1. This Chapter shall apply to measures adopted or maintained by a Party relating to investors of the other Party and establishments of investors of the other Party.
2. This Chapter shall apply to establishments in all sectors with the exception of sectors covered by Chapter 8 (Trade in Services). (4) (5)
3. The obligations of a Party under this Chapter shall apply to measures adopted or maintained by any person when it exercises any governmental authority delegated to it by that Party. For greater certainty, governmental authority is delegated under the laws of the Party, including through a legislative grant or a government order, directive or other action transferring or authorising the exercise of governmental authority.
4. This Chapter shall not apply to:
(a) 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 and establishments of the other Party in the Area of that Party, including government-supported loans, guarantees and insurance;
(b) government procurement; or
(c) any act or fact that took place or any situation that ceased to exist before the date of entry into force of this Agreement.
Article 12.3. Relation to other Chapters
In the event of any inconsistency between this Chapter and another Chapter of this Agreement, the other Chapter shall prevail to the extent of the inconsistency.
Article 12.4. National Treatment (6)
Subject to the reservations set out in Article 12.6, each Party shall accord to investors of the other Party, and to establishments of such investors, treatment no less favourable than that it accords, in like circumstances, to its own investors and to the establishments of such investors in its Area.
Article 12.5. Performance Requirements
1. Neither Party shall, in connection with the establishment of an investor of the other Party in its Area, impose or enforce any requirement, or enforce any commitment or undertaking, to (7):
(a) export a given level or percentage of goods;
(b) achieve a given level or percentage of domestic content;
(c) purchase, use or accord a preference to goods produced in its Area, or to purchase goods from persons in its Area;
(d) 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 establishment;
(e) restrict sales of goods in its Area that such establishment produces or supplies by relating such sales in any way to the volume or value of its exports or foreign exchange earnings;
(f) transfer a particular technology, a production process or other proprietary knowledge to a person in its Area; or
(g) supply exclusively from its Area the goods that such establishment produces to a specific regional market or to the world market.
2. For greater certainty, a measure that requires an investor of a Party to use technology to meet health, safety or environmental requirements shall not be construed to be inconsistent with paragraph 1(f). For greater certainty, Article 12.4 applies to such a measure.
3. Neither Party shall condition the receipt or continued receipt of an advantage, in connection with the establishment of an investor of the other Party, on compliance with any requirement to:
(a) achieve a given level or percentage of domestic content;
(b) purchase, use or accord a preference to goods produced in its Area, or to purchase goods from persons in its Area;
(c) 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 establishment; or
(d) restrict sales of goods in its Area that such establishment produces or supplies by relating such sales in any way to the volume or value of its exports or foreign exchange earnings.
4. Nothing in paragraph 3 shall be construed to prevent a Party from conditioning the receipt or continued receipt of an advantage, in connection with the establishment of investors of the other Party, on compliance with a requirement to locate production, train or employ workers, construct or expand particular facilities, or carry out research and development, in its Area.
5. Paragraph 1(f) shall not apply:
(a) if a Party authorises use of an intellectual property right in accordance with the TRIPS Agreement, or to measures requiring the disclosure of proprietary information that fall within the scope of, and are consistent with, Article 39 of the TRIPS Agreement; or
(b) if 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 competition laws and regulations of a Party.
6. Paragraph 1(a), paragraph 1(b), paragraph 1(c), paragraph 3(a) and paragraph 3(b) shall not apply to qualification requirements for goods with respect to export promotion and foreign aid programs.
7. Paragraph 3(a) and paragraph 3(b) shall 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. For greater certainty, nothing in paragraph 1 shall be construed to prevent a Party, in connection with the establishment of an investor of the other Party, from imposing or enforcing a requirement, or enforcing a commitment or undertaking, to employ or train workers in its Area provided that the employment or training does not require the transfer of a particular technology, production process or other proprietary knowledge to a person in its Area.
9. For greater certainty, paragraph 1 and paragraph 3 do not apply to any commitment, undertaking or requirement other than those set out in those paragraphs.
10. For greater certainty, this Article does not preclude enforcement of any commitment, undertaking or requirement between private parties, where a Party did not impose or require the commitment, undertaking, or requirement.
Article 12.6. Non-Conforming Measures
1. Articles 12.4 and 12.5 shall 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;
(ii) the regional level of government, as set out by that Party in its Schedule to Annex I; or
(iii) the 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 12.4 or 12.5.
2. Articles 12.4 and 12.5 shall 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.
3. Article 12.4 shall not apply to any measure that falls within Article 5 of the TRIPS Agreement, or an exception to, or derogation from, the obligations which are imposed by Article 3 of the TRIPS Agreement.
Article 12.7. Special Formalities and Information Requirements
1. Nothing in Article 12.4 shall be construed to prevent a Party from adopting or maintaining a measure that prescribes special formalities in connection with an establishment, such as a residency requirement for registration or a requirement that an enterprise of a Party be legally constituted or organised under the laws or regulations of the Party, provided that these formalities do not materially impair the protections afforded by the Party to investors of the other Party and establishments in accordance with this Chapter.
2. Notwithstanding Article 12.4, a Party may require an investor of the other Party to provide information concerning that establishment solely for informational or statistical purposes. The Party shall protect such information that is confidential from any disclosure that would prejudice the competitive position of the investor or establishment of such investor. 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 laws.
Article 12.8. Denial of Benefits
A Party may, at any time, deny the benefits of this Chapter to an investor of the other Party that is an enterprise of that other Party if:
(a) persons of a non-party own or control the enterprise; and
(b) the denying Party adopts or maintains measures with respect to the non-party or a person of the non-party that prohibit transactions with the enterprise or that would be violated or circumvented if the benefits of this Chapter were accorded to the enterprise.
Article 12.9. Establishment and Environmental, Health and other Regulatory Objectives
Nothing in this Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that the establishment in its Area is undertaken in a manner sensitive to environmental, health or other regulatory objectives.
Article 12.10. Exceptions
For the purposes of this Chapter and subject to the requirement that such measures are not applied in a manner which would constitute arbitrary or unjustifiable discrimination between establishments or between investors, or a disguised restriction on international trade or investment, nothing in this Chapter shall be construed to prevent a Party from adopting or maintaining measures:
(a) necessary to protect public morals or to maintain public order (9);
(b) necessary to protect human, animal or plant life or health;
(c) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Chapter including those relating to:
(i) the prevention of deceptive and fraudulent practices or to deal with the effects of a default on a contract;
(ii) the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts; or
(iii) safety;
(d) imposed for the protection of national treasures of artistic, historic or archaeological value; or
(e) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption
Annex I. SCHEDULE OF HONG KONG, CHINA (Existing Non-Conforming Measures for Establishment) (1)
EXPLANATORY NOTES
1. This Schedule sets out, pursuant to Article 12.6.1 (Non-Conforming Measures) of Chapter 12 (Establishment and Related Provisions), the existing measures of Hong Kong, China that are not subject to the following obligations:
(a) Article 12.4 (National Treatment) of Chapter 12 (Establishment and Related Provisions); or
(b) Article 12.5 (Performance Requirements) of Chapter 12 (Establishment and Related Provisions).
2. 2. Each Schedule entry sets out the following elements:
(a) Sector refers to the sector for which the entry is made;
(b) Obligations Concerned specifies the obligations referred to in paragraph 1 that, pursuant to Article 12.6.1(a) (Non-Conforming Measures) of Chapter 12 (Establishment and Related Provisions), do not apply to the listed measure(s) pursuant to paragraph 4;
(c) Measures identifies the laws, regulations or other measures for which the entry is made. A measure cited in the Measures element:
(i) means the measure as amended, continued or renewed as of the date of entry into force of this Agreement; and
(ii) includes any subordinate measure adopted or maintained under the authority of and consistent with the measure; and
(d) Description sets out the non-conforming measure for which the entry is made.
3. A measure that is only inconsistent with Article 12.5 (Performance Requirements) of Chapter 12 (Establishment and Related Provisions) need not be reserved against Article 12.4 (National Treatment) of Chapter 12 (Establishment and Related Provisions).
4. In accordance with Article 12.6.1 (Non-Conforming Measures) of Chapter 12 (Establishment and Related Provisions), the obligations of this Agreement specified in the Obligations Concerned element of an entry do not apply to the non-conforming measures set out in the Description element of that entry.
I-HKC-1 (Establishment)
Sector: Fishing
Obligations Concerned: National Treatment (Article 12.4)
Description: Under the Fisheries Protection Ordinance (Cap. 171), only certificated local fishing vessels which possess a valid operating licence under the Merchant Shipping (Local Vessels) Ordinance (Cap. 548) can be registered for engaging in fishing activities within the waters of Hong Kong, China.
Under the Merchant Shipping (Local Vessels) Ordinance (Cap. 548), fishing vessels must be certificated. To be certificated as a Local Vessel Class III “fishing vessel” plying within the waters of Hong Kong, China, the owner of a local vessel shall be:
(a) an individual who holds a valid Hong Kong Identity Card and who is ordinarily resident in Hong Kong; or
(b) a company or registered non-Hong Kong company as defined by section 2(1) of the Companies Ordinance (Cap. 622).
Source of Measure: Fisheries Protection Ordinance (Cap. 171)
Section 12 of the Merchant Ordinance (Cap. 548) Shipping (Local Vessels)
I-HKC-2 (Establishment)
Sector: Mining
Obligations Concerned: National Treatment (Article 12.4)
Description: When not resident in Hong Kong, China every holder of a prospecting or mining licence and every lessee of a mining lease shall at all times have a duly authorised attorney, approved by the Director of Lands, resident in Hong Kong, China, with full power to represent the holder or lessee in all matters relating to his or her licence or lease.
Source of Measure: Section 7(1) of Mining Ordinance (Cap. 285)
I-HKC-3 (Establishment)
Sector: Manufacture and storage of dutiable commodities
Obligations Concerned: National Treatment (Article 12.4)
Description: To apply for a licence for the manufacture or storage of dutiable commodities under the Dutiable Commodities Ordinance (Cap. 109), the applicant has to appoint a responsible person to be held responsible for the running and management of the premises concerned. The responsible person has to be a Hong Kong resident holding a valid Hong Kong Identity Card.
Source of Measure: Sections 7 and 8A of the Dutiable Commodities Ordinance (Cap. 109)
Regulation 22 of the Dutiable Commodities Regulations (Cap. 109A)
I-HKC-4 (Establishment)
Sector: Manufacture of optical discs and stampers
Obligations Concerned: National Treatment (Article 12.4)
Description: To apply for a licence for the manufacture of optical discs or stampers under the Prevention of Copyright Piracy Ordinance (Cap. 544), the applicant has to be a Hong Kong resident holding a valid Hong Kong Identity Card.
Source of Measure: Sections 5(1), 5(2)(c)(v) and 30 of the Prevention of Copyright Piracy Ordinance (Cap. 544)
Annex I. SCHEDULE OF PERU (Existing Non-Conforming Measures for Trade in Services and Establishment) (1)
EXPLANATORY NOTES
1. This Schedule sets out, pursuant to Article 8.7 (Non-Conforming Measures) of Chapter 8 (Trade in Services) and Article 12.6 (Non-Conforming Measures) of Chapter 12 (Establishment and Related Provisions), existing measures that are not subject to some or all of the obligations imposed by:
(a) Article 8.3 (National Treatment) of Chapter 8 (Trade in Services) or Article 12.4 (National Treatment) of Chapter 12 (Establishment and Related Provisions);
(b) Article 8.4 (Most-Favoured-Nation Treatment) of Chapter 8 (Trade in Services);
(c) Article 8.5 (Market Access) of Chapter 8 (Trade in Services);
(d) Article 8.6 (Local Presence) of Chapter 8 (Trade in Services); or
(e) Article 12.5 (Performance Requirements) of Chapter 12 (Establishment and Related Provisions).
2. Each Schedule entry sets out the following elements:
(a) Sector refers to the sector for which the entry is made;
(b) Sub-Sector, where referenced, refers to the specific sub-sector for which the entry is made;
(c) To identify the different sectors and sub-sectors in this list, the CPC prove, 1991 is used, which stands for the Central Product Classification according to the definition of the United Nations Statistics Office, Statistical Reports, Series M, No. 77, CPC prov, 1991;
(d) Obligations Concerned specifies the obligations referred to in paragraph 1 that, pursuant to Article 8.7.1.(a) (Non-Conforming Measures) of Chapter 8 (Trade in Services) and Article 12.6.1(a) (Non-Conforming Measures) of Chapter 12 (Establishment and Related Provisions), do not apply to the listed measure(s);
(e) Level of Government indicates the level of government maintaining the listed measures;
(f) Measures identifies the laws, regulations or other measures for which the entry is made. A measure cited in the Measures element:
(i) means the measure as amended, continued or renewed as of the date of entry into force of this Agreement; and
(ii) includes any subordinate measure adopted or maintained under the authority of and consistent with the measure; and
(g) Description provides a general non-binding description of the measure for which the entry is made.
3. Articles 8.3 (National Treatment) and 8.6 (Local Presence) of Chapter 8 (Trade in Services) are separate disciplines and a measure that is only inconsistent with Article 8.6 (Local Presence) of Chapter 8 (Trade in Services) need not be reserved against Article 8.3 (National Treatment) of Chapter 8 (Trade in Services).
4. In accordance with Article 8.7.1 (Non-Conforming Measures) of Chapter 8 (Trade in Services) and Article 12.6.1 (Non-Conforming Measures) of Chapter 12 (Establishment and Related Provisions), the articles of this Agreement specified in the Obligations Concerned element of an entry do not apply to the non-conforming aspects of the law, regulation or other measure identified in the Measures element of that entry.
I-PERU-1
Sector: All
Obligations Concerned: National Treatment (Article 12.4)
Level of Government: Central
Measures: Political Constitution of Peru (Constitución Política del Perú) (1993), Article 71
Legislative Decree N° 757, “El Peruano” Official Gazette of November 13, 1991, Framework Law for Private Investment Growth (Ley Marco para el Crecimiento de la Inversión Privada), Article 13
Description: Establishment
No foreign national, enterprise constituted under foreign law or enterprise constituted under Peruvian law, and owned in whole or part, directly or indirectly, by foreign nationals may acquire or own, directly or indirectly, by any title, land or water (including mines, forest or energy sources) located within 50 kilometres of the Peruvian border. Exceptions may be authorised by Supreme Decree approved by the Council of Ministers in conformity with law in cases of expressly declared public necessity.
For each case of acquisition or possession within the referred area, the investor shall hand in the correspondent request to the relevant Ministry, in accordance with laws in force. For example, authorisations of this kind have been given in the mining sector.
I-PERU-2
Sector: Services Related to Fishing
Sub-Sector:
Obligations Concerned: National Treatment (Article 8.3)