Investment, Services, and Other Matters

• Author: Jon R. Johnson
• Pages: 215-260

INVESTMENT,

SERVICES,

AND

OTHER MATTERS

NAFTA

and

CCFTA

set out

provisions respecting investment, services,

telecommunications

and

temporary entry,

and

NAFTA

(but

not

CCFTA)

covers financial services. There

is no

counterpart

to the

NAFTA

invest-

ment chapter among

the WTO

agreements

but the

GATS

and its

annexes

set

out

provisions

affecting

services, telecommunications, financial

ser-

vices,

and

temporary entry.

CIFTA

does

not

cover

any of

these areas.

GATT

1994,

the

GATS,

NAFTA,

CIFTA,

and

CCFTA

all

contain

provisions

affecting

monopolies

and

state enterprises,

and the

GATS,

NAFTA,

CIFTA,

and

CCFTA

set out

tentative provisions respecting

competition

law.

A.

COMMON

THEMES

The

obligations created

by the

trade agreements

to

which Canada

is a

party

affecting

investment, services, telecommunications, financial

ser-

vices,

and

temporary entry

are

based

on

common themes.

1)

Non-Discrimination

The

investment

and

services chapters

of

both

NAFTA

and

CCFTA

impose national treatment

and MFN

treatment obligations.

The

NAFTA

financial

services chapter also incorporates modified national treatment

and MFN

treatment

obligations.

The

GATS

sets

out a

general

MFN

treatment obligation.

The

NAFTA,

CCFTA,

and

GATS

provisions

215

C H A P T E R 8

216

INTERNATIONAL

TRADE

LAW

respecting telecommunications

and

monopolies

and

state enterprises

all

contain

non-discrimination requirements.

2)

Creation

of

Norms

The

NAFTA

and

CCFTA

investment, services,

and

telecommunications

chapters

and the

NAFTA

financial services chapter

all

establish norms

that

go

beyond non-discrimination.

The

NAFTA

and

CCFTA temporary

entry provisions

are

based

on

norms which require that certain other-

wise applicable entry requirements

not be

applied

to

citizens

of

other

member countries.

3)

Transparency

The

NAFTA

and

CCFTA

telecommunications chapters,

the

GATS

Annex

on

Telecommunications,

and the

NAFTA

financial services

chapter

each

set out

transparency requirements.

4)

Limitation

of

Scope

through

Exceptions

and

Reservations

The

scope

of the

NAFTA

and

CCFTA

investment

and

services

provi-

sions,

the

NAFTA

financial

services provisions,

and the

GATS

services

provisions

are all

subject

to

exceptions

and

reservations.

B.

INVESTMENT

NAFTA

Chapter Eleven, which

is a

comprehensive investment treaty

among

the

three

NAFTA

countries,

is

based

on

CUFTA

Chapter Sixteen

and on the

Model

Bilateral

Investment

Treaty

de

veloped

by the

U.S. govern-

ment

in the

early

1980s

for use in its

bilateral

investment

treaty program.

CCFTA

Chapter

G

(Investment)

is

based

on and

closely

follows

the

provi-

sions

of

NAFTA

Chapter Eleven.

The

provisions

of the

TRIMs

Agreement

are

limited

to

requiring

the

elimination

of

certain "trade-related invest-

ment measures"

and

will

be

discussed below under "Performance Require-

ments."

Canada

is

currently negotiating

a

Multilateral

Agreement

on

Invest-

ment

(MAI) with other

OECD

countries.

If and

when

the MAI

becomes

effective,

its

provisions will resemble those

of

NAFTA

and

CCFTA.

1)

Scope

and

Coverage:

NAFTA

and

CCFTA

The

requirements

of

NAFTA

Chapter Eleven

and

CCFTA

Chapter

G

apply

to

"investors

of

another Party"

(NAFTA)

or

"investors

of the

other

Investment,

Services,

and

Other Matters

217

Party"

(CCFTA)

and to

their "investments"

in the

territory

of a

Party.

The

expression "Party" under

NAFTA

means

any of

Canada,

the

United

States,

or

Mexico,

and

under CCFTA means either Canada

or

Chile.

A

"non-Party"

under

NAFTA

is any

country other than Canada,

the

United States,

and

Mexico,

and a

"non-Party" under CCFTA

is any

country other than Canada

or

Chile.

Between

the

United States

and

Canada under

NAFTA,

the

provi-

sions

of

Chapter Eleven apply

to

"investors

of the

United States"

and

their "investments"

in

Canada

and to

"investors

of

Canada"

and

their

"investments"

in the

United

States.1

Between Canada

and

Chile under

CCFTA,

the

provisions

of

Chapter

G

apply

to

"investors

of

Canada"

and

their "investments"

in

Chile

and to

"investors

of

Chile"

and

their

"investments"

in

Canada.

The

scope

and

coverage

of the

investment

provisions

in

each

of

NAFTA

and

CCFTA depend upon

the

definitions

of

investor

of a

Party

and

investment.

a)

Investor

of a

Party

An

investor

of a

Party under both

NAFTA

and

CCFTA

is:2

the

government

or a

state enterprise

of a

Party;

or

a

natural person

who is a

citizen

or

resident

of a

Party;

or

an

"enterprise

of a

Party" (i.e.,

a

corporation, trust, partnership, sole

proprietorship, joint venture

or

other association organized under

the

laws

of a

Party)

that seeks

to

make

or is

making

or has

made

an

investment.3

An

enterprise

of a

Party need

not be

owned

or

controlled

by

citizens

or

residents

of a

member country

to

fall

within

the

definition

of

investor

of

a

Party. Thus

a

corporation constituted under

New

York

state

law but

owned

by

citizens

of

Japan

is an

"investor

of the

United States"

for

NAFTA

purposes. Similarly,

a

corporation constituted under

the

laws

of

Canada

and

owned

by

citizens

of

France

is an

"investor

of

Canada"

for

both

NAFTA

and for

CCFTA purposes. However, each

of

NAFTA

and

CCFTA

permit

a

Party

to'deny

benefits

to an

"enterprise

of a

Party" that

does

not

have substantial business activities

in the

Party under whose

The

same applies between Canada

and

Mexico, substituting "Mexico"

for the

"United

States."

See

the

North American

Free

Trade

Agreement,

17

December 1992, Can. T.S. 1994

No.

2

[NAFTA],

art.

1139,

and the

Canada-Chile

Free

Trade

Agreement,

in

force

5

July 1997,

see

http://www.dfait-maeci.gc.ca/english/trade/agrement.htm

[CCFTA],

art.

G-40.

See

NAFTA,

ibid.,

art. 201,

and

CCFTA,

ibid.,

art.

B-01.

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2

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