the Party, except to fulfil any terms of their public service mandate that are not inconsistent with subparagraph (a) ii and iii;
(ii) in their purchases of goods or services, accord to goods or services supplied by investors of the other Party and the covered enterprises treatment no less favourable than they accord to like goods or like services supplied by investors and enterprises of the Party; and
(iii) in their sales of goods or services, accord to investors of the other Party and to the covered enterprises treatment no less favourable than they accord, in like situations, to investors and enterprises of the Party.
(b) Subparagraph (a) does not preclude a covered entity from:
(i) purchasing or selling goods or services on different terms or conditions, including those relating to price; or
(ii) refusing to purchase or sell goods or services, provided that such different terms or conditions or refusal is undertaken in accordance with commercial considerations.
(c) Subparagraph (a) does not apply to the extent that a covered entity of a Party makes purchases or sales of goods or services pursuant to a non-conforming measure that the Party adopts or maintains in accordance with Article X (Non-Conforming Measures), as set out in its Schedules to Annex II (reservations taken against a National Treatment or Most-Favoured Nation treatment obligation).
4. Transparency
(a) A Party which has reason to believe that its interests under this Article are being adversely affected by the commercial activities of a covered entity of the other Party, may request in written form that Party to supply information about the operations of such entity related to the carrying out of the provisions of this Article. Requests for such information shall indicate the enterprise, the products/services and markets concerned, and include an explanation of how the activities of such enterprise have or could have adversely affected the interests under this Article. Such information includes the following:
i. the percentage of shares and the percentage of voting rights that the Party and/or a covered entity of the Party cumulatively own or hold in the enterprise, as well as the ownership and the voting structure of that enterprise;
ii. a description of any special shares or special voting or other rights that a Party and/or a covered entity holds, where such rights differ from the rights attached to the general common shares of the enterprise;
iii. the organisational structure of the enterprise, the composition of its board of directors or of any other equivalent management body exercising control in such enterprise, and cross-holdings and other legal arrangements with covered entities where relevant for the assessment of the compliance with the provisions of this Article;
iv. annual revenue or total assets, or both;
v. any exemptions, immunities and equivalent measures applicable to the enterprise under the requested Party's laws and regulations;
vi. a description of which competent authority is responsible for exercising the government's ownership functions with respect to the enterprise and which government department is responsible to regulate its activities at issue; if applicable, a description of the reporting requirements imposed by those departments/competent authority and of the manner in which the latter may be involved in the appointment, dismissal and remuneration of executives and members of its board of directors or any other equivalent management body of the enterprise.
(b) Each Party shall endeavor to ensure that its covered entities respect international good practices of corporate governance and transparency.