5. The provisions of:
(a) subparagraphs 1(a), 1(b), and 1(c), and 2(a) and 2(b), do not apply to a qualification requirement for a good or service with respect to export promotion and foreign aid programs;
(b) subparagraphs 1(b), 1(c), 1(f), 1(g), 1(h), 1(i) and 2(a), and 2(b) do not apply to procurement by a Party or a state enterprise;
(c) subparagraphs 2(a) and 2(b) do not apply to a requirement imposed by an importing Party relating to the content of a good necessary to qualify for a preferential tariff or preferential quota;
(d) subparagraph 1(f) do not preclude a regulatory body or judicial authority of a Party from requiring a person of the other Party to preserve and make available the source code of software, or an algorithm expressed in that source code, to the regulatory body for a specific investigation, inspection, examination, enforcement action, or judicial proceeding (6), subject to safeguards against unauthorized disclosure; and
(e) subparagraph 1(i) do not apply to information held or processed by or on behalf of a Party, or a measure related to this information, including a measure related to its collection.
6. This Article does not preclude enforcement of any commitment, undertaking, or requirement between private parties, if a Party did not impose or require the commitment, undertaking, or requirement.
Article 11. Expropriation
1. No Party shall expropriate a covered investment either directly or indirectly, except:
(a) for a public purpose; (7)
(b) in accordance with due process of law;
(c) in a non-discriminatory manner; and
(d) on payment of compensation in accordance with paragraph 5.
2. A direct expropriation under paragraph 1 occurs only when a covered investment is taken by a Party through formal transfer of title or outright seizure.
3. An indirect expropriation under paragraph 1 may occur when a measure or a series of measures of a Party has an effect equivalent to direct expropriation without formal transfer of title or outright seizure. A non-discriminatory measure of a Party that is adopted and maintained in good faith to protect legitimate public welfare objectives, such as health, safety and the environment, does not constitute indirect expropriation, even if it has an effect equivalent to direct expropriation. The determination of whether a measure or a series of measures of a Party has an effect equivalent to direct expropriation requires a case-by-case, fact-based inquiry that shall consider:
(a) the economic impact of the measure or the series of measures, although the sole fact that a measure or a series of measures of a Party has an adverse effect on the economic value of a covered investment does not establish that an indirect expropriation has occurred;
(b) the duration of the measure or series of measures of a Party;
(c) the extent to which the measure or the series of measures interferes with distinct, reasonable investment-backed expectations; and
(d) the character of the measure or the series of measures.
4. A measure of a Party cannot violate this Article unless it expropriates a covered investment that is a tangible or intangible property right under the domestic law of the Party in which the investment was made. This determination requires the consideration of relevant factors, such as the nature and scope of the tangible or intangible property right under the applicable domestic law of the Party in which the investment was made.
5. The compensation referred to in paragraph 1 shall:
(a) be paid without delay in a freely convertible currency;
(b) be equivalent to the fair market value of the expropriated investment immediately before the expropriation took place (date of expropriation). Appropriate valuation criteria includes going concern value, asset value including the declared tax value of tangible property, and other criteria, which may be appropriate or relevant under the circumstances, to determine fair market value;
(c) not reflect any change in value occurring because the intended expropriation had become known earlier;
(d) include interest at a commercially reasonable rate for that currency from the date of the expropriation until the date of payment; and
(e) be freely transferable.
6. A measure of a Party that would otherwise constitute an expropriation of an intellectual property right under this Article does not constitute a breach of this Article if it is consistent with the TRIPS Agreement and any waiver or amendment of that Agreement accepted by that Party.
Article 12. Transfer of Funds
1. Each Party shall permit all transfers relating to a covered investment to be made freely, and without delay, into and out of its territory. Those transfers include:
(a) contributions to capital;
(b) profits, dividends, interest, capital gains, royalty payments, management fees, technical assistance and other fees, returns in kind, and other amounts derived from the covered investment;
(c) proceeds from the sale of all or part of the covered investment or from the partial or complete liquidation of the covered investment;
(d) payments made under a contract entered into by the investor or the covered investment, including payments made pursuant to a loan agreement or an employment agreement;
(e) payments made under Article 8 (Compensation for Losses) and Article 11 (Expropriation); and
(f) payments arising out of a dispute.
2. Each Party shall permit transfers relating to a covered investment to be made in the convertible currency in which the capital was originally invested or in another convertible currency agreed to by the investor and the Party concerned. Unless otherwise agreed by the investor, transfers shall be made at the market rate of exchange in effect on the date of transfer.
3. Notwithstanding paragraphs 1, 2, 5 and 7, a Party may prevent or limit a transfer through the equitable, non-discriminatory, and good faith application of its domestic law relating to:
(a) bankruptcy, insolvency, or the protection of the rights of a creditor;
(b) issuing, trading, or dealing in securities;
(c) a criminal or penal offence;
(d) financial reporting or record keeping of transfers when necessary to assist law enforcement or financial regulatory authorities; or
(e) ensuring compliance with an order or judgment in judicial or administrative proceedings.
4. For greater certainty, this Article does not preclude the equitable, non-discriminatory, and good faith application of a Party’s domestic law relating to its social security, public retirement, or compulsory savings programs.
5. A Party may not require one of its investors to transfer, or penalize one of its investors for failing to transfer, the income, earnings, profits, or other amounts derived from or attributable to an investment in the territory of the other Party.
6. Notwithstanding paragraph 1, a Party may restrict transfers of returns in kind in circumstances in which it could otherwise restrict those transfers under the WTO Agreement and as set out in paragraph 3.
7. Notwithstanding paragraphs 1, 2 and 5, and without limiting the applicability of paragraph 3, a Party may prevent or limit transfers by a financial institution to, or for the benefit of, an affiliate of or person related to that institution, through the equitable, non-discriminatory, and good faith application of a measure relating to maintenance of the safety, soundness, integrity, or financial responsibility of financial institutions.
Article 13. Transparency
1. Each Party should ensure that its laws, regulations, procedures, and administrative rulings of general application respecting a matter covered by this Agreement are promptly published or otherwise made available in such a manner as to enable interested persons and the other Party to become acquainted with them.
2. To the extent possible, each Party shall:
(a) publish in advance any measure referred to in paragraph 1 that it proposes to adopt;
(b) provide interested persons and the other Party a reasonable opportunity to comment on that proposed measure; and
(c) allow reasonable time between publication of the measure referred to in paragraph 1 and the date on which investors of a Party must comply with the measure.
3. Canada shall ensure that its laws, regulations, procedures and administrative rulings with regards to the rights of Indigenous peoples, including any applicable consultation process, are made available in such a manner as to enable an interested person to duly comply with its domestic law.
4. Each Party should maintain or establish appropriate mechanisms for responding to enquiries from interested persons regarding the measures referred to in paragraphs 1 and 3.
5. On request by a Party, the other Party should provide information on and respond to questions pertaining to a proposed or actual measure that may have an impact on a covered investment. A Party may convey a request or provide information under this Article to the other Party through its contact point.
6. Each Party shall designate a contact point to facilitate communications between the Parties on any matter covered by this Agreement. Each Party shall notify the other Party in writing of its designated contact point no later than 60 days after the date of entry into force of this Agreement. Each Party shall promptly notify the other Party in the event of any change to its contact point.
Article 14. Subrogation
1. If a Party or an agency of a Party makes a payment to one of its investors under a guarantee or a contract of insurance it has entered into in respect of a covered investment, the other Party shall recognize the validity of the subrogation in favour of the first-mentioned Party or agency to a right or title held by the investor.
2. A Party or an agency of a Party that is subrogated to a right of an investor in accordance with paragraph 1 is entitled to the same rights as those of the investor regarding the covered investment. Those rights may be exercised by the Party or an agency of the Party or by the investor if the Party or its agency so authorizes.
Article 15. Taxation Measures
1. Except as set out in this Article, this Agreement does not apply to a taxation measure.
2. This Agreement does not affect the rights and obligations of a Party under a tax convention. In the event of inconsistency between this Agreement and a tax convention, that convention prevails.
3. Provided that the conditions in paragraph 4 are met:
(a) the provisions of Article 11 (Expropriation) apply to taxation measures; and
(b) the determination of whether a taxation measure constitutes an expropriation must consider the factors set out in Article 11(3) (Expropriation).
4. An investor may not make a claim under paragraph 3 unless:
(a) the investor provides a copy of the notice of claim to the taxation authorities of the Parties, in which case, the taxation authority of a Party may submit in writing a request to the taxation authority of the other Party for a joint determination that the measure in question is not an expropriation; and
(b) 180 days after receiving notification of the claim by the investor, the taxation authorities of the Parties fail to reach a joint determination that the measure in question is not an expropriation.
5. If, in connection with a claim by an investor of a Party or a dispute between the Parties, an issue arises as to whether a measure of a Party is a taxation measure or whether an inconsistency exists between this Agreement and a tax convention, a Party may submit in writing to the taxation authorities of each Party a request for a joint determination. A Tribunal or arbitral panel seized of a claim or a dispute in which the issue arises may not proceed until:
(a) it receives the decision of the taxation authorities within 180 days of the request for joint determination, in which case, the decision of the taxation authorities shall bind the Tribunal formed pursuant to Section E (Settlement of Disputes between a Party and an Investor of the Other Party) or arbitral panel formed pursuant to Section G (State-to-State Dispute Settlement Procedures); or
(b) 180 days have passed following the request for joint determination and the taxation authorities have not decided the issue, in which case, the Tribunal or arbitral panel shall decide the issue before proceeding with the claim.
6. Each Party shall notify the other Party by diplomatic note of the identity and contact information of the taxation authorities referred to in this Article.
Article 16. Non-Derogation
The Parties recognize that it is not appropriate to encourage investment by relaxing domestic measures relating to health, safety, the environment, other regulatory objectives, or the rights of Indigenous peoples. Accordingly, no Party shall relax, waive, or otherwise derogate from or offer to relax, waive, or otherwise derogate from such measures in order to encourage the expansion, or management of the investment of an investor in its territory. If a Party considers that the other Party has offered such an encouragement, it may request consultations with the other Party and the Parties shall consult with a view to avoiding the encouragement.
Article 17. Corporate Social Responsibility
Each Party reaffirms the importance of internationally recognized standards, guidelines, and principles of corporate social responsibility that have been endorsed or are supported by that Party, including the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises, and each Party should encourage enterprises operating within its territory or subject to its jurisdiction to voluntarily incorporate these standards, guidelines, and principles into their business practices and internal policies.
Article 18. Denial of Benefits
A Party may, within reasonable time and no later than its principal submission on the merits, deny the benefits of this Agreement to an investor of the other Party that is an enterprise of that Party and to investments of that investor if an investor of a non-Party or of the denying Party owns or controls the enterprise, and the denying Party adopts or maintains measures with respect to the non-Party that prohibit transactions with the enterprise or that would be violated or circumvented if the benefits of this Agreement were accorded to the enterprise or to its investments.
Section C. Investment Facilitation
Article 19. Processing of Applications for an Authorization
1. Each Party should ensure that its administrative or procedural rules that must be adhered to in order to obtain, amend or renew an authorization do not unduly complicate or delay the expansion, management, conduct, operation, and sale or other disposition of an investment in the territory of a Party.
2. A Party’s competent authority should:
(a) accept applications for an authorization in electronic format under similar conditions of authenticity as paper submissions; and
(b) accept authenticated copies, if considered appropriate, in place of original documents.
3. At the request of an applicant, a Party’s competent authority should provide, without undue delay, information concerning the status of the application for an authorization.
4. If a Party’s competent authority considers an application for an authorization to be incomplete, the competent authority should, within a reasonable period of time, inform the applicant for an authorization, identify the additional information required to complete the application for an authorization, and provide the applicant for an authorization an opportunity to correct deficiencies.
5. Each Party should ensure that the processing of an application for an authorization, including reaching a final decision, is completed within a reasonable timeframe from the submission of a complete application for an authorization.
6. Each Party should ensure that an authorization, once granted, enters into effect without undue delay, in accordance with the terms and conditions specified therein.
7. If a Party’s competent authority rejects an application for an authorization, the Party should ensure that its competent authority:
(a) informs the applicant in writing and without undue delay;
(b) on request of the applicant, informs the investor of the reasons the application for an authorization was rejected and of the timeframe for an appeal or review against the decision; and
(c) permits the applicant to resubmit an application for an authorization.
Article 20. Fees and Charges
1. A fee that an applicant may incur in relation to its application for an authorization should be reasonable and commensurate with the costs incurred to process the application, and shall not in itself restrict the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of an investment in the territory of a Party.
2. Authorization fees do not include payments for auction, the use of natural resources, royalties, tendering or other non-discriminatory means of awarding concessions, or mandated contributions to provide a universal service.
3. This Article does not apply to a measure a Party adopts or maintains relating to a financial institution.
Section D. Reservations, Exceptions
Article 21. Non-Conforming Measures
1. Article 5 (National Treatment), Article 6 (Most-Favoured-Nation Treatment), Article 9 (Senior Management, Boards of Directors, and Entry of Personnel), Article 10 (Performance Requirements) and Section C (Investment Facilitation) shall not apply to:
(a) any measure:
(i) existing and non-conforming, maintained in the territory of a Party, or
(ii) maintained or adopted after the date of entry into force of this Agreement that, at the time of sale or other disposition of a government’s equity interests in or the assets of an existing state enterprise or an existing governmental entity, prohibits or imposes limitations on the ownership or control of equity interests or assets or imposes nationality requirements relating to senior management or members of the board of directors;
(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 with Article 5 (National Treatment), Article 6 (Most-Favoured-Nation Treatment), Article 9 (Senior Management, Board of Directors, and Entry of Personnel), Article 10 (Performance Requirements) and Section C (Investment Facilitation), as the measure existed immediately before the amendment.
2. Article 5 (National Treatment), Article 6 (Most-Favoured-Nation Treatment), Article 9 (Senior Management, Board of Directors, and Entry of Personnel), Article 10 (Performance Requirements) and Section C (Investment Facilitation) shall not apply to any measure that a Party adopts or maintains with respect to sectors, subsectors, or activities, as set out in its schedule to Annex I (Reservations for Future Measures).
3. No Party shall, under any measure adopted after the date of entry into force of this Agreement and covered by its Schedule to Annex I (Reservations for Future Measures) require an investor of the other Party, by reason of its nationality, to sell or otherwise dispose of an investment existing at the time the measure becomes effective.
4. Article 6 (Most-Favoured-Nation Treatment) shall not apply to treatment accorded by a Party pursuant to agreements set out in its schedule to Annex II (Exceptions from Most-Favoured-Nation Treatment).
5. In respect of intellectual property rights, a Party may derogate from Article 5 (National Treatment), Article 6 (Most-Favoured-Nation Treatment) and Article 10 (Performance Requirements) in a manner that is consistent with:
(a) the TRIPS Agreement;
(b) an amendment to the TRIPS Agreement in force for both Parties; and
(c) a waiver to the TRIPS Agreement granted pursuant to Article IX of the WTO Agreement.
6. Article 5 (National Treatment), Article 6 (Most-Favoured-Nation Treatment) and Article 9 (Senior Management, Board of Directors, and Entry of Personnel) do not apply to:
(a) procurement by a Party or a state enterprise; or
(b) a subsidy or grant provided by a Party or a state enterprise, including a government-supported loan, a guarantee, or insurance.
Article 22. General Exceptions
1. This Agreement does not prevent Canada from adopting or maintaining a measure necessary to fulfill Aboriginal or treaty rights as recognized and affirmed by section 35 of the Constitution Act, 1982, including land claims agreements, and those rights set out in self-government agreements between the national government or a sub-national government and Aboriginal peoples.
2. This Agreement does not apply to a measure adopted or maintained by a Party with respect to a person engaged in a cultural industry. “Person engaged in a cultural industry” means a person engaged in the following activities:
(a) the publication, distribution, or sale of books, magazines, periodicals or newspapers in print or machine-readable form, except when printing or typesetting any of the foregoing is the only activity;
(b) the production, distribution, sale, or exhibition of film or video recordings;
(c) the production, distribution, sale, or exhibition of audio or video music recordings;
(d) the publication, distribution, or sale of music in print or machine-readable form; or
(e) radio communications in which the transmissions are intended for direct reception by the general public, and all radio, television, or cable broadcasting undertakings and all satellite programming and broadcast network services.
3. This Agreement does not prevent a Party from adopting or maintaining measures for prudential reasons, such as:
(a) protecting investors, depositors, policy-holders, or persons to whom a fiduciary duty is owed by a financial institution;
(b) maintaining the safety, soundness, integrity, or financial responsibility of financial institutions;
(c) maintaining the safety, and financial and operational integrity of payment and clearance systems; and
(d) ensuring the integrity and stability of a Party’s financial system;
provided such measures are not used as a means of avoiding the Party’s commitments or obligations under this Agreement.
4. This Agreement does not apply to non-discriminatory measures of general application taken by a central bank or monetary authority of a Party, or a financial institution that is owned or controlled by a Party, in pursuit of monetary and related credit or exchange rate policies. This paragraph shall not affect a Party’s obligations under Article 10 (Performance Requirements) or Article 12 (Transfer of Funds).
5. This Agreement does not:
(a) require a Party to furnish or allow access to information if that Party determines that the disclosure of this information would be contrary to its essential security interests;
(b) prevent a Party from taking an action that it considers necessary to protect its essential security interests:
(i) relating to the traffic in arms, ammunition, and implements of war and to such traffic and transactions in other goods, materials, services, and technology undertaken directly or indirectly for the purpose of supplying a military or other security establishment,
(ii) taken in time of war or other emergency in international relations, or
(iii) relating to the implementation of national policies or international agreements respecting the non-proliferation of nuclear weapons or other nuclear explosive devices; or
(c) prevent a Party from fulfilling its obligations under the United Nations Charter for the maintenance of international peace and security.
6. This Agreement does not require a Party to furnish or allow access to information which if disclosed would impede law enforcement or would be contrary to the Party’s domestic law, or which would prejudice the legitimate commercial interest of particular enterprises, public or private.
7. If a right or obligation in this Agreement duplicates one under the WTO Agreement, the Parties agree that a measure adopted by a Party in conformity with a waiver decision granted by the WTO pursuant to Article IX of the WTO Agreement is deemed to be also in conformity with this Agreement. Such conforming measure of either Party may not give rise to a claim by an investor of a Party against the other Party under Section E (Settlement of Disputes between a Party and an Investor of the Other Party) of this Agreement.
Section E. Settlement of Disputes between a Party and an Investor of the other Party
Article 23. Scope and Purpose
1. Without prejudice to the rights and obligations of the Parties under Section G (State-to-State Dispute Settlement Procedures), this Section establishes a mechanism for the settlement of disputes between a Party and an investor of the other Party.
2. Under this Section, an investor of a Party may submit a claim that the other Party has breached an obligation under Section B (Substantive Obligations), other than Article 9(3) and (4) (Senior Management, Boards of Directors, and Entry of Personnel), Article 10(1)(i) (Performance Requirements), Article 13 (Transparency), Article 16 (Non-Derogation), or Article 17 (Corporate Social Responsibility).
Article 24. Request for Consultations
1. In the event of an investment dispute under this Agreement, an investor of a Party shall seek to resolve the dispute through consultations, which may include the use of non-binding, third party procedures, such as good offices, conciliation or mediation. Unless otherwise agreed, consultations shall be held within 90 days of the delivery of the request for consultations pursuant to paragraph 2.
2. The request for consultations shall be submitted to the other Party under this Article no later than:
(a) three years from the date on which the investor or, as applicable, the enterprise referred to in Article 26(2) (Submission of a Claim to Dispute Settlement), first acquired or should have first acquired knowledge of the alleged breach and knowledge that the investor or, as applicable, the enterprise, has incurred loss or damage by reason of, or arising out of, that breach; or
(b) two years after an investor or, as applicable, the enterprise, ceases to pursue a claim or proceeding before a tribunal or court under the law of a Party with respect to the measure at issue in the investor’s request for consultation, or when those proceedings have otherwise ended, provided that it is no later than seven years after the date on which the investor or, as applicable, the enterprise, first acquired or should have first acquired knowledge of the alleged breach and knowledge that the investor has incurred loss or damage thereby.
Neither a continuing breach nor the occurrence of similar or related acts or omissions may renew or interrupt the periods set out in subparagraphs (a) and (b).