2. Each Party shall accord to financial institutions of the other Party and to investments of investors of the other Party in financial institutions treatment no less favorable than that it accords, in like circumstances, to its own financial institutions and to investments of its own investors in financial institutions with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of financial institutions and investments.
3. For purposes of the national treatment obligations in Article 14.5.1, a Party shall accord to cross-border financial service suppliers of the other Party treatment no less favorable than that it accords, in like circumstances, to its own financial service suppliers with respect to the supply of the relevant service.
Article 14.3. MOST-FAVORED-NATION TREATMENT
1. Each Party shall accord to investors of the other Party, to financial institutions of the other Party, to investments of investors in financial institutions, and to cross-border financial service suppliers of the other Party, treatment no less favorable than that it accords, in like circumstances, to investors, to financial institutions, to investments of investors in financial institutions, and to cross-border financial service suppliers of a non-Party.
2. A Party may recognize prudential measures of a non-Party in the application of measures covered by this Chapter. Such recognition may be:
(a) granted unilaterally;
(b) achieved by harmonization or other means; or
(c) based on a convention or agreement with a non-Party.
3. A Party granting recognition of prudential measures under paragraph 2 shall provide the other Party with adequate opportunity to demonstrate that circumstances exist in which there are or will be equivalent regulation, supervision and enforcement and, if appropriate, that there are or will be procedures relating to the exchange of information between the Parties.
4. Where a Party grants recognition of prudential measures in accordance with paragraph 2(c) and the circumstances set out in paragraph 3 exist, the Party shall provide adequate opportunity for the other Party to negotiate accession to the convention or agreement, or to negotiate a comparable convention or agreement.
Article 14.4. RIGHT OF ESTABLISHMENT
1. A Party shall permit an investor of the other Party that does not control or own a financial institution in the Party's territory to establish a financial institution authorized to supply financial services that such financial institution may supply in accordance with the Party's domestic law at the time of establishment, without the imposition of numerical restrictions or specific types of legal form requirements. The obligation not to impose requirements of specific types of legal form does not, subject to Article 14.2, preclude a Party from imposing terms, conditions, or other requirements in connection with the establishment of a particular type of entity chosen by an investor of the other Party.
2. A Party shall permit an investor of the other Party that controls or owns a financial institution in the territory of the Party to establish such additional financial institutions as may be necessary for the supply of the full scope of financial services permitted under the Party's domestic law at the time of the establishment of the additional financial institutions. Subject to Article 14.2, a Party may impose terms, conditions, or other requirements for the establishment of additional financial institutions and determine the institutional and legal form to be used for the supply of specific financial services or to carry out specific activities.
3. The right of establishment under paragraphs 1 and 2 shall include the acquisition of existing entities.
4. Subject to Article 14.2, a Party may prohibit a specific financial service or activity. Such prohibition shall not apply to all financial services or to an entire subsector of financial services, such as banking services.
5. For the purposes of this Article, numerical restrictions means limitations imposed, whether on a regional subdivision basis or on the entire territory of a Party, on the number of financial institutions, whether in the form of numerical quotas, monopolies, exclusive service suppliers or by requiring an economic needs test.
Article 14.5. CROSS-BORDER TRADE
1. Each Party shall permit, on terms and conditions that accord national treatment, cross-border financial service suppliers of the other Party to supply the services specified in Annex 14-A.
2. Each Party shall permit persons located in its territory, and its nationals wherever located, to purchase financial services from cross-border financial service suppliers of the other Party located in the territory of the other Party. This does not oblige a Party to allow such suppliers to do business or advertise in its territory. Each Party may define doing business and advertising for the purposes of this obligation, provided that such definitions are not inconsistent with paragraph 1.
3. Without prejudice to other means of prudential regulation of cross-border trade in financial services, a Party may require registration of cross-border financial service suppliers of the other Party and of financial instruments.
Article 14.6. NEW FINANCIAL SERVICES (1)
1. Each Party shall permit a financial institution of the other Party to supply any new financial service that that Party would permit its own financial institutions to supply in like circumstances, without further legislative action by the Party.
2. A Party may determine the legal and institutional form through which the new financial service may be supplied and may require authorization for the supply of the new financial service. Where a Party requires authorization to supply a new financial service, the decision shall be made within a reasonable period of time and the authorization may be refused only on prudential grounds or for failure to meet requirements.
Article 14.7. TREATMENT OF CERTAIN TYPES OF INFORMATION
Nothing in this Chapter obliges a Party to disclose or allow access to:
(a) information relating to the financial affairs and accounts of individual customers of financial institutions or of cross-border financial service suppliers; or
(b) any confidential information the disclosure of which would impede law enforcement or otherwise be contrary to the public interest or would prejudice the legitimate commercial interests of particular enterprises.
Article 14.8. SENIOR EXECUTIVES AND BOARDS OF DIRECTORS
No Party may require that financial institutions of the other Party employ persons of a particular nationality for senior executive or other key personnel.
No Party may require that more than a minority of the Board of Directors of a financial institution of the other Party be composed of nationals of the Party, persons residing in the territory of the Party, or a combination of both.
Article 14.9. NON-CONFORMING MEASURES
1. Articles 14.2 through 14.5 and 14.8 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 III; or
(ii) the local level of government;
(b) the continuation or prompt renewal of any non-conforming measure referred to in paragraph (a); or
(c) the modification of any nonconforming measure referred to in paragraph (a), provided that such modification does not diminish the degree of conformity of the measure as in effect:
(i) immediately prior to the modification, with Article 14.2, 14.3, 14.4 or 14.8; or
(ii) as of the date of entry into force of this Agreement, with Article 14.5.
2. Articles 14.2 through 14.5 and 14.8 shall not apply to any measures that a Party adopts or maintains with respect to sectors, subsectors, or activities as set out in its Schedule to Annex III.
3. A non-conforming measure set out in a Party's Schedule to Annex I or II as a measure to which Article 12.2 (National Treatment), 12.3 (Most-Favored-Nation Treatment), 13.3 (National Treatment), or 13. 4 (Most-Favored-Nation Treatment) shall be treated as a non-conforming measure to which Article 14.2 or 14.3, as the case may be, does not apply, to the extent that the measure, sector, subsector, or activity set out in the Schedule is covered by this Chapter.
Article 14.10. EXCEPTIONS
1. Nothing in this Chapter or this Agreement shall be construed to prevent a Party from adopting or maintaining measures for prudential reasons (2), including for the protection of investors, financial market participants, depositors, policyholders, policyholders, insureds, or beneficiaries, or persons to whom a financial institution or cross-border financial service supplier owes a fiduciary duty, or to ensure the integrity and stability of the financial system. Where such measures are not in accordance with the provisions of this Chapter or this Agreement, they shall not be used as a means of avoiding the Party's obligations under those provisions.
2. Nothing in this Chapter or this Agreement applies to non-discriminatory measures of a general nature taken by any governmental entity in pursuance of monetary, credit, related or exchange rate policies. This paragraph shall not affect a Party's obligations under Article 12.6 (Performance Requirements) with respect to measures covered by Chapter 12 (Investment) or under Articles 12.12 (Transfers) or 13.12 (Transfers and Payments).
3. Notwithstanding the provisions of Articles 12.12 (Transfers) and 13. 12 (Transfers and Payments) as incorporated into this Chapter, a Party may prevent or limit transfers by a financial institution or cross-border financial service supplier to or for the benefit of a person affiliated or related to such institution or supplier through the equitable, non-discriminatory and good faith application of measures relating to the maintenance of the safety, soundness, integrity or financial responsibility of financial institutions or cross-border financial service suppliers. This paragraph is without prejudice to any other provision of this Agreement that allows the Party to restrict transfers.
4. For greater certainty, nothing in this Chapter shall be construed to prevent a Party from adopting or applying measures necessary to secure compliance with laws or regulations that are not inconsistent with this Chapter, including those relating to the prevention of deceptive and fraudulent practices or to address the effects of a breach of financial services contracts, subject to the requirement that such measures are not applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, or a disguised restriction on investment in financial institutions or on cross-border trade in financial services.
Article 14.11. TRANSPARENCY
1. The Parties recognize that transparent regulations and policies governing the activities of financial institutions and cross-border financial service suppliers are important to facilitate financial institutions and cross-border financial service suppliers' access to and operations in each Party's market. Each Party undertakes to promote regulatory transparency in financial services.
2. In lieu of Article 19.2 (Publication), each Party shall, to the extent practicable:
(a) publish in advance any regulations of general application relating to matters in this Chapter that it proposes to adopt; and
(b) provide interested persons and the other Party a reasonable opportunity to comment on the proposed regulations.
3. The regulatory authorities of each Party shall make publicly available the requirements, including any necessary documentation, for completing applications relating to the supply of financial services.
4. Upon request, the regulatory authority of a Party shall inform the interested party of the status of its application. Where the authority requires additional information from the applicant, it shall notify the applicant without undue delay.
5. Within 120 days, the regulatory authority of a Party shall make an administrative decision on a complete application of an investor in a financial institution, a financial institution or a cross-border financial service supplier of the other Party relating to the supply of a financial service, and shall promptly notify the applicant of the decision. An application shall not be considered complete until all relevant hearings have been held and all necessary information has been received. Where it is not practicable to make a decision within 120 days, the regulatory authority shall notify the applicant without undue delay and shall attempt to make the decision subsequently within a reasonable period of time.
6. Each Party shall maintain or establish appropriate mechanisms for responding to inquiries from interested parties regarding measures of general application covered by this Chapter.
7. Each Party shall ensure that standards of general application adopted or maintained by self-regulatory organizations of the Party are published in a timely manner or otherwise made available so that interested persons may become aware of them.
8. To the extent practicable, each Party shall allow a reasonable period of time between the publication of final regulations and their entry into force.
9. In adopting final regulations, the Party shall, to the extent practicable, consider in writing substantive comments received from interested parties with respect to the proposed regulations.
Article 14.12. SELF-REGULATORY BODIES
Where a Party requires a financial institution or cross-border financial service supplier of another Party to be a member of, participate in, or have access to a self-regulatory entity in order to provide a financial service in or into the territory of that Party, the Party shall ensure that such self-regulatory entity complies with the obligations in Article 14.2.
Article 14.13. PAYMENT AND CLEARING SYSTEMS
Each Party shall grant, on terms and conditions that accord national treatment, to financial institutions of another Party established in its territory, access to payment and clearing systems administered by public entities and to official means of financing and refinancing available in the ordinary course of business. This paragraph is not intended to grant access to the Party's lender of last resort facilities.
Article 14.14. FINANCIAL SERVICES COMMITTEE
1. The Parties establish the Financial Services Committee (hereinafter referred to as the "Committee"), composed of representatives of each Party. The principal representative of each Party shall be an official of the Party's authority responsible for financial services set out in Annex 14-B.
2. The functions of the Committee shall include, inter alia:
(a) overseeing the implementation of this Chapter and its further development;
(b) considering matters relating to financial services referred to it by a Party; and
(c) participating in dispute settlement procedures under Article 14.17.
3. Unless otherwise agreed by the Parties, the Committee shall meet at least once a year, on a date and according to an agenda previously agreed, to evaluate the operation of this Agreement with respect to financial services. By mutual agreement, the Parties may hold extraordinary meetings. The Committee shall report to the Commission on the results of each meeting.
4. The meetings may be held by any means agreed 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.
5. Unless otherwise agreed by the Parties, the Committee shall be of a permanent nature and shall draw up its working rules.
6. All decisions of the Committee shall be taken by mutual agreement.
Article 14.15. CONSULTATIONS
1. A Party may request consultations with the other Party with respect to any matter under this Agreement affecting financial services. The other Party shall give due consideration to the request. The Parties shall inform the Committee of the results of the consultations.
2. Consultations under this Article shall include officials of the authorities set out in Annex 14-B.
3. Nothing in this Article shall be construed to require regulatory authorities participating in consultations under paragraph 1 to disclose information or to act in a manner that would interfere with specific regulatory, supervisory, administrative or enforcement matters.
4. Nothing in this Article shall be construed to require a Party to derogate from its relevant legislation relating to the exchange of information between financial regulators or the requirements of an agreement or arrangement between the Parties' financial authorities.
Article 14.16. DISPUTE SETTLEMENT
1. Chapter 18 (Dispute Settlement) shall apply, as modified by this Article, to the settlement of disputes arising out of the application of this Chapter.
2. Where a Party claims that a dispute arises under this Chapter, Article 18.9 (Panel Selection) shall apply, except:
(a) where the disputing Parties so agree, the panel shall be composed entirely of panelists who meet the qualifications set out in paragraph 3; and
(b) in any other case:
(i) each disputing Party may select panelists that meet the qualifications set out in paragraph 3 or in Article 18.8 (Panelist Qualifications); and
(ii) if the Party complained against invokes Article 14.10, the chair of the panel shall meet the qualifications set out in paragraph 3, unless the disputing Parties agree otherwise.
3. Financial services panelists shall:
(a) have expertise or experience in financial law or financial services practice, which may include the regulation of financial institutions;
(b) be selected strictly on the basis of objectivity, reliability and sound judgment;
(c) be independent and not be bound by or take instructions from any Party; and
(d) comply with the Code of Conduct to be established by the Commission.
4. Notwithstanding Article 18.14 (Non-Compliance - Suspension of Benefits), where a panel finds that a measure is inconsistent with this Agreement and the measure under dispute affects:
(a) only the financial services sector, the complaining Party may suspend benefits only in the financial services sector;
(b) only a sector other than the financial services sector, the complaining Party may not suspend benefits in the financial services sector; or
(c) to the financial services sector and any other sector, the complaining Party may suspend benefits in the financial services sector that have an effect equivalent to the effect of the measure on the Party's financial services sector.
Article 14.17. FINANCIAL SERVICES INVESTMENT DISPUTES
1. Where an investor of a Party submits a claim under Section B (Investor-State Dispute Settlement) of Chapter 12 (Investment) and the respondent invokes Article 14.10, the tribunal shall, at the request of the respondent, refer the matter in writing to the Committee for a decision. The tribunal may not proceed pending receipt of a decision or report under this Article.
2. In the referral made pursuant to paragraph 1, the Committee shall decide whether and to what extent Article 14.10 is a valid defense to the investor's claim. The Committee shall send a copy of its decision to the tribunal and to the Commission. The decision shall be binding on the tribunal.
3. Where the Committee has not decided the matter within 60 days of receipt of the referral pursuant to paragraph 1, the respondent or the Party of the claimant may request the establishment of a Panel pursuant to Article 18.6 (Establishment of a Panel). The Panel shall be composed in accordance with Article 14.16. The Panel shall send its final report to the Committee and to the tribunal. The report shall be binding on the tribunal.
4. Where the establishment of a Panel has not been requested in accordance with paragraph 3 within 10 days after the expiration of the 60-day period referred to in paragraph 3, the tribunal may proceed to decide the case.
5. For purposes of this Article, tribunal means a tribunal established under Article 12.21 (Selection of Arbitrators).
Article 14.18. UNDERSTANDINGS AND COMMITMENTS OF THE PARTIES
Annex 14-C sets out certain understandings and commitments of the Parties with respect to the provisions of this Chapter.
Article 14.19. DEFINITIONS
For purposes of this Chapter:
cross-border trade in financial services or cross-border supply of financial services means the supply of a financial service:
(a) from the territory of a Party into the territory of the other Party;
(b) in the territory of a Party by a person of that Party to a person of the other Party; or
(c) by a national of a Party in the territory of the other Party,
but does not include the supply of a financial service in the territory of a Party by an investment in that territory;
self-regulatory entity means any non-governmental entity, including any securities or futures exchange or market, clearing house or other body or association, that exercises proprietary or delegated regulatory or supervisory authority over financial service suppliers or financial institutions;
public entity means a central bank or monetary authority of a Party, or any financial institution owned or controlled by a Party;
financial institution means any financial intermediary or other enterprise that is authorized to do business and that is regulated or supervised as a financial institution under the law of the Party in whose territory it is located;
financial institution of the other Party means a financial institution, including a branch, that is located in the territory of a Party and that is controlled by persons of the other Party;
investment means "investment" as defined in Article 12.31 (Definitions), except that, with respect to "loans" and "debt instruments" referred to in that Article:
(a) a loan made to a financial institution or a debt instrument issued by a financial institution is an investment only when it is treated as regulatory capital by the Party in whose territory the financial institution is located; and
(b) a loan made by a financial institution or a debt instrument owned by a financial institution, other than a loan or debt instrument of a financial institution referred to in paragraph (a), is not an investment.
for greater certainty, a loan provided by a cross-border financial service supplier, or a debt instrument owned by a cross-border financial service supplier, other than a loan to a financial institution or a debt instrument issued by a financial institution, is an investment if such loan or debt instrument meets the criteria for investments set out in Article 12.31 (Definitions);
investor of a Party means a Party or State enterprise, or a person of a Party, that intends to make, is making, or has made an investment in the territory of the other Party; provided, however, that a natural person that is a dual national shall be considered exclusively a national of the State of its dominant and effective nationality;
new financial service means a financial service not supplied in the territory of the Party, but which is supplied in the territory of the other Party, and includes any new form of supply of a financial service or the sale of a financial product that is not sold in the territory of the Party;
person of a Party means a "person of a Party" as defined in Article 1.4 (Definitions of General Application) and, for greater certainty, does not include a branch of a company of a non-Party;
financial service supplier of a Party means a person of a Party that is engaged in the business of supplying a financial service in the territory of that Party;
cross-border financial service supplier of a Party means a person of a Party that is engaged in the business of supplying a financial service in the territory of the Party and that seeks to supply or does supply a financial service through the cross-border supply of such services;
financial service means any service of a financial nature. Financial services include all insurance and insurance-related services, and all banking and other financial services (except insurance), as well as all services incidental or auxiliary to a service of a financial nature. Financial services include the following activities:
Insurance and insurance-related services.
(a) direct insurance (including coinsurance):
(i) life insurance;
(ii) non-life insurance;
(b) reinsurance and retrocession;
(c) insurance intermediation activities, such as those of insurance brokers and agents;
(d) services auxiliary to insurance, such as consulting, actuarial, risk assessment and claim settlement services;
Banking and other financial services (excluding insurance); (e) acceptance of deposits and other financial services (excluding insurance); and
(e) acceptance of deposits and other repayable funds from the public;
(f) lending of all types, including personal loans, mortgage loans, factoring and financing of commercial transactions;
(g) financial leasing services;
(h) all payment and money transfer services, including credit, payment and similar cards, traveler's checks and bank drafts;
(i) guarantees and commitments;
(j) trading for its own account or for the account of customers, whether on an exchange, in an over-the-counter market or otherwise, of the following:
(i) money market instruments (including checks, bills and certificates of deposit);
(ii) foreign currencies;
(iii) derivative products, including futures and options;
(iv) exchange and money market instruments, e.g., swaps and forward rate agreements;
(v) transferable securities;
(vi) other negotiable instruments and financial assets, including metal;
(k) participation in issues of all kinds of securities, including underwriting and placement as agents (publicly or privately), and the provision of services related to such issues;
(l) foreign exchange brokerage;
(m) asset management, e.g., cash or portfolio management, collective investment management in all its forms, pension fund management, depository and custodial services, and trust services;
(n) payment and clearing services in respect of financial assets, including securities, derivatives and other negotiable instruments;
(o) provision and transfer of financial information, and financial data processing and related software, by suppliers of other financial services; and