3. A determination that there has been a breach of another provision of this Agreement, or of a separate international agreement, does not establish that there has been a breach of this Article.
Article 11.7. Compensation for Losses
1. Investors of one Party whose investments in the territory of the other Party suffer losses owing to war or other armed conflict, revolution, a state of national emergency, insurrection, riot or any other similar event, shall be accorded by the latter Party treatment, as regards restitution, indemnification, compensation or other settlement, no less favourable than that which the latter Party accords to investments of its own investors or investments of investors of any non-Party, whichever is more favourable, to the investment of the investor of the former Party. All payments that may result shall be deemed freely transferable.
2. Paragraph 1 does not apply to existing measures relating to subsidies or grants provided by a Party, or to any conditions attached to the receipt or continued receipt of such subsidies or grants, whether or not such subsidies or grants are offered exclusively to investors of the Party or investments of investors of the Party, including government-supported loans, guarantees and insurance, that would be inconsistent with Article 11.4 (National Treatment) and Article 11.5 (Most-Favoured-Nation Treatment) but for Article 11.13.4 (Non-Conforming Measures).
Article 11.8. Performance Requirements
1. Neither Party may impose or enforce any of the following requirements, or enforce any commitment or undertaking, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of an investment of an investor of a Party or of a non-Party in its territory:
(a) to export a given level or percentage of goods or services;
(b) to achieve a given level or percentage of domestic content;
(c) to purchase, use or accord a preference to goods produced in its territory, or to purchase goods from persons in its territory;
(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 investment;
(e) to restrict sales of goods or services in its territory that such investment produces or supplies by relating such sales in any way to the volume or value of its exports or foreign exchange earnings;
(f) to transfer a particular technology, production process or other proprietary knowledge to a person in its territory; or
(g) to supply exclusively from the territory of the Party the goods that it produces or the services that it provides to a specific regional market or to the world market.
2. Neither Party may condition the receipt or continued receipt of an advantage, in connection with the establishment, acquisition, expansion, management, conduct, operation, or sale or other disposition of an investment in its territory of an investor of a Party or of a non-Party, on compliance with any of the following requirements:
(a) to achieve a given level or percentage of domestic content;
(b) to purchase, use or accord a preference to goods produced in its territory or to purchase goods from persons 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 investment; or
(d) to restrict sales of goods or services in its territory that such investment produces or supplies by relating such sales in any way to the volume or value of its exports or foreign exchange earnings.
3. (a) Nothing in paragraph 2 shall be construed to prevent a Party from conditioning the receipt or continued receipt of an advantage, in connection with an investment in its territory of an investor of a Party or of a non-Party, on compliance with a requirement to locate production, supply a service, train or employ workers, construct or expand particular facilities, or carry out research and development, in its territory.
(b) The provisions of subparagraph 1(f) do not apply:
i. when a Party authorizes use of an intellectual property right in accordance with Article 31 of the TRIPS Agreement, and to measures requiring the disclosure of proprietary information that fall within the scope of, and are consistent with Article 39 of the TRIPS Agreement (23) ; or
ii. when the requirement is imposed or the commitment or undertaking is enforced by a court, administrative tribunal or competition authority to remedy a practice determined after judicial or administrative process to be anticompetitive under the Party's competition laws (24).
(c) Provided that such measures are not applied in an arbitrary or unjustifiable manner, and provided that such measures do not constitute a disguised restriction on international trade or investment, subparagraphs 1(b), (c), and (f), and 2(a) and (b), shall not be construed to prevent a Party from adopting or maintaining measures, including environmental measures:
i. necessary to secure compliance with laws and regulations that are not inconsistent with this Agreement;
ii. necessary to protect human, animal, or plant life or health; or
iii. related to the conservation of living or non-living exhaustible natural resources.
(d) Subparagraphs (1)(a), (b) and (c), and (2)(a) and (b) do not apply to qualification requirements for goods or services with respect to export promotion and foreign aid programmes.
(e) The provisions of 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.
(f) Subparagraphs 1(b), (c), (f) and (g), and 2(a) and (b), do not apply to government procurement.
4. For greater certainty, paragraphs 1 and 2 do not apply to any requirement other than the requirements set out in those paragraphs.
5. This Article does not preclude the application of any commitment, undertaking or requirement between private parties, where a Party did not impose or require the commitment, undertaking or requirement.
Article 11.9. Special Formalities and Information Requirements
1. Nothing in Article 11.4 (National Treatment) shall be construed to prevent a Party from adopting or maintaining a measure that prescribes special formalities in connection with investments of investors of the other Party, such as a requirement that investors be residents of the Party or that investments of investors of the other Party be legally constituted under the laws or regulations of the Party, provided that such formalities do not materially impair the protections afforded by a Party to investors of the other Party and investments of investors of the other Party pursuant to this Chapter. The Parties shall endeavour to exchange information on any existing or future special formalities.
2. Notwithstanding Article 11.4 (National Treatment) and Article 11.5 (Most-Favoured-Nation Treatment), a Party may require an investor of the other Party or investment of investor of the other Party, to provide information concerning that investment solely for informational or statistical purposes. The Party shall protect any confidential business information from any disclosure that would prejudice the competitive position of the investor or the investment of investor of the other Party. Nothing in this paragraph shall be construed to prevent a Party from otherwise obtaining or disclosing information in connection with the equitable and good faith application of its law.
Article 11.10. Expropriation and Nationalization (25)
1. Neither Party shall expropriate or nationalize the investments of investors of the other Party either directly or indirectly through measures equivalent to expropriation or nationalization (hereinafter referred to as "expropriation"), unless such a measure is taken on a non-discriminatory basis, for a public purpose, in accordance with due process of law and Article 11.6 (Minimum Standard of Treatment), and upon payment of compensation in accordance with this Article (26).
2. The expropriation shall be accompanied by the payment of prompt, adequate and effective compensation. Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriation or impending expropriation became public knowledge. Compensation shall carry an appropriate interest, taking into account the date of expropriation until the date of payment. Such compensation shall be effectively realizable, freely transferable in accordance with Article 11.11 (Transfers) and made without delay.
3. This Article does not apply to the issuance of compulsory licenses granted in relation to intellectual property rights, or to the revocation, limitation or creation of intellectual property rights, to the extent that such issuance, revocation, limitation or creation is consistent with the TRIPS Agreement (27).
Article 11.11. Transfers
1. Each Party shall permit all transfers relating to investments of an investor of the other Party to be made freely and without delay into and out of its territory. Such transfers include:
(a) contributions to capital;
(b) profits, dividends, capital gains, and proceeds from the sale of all or any part of the investment or from the partial or complete liquidation of the investment;
(c) interest, royalty payments, management fees, and technical assistance and other fees;
(d) payments made under a contract entered into by the investor, or its investment, including payments made pursuant to a loan agreement;
(e) payments made pursuant to Article 11.7 (Compensation for Losses) and Article 11.10 (Expropriation and Nationalization); and
(f) payments arising under Article 11.16 (Investor-State Dispute Settlement).
2. Each Party shall permit such transfers to be made in a freely usable currency at the market rate of exchange prevailing on the date of transfer.
3. Each Party shall permit returns in kind relating to an investment of investors of the other Party to be made as authorized or specified in a written agreement between the Party and an investment by an investor of the other Party, or an investor of the other Party.
4. Notwithstanding paragraphs 1, 2 and 3, a Party may prevent or delay a transfer through the equitable, non-discriminatory, and good faith application of its laws relating to:
(a) bankruptcy, insolvency, or the protection of the rights of creditors;
(b) issuing, trading, or dealing in securities, futures, options, or derivatives;
(c) financial reporting or record keeping of transfers when necessary to assist law enforcement or financial regulatory authorities;
(d) criminal or penal offenses;
(e) ensuring compliance with orders or judgments in judicial or administrative proceedings; or
(f) social security, public retirement or compulsory savings schemes.
5. Nothing in this Chapter shall affect the rights and obligations of the members of the International Monetary Fund under the Articles of Agreement of the Fund, including the use of exchange actions which are in conformity with the Articles of Agreement, provided that a Party shall not impose restrictions on any capital transactions inconsistently with its obligations under this Chapter regarding such transactions, except under Article 18.5 (Restrictions to Safeguard the Balance of Payments) or at the request of the Fund.
Article 11.12. Senior Management and Board of Directors
1. Neither Party may require that an enterprise of that Party that is an investment of an investor of the other Party appoint to senior management positions natural persons of any particular nationality.
2. A Party may require that a majority of the board of directors, or any committee thereof, of an enterprise of that Party that is an investment of an investor of the other Party, be of a particular nationality, or resident in the territory of the Party, provided that the requirement does not materially impair the ability of the investor of the other Party to exercise control over its investment.
Article 11.13. Non-conforming Measures
1. Articles 11.4 (National Treatment), 11.5 (Most-Favoured-Nation Treatment), 11.8 (Performance Requirements) and 11.12 (Senior Management and Board of Directors) do not apply to:
(a) any existing non-conforming measure that is maintained by a Party at:
i. the central level of government, as set out by that Party in its Schedule to Annex I (Non-Conforming Measures); or
ii. a local level of government;
(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 11.4 (National Treatment), 11.5 (Most-Favoured-Nation Treatment), 11.8 (Performance Requirements) and 11.12 (Senior Management and Board of Directors). 2. Articles 11.4 (National Treatment), 11.5 (Most-Favoured-Nation Treatment), 11.8 (Performance Requirements) and 11.12 (Senior Management and Board of Directors) 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 (Non-Conforming Measures).
3. Neither Party may, under any measure adopted after the date of entry into force of this Agreement and covered by its Schedule to Annex II (Non-Conforming Measures), require an investor of the other Party, by reason of its nationality, to sell or otherwise dispose of an investment existing at the time the measure becomes effective.
4. Articles 11.4 (National Treatment), 11.5 (Most-Favoured-Nation Treatment) and 11.12 (Senior Management and Board of Directors) shall not apply to subsidies or grants provided by a Party, or to any conditions attached to the receipt or continued receipt of such subsidies or grants, whether or not such subsidies or grants are offered exclusively to investors of the Party or investments of investors of the Party, including government supported loans, guarantees and insurance.
5. Articles 11.4 (National Treatment), 11.5 (Most-Favoured-Nation Treatment) and 11.12 (Senior Management and Board of Directors) shall not apply to government procurement as defined in Article 8.2 (Definitions) of Chapter 8 (Government Procurement).
6. Articles 11.4 (National Treatment) and 11.5 (Most-Favoured-Nation Treatment) do not apply to any measure that is an exception to, or derogation from, a Party's obligations under the TRIPS Agreement, as specifically provided for in that Agreement.
Article 11.14. Denial of Benefits
Subject to prior notification and consultation, a Party may deny the benefits of this Chapter to:
(a) an investor of the other Party and to its investments if the investor is an enterprise owned or controlled by persons of a non-Party and such enterprise has no substantive business operations in the territory of the other Party; or
(b) an investor of the other Party and to its investments if the investor is an enterprise owned or controlled by persons of the denying Party and such enterprise has no substantive business operations in the territory of the other Party.
Article 11.15. Subrogation
1. If a Party or a designated agency of a Party makes a payment to any of its investors under a guarantee, a contract of insurance or other form of indemnity it has granted in respect of an investment of an investor of that Party, the other Party shall recognize the subrogation or transfer of any right or title in respect of such investment. The subrogated or transferred right or claim shall not be greater than the original right or claim of the investor.
2. Where a Party or a designated agency of a Party has made a payment to an investor of that Party and has taken over rights and claims of the investor, that investor shall not, unless authorized to act on behalf of the Party or the designated agency of the Party making the payment, pursue those rights and claims against the other Party.
Article 11.16. Investor-state Dispute Settlement
1. This Article shall apply to disputes between a Party and an investor of the other Party concerning an alleged breach of an obligation of a Party under this Chapter which results in loss or damage to the investor or its investment by reason of that breach.
2. The parties to the dispute shall initially seek to resolve the dispute by consultations and negotiations.
3. Where the dispute cannot be resolved as provided for under paragraph 2 within 6 months from the date of a request for consultations and negotiations, then, and unless the disputing investor and the disputing Party agree otherwise or if the disputing investor has already submitted the dispute for resolution before the courts or administrative tribunals of the disputing Party (excluding proceedings for interim measures of protection referred to in paragraph 5 of this Article) or to any other dispute settlement procedures, the disputing investor may submit the dispute for settlement to (28) :
(a) the International Centre for Settlement of Investment Disputes (ICSID) for conciliation or arbitration pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), if both Parties are parties to the ICSID Convention;
(b) the Additional Facility Rules of ICSID for conciliation or arbitration, provided that one of the Parties, but not both, is a party to the ICSID Convention; or
(c) arbitration under the rules of the United Nations Commission on International Trade Law (UNCITRAL). The conciliation or arbitration rules applicable under subparagraphs (a), (b) and (c), and in effect on the date the dispute is submitted to conciliation or arbitration under this Article, shall govern the conciliation or arbitration except to the extent modified by this Article.
4. Each Party hereby consents to the submission of a dispute to conciliation or arbitration under subparagraphs 3 (a), (b) and (c) in accordance with the provisions of this Article, conditional upon:
(a) the submission of the dispute to such conciliation or arbitration taking place within 3 years of the time at which the disputing investor became aware, or should reasonably have become aware, of a breach of an obligation under this Chapter resulting in loss or damage to the disputing investor or its investment by reason of that breach; and
(b) the disputing investor providing written notice to the disputing Party of its intent to submit the dispute to such conciliation or arbitration, at least 30 days before the dispute is submitted, and which:
i. states the name and address of the disputing investor and, where a dispute is submitted on behalf of an enterprise, the name, address, and place of constitution of the enterprise;
ii. nominates either subparagraphs 3(a), (b) or (c) of this Article as the procedure for dispute settlement (and, in the case of ICSID, nominates whether conciliation or arbitration is being sought);
iii. waives its right to initiate or continue any proceedings before the courts or administrative tribunals of the disputing Party (excluding proceedings for interim measures of protection referred to in paragraph 5 of this Article) or to any other dispute settlement procedures or other dispute settlement fora referred to in paragraph 3 in relation to the matter under dispute; and
iv. briefly summarizes the alleged breach of the disputing Party under this Chapter (including the Articles alleged to have been breached), the legal and factual basis for the dispute, and the loss or damage allegedly caused to the disputing investor or its investment by reason of that breach.
5. Neither Party shall prevent the disputing investor from seeking interim measures of protection under the laws of the disputing Party, not involving the payment of damages or resolution of the substance of the matter in dispute before the courts or administrative tribunals of the disputing Party for the preservation of its rights and interests.
6. Neither Party shall give diplomatic protection, or bring an international claim, in respect of a dispute which one of its investors and the other Party shall have consented to submit or have submitted to conciliation or arbitration under this Article, unless such other Party has failed to abide by and comply with the award rendered in such dispute. Diplomatic protection, for purposes of this paragraph, shall not include informal diplomatic exchanges for the sole purpose of facilitating a settlement of the dispute.
7. The arbitral awards shall be based on the provisions of this Agreement, the laws of the disputing Party, including its rules on the conflict of laws, and the applicable rules of international law. The arbitral award shall be final and binding and each Party shall ensure the recognition and enforcement of the arbitral award in accordance with its laws.
Annex 11.1. Expropriation and Nationalization
The Parties confirm their shared understanding that:
1. Article 11.10.1 (Expropriation and Nationalization) is intended to reflect customary international law concerning the obligation of States with respect to expropriation.
2. An action or a series of actions by a Party cannot constitute an expropriation unless it interferes with a tangible or intangible property right or property interest in an investment.
3. Article 11.10.1 (Expropriation and Nationalization) addresses two situations. The first is direct expropriation, where an investment is nationalized or otherwise directly expropriated through formal transfer of title or outright seizure.
4. The second situation addressed by Article 11.10.1 (Expropriation and Nationalization) is indirect expropriation, where an action or series of actions by a Party has an effect equivalent to direct expropriation without formal transfer of title or outright seizure.
(a) The determination of whether an action or series of actions by a Party, in a specific fact situation, constitutes an indirect expropriation, requires a case-by-case, fact-based inquiry that considers, among other factors:
i. the economic impact of the government action, although the fact that an action or series of actions by a Party has an adverse effect on the economic value of an investment, standing alone, does not establish that an indirect expropriation has occurred;
ii. the extent to which the government action interferes with distinct, reasonable investment-backed expectations; and
iii. the character of the government action.
(b) Except in rare circumstances, non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety and the environment, do not constitute indirect expropriations.
Chapter 12. Electronic Commerce
Article 12.1. General
1. The Parties recognize the economic growth and opportunities that electronic commerce provides, the importance of avoiding barriers to its use and development, and the applicability of WTO rules to measures affecting electronic commerce.
2. For greater certainty, nothing in this Chapter shall be construed to prevent a Party from imposing internal taxes, directly or indirectly, on digital products, provided they are imposed in a manner consistent with this Agreement.
Article 12.2. Definitions
For purposes of this Chapter:
carrier medium means any physical object capable of storing the digital codes that form a digital product by any method now known or later developed, and from which a digital product can be perceived, reproduced, or communicated, directly or indirectly, and includes an optical medium, a floppy disk, and a magnetic tape;
digital products means computer programs, text, video, images, sound recordings, and other products that are digitally encoded, regardless of whether they are fixed on a carrier medium or transmitted electronically (29) ;
electronic transmission or transmitted electronically means the transfer of digital products using any electromagnetic or photonic means; and
using electronic means means employing computer processing.
Article 12.3. Electronic Supply of Services
For greater certainty, the Parties affirm that measures affecting the supply of a service using electronic means fall within the scope of the obligations contained in the relevant provisions of Chapter 10 (Trade in Services) and Chapter 11 (Investment), subject to any exceptions or non conforming measures set out in this Agreement, which are applicable to such obligations.
Article 12.4. Digital Products
1. Neither Party shall impose customs duties, fees, or other charges on or in connection with the importation or exportation of digital products by electronic transmission.
2. Each Party shall determine the customs value of an imported carrier medium bearing a digital product based on the cost or value of the carrier medium alone, without regard to the cost or value of the digital product stored on the carrier medium.
3. Neither Party shall accord less favourable treatment to some digital products transmitted electronically than it accords to other like digital products transmitted electronically:
(a) on the basis that:
i. the digital products receiving less favourable treatment are created, produced, published, stored, transmitted, contracted for, commissioned, or first made available on commercial terms outside its territory; or
ii. the author, performer, producer, developer, or distributor of such digital products is a person of the other Party or non-Party; or
(b) so as otherwise to afford protection to the other like digital products that are created, produced, published, stored, transmitted, contracted for, commissioned, or first made available on commercial terms in its territory (30).
4. Neither Party shall accord less favourable treatment to digital products transmitted electronically:
(a) that are created, produced, published, stored, transmitted, contracted for, commissioned, or first made available on commercial terms in the territory of the other Party than it accords to like digital products transmitted electronically that are created, produced, published, stored, transmitted, contracted for, commissioned, or first made available on commercial terms in the territory of a non-Party; or
(b) whose author, performer, producer, developer, or distributor is a person of the other Party than it accords to like digital products transmitted electronically whose author, performer, producer, developer, or distributor is a person of a non-Party.
5. Paragraphs 3 and 4 do not apply to any non-conforming measure described in Articles 10.7 (Non-Conforming Measures), or 11.13 (Non-Conforming Measures).
6. This Article does not apply to measures affecting broadcasting services, including the electronic transmission of a series of text, video, images, sound recordings, and other products scheduled by a content provider for aural and/or visual reception, and for which the content consumer has no choice over the scheduling of the series.
Article 12.5. Transparency
Each Party shall publish or otherwise make available to the public its laws, regulations, and other measures of general application that pertain to electronic commerce.
Article 12.6. Cooperation
Recognizing the global nature of electronic commerce, the Parties shall encourage cooperative activities to promote it. The areas of cooperation may include the following:
(a) promoting and facilitating the use of electronic commerce by small and medium sized enterprises; and
(b) sharing information and experiences as mutually agreed on laws, regulations and programmes in the sphere of electronic commerce.
Chapter 13. Intellectual Property and Innovation
Article 13.1. Principles
1. The Parties recognize the importance of intellectual property rights in promoting economic and social development, particularly in the globalization of technological innovation and trade, science, as well as the transfer and dissemination of knowledge and technology to the mutual advantage of technology producers and users, and agree to encourage the development of social economic well-being and trade through these means.
2. The Parties recognize the need to achieve a balance between the rights of right holders and the legitimate interests of users and the community with regard to protected subject matter.