STATE-OWNED ENTERPRISES AND DESIGNATED MONOPOLIES
Article 17.1: Definitions
For the purposes of this Chapter:
Arrangement means the Arrangement on Officially Supported Export Credits, developed within the framework of the Organization for Economic Co-operation and Development (OECD), or a successor undertaking, whether developed within or outside of the OECD framework, that has been adopted by at least 12 original WTO Members that were Participants to the Arrangement as of January 1, 1979;
commercial activities means activities which an enterprise undertakes with an orientation toward profit-making 1 and which result in the production of a good or supply of a service that will be sold to a consumer in the relevant market in quantities and at prices determined by the enterprise;2
commercial considerations means price, quality, availability, marketability, transportation, and other terms and conditions of purchase or sale, or other factors that would normally be taken into account in the commercial decisions of a privately owned enterprise in the relevant business or industry;
designate means to establish, designate or authorise a monopoly, or to expand the scope of a monopoly to cover an additional good or service;
designated monopoly means a privately owned monopoly that is designated after the date of entry into force of this Agreement and any government monopoly that a Party designates or has designated;
government monopoly means a monopoly that is owned, or controlled through ownership interests, by a Party or by another government monopoly;
independent pension fund means an enterprise that is owned, or controlled through ownership interests, by a Party that:
(a) is engaged exclusively in the following activities:
(i) administering or providing a plan for pension, retirement, social security, disability, death or employee benefits, or any
combination thereof solely for the benefit of natural persons who are contributors to such a plan and their beneficiaries; or
(ii) investing the assets of these plans;
(b) has a fiduciary duty to the natural persons referred to in subparagraph
(c) is free from investment direction from the government of the Party;3
market means the geographical and commercial market for a good or service;
monopoly means an entity, including a consortium or government agency, that in any relevant market in the territory of a Party is designated as the sole provider or purchaser of a good or service, but does not include an entity that has been granted an exclusive intellectual property right solely by reason of the grant;
non-commercial assistance4 means assistance to a state-owned enterprise by virtue of that state-owned enterprise’s government ownership or control, where:
(a) “assistance” means:
(i) direct transfers of funds or potential direct transfers of funds or liabilities, such as:
(A) grants or debt forgiveness;
(B) loans, loan guarantees or other types of financing on terms more favourable than those commercially available to that enterprise; or
(C) equity capital inconsistent with the usual investment practice, including for the provision of risk capital, of private investors; or
(ii) goods or services other than general infrastructure on terms more favourable than those commercially available to that enterprise;
(b) “by virtue of that state-owned enterprise’s government ownership or control” 5 means that the Party or any of the Party’s state enterprises or state-owned enterprises:
(i) explicitly limits access to the assistance to the Party’s state- owned enterprises;
(ii) provides assistance which is predominately used by the Party’s
(iii) provides a disproportionately large amount of the assistance to the Party’s state-owned enterprises; or
(iv) otherwise favours the Party’s state-owned enterprises through the use of its discretion in the provision of assistance;
public service mandate means a government mandate pursuant to which a state-owned enterprise makes available a service, directly or indirectly, to the general public in its territory;6
sovereign wealth fund means an enterprise owned, or controlled through ownership interests, by a Party that:
(a) serves solely as a special purpose investment fund or arrangement7 for asset management, investment, and related activities, using financial assets of a Party; and
(b) is a Member of the International Forum of Sovereign Wealth Funds or endorses the Generally Accepted Principles and Practices (“Santiago Principles”) issued by the International Working Group of Sovereign Wealth Funds, October 2008, or such other principles and practices as may be agreed to by the Parties,
and includes any special purpose vehicles established solely for such activities described in subparagraph (a) wholly owned by the enterprise, or wholly owned by the Party but managed by the enterprise; and
state-owned enterprise means an enterprise that is principally engaged in commercial activities in which a Party:
(a) directly owns more than 50 per cent of the share capital;
(b) controls, through ownership interests, the exercise of more than 50 per cent of the voting rights; or
(c) holds the power to appoint a majority of members of the board of directors or any other equivalent management body.
Article 17.2: Scope8
1. This Chapter shall apply with respect to the activities of state-owned enterprises and designated monopolies of a Party that affect trade or investment between Parties within the free trade area.9
2. Nothing in this Chapter shall prevent a central bank or monetary authority of a Party from performing regulatory or supervisory activities or conducting monetary and related credit policy and exchange rate policy.
3. Nothing in this Chapter shall prevent a financial regulatory body of a Party, including a non-governmental body, such as a securities or futures exchange or market, clearing agency, or other organisation or association, from exercising regulatory or supervisory authority over financial services suppliers.
4. Nothing in this Chapter shall prevent a Party, or one of its state enterprises or state-owned enterprises from undertaking activities for the purpose of the resolution of a failing or failed financial institution or any other failing or failed enterprise principally engaged in the supply of financial services.
5. This Chapter shall not apply with respect to a sovereign wealth fund of a Party10, except:
(a) Article 17.6.1 and Article 17.6.3 (Non-commercial Assistance) shall apply with respect to a Party’s indirect provision of non-commercial assistance through a sovereign wealth fund; and
(b) Article 17.6.2 (Non-commercial Assistance) shall apply with respect to a sovereign wealth fund’s provision of non-commercial assistance.
6. This Chapter shall not apply with respect to:
(a) an independent pension fund of a Party; or
(b) an enterprise owned or controlled by an independent pension fund of a
(i) Article 17.6.1 and Article 17.6.3 (Non-commercial Assistance) shall apply with respect to a Party’s direct or indirect provision of non-commercial assistance to an enterprise owned or controlled by an independent pension fund; and
(ii) Article 17.6.1 and Article 17.6.3 (Non-commercial Assistance) shall apply with respect to a Party’s indirect provision of non- commercial assistance through an enterprise owned or controlled by an independent pension fund.
7. This Chapter shall not apply to government procurement.
8. Nothing in this Chapter shall prevent a state-owned enterprise of a Party from providing goods or services exclusively to that Party for the purposes of carrying out that Party’s governmental functions.
9. Nothing in this Chapter shall be construed to prevent a Party from:
(a) establishing or maintaining a state enterprise or a state-owned enterprise;
(b) designating a monopoly.
10. Article 17.4 (Non-discriminatory Treatment and Commercial Considerations), Article 17.6 (Non-commercial Assistance) and Article 17.10 (Transparency) shall not apply to any service supplied in the exercise of governmental authority.11
11. Article 17.4.1(b), Article 17.4.1(c), Article 17.4.2(b) and Article 17.4.2(c) (Non- discriminatory Treatment and Commercial Considerations) shall not apply to the extent that a Party’s state-owned enterprise or designated monopoly makes purchases and sales of goods or services pursuant to:
(a) any existing non-conforming measure that the Party maintains, continues, renews or amends in accordance with Article 9.12.1 (Non-Conforming Measures), Article 10.7.1 (Non-Conforming Measures) or Article 11.10.1 (Non-Conforming Measures), as set out in its Schedule to Annex I or in Section A of its Schedule to Annex III; or
(b) any non-conforming measure that the Party adopts or maintains with respect to sectors, subsectors, or activities in accordance with Article
9.12.2 (Non-Conforming Measures), Article 10.7.2 (Non-Conforming Measures) or Article 11.10.2 (Non-Conforming Measures), as set out in its Schedule to Annex II or in Section B of its Schedule to Annex III.
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