(e) take any other steps that the Parties consider will assist them in implementing this Chapter and the TBT Agreement.
Chapter 10. INVESTMENT LIBERALISATION
Article 10.1. Definitions
1. For the purposes of this Chapter:
(a) "covered enterprise" means an enterprise which is established in accordance with point (e) by an investor of a Party in the territory of the other Party, in accordance with applicable law, and which is in existence at the date of entry into force of this Agreement or is established thereafter;
(b) "economic activity" means an activity of an industrial, commercial or professional character, and an activity of craftsmen, including the supply of services, except an activity performed in the exercise of governmental authority;
(c) "enterprise" means an enterprise as defined in Article 1.3 (Definitions of General Application), or a branch or a representative office thereof 27 ;
(d) "enterprise of the European Union" or "enterprise of Mexico" means an enterprise set up in accordance with the law of the European Union or its Member States, or of Mexico and engaged in substantive business operations 28 in the territory of the European Union or of Mexico, respectively; 29
shipping companies established outside the European Union or Mexico and controlled by nationals of a Member State of the European Union or of Mexico, respectively, shall also be beneficiaries of the provisions of this Chapter, if their vessels are registered in accordance with the law of a Member State of the European Union or of Mexico, as appropriate, and fly the flag of that Member State of the European Union or of Mexico;
(e) "establishment" means the setting up, including the acquisition 30 , of an enterprise in the European Union or in Mexico;
(f) "investor of a Party" means a Party or natural person or an enterprise of a Party, other than a branch or representative office, that seeks to establish, is establishing or has established an enterprise in accordance with point (e) within the territory of the other Party;
(g) "investor of a third country" means an investor that seeks to establish, is establishing or has established an enterprise in accordance with point (e) within the territory of a Party, that is not an investor of a Party;
(h) "operation" means the conduct, management, maintenance, use, enjoyment, sale or other disposal of an enterprise.
Article 10.2. Scope
1. This Chapter applies to measures adopted or maintained by: 31
(a) the central, regional or local governments or authorities of that Party; and
(b) any person, including a state enterprise or any other non-governmental body in the exercise of powers delegated by central, regional, or local governments or authorities.
2. This Chapter does not apply to measures of a Party insofar as they are covered by Chapter 18 (Financial Services).
Article 10.3. Right to Regulate
The Parties affirm the right to regulate within their territories to achieve legitimate policy objectives, such as public health, social services, public education, safety, environment, public morals, social or consumer protection, privacy and data protection, the promotion and protection of cultural diversity, or competition.
Article 10.4. Relation to other Chapters
If an inconsistency arises between this Chapter and Chapter 18 (Financial Services), the latter shall prevail to the extent of the inconsistency.
Article 10.5. Scope
1. This Chapter applies to measures adopted or maintained by a Party affecting the establishment of an enterprise or the operation of such an enterprise by an investor of the other Party in its territory.
2. This Chapter does not apply to:
(a) activities performed in the exercise of governmental authority within the territory of the respective Party;
(b) government procurement of a good or service purchased for governmental purposes, and not with a view to commercial resale or use in the production of a good or supply of a service for commercial sale, irrespective of whether that procurement constitutes a covered procurement within the meaning of Article 21.1 (Definitions);
(c) audio-visual services;
(d) national maritime cabotage; 32
(e) air services, or related services in support of air services 33 , other than the following:
(i) aircraft repair and maintenance services during which an aircraft is withdrawn from service;
(ii) selling and marketing of air transport services;
(iii) computer reservation system services; and
(iv) ground handling services.
3. Articles 10.6 to 10.8 do not apply to subsidies 34 or grants provided by a Party, including government-supported loans, guarantees and insurance.
4. Articles 10.6 to 10.10 do not apply to new services, as set out in Annex VII (Understanding on New Services Not Classified in the United Nations Provisional Central Product Classification 1991).
5. This Chapter does not bind a Party in relation to 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 10.6. Market Access
In the sectors or subsectors where market access commitments are undertaken, a Party shall not adopt or maintain, with respect to market access through establishment or operation by investors of the other Party or by covered enterprises, either on the basis of its entire territory or on the basis of a territorial subdivision, a measure 35 that:
(a) limits the number of enterprises that may carry out a specific economic activity, whether in the form of numerical quotas, monopolies, exclusive rights or the requirement of an economic needs test;
(b) limits the total value of transactions or assets in the form of numerical quotas or the requirement of an economic needs test;
(c) limits the total number of operations or the total quantity of output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test;
(d) restricts or requires specific types of legal entity or joint venture through which an investor of the other Party may carry out an economic activity; or
(e) limits the total number of natural persons that may be employed in a particular sector or that an enterprise may employ and who are necessary for, and directly related to, the performance of an economic activity in the form of numerical quotas or the requirement of an economic needs test.
Article 10.7. National Treatment
1. Each Party shall accord to investors of the other Party and to their covered enterprises treatment no less favourable than the treatment it accords, in like situations, to its own investors and to their enterprises, respectively, with respect to their establishment in its territory.
2. Each Party shall accord to investors of the other Party and to their covered enterprises, treatment no less favourable than the treatment it accords, in like situations, to its own investors and to their enterprises, respectively, with respect to their operation in its territory.
3. The treatment to be accorded by a Party pursuant to paragraphs 1 and 2 means, with respect to a regional level of government of Mexico, treatment no less favourable than the most favourable treatment accorded, in like situations, by that regional level of government to investors of Mexico, and to their enterprises in the territory of that regional government.
4. The treatment to be accorded by a Party pursuant to paragraphs 1 and 2 means, with respect to a government of or in a Member State of the European Union, treatment no less favourable than the most favourable treatment accorded, in like situations, by that government to its own investors, and to their enterprises in its territory.
Article 10.8. Most-Favoured-Nation Treatment
1. Each Party shall accord to investors of the other Party and to their covered enterprises treatment no less favourable than the treatment it accords, in like situations, to investors and enterprises, respectively, of any third country with respect to their establishment in its territory.
2. Each Party shall accord to investors of the other Party and to their covered enterprises treatment no less favourable than the treatment it accords, in like situations, to investors and enterprises, respectively, of any third country with respect to the operation of enterprises in its territory.
3. Paragraphs 1 and 2 shall not be construed as obliging a Party to extend to the investors of the other Party the benefit of any treatment resulting from measures providing for recognition, including of the standards or criteria for the authorisation, licencing or certification of a natural person or enterprise to carry out an economic activity, or of prudential measures.
4. For greater certainty, the treatment referred to in this Article does not include treatment accorded to investors of a third country and their enterprises by provisions concerning the settlement of investment disputes provided for in other international agreements concluded between a Party and a third country. The substantive provisions in other international agreements do not in themselves constitute treatment as referred to in paragraphs 1 and 2, and thus cannot give rise to a breach of this Article. Measures applied pursuant to such provisions may constitute treatment under this Article.
Article 10.9. Performance Requirements
1. A Party shall not, in connection with the establishment or the operation of an enterprise of an investor of a Party or of a third country in the territory of that Party, impose or enforce any requirement or enforce any commitment or undertaking to: 36
(a) export a given level or percentage of goods or services;
(b) achieve a given level or percentage of domestic content;
(c) purchase, use or accord a preference to goods produced or services provided in its territory, or to purchase goods or services from natural persons or enterprises in its territory;
(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 enterprise;
(e) restrict sales of goods or services in its territory that such enterprise produces or supplies by relating those sales in any way to the volume or value of its exports or foreign exchange earnings;
(f) provide access to or transfer a particular technology, a production process or other proprietary knowledge to a natural person or enterprise in its territory;
(g) supply exclusively from the territory of the Party to a specific regional or the world market, goods or services that such enterprise produces;
(h) locate the headquarters of that enterprise for a specific regional or the world market in its territory; or
(k) restrict the exportation or sale for export.
2. A Party shall not condition the receipt or continued receipt of an advantage, in connection with the establishment or the operation of an enterprise of an investor of a Party or of a third country in its territory, 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 or services provided in its territory, or to purchase goods from natural persons or enterprises 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 enterprise;
(d) restrict sales of goods or services in its territory that such enterprise produces or supplies by relating those sales in any way to the volume or value of its exports or foreign exchange earnings; or
(e) restrict the exportation or sale for export.
3. Nothing in paragraph 2 shall be construed as preventing a Party from conditioning the receipt or continued receipt of an advantage, in connection with the establishment or the operation of an enterprise of an investor of a Party or of a third country, 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.
4. Subparagraph 1(f) does not apply if:
(a) 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 a judicial or administrative process to be a violation of the Party's competition law; or
(b) a Party authorises use of an intellectual property right in accordance with Articles 31 and 31bis of 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.
5. Subparagraphs 1(a), (b) and (c) and 2(a) and (b), do not apply to qualification requirements for goods or services with respect to participation in export promotion and foreign aid programmes.
6. 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.
7. For greater certainty, paragraphs 1 and 2 do not apply to any commitment, undertaking or requirement other than those set out in those paragraphs.
8. This Article does not preclude enforcement of any commitment, undertaking or requirement between private parties other than a Party, where a Party did not impose or require the commitment, undertaking or requirement.
9. This Article is without prejudice to commitments of a Party made under the WTO Agreement.
Article 10.10. Senior Management and Board of Directors
1. A Party shall not require that an enterprise that is a covered enterprise appoint natural persons of any particular nationality to senior management positions.
2. A Party shall not require that the board of directors of an enterprise of that is a covered enterprise be composed of nationals or residents in the territory of the Party, or a combination thereof.
Article 10.11. Formal Requirements
Notwithstanding Articles 10.7 and 10.8, a Party may require an investor of the other Party or its covered enterprise to provide routine information concerning that enterprise solely for informational or statistical purposes. The Party shall protect that information which is confidential from any disclosure that would prejudice the competitive position of the investor or the covered enterprise. Nothing in this Article shall be construed as preventing a Party from otherwise obtaining or disclosing information in connection with the equitable and good faith application of its law.
Article 10.12. Non-Conforming Measures and Exceptions
1. Articles 10.7 to 10.10 do not apply to:
(a) an existing non-conforming measure that is maintained by a Party at the level of:
(i) the European Union, as set out in its List to Annex I (Reservations for Existing Measures);
(ii) a central government, as set out by that Party in its List to Annex I (Reservations for Existing Measures);
(iii) a regional government, as set out by that Party in its List to Annex I (Reservations for Existing Measures); or
(iv) a local government
(b) the continuation or prompt renewal of a non-conforming measure referred to in subparagraph (a); or
(c) any amendment to a 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 10.7 to 10.10.
2. Articles 10.7 to 10.10 do not apply to a measure that a Party adopts or maintains with respect to sectors, subsectors or activities as set out in its List to Annex II (Reservations for Future Measures).
3. A Party shall not, under a measure adopted after the date of entry into force of this Agreement and covered by its List to Annex II (Reservations for Future Measures), require directly or indirectly an investor of the other Party, by reason of its nationality, to sell or otherwise dispose of a covered enterprise existing at the time the measure becomes effective.
4. Article 10.6 does not apply to a measure that a Party adopts or maintains with respect to committed sectors or subsectors as set out in its Schedule to Annex III (Market Access Commitments).
5. Articles 10.7 and 10.8 do not apply to any measure that constitutes an exception, exemption or waiver from Articles 3 or 4 of the TRIPS Agreement, as provided in Articles 3 to 5 of that Agreement.
6. Without prejudice to paragraphs 1 to 5, within five years after the date of entry into force of this Agreement, Mexico may notify to the European Union a draft Trade Council decision to modify Annexes I (Reservations for Existing Measures), II (Reservations for Future Measures) and III (Specific Commitments and Limitations on Market Access):
(a) in Appendix I-B-2 (List of Mexico. Reservations Applicable at Sub-Central Level) to Annex I (Reservations for Existing Measures) and Appendix III-B-2 (Schedule of Mexico. Limitations Applicable at Sub-Central Level) to Annex III (Specific Commitments and Limitations on Market Access) any existing non-conforming measures maintained at the sub‑federal level of government; and
(b) in Appendix I-B-1 (List of Mexico. Reservations Applicable at Central Level) to Annex I (Reservations for Existing Measures) and Appendix II-B (List of Mexico) to Annex II (Reservations for Future Measures) its performance requirements.
The European Union shall review that draft within a period of three months and consult with Mexico any related issues. After consultation, the Trade Council shall adopt the modifications to the annexes referred to in this paragraph. The modified annexes shall apply as of the date of adoption of the modifications.
Article 10.13. Denial of Benefits
A Party may deny the benefits of this Chapter to an investor of the other Party that is an enterprise of that Party and to investments of that investor if:
(a) an investor of a third country owns or controls the enterprise; and
(b) the denying Party adopts or maintains a measure with respect to that third country, or with respect to natural persons or enterprises of that third country, that prohibits transactions with the enterprise or that would be violated or circumvented if the benefits of this Chapter were accorded to that investor or to its investments.
Article 10.14. Sub-Committee on Services and Investment
The Sub-Committee on Services and Investment established pursuant to Article 33.4.1(h) (Sub‑Committees and Other Bodies) shall:
(a) provide a forum for the Parties to consult on issues related to this Chapter, including:
(i) difficulties which may arise in the implementation of this Chapter;
(ii) possible improvements of this Chapter, in particular in light of experience and developments in other international fora and under other agreements of the Parties; and
(b) prepare decisions to be adopted or actions to be taken by the Trade Council pursuant to this Chapter.
Chapter 11. CROSS-BORDER TRADE IN SERVICES
ARTICLE 11.1
Definitions
1. For the purposes of this Chapter:
(a) "cross-border trade in services" or "cross-border supply of services" means the supply of a service:
(i) from the territory of a Party into the territory of the other Party; or
(ii) in the territory of a Party to a service consumer of the other Party;
(b) "enterprise" means an enterprise as defined in Article 1.3 (Definitions of General Application), or a branch or a representative office thereof;
(c) "enterprise of the European Union" or "enterprise of Mexico" means an enterprise set up in accordance with the law of the European Union or its Member States, or of Mexico and engaged in substantive business operations 37 in the territory of the European Union or of Mexico, respectively; 38
shipping companies established outside the European Union or Mexico and controlled by nationals of a Member State of the European Union or of Mexico, respectively, shall also be beneficiaries of the provisions of this Chapter if their vessels are registered in accordance with the law of a Member State of the European Union or of Mexico, as appropriate, and fly the flag of that Member State of the European Union or of Mexico;
(d) "service supplied in the exercise of governmental authority" means, for each Party, any service that is supplied neither on a commercial basis nor in competition with one or more service suppliers; and
(e) "service supplier of a Party" means a natural person or an enterprise of a Party other than a branch or a representative office that seeks to supply or supplies a service.
ARTICLE 11.2
Scope
1. This Chapter applies to measures of a Party affecting cross-border trade in services by service suppliers of the other Party. Those measures include measures affecting:
(a) the production, distribution, marketing, sale or delivery of a service;
(b) the purchase or use of, or payment for, a service;
(c) the access to and use of, in connection with the supply of a service, services which are required by a Party to be offered to the public generally, including distribution, transport or telecommunications networks; and
(d) the provision of any form of financial security, including a bond, as a condition for the supply of a service.
2. This Chapter does not apply to:
(a) audio-visual services;
(b) national maritime cabotage; 39
(c) measures of a Party insofar as they are covered by Chapter 18 (Financial Services);
(d) services supplied in the exercise of governmental authority;
(e) government procurement of a good or service purchased for governmental purposes, and not with a view to commercial resale, or use in the production of a good or supply service for commercial sale, irrespective of whether that procurement constitutes a covered procurement within the meaning of Article 21.1 (Definitions);
(f) subsidies 40 or grants provided by a Party, including government-supported loans, guarantees and insurance; and
(g) air services or related services in support of air services 41 , other than:
(i) aircraft repair and maintenance services during which an aircraft is withdrawn from service;
(ii) selling and marketing of air transport services;
(iii) computer reservation system services; and
(iv) ground handling services.
3. Articles 11.4 to 11.7 do not apply to new services as set out in Annex VII (Understanding on New Services Not Classified in the United Nations Provisional Central Product Classification 1991).
ARTICLE 11.3
Right to Regulate
The Parties affirm the right to regulate within their territories to achieve legitimate policy objectives, such as public health, social services, public education, safety, environment, public morals, social or consumer protection, privacy and data protection, the promotion and protection of cultural diversity, or competition.
ARTICLE 11.4
Market Access
In the sectors or subsectors where market access commitments are undertaken, a Party shall not adopt or maintain, either on the basis of its entire territory or on the basis of a territorial subdivision, measures imposing limitations on: