(b) the proposed modification covers an entity over which the Party has effectively eliminated control or influence.
3. If the other Party does not agree that:
(a) a proposed adjustment under the scope of subparagraph 1(b) is adequate to maintain a comparable level of mutually agreed coverage;
(b) the proposed modification is a minor amendment or rectification within the scope of subparagraph 2 (a); or
(c) the proposed modification covers a contracting entity over which the Party has effectively eliminated its control or influence under the scope of subparagraph 2(b), must object in writing within thirty (30) days of receipt of the notice referred to in paragraph 1 or agreement on the proposed change or modification shall be deemed to have been reached even for the purposes of Chapter 15 (Dispute Settlement).
4. When the Parties agree on the proposed modification, rectification or amendment, including when a Party has not objected within thirty (30) days of the date of the proposed modification, rectification or amendment, under the scope of paragraph 3, the Parties shall give effect to the agreement by immediately amending Annex 10.1 (Coverage Annex) through the Commission.
Article 10.17. Integrity In Procurement Practices
Each Party shall establish or maintain procedures for declaring the ineligibility to participate in the Party's procurement, either indefinitely or for a prescribed period, of suppliers that the Party determines to have engaged in illegal or fraudulent activities relating to government procurement. Upon request of the other Party, the Party receiving the request shall identify the suppliers determined to be ineligible under these procedures and, where appropriate, exchange information with respect to these suppliers or the fraudulent or illegal activity.
Article 10.18. Additional Negotiations
At the request of a Party, the other Party may consider conducting additional negotiations for the purpose of expanding the scope and coverage of this Chapter. If as a result of such negotiations the Parties agree to modify the Annexes to this Chapter, the result shall be submitted to the Committee on Government Procurement established in Article 10.21 for implementation.
Article 10.19. Participation of Micro, Small and Medium-Size Enterprises
1. The Parties recognize the importance of the participation of micro, small and medium-sized enterprises in public procurement.
2. The Parties also recognize the importance of business alliances between suppliers of each Party, and in particular micro, small and medium-sized enterprises, including joint participation in bidding procedures.
Article 10.20. Cooperation
1. The Parties recognize the importance of cooperation as a way to achieve a better understanding of their respective government procurement systems, as well as improved access to their respective markets, particularly for micro, small and medium-sized enterprises.
2. The Parties shall make their best efforts to cooperate on issues such as:
(a) exchange of experiences and information, including regulatory framework, best practices and statistics;
(b) development and use of electronic means of information in public procurement systems;
(c) training and technical assistance to suppliers on access to the public procurement market; and
(d) institutional strengthening for compliance with this Chapter, including the training of public officials.
Article 10.21. Public Procurement Committee
1. The Parties establish a Government Procurement Committee (hereinafter the Committee), composed of representatives of each Party.
2. The functions of the Committee shall include:
(a) monitor the implementation and administration of this Chapter, including its use, and recommend to the Commission the corresponding activities;
(b) report to the Commission on the implementation and administration of this Chapter, as appropriate;
(c) evaluate and follow up on cooperation activities;
(d) consider conducting additional negotiations with the objective of expanding the coverage of this Chapter; and
(e) to deal with any other matter related to this Chapter.
3. Unless otherwise agreed by the Parties, the Committee shall meet at least once (1) a year, on the date and according to the agenda previously agreed upon by the Parties. The Parties shall determine those cases in which extraordinary meetings may be held.
4. The meetings may be held by any means agreed upon by the Parties. When they are face-to-face, they shall be held alternately in the territory of each Party, and it shall be the responsibility of the host Party to organize the meeting. The first meeting of the Committee shall be held no later than one (1) year after the date of entry into force of this Agreement.
5. Unless otherwise agreed by the Parties, the Committee shall be of a permanent nature and shall develop its working rules.
6. All decisions of the Committee shall be made by mutual agreement.
Article 10.22. Definitions
For the purposes of this Chapter:
notice of intended procurement means a notice published by the procuring entity inviting interested suppliers to submit a request for participation, a bid, or both;
conditions of participation means any registration, qualification or other prerequisites for participation in a public procurement;
special compensatory conditions means any conditions or commitments that encourage local development or improve a Party's balance of payments accounts, such as local content requirements, technology licensing, investment requirements, countertrade or similar requirements;
contracting entity means an entity listed in Schedule 10.1 (Schedule of Coverage);
written or in writing means any expression in words, numbers or other symbols, which can be read, reproduced and subsequently communicated. It may include information transmitted and stored electronically;
technical specification means a procurement requirement that:
(a) establishes the characteristics of the goods or services to be contracted, including quality, performance, safety and dimensions, or the processes and methods for their production or provision; or
(b) establish terminology, symbols, packaging, marking or labeling requirements as they apply to a good or service;
open bidding means a method of procurement in which all interested suppliers may submit a bid;
commercial goods or services means the goods or services of the type that are generally sold or offered for sale in the commercial market to, and usually purchased by, non-governmental buyers for non-governmental purposes;
standard means a document approved by a recognized body, which provides, for common and repeated use, rules, guidelines or characteristics for goods, or related services or processes and methods of production, compliance with which is not mandatory. It may also include or refer exclusively to requirements for terminology, symbols, packaging, markings or labeling as they apply to a product, service, process or method of production;
supplier means a person who provides or could provide goods or services to a contracting entity;
services include construction services, unless otherwise specified;
construction service means a service the object of which is the performance by whatever means of civil or construction work, based on Division 51 of the provisional version of the United Nations Central Product Classification (CPC); and
electronic auction means an iterative process in which suppliers use electronic means to submit new prices or new values for quantifiable non-price bid elements, or both, that are linked to the evaluation criteria, and which results in a ranking or reclassification of bids.
Chapter 11. Competition Policy
Article 11.1. Objectives
The purpose of this Chapter is to ensure that the benefits of trade liberalization under this Agreement are not undermined by anti-competitive practices, as well as to promote cooperation between the Parties in the application of their respective competition laws.
Article 11.2. Legislation and Competent Authorities
1. Each Party shall adopt or maintain national competition legislation that comprehensively and effectively addresses anticompetitive practices in order to promote economic efficiency and consumer welfare.
2. Each Party shall establish or maintain an authority responsible for the enforcement of its respective competition laws.
3. Each Party shall maintain its autonomy to develop and apply its respective competition legislation.
4. Each Party shall ensure that its respective national competition authorities act in accordance with the principles of transparency, non-discrimination and due process in the application of their respective competition laws.
Article 11.3. Cooperation
1. The Parties recognize the importance of cooperation and coordination between their respective national competition authorities to promote the effective enforcement of their respective competition laws.
2. Accordingly, the Parties shall cooperate in matters relating to the application of competition policy and law, including notification, exchange of information and consultations, in accordance with Articles 11.4, 11.5 and 11.6, respectively.
3. The Parties, through their competition authorities or competent competition authorities, may sign cooperation agreements or arrangements for the purpose of strengthening cooperation in competition matters.
Article 11.4. Notifications
1. The competition authority of a Party shall notify the competition authority of the other Party.
The Parties shall not be bound by the competition law of the other Party with respect to any activity in the application of their competition law, if they consider that such activity may affect important interests of the other Party.
2. Provided that it is not contrary to the domestic law of the Parties, nor does it affect any ongoing investigation, notification shall be made at an early stage of the administrative proceeding. The competition authority of the Party conducting the enforcement activity of its competition law may take into consideration the comments received from the other Party in its determinations.
Article 11.5. Exchange of Information
1. The Parties recognize the value of transparency in competition policies.
2. In order to facilitate the effective application of their respective competition laws, the Parties may exchange information at the request of one of them, provided that this is not contrary to their national laws and does not affect any ongoing investigation.
Article 11.6. Consultations
To promote understanding between the Parties or to address specific matters arising under this Chapter, each Party shall, at the request of the other Party, initiate consultations. The requesting Party shall indicate how the matter affects trade between the Parties. The requested Party shall give the utmost consideration to the concerns of the other Party.
Article 11.7. Settlement of Disputes
Neither Party may have recourse to the dispute settlement procedures set forth in Chapter 12 (Investment) and Chapter 18 (Dispute Settlement) with respect to any matter arising under this Chapter.
Chapter 12. Investment
Section A. Substantive Obligations
Article 12.1. Scope of Application and Coverage (1)
1. This Chapter shall apply to measures adopted or maintained by a Party relating to:
(a) investors of the other Party;
(b) covered investments; and
(c) with respect to Articles 12.6 and 12.8, to all investments in the territory of the Party.
2. The obligations of a Party under this Section shall apply to a state enterprise or other person when it exercises regulatory, administrative or other governmental authority delegated to it by that Party, such as the authority to expropriate, grant licenses, approve commercial transactions or impose dues, fees or other charges.
3. For greater certainty, this Chapter does not bind a Party in relation to any act or fact that took place before the date of entry into force of this Agreement.
4. For greater certainty, nothing in this Chapter shall be construed to impose an obligation on a Party to privatize any investment that it owns or controls, or to prevent a Party from designating a monopoly.
5. Nothing in this Chapter shall require a Party to protect investments made with capital or assets derived from illegal activities, and shall not be construed t o prevent a Party from adopting or maintaining measures aimed at the preservation of public order, the performance of its duties to maintain or restore international peace and security, or the protection of its own essential security interests.
6. 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.
7. A Party's requirement that a service supplier of the other Party post a bond or other form of financial security as a condition for supplying a cross-border service does not, in itself, make this Chapter applicable to measures adopted or maintained by the Party with respect to the cross-border supply of the service. This Chapter applies to the measures adopted or maintained by the Party with respect to the bond or financial guarantee, to the extent that such bond or financial guarantee constitutes a covered investment.
8. This Chapter shall not apply to a measure adopted or maintained by a Party if such measure is covered by Chapter 14 (Financial Services).
Article 12.2. National Treatment
1. Each Party shall accord to investors of the other Party treatment no less favorable than that it accords, in like circumstances, to its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments in its territory.
2. Each Party shall accord to covered investments treatment no less favorable than that it accords, in like circumstances, to investments of its own investors with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments in its territory.
Article 12.3. Most-Favored-Nation Treatment
1. Each Party shall accord to investors of the other Party treatment no less favorable than that it accords, in like circumstances, to investors of a non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments in its territory.
2. Each Party shall accord to covered investments treatment no less favorable than that it accords, in like circumstances, to investments of investors of a non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory.
3. For greater certainty, the treatment with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments, referred to in paragraphs 1 and 2, does not include dispute settlement procedures, such as that provided for in Section B, that are set forth in international treaties, including trade or investment agreements.
Article 12.4. Minimum Standard of Treatment (2)
1. Each Party shall accord to covered investments treatment in accordance with customary international law, including fair and equitable treatment, as well as full protection and security.
2. For greater certainty, paragraph 1 prescribes that the minimum standard of treatment of aliens under customary international law is the minimum standard of treatment that may be afforded to covered investments. The concepts of "fair and equitable treatment" and "full protection and security" do not require treatment in addition to or beyond that required by that standard and do not create significant additional rights. The obligation in paragraph 1 to provide:
(a) "fair and equitable treatment" includes the obligation not to deny justice in criminal, civil or administrative proceedings, in accordance with the principle of due process embodied in the principal legal systems of the world; and
(b) "Full protection and security" requires each Party to provide the level of police protection that is required by customary international law.
3. A determination that another provision of this Agreement or of a separate international agreement has been violated does not establish that this Article has been violated.
Article 12.5. Senior Management and Boards of Directors
1. No Party may require an enterprise of that Party that is a covered investment to appoint natural persons of a particular nationality to senior management positions.
2. A Party may require that a majority of the members of the board of directors, or any committee thereof, of an enterprise of that Party that is a covered investment be of a particular nationality or resident in the territory of the Party, provided that the requirement does not significantly impair the ability of the investor to exercise control over its investment.
Article 12.6. Performance Requirements
1. No Party may, in connection with the establishment, acquisition, expansion, management, conduct, operation, sale or other disposition of an investment of an investor of a Party or of a non-Party in its territory, impose or enforce any requirement or enforce any obligation or commitment of (3):
(a) export a certain level or percentage of goods or services;
(b) to reach a certain degree or percentage of domestic content;
(c) to purchase, use or give preference to goods produced in its territory, or to purchase goods from persons in its territory;
(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 investment;
(e) restrict sales in its territory of the goods or services that such investment produces or provides, by relating such sales in any way to the volume or value of its exports or to the foreign exchange earnings it generates;
(f) transfer a particular technology, production process or other proprietary knowledge to a person in its territory, except where the requirement is imposed or the obligation or undertaking is enforced by a judicial or administrative tribunal or a competition authority, to remedy a practice that has been determined after judicial or administrative proceedings to be anticompetitive under the Party's competition laws (4) ; or
(g) to supply exclusively from the territory of a Party the goods produced by the investment or the services it provides to a specific regional market or to the world market.
2. A measure that requires an investment to use a technology to comply with general regulations applicable to health, safety or the environment shall not be considered inconsistent with subparagraph 1(f).
3. Sub-paragraph 1 (f) does not apply where a Party authorizes the use of an intellectual property right pursuant to Article 31 (5) of the WTO 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 WTO TRIPS Agreement (6).
4. For greater certainty, nothing in paragraph 1 shall be construed to prevent a Party, in connection with the establishment, acquisition, expansion, management, conduct, operation or sale or other disposition of a covered investment or an investment of an investor of a non-Party in its territory, from imposing or enforcing a requirement or enforcing an obligation or commitment to train workers in its territory.
5. No Party may condition the receipt of an advantage, or the continued receipt of an advantage, in connection with the establishment, acquisition, expansion, management, conduct, operation, sale or other disposition of an investment in its territory by an investor of a Party or of a non-Party, on compliance with any of the following requirements:
(a) to reach a certain degree or percentage of domestic content;
(b) to purchase, use or grant preferences to goods produced in its territory or to purchase goods from persons in its territory;
(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 investment; or
(d) restrict sales in its territory of the goods or services that such investment produces or provides, by relating such sales in any way to the volume or value of its exports or foreign exchange earnings.
6. Nothing in paragraph 5 shall be construed to prevent a Party from conditioning the receipt of an advantage, or the continued receipt of an advantage, in connection with an investment in its territory by an investor of a Party or of a non-Party on compliance with a requirement that it locate production, provide services, train or employ workers, construct or expand particular facilities, or carry out research and development, in its territory.
7. Paragraphs 1 and 5 shall not apply to any requirement other than the commitment, obligation or requirements set forth in those paragraphs.
8. The provisions of the:
(a) subparagraphs 1 (a), (b) and (c), and 5 (a) and (b) shall not apply to requirements for qualification of goods or services with respect to export promotion programs and foreign aid programs; and
(b) subparagraphs 5(a) and (b) shall not apply to requirements imposed by an importing Party with respect to the content of goods necessary to qualify for preferential duties or quotas.
9. Provided that such measures are not applied in an arbitrary or unjustified manner and provided that such measures do not constitute a disguised restriction on international trade or investment, nothing in subparagraphs 1(b), (c) and (f) and 5(a) and 5(a) shall be construed to prevent the application of such measures.
(b) shall be construed to prevent a Party from adopting or maintaining measures, including measures of an environmental nature:
(a) necessary to ensure compliance with laws and regulations that are not inconsistent with the provisions of this Agreement;
(b) necessary to protect human, animal or plant life or health; or
(c) related to the preservation of living or non-living non-renewable natural resources.
10. Subparagraphs 1 (b), (c), (f) and (g), and 5 (a) and (b) do not apply to public procurement.
11. This Article does not exclude the application of any commitment, obligation or requirement between private parties, where a Party did not impose or require the commitment, obligation or requirement.
Article 12.7. Nonconforming Measures
1. Articles 12.2, 12.3, 12.5 and 12.6 shall not apply to:
(a) any non-conforming measure existing or maintained by a Party in:
(i) the central or regional level of government, as specified by that Party in its Schedule to Annex I; or
(ii) a local level of government;
(b) the continuation or prompt renewal of any nonconforming measure referred to in subparagraph (a); or
(c) the modification of any nonconforming measure referred to in subparagraph (a) provided that such modification does not diminish the degree of conformity of the measure, as in effect immediately before the modification, with Articles 12.2, 12.3, 12.5, and 12.6.
2. Articles 12.2, 12.3, 12.5 and 12.6 shall not apply to any measure that a Party adopts or maintains, in relation to sectors, subsectors or activities, as indicated in its Schedule to Annex II.
3. Articles 12.2 and 12.3 do not apply to any measure adopted under the exceptions under Articles 3, 4 and 5 of the WTO TRIPS Agreement.
4. Neither Party may require, pursuant to any measure adopted after the date of entry into force of this Agreement and included in its Schedule to Annex II, 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.
5. The provisions of Articles 12.2, 12.3 and 12.5 shall not apply to:
(a) subsidies or grants provided by a Party, including government-backed loans, guarantees and insurance; or
(b) public procurement.