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Chapter Six - Investment
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Agreement on Internal Trade
September 1994
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Article 600: Application of General Rules
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Article 601: Relationship to Other Chapters
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Article 602: Scope and Coverage
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Article 603: Reciprocal Non-Discrimination
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Article 604: Local Presence and Residency
Requirements
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Article 605: Legitimate Objectives
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Article 606: Corporate Registration and Reporting
Requirements
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Article 607: Performance Requirements
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Article 608: Incentives
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Article 609: Government Enterprises and Monopolies
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Article 610: Environmental Measures
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Article 611: Non-Application
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Article 612: Transparency and Reporting
Requirements
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Article 613: Preference for Canadians
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Article 614: Consultations
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Article 615: Working Group on Investment
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Article 616: Definitions
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Annex 604.4 - Local Presence and Residency
Requirements
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Annex 608.3 - Code of Conduct on Incentives
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Articles 401 (Reciprocal Non-Discrimination), 402 (Right of Entry
and Exit), 403 (No Obstacles) and 404 (Legitimate Objectives) do
not apply to this Chapter.
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For greater certainty, Articles 400 (Application), 405
(Reconciliation) and 406 (Transparency) apply to this Chapter,
except as otherwise provided in this Chapter.
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Except as otherwise provided in this Chapter, in the event of an
inconsistency between this Chapter and any other chapter in Part IV,
the other chapter prevails to the extent of the inconsistency.
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This Chapter applies to measures adopted or maintained by a Party
relating to investors of a Party and enterprises.
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This Chapter, except as provided in paragraph 6 of Annex 608.3,
does not apply to measures relating to procurement by the entities
listed in the Annexes to Article 502 (Scope and Coverage) and the
entities referred to in Article 502(4). For the purposes of this
paragraph, "procurement" means the acquisition by any
means, including by purchase, rental, lease or conditional sale, of
goods, services or construction.
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This Chapter, except as provided in Articles 607 and 608, does not
apply to measures relating to incentives.
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Subject to Article 605, each Party shall accord to an investor of a
Party treatment no less favourable than the best treatment it
accords, in like circumstances, to an investor of any Party.
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Subject to Article 605, each Party shall accord to an enterprise of
any other Party, established and carrying on business activities in
its territory, treatment no less favourable than the treatment it
accords, in like circumstances, to its own enterprises.
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With respect to the Federal Government, paragraphs 1 and 2 mean
that, subject to Article 605, it shall ensure that any measure it
adopts or maintains does not operate so as to discriminate between
Provinces or regions.
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Subject to Article 605, no Party shall require an investor of any
other Party to be resident in its territory as a condition for the
establishment or acquisition of an enterprise.
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Subject to Article 605, no Party shall require an enterprise of any
other Party to establish or maintain a representative office or
enterprise, or to be resident, in its territory as a condition for
carrying on business activities.
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For greater certainty, a requirement by a Party that an investor of
any other Party:
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have an agent for service of notices of proceedings or other
judicial documents; or
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post a bond or other form of financial security, for a
legitimate objective;
as a condition for carrying on business activities in or into
its territory is not a requirement to establish or maintain a local
presence or to be resident in its territory.
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Each Party shall, no later than December 31, 1995, list in Annex
604.4 its existing measures that are inconsistent with paragraph 1
or 2. Any such listed measure may not be made more restrictive than
it was on the date of entry into force of this Agreement.
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The Parties shall, no later than December 31, 1996, examine the
measures listed in Annex 604.4 and make recommendations to the
Committee as to the appropriate retention, removal or replacement
of such measures.
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No measure that a Party lists or proposes to list in Annex 604.4
shall, before January 1, 1997, be subject to the obligations of
paragraphs 1 and 2 or to dispute settlement procedures under this
Agreement.
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Where it is established that a measure is inconsistent with Article
603 or 604, that measure is still permissible under this Chapter where
it can be demonstrated that:
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the purpose of the measure is to achieve a legitimate
objective;
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the measure does not operate to impair unduly the access of
investors of a Party or enterprises that meet that legitimate
objective;
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the measure is not more restrictive on investors of a Party or
enterprises than necessary to achieve that legitimate objective;
and
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the measure does not create a disguised restriction on investors of
a Party or enterprises.
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The Parties shall endeavour to reconcile extra-provincial corporate
registration and reporting requirements for enterprises incorporated
under the law of any Party. The Parties shall, no later than July 15,
1995, prepare an implementation plan for consideration by the
Committee.
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No Party shall impose or enforce, in relation to an investor of a
Party or an enterprise in its territory, or condition the receipt
of an incentive by an enterprise on compliance with, any
requirement to:
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achieve a specific level or percentage of local content of
goods or services;
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purchase or use goods or services produced locally; or
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purchase goods or services from a local source.
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For greater certainty, nothing in paragraph 1 shall be construed to
prevent a Party from conditioning the receipt of an incentive on
any requirement to carry out economic activities in its territory
or to create or maintain employment.
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A Party may, under exceptional circumstances, adopt or maintain a
measure inconsistent with paragraph 1 for regional economic
development purposes, provided that:
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the measure does not operate to impair unduly the access of
persons, goods, services or investors of another Party;
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the measure is not more trade restrictive than necessary to
achieve its specific objective; and
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the Party promptly notifies the other Parties of the details
of the measure.
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No Party shall, in the provision of incentives to enterprises
located in its territory, discriminate against an enterprise on the
basis that:
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the enterprise is owned or controlled by an investor of
another Party; or
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the head office of the enterprise is located in the territory
of another Party.
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Nothing in this Agreement shall be construed to require a Party to
provide incentives for activities undertaken outside its territory.
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The Code of Conduct on Incentives set out in Annex 608.3 applies to
the Parties.
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A Party may maintain or establish a government enterprise and may
maintain, establish or authorize a monopoly.
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Further to Article 102(1)(c) (Extent of Obligations), each Party
shall ensure that any government enterprise maintained or
established by it exercises any delegated administrative or other
governmental authority in a manner consistent with this Chapter.
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No Party shall waive or otherwise derogate from, or offer to waive
or otherwise derogate from, its environmental measures as an
encouragement for the establishment, acquisition, expansion,
ongoing business activities or retention in its territory of an
enterprise.
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Notwithstanding paragraph 1 and Article 1505(5) (Basic Rights and
Obligations), a Party is permitted a reasonable, but as short as
possible, period of time to seek compliance by an established
enterprise in its territory with its environmental measures.
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Articles 603, 604 and 605 do not apply to a measure for the
privatization of government services, government assets or an
enterprise.
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Articles 603 and 604 do not apply to an existing measure that
restricts the acquisition or use of land by non-residents of a
Party. Any such measure may not be made more restrictive in its
treatment of non-residents than it was on the date of entry into
force of this Agreement.
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Articles 603 and 604 do not apply to a measure:
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adopted by Prince Edward Island, after the date of entry into
force of this Agreement, that restricts the acquisition or
use of land by non-residents of Prince Edward Island; or
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adopted by a Party, other than Prince Edward Island, after
the date of entry into force of this Agreement, that
restricts the acquisition or use of agricultural,
recreational or shorefront land by a non-resident of that
Party.
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Notwithstanding any other provision of this Agreement, in the event
of an inconsistency between paragraph 2 or 3 and any other
provision of this Agreement, paragraph 2 or 3 prevails to the
extent of the inconsistency.
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Further to Article 406(1) (Transparency), each Party shall ensure
that all measures it adopts or maintains pertaining to investors of
a Party or enterprises are promptly published or otherwise made
available in a manner easily accessible to the Parties and
interested persons.
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Each Party shall endeavour to reduce or simplify any requirement
for the filing or other submission of documents imposed on
investors or enterprises.
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Each Party shall endeavour to facilitate public access to
up-to-date information on its investment-related programs and
measures through the development and interconnection of electronic
data bases and networks.
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Nothing in this Chapter shall be construed to prevent a Party from
adopting or maintaining a measure that accords rights or
preferences to Canadians.
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For the purposes of paragraph 1, "Canadian" means a
Canadian citizen, a natural person who is a permanent resident of
Canada, or an enterprise controlled by a Canadian citizen or
natural person who is a permanent resident of Canada.
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Where a Party considers that an actual or proposed measure of
another Party is or would be inconsistent with this Chapter, it may
request consultations with that Party by delivering written notice
of the request to the other Party. The Parties concerned shall
consult in an effort to resolve the matter.
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The Parties concerned may request the Investment Working Group to
assist them in the resolution of the matter.
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If the matter is not resolved within 90 days after the date of
delivery of the request under paragraph 1, recourse may be had to
Chapter Seventeen (Dispute Resolution Procedures).
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The Parties shall establish a Working Group on Investment which shall:
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examine local presence and residency requirements as set out in
Article 604;
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prepare the annual report on incentives referred to in paragraph 15
of Annex 608.3;
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examine matters referred to it under Article 614(2) and paragraph
12 of Annex 608.3 and make recommendations as appropriate; and
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examine any other investment matter as directed by the Committee.
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In this Chapter:
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enterprise
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means an entity constituted, established or organized under the
applicable laws of a Party, whether privately-owned or
governmentally-owned, including any corporation, trust,
partnership, cooperative, sole proprietorship, joint venture or
other form of association, for the purpose of economic gain;
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government enterprise
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means a Crown corporation within the meaning of the Financial
Administration Act (Canada), a Crown corporation within the meaning
of comparable provincial law or any equivalent entity formed under
other applicable provincial law;
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incentive
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means:
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a contribution with a financial value that confers a benefit
on the recipient, including cash grants, loans, debt
guarantees or an equity injection, made on preferential
terms; or
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any form of income or price support which results directly or
indirectly in a draw on the public purse;
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investor of a Party
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means:
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a Party;
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a Canadian citizen or permanent resident of Canada; or
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an enterprise;
that seeks to establish, acquire or dispose of an enterprise;
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market
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means the geographic or commercial market for a good or service;
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monopoly
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means an entity, whether privately-owned or owned by a Party, that,
in the relevant market in the territory of a Party, is granted the
right to be the only provider or purchaser of a good or service.
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Working Group on Investment
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means the Working Group established under Article 615;
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Scope and Coverage
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This Annex applies to incentives provided to enterprises by a Party
or any entity acting on its behalf.
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In this Annex, "incentive" means:
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a contribution with a financial value that confers a benefit
on the recipient, including cash grants, loans, debt
guarantees or an equity injection, made on preferential
terms;
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a reduction in taxes or government levies otherwise payable
aimed at a specific enterprise, whether organized as one
legal entity or as a group of legal entities, but does not
include a reduction resulting from a provision of general
application of a tax law of a Party; or
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any form of income or price support that results directly or
indirectly in a draw on the public purse.
Purpose
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The Parties affirm the application of the operating principles of
this Agreement to incentives and shall minimize the adverse effects
of their incentives on the economic interests of other Parties.
Prohibited Incentives
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No Party shall provide an incentive that is, in law or in fact,
contingent on, and would directly result in, an enterprise located
in the territory of any other Party relocating an existing
operation to its territory.
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An incentive shall not be considered to be inconsistent with
paragraph 4 where a Party can demonstrate that the incentive was
provided to offset the possibility for relocation of the existing
operation outside Canada and the relocation was imminent, well
known and under active consideration.
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No Party shall provide an incentive the primary purpose of which is
to enable the recipient enterprise to undercut competitors of
another Party in obtaining a specific contract in the territory of
a Party.
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For greater certainty, paragraph 4 shall not be construed to
prevent a Party from carrying out general investment promotion
activities such as market information and intelligence.
Avoidance of Certain Incentives
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The Parties affirm that economic development within their
territories may include the provision of incentives. The Parties
acknowledge that certain incentives may harm the economic interests
of other Parties. The Parties shall take into account the economic
interests of other Parties in developing and applying their
incentive measures, and shall endeavour to refrain from providing
an incentive that:
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sustains, for an extended period of time, an economically
non-viable operation whose production adversely affects the
competitive position of a facility located in the territory
of another Party;
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increases capacity in sectors where the increase is not
warranted by market conditions; or
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is excessive, either in absolute terms or relative to the
total value of the specific project for which the incentive
is provided, taking into account such factors as the economic
viability of the project and the magnitude of the economic
disadvantage that the incentive is designed to overcome.
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Each Party shall endeavour to refrain from engaging in bidding wars
to attract prospective investors seeking the most beneficial
incentive package.
Request for Information
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Where a Party has reason to consider that an incentive program or
an individual incentive package offered or implemented by another
Party may be inconsistent with paragraphs 4 through 9, it may
request relevant information. The other Party shall respond
promptly to any such request.
Consultation
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Where, on reviewing the information provided, a Party considers
that its economic or commercial interests have been, or are likely
to be, adversely affected by an incentive offered by another Party,
it may request consultations. The consulting Parties shall make
every effort to arrive at a mutually satisfactory resolution,
taking into account this Annex.
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The consulting Parties may refer the matter to the Working Group on
Investment to review it and, where appropriate, to draw the
attention of those Parties to relevant information and
considerations that would assist them in arriving at a mutually
satisfactory resolution.
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Where a dispute concerning a matter referred to in paragraphs 4
through 7 has not been resolved within 90 days after the date of
delivery of a request under paragraph 11, recourse may be had to
Chapter Seventeen (Dispute Settlement Procedures).
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Chapter Seventeen (Dispute Settlement Procedures) does not apply to
a dispute concerning a matter referred to in paragraph 8 or 9.
Annual Report
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The Working Group on Investment shall prepare an annual report on
incentives for submission to the Committee that includes:
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a short description, including the goals and objectives, of
the incentive programs and of the individual incentive
packages that are outside established programs offered by
each Party;
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the total amount of each of the following types of incentives
committed by a Party to enterprises in its territory:
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cash grants or contributions;
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loans or loan guarantees; and
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equity injections;
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in the case of the Federal Government, the total amount for
each Province of each of the types of incentives referred to
in paragraph (b) committed by it to enterprises;
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the amounts of:
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each cash grant or contribution over $500,000;
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each loan or loan guarantee over $1,000,000; and
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each equity injection over $1,000,000;
committed by a Party to enterprises in its territory;
and
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where relevant, a summary of any matter that has given rise
to procedures under paragraph 10 or paragraphs 11 through 14.
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Agreement on Internal Trade
