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Chile - United States Free Trade Agreement
Article 1 establishes the free trade area.
Article 2 sets forth the objectives of the agreement and provides that the parties will interpret and apply the agreement in light of these objectives.
In Article 3 the parties affirm their existing rights and obligations under the WTO Agreement and other agreements to which both parties are party.
Section A - Definitions and Scope and Coverage
The U.S. and Chile agreed on definitions for the following concepts that appear in the Trade in Goods text: advertising films and recordings, agricultural goods, articles eligible for duty-free treatment under the U.S. Generalized System of Preferences, commercial samples of negligible value, consular transactions, consumed, customs duty, export subsidies, goods temporarily admitted for sports purposes, goods intended for display or demonstration, printed advertising materials, duty- free, import licensing, and performance requirement.
Article 2: Scope and Coverage
This chapter generally applies to trade in goods of a Party.
Section B - National Treatment
This article reaffirms the two Parties' rights and obligations under Article III of GATT 1994. In addition, it specifies that national treatment shall apply at the state (sub-national) level, and that it applies to like, directly competitive, or substitutable goods.
Section C - Tariff Elimination
Article 4: Tariff Elimination
Article 4 provides for the phased elimination of U.S. and Chilean tariffs on goods traded between the two Parties that qualify under the rules of origin set out in a separate chapter of the Agreement. It also states that neither party may raise duties on originating goods. The U.S. agrees to accelerate the elimination of customs duties on any non-agricultural originating goods that are newly designated as duty-free under GSP1 after the Agreement enters into force. The Parties may consult to consider acceleration of tariff elimination at the request of either Party. Parties may raise tariffs only when a tariff has been unilaterally reduced to a level below that specified in the FTA's tariff elimination schedule or pursuant to WTO dispute settlement provisions.
Article 5: Used Goods
Chile agrees to immediate elimination of its 50% surcharge on imports of originating used goods.
Article 6: Customs Valuation
The Parties agree that the WTO Customs Valuation Agreement will be used to determine customs value. This article also specifies the method of valuing imported carrier media of HS 8523 and 8524 and that each Party will determine the rate basis of any indirect or direct taxes on importation according to its domestic legislation.
Article 6: Waiver of customs duties
Article 6 provides that, except as permitted under the article that deals with duty drawback and deferral programs, neither Party may extend or renew any duty waivers where such a waiver is conditioned on a performance requirement. This article ensures that Chile and the U.S. will not offer waivers of otherwise applicable duties in return for commitments from firms in their territories to export their products to the other FTA Party or to use locally-produced components.
Article 7: Temporary admission of goods
Article 7 provides that each Party will grant duty-free admission for a variety of goods and equipment that will stay in the country only for a short period or are of negligible commercial value. Example of these items include the following:
Article 8: Drawback and Duty Deferral Programs
Article 8 eventually eliminates the amount of duty drawback and duty waivers and reductions under a foreign trade zone, bonded warehouse or "zona franca" that may be claimed on goods from outside the territory of the two Parties ("non-originating goods") that are traded between the two Parties. Duty drawback rights will be phased out over a 12-year period. For the first 8 years that the Agreement is in force, full drawback rights for both originating and non-originating goods will be granted. Thereafter, drawback for both originating and non-originating goods will be phased out over a four year period. Duty drawback reduces the incentive for integration and increased trade between the FTA partner countries since inputs from third countries are duty-free under the duty-drawback or free trade zone programs.
Article 9: Good re-entered after repair or alteration
Article 9 prevents either Party from applying a customs duty on goods, regardless of origin, that are temporarily admitted into its territory from the other Party for repair or minor alteration. Also prohibits customs duties on such goods when they re-enter the territory of a Party.
Article 10: Duty-Free Entry of Commercial Samples of Negligible Value and Printed Advertising Materials
Duty-free entry would be allowed for these goods regardless of origin, facilitating the conduct of business. Conditions are specified under which the Parties must allow duty-free entry to these articles.
Article 12: Import and Export Restrictions
Article 12 forbids import bans except as otherwise provided in the Agreement. Incorporates Article XI of GATT 1994 into the Agreement. Prevents either Party from maintaining export and import price requirements, import licensing conditioned on the fulfillment of a performance requirement, and WTO-inconsistent voluntary export restraint. Allows either Party to ensure that any bans on trade with a non-Party are not circumvented by the Agreement.
Article 13: Administrative Fees and Formalities
This article requires that fees associated with importation are commensurate with the approximate cost of the services rendered. Prohibits consular transactions. Requires each Party to notify all new fees and charges imposed in connection with importation or exportation within 60 days of publication and specifies the information that must be contained in the notification. Requires that a current list of fees and charges imposed on traders is published and made available on the Internet. The U.S. agrees to eliminate its Merchandise Processing Fee.
Article 14: Export Taxes
Article 14 prohibits export taxes except when the tax is also applied to the same goods when domestically consumed.
Article 15: Luxury Tax
Chile agreed to phase out its automotive luxury tax in four years.
Article 16: Distinctive Products
The Parties agreed to recognize the following beverage products: Bourbon Whiskey, Tennessee Whiskey, Chilean Pisco, Vino Pajarete, and Vino Asoleado.
Article 16: Agricultural Export Subsidies
The Parties agreed to work together in the WTO negotiations to eliminate export subsidies and to establish certain disciplines on subsidized exports between parties.
Article 17: Agricultural Marketing and Grading Standards
The Parties agreed to provisions for recognizing grading, quality, or marketing measures.
Article 18: Agricultural Safeguard
The Parties agreed to Parties agreed to provisions for a transitional tariff snap-back mechanism for specified products under certain conditions. Once the tariffs are at zero, the ability to use the snapback disappears. The snap-back mechanism allows the possibility of adding additional import charges to the preferential tariff but never above MFN rates. The actual amount of the additional charge depends on the relationship between the import price of the item and a "trigger price" that is set out in the Agreement. The list of products eligible for the mechanism are identified in an annex.
Article 18: Committee on Trade in Goods
The final article establishes a Committee on Trade in Goods that would meet at the request of either Party to discuss any matter arising under this chapter or the chapters on customs administration or rules of origin. The Committee will strive to promote trade between the Parties, including efforts to accelerate tariff elimination. It will also address any non-tariff measures that are of concern to either Party.
Article 1: Definitions
Defines terms used throughout the chapter.
Article 2: Criteria for Qualification of Goods as Originating
Provides three criteria under which goods will generally be considered to be originating goods: 1) wholly obtained or produced in the territory; 2) non-originating materials undergo the requisite change in tariff classification, the good meets any applicable regional value content requirement and the good satisfies all other requirements of the chapter; or 3) produced in the territory entirely from originating materials.
Clarifies that simple combining or packaging operations or mere dilution with water or with another substance that does not materially alter the characteristics of the good or material will not confer origin.
Article 3: Regional Value Content
Provides two methods, for calculating regional value content, the "Build-down method" based on the value of non-originating materials used, and the "Build-up method" based on the value of originating materials used.
Article 4: Accessories, Spare Parts and Tools
Provides that accessories, spare parts and tools delivered with a good shall be considered as a material of that good provided they are classified with the good, are not separately invoiced from the good, and their quantities and values are customary for the good.
Article 5: Fungible Goods and Materials
Provides that the determination of whether fungible goods or materials are originating shall be made by either physical segregation of each good or material or through the use of inventory management methods.
Article 6: Accumulation
Allows the accumulation of originating goods or materials from the territory of the Parties.
Article 7: De Minimis
Provides a de minimis exception to the change in tariff classification criteria.
Establishes certain types of materials that will not receive the benefits of the de minimis exception.
Article 8: Indirect Materials Used in Production
Provides that indirect materials are considered to be originating materials regardless of where they are produced.
Article 9: Packaging Materials and Containers for Retail Sale
Provides that packing materials and containers for retail sale that are classified with the good are disregarded in determining whether the good meets the tariff shift rule but are considered in determining whether the good meets the regional value content requirement.
Article 10: Packing Materials and Containers for Shipment
Provides that packing materials and containers for shipment are disregarded in determining whether a good meets the tariff shift rule or satisfies the regional value content requirement.
Article 11: Transit and Transhipment
Establishes that a good will not be considered to be an originating good if it undergoes subsequent production outside the territories of the Parties but allows unloading, reloading or other processes necessary to preserve or transport the good.
Article 12: Certification of Origin
Establishes that the certificate of origin may be issued by the importer, exporter or producer.
Establishes that the certificate of origin may cover one importation of one or more goods or several importations of identical goods.
Establishes that a certificate of origin is valid for four years.
Establishes that certificates of origin may be completed in English or Spanish.
Establishes a method for filing claims for preferential treatment within one year of importation.
Article 13: Exceptions
Provides exceptions to the certificate of origin requirement for goods of low value.
Article 14: Obligations Relating to Importations
Provides that each Party shall require an importer that claims preferential tariff treatment to make a written declaration that the good qualifies as an originating good, submit upon request the certificate of origin or other information to support the claim, promptly correct erroneous declarations and demonstrate upon request that applicable requirements have been met.
Requires importers to retain the certificate of origin and all other documentation which supports the claim for preferential treatment for five years.
Article 15: Procedures for Verification of Origin
Requires that denials of preferential treatment be issued in writing and contain the facts and laws relied upon in making the determination.
Provides that an importer who voluntarily corrects a declaration shall not be penalized for making an incorrect declaration.
Provides that verification of more than one false certification by an importer may result in preferential tariff treatment being denied to identical goods of that importer until compliance has been established.
Article 16: Obligations Relating to Exportations
Establishes that an exporter or producer issuing a certificate of origin will provide a copy of these documents to the customs administration of the exporting Party upon request.
Requires an exporter or producer issuing a certificate of origin to retain all the records related to the origin of the goods for five years.
Provides that an exporter or producer issuing a certificate of origin that has reason to believe that the certificate contains incorrect information shall notify in writing every person to whom a certificate has been issued of any change that could affect the accuracy or validity of the certificate of origin without threat of penalty.
Article 17: Common Guidelines
Requires the Parties to publish guidelines for the interpretation, application, and administration of the chapters on Market Access, Rules of Origin and other agreed matters.
Outline of the provisions contained in the Customs Chapter.
Chile and the US agreed in the FTA text to establish an SPS Committee, consisting of trade and regulatory officials, to serve as forum for SPS issues. The Committee will address three primary issues. First, the Committee will serve as a forum to address specific SPS issues affecting trade between the parties; second, the Committee will serve as a means to consult on SPS issues in international SPS-related organizations (e.g., WTO SPS Committee, Codex, IPPC, OIE, and others); the Committee will provide a forum for the coordination of technical cooperation programs.
The key provisions of this Chapter are as follows.
International Standards. Requires the Parties to apply the principles in the WTO TBT Committee Decision on Principles for the Development of International Standards, Guides and Recommendations, which emphasizes the need for openness and consensus in the development of international standards.
Trade Facilitation. Promotes bilateral cooperation to facilitate market access and encourages the consideration of multiple options to do so.
Technical Regulations. Requires an explanation for not accepting technical regulations of the other Party as equivalent to one’s own technical regulation, when acceptance of a foreign technical regulation as equivalent is provided for.
Conformity Assessment. Requires an intensified exchange of information on the range of mechanisms available to facilitate the acceptance of conformity assessment results.
Requires the recognition of competent conformity assessment bodies located in the territory of the other Party on a non-discriminatory basis, where the Party has such a recognition program in place. Where a Party denies such recognition, it will explain its reasons upon request.
Where a Party declines to engage in or conclude negotiations to facilitate the recognition of conformity assessment results, requires that Party to explain why, upon request.
Transparency. Requires non-discriminatory opportunities to participate in the development of standards, technical regulations, and conformity assessment procedures.
Enhances the opportunity for meaningful comment on proposed technical regulations by requiring the Parties to describe the objective of the proposal and the rationale for the approach it is proposing in its published notice of the proposal. Also obligates a Party to provide additional information on the objective and rationale, upon request.
Requires notifications to be made between Parties at the same time they are made to the WTO.
Requires the publication (in print or electronically) of responses to significant comments made on proposed regulations at the time of their final adoption.
Committee on Technical Barriers to Trade. Establishes a Committee comprised of representatives of the Parties to monitor implementation and administer the Chapter, and to promote bilateral cooperation, information exchange and the resolution of trade concerns.
Allows the Committee to review the Chapter and to develop recommendations for amending it in light of developments.
Information Exchange. Requires that any information or explanations provided for by this Chapter be provided in print or electronically within a reasonable period of time.
1. Bilateral Actions
Article 1 permits each party to take bilateral safeguard actions during the transition period if, as a result of the reduction or elimination of a duty under the agreement, an originating good is being imported in such increased quantities, in absolute terms or relative to domestic production, and under such conditions as to constitute a substantial cause of serious injury, or threat thereof, to a domestic industry producing a like or directly competitive product. If injury or threat is found, the importing party may suspend any further reduction in duties on that good, or may increase the rate of duty on the good to a level not to exceed the lesser of the current most-favored-nation (MFN) applied rate of duty or the MFN applied rate of duty in effect immediately preceding the entry into force of the agreement.
Article 2 provides that a party may impose a measure for up to three years. Where the measure will be in place for more than one year, the party must progressively liberalize the measure at regular intervals. A party may impose a bilateral measure or a global measure, but not both at the same time. No measures are permitted after expiration of the transition period.
Article 3 incorporates by reference the procedural and substantive investigation requirements set forth in Articles 3.1, 4.2(a), and 4.2(c) of the WTO Safeguards Agreement. It also requires investigating authorities to maintain procedures to protect confidential information submitted during an investigation.
Article 4 provides that the investigating party must notify the other party when it initiates an investigation or makes an affirmative finding.
Article 5 provides that a party that imposes a bilateral safeguard measure must provide mutually agreed trade liberalizing compensation in the form of concessions having substantially equivalent trade effects or equivalent to the value of the additional duties expected to result from the measure. If no agreement is reached on compensation within 30 days, the other party may suspend the application of substantially equivalent trade concessions.
Article 6 defines relevant terms.
2. Global Safeguards
Article 7 maintains each country's right to take remedial action against imports from all sources
under GATT Article XIX and the WTO Safeguards Agreement, without providing additional
rights or obligations.
Definitions of key terms.
Article XX.2: Scope and Coverage
Outlines the coverage of the agreement, the kinds of activities that are not covered by the Agreement, and commitments to not circumvent the Agreement.
Article XX.3: National Treatment and Non-Discrimination
Requires national treatment of other Party's goods, services and suppliers; precludes discrimination against locally established suppliers on the basis of foreign affiliation or ownership. Also provides that rules of origin determination shall be non-preferential, and offsets are not allowed.
Article XX. 4: Publication of Procurement Measures
Establishes an obligation to publish laws, regulations and other measures that govern government procurement.
Article XX.5: Publication of Advance Notice of Intended Procurement
Requires Parties to publish notices of procurement opportunities in advance, and lists certain information that such notifications must include.
Article XX.6: Technical Cooperation
Requires Parties to provide via the Internet, or other comparable means, access to a database with
information on procurement by the covered federal entities.
Entities should be encouraged to publish their future procurement plans.
Article XX.7: Time Periods for the Tendering Process
Requires covered entities to allow at least 30 days between publication of the notice of procurement and the deadline for submitting tenders. Allows for reduction of the time period in certain circumstances, such as for unforseen emergencies.
Article XX.8: Information on Intended Procurements
Requires Parties to provide all information that suppliers need to prepare and submit responsive tenders. Such information includes all the criteria that will be used to evaluate tenders. If entities modify the criteria, they must provide the new information to all suppliers and in a timely manner.
Article XX.9: Technical Specifications
Procuring entities shall not adopt or apply any technical specification that would create unnecessary obstacles to trade. Technical specifications shall, where appropriate, be performance-based, and based on international standards, where applicable. Technical specifications shall not be written to favor a particular supplier or product.
Article XX.10: Conditions for Suppliers' Participation in Procurement
Establishes requirements that apply when entities require suppliers to satisfy registration, qualification or other conditions for participation in procurement. These include timely publication of information on such procedures, and allowing adequate time for suppliers to prepare and submit responsive applications. Any conditions of participation shall be limited to those that are essential to ensure that the potential supplier has the legal, technical and financial abilities to fulfill the requirements and technical specifications of the procurement. Prohibits restriction of procurement only to suppliers who have previously participated in procurements in the territory of the Party. Require consideration of supplier's global activities. Requires prompt notification of suppliers of qualification decisions.
Article XX.11: Tendering Procedures
Requires open tendering procedures, in which all interested suppliers may participate, except under certain defined circumstances, such as absence of tenders. When open tendering procedures are not used, entities must make public the reason.
Article XX.12: Awarding of Contracts
Tenders mus be in writing, and must conform to the requirements in the tender documentation.
Award of contracts must be based solely on the criteria set out in the tender documentation.
Article XX.13: Information on Awarded Contracts
Requires procuring entities to notify suppliers of the winning offer, and to publish certain information about the winning bid, such as the name of the supplier, the winning bid, and the goods or services involved. Requires maintenance of procurement records for at least three years.
Article XX.14: Non-Disclosure of Information
Requires Parties to protect confidential or proprietary information, and treat tenders in confidence.
Article XX.15: Ensuring Integrity in Procurement Practices
Requires Parties to maintain laws that make bribery of procurement officials a crime
Article XX.16: Procurement Exceptions
Nothing in the chapter shall be construed to prevent any Party from adopting or maintaining measures necessary to protect public morals, order or safety; necessary to protect human, animal or plant life or health; necessary to protect intellectual property; or relating to goods or services of handicapped persons, of philanthropic institutions or of prison labor.
Article XX.17: Domestic Review of Supplier Challenges
Requires Parties to provide for domestic review of challenges by suppliers to the procurement process. Parties must establish an impartial review authority, which is independent from the procuring entities, to hear the challenges, as well as procedures that provide for timely, transparent and effective reviews based on due process. Review procedures shall be made available in writing.
Article XX.18: Modifications and Rectifications to Coverage
Outlines the procedures under which Parties may make modifications and rectifications to the coverage under the chapter.
Article XX.19: Government Procurement Working Group
Creates a bilateral working group to address issues related to implementation of the chapter.
Article XX.20: Further Negotiations
If a Party offers a third party more advantageous coverage, then that Party shall enter into negotiations with the other Party (if requested) with a view towards extending coverage on a reciprocal basis.
The investment chapter is a comprehensive set of classic standards found in investment agreements throughout the world. The chapter is in large part modeled after the NAFTA investment chapter, but also draws from United States bilateral investment treaties and customary international law. The chapter also incorporates a number of innovations to traditional investment agreement provisions that reflect U.S. experience with the implementation of investment agreements, and innovations that respond to new investment objectives set forth
in the Trade Promotion Act of 2002.
The chapter is divided in three parts. Part A contains a set of definitions. Part B sets out each government’s
obligations with respect to investors from the other Party and their investments in its territory. Part C affords
investors the right to seek compensation through international arbitration for a breach of an obligation under
Section B, breach of an investment agreement, and breach of an investment authorization. The chapter also
contains a set of annexes.
Section B - Investment Obligations
Scope and Coverage
Part B provides six basic protections to "investors of the other Party": non-discriminatory treatment relative to domestic investors as well as investors of non-Parties; freedom from "performance requirements;" free transfer of funds related to an investment; expropriation only in conformity with customary international law; so-called “minimum standard of treatment” in conformity with customary international law; and the ability to hire key managerial and technical personnel without regard to nationality.
"Investment" is broadly defined to cover all forms of investment, including enterprises, securities, debt, intellectual property, concessions and contracts. Both existing and future investments are covered, but not events that predate the entry into force of the Agreement. "Investor of a Party" is defined to encompass both nationals of the Parties and firms (including branches) established in one of the Parties, and subject to very
limited exceptions discussed below, without distinction as to the ultimate nationality of ownership. The chapter applies where such firms or nationals make or attempt to make investments in the territory of the other Party.
The chapter applies to all governmental measures, at all levels of government, relating to investment, with the exception of measures governing financial services, which are treated in a separate financial services chapter.
In other words, with the exception of financial services, the investment chapter covers all sectors, including service sectors. However, the Parties may exclude particular sectors or measures if explicitly stated in annexes to the Agreement. In the event of any inconsistency between the investment chapter and another chapter, the other chapter will prevail.
The basic non-discrimination rules of "national treatment" and "most-favored-nation treatment" are set out in
two articles. These rules require, respectively, each government to treat investors of the other Party and their
Minimum Standard of Treatment
This article affords investments treatment in accordance with customary international law, including fair and equitable treatment and full protection and security. Through this provision, the chapter provides investments,
inter alia, with the due process standards of customary international law, nondiscriminatory treatment with respect to losses suffered as a result of armed conflict or civil strife, and compensation or restitution for the requisitioning of property or unnecessary destruction of property by authorities or their armed forces.
This article, together with a supplementary annex, provides more detail than previous investment agreements with respect to the standards of treatment of aliens and their property found in customary international law. This new detail and supplementary information has been added to ensure the proper interpretation and application of the standards, consistent with the guidance of the Trade Promotion Act of 2002. For example,
the provisions explain that fair and equitable treatment under customary international law includes the
obligation not to deny justice in adjudicatory proceedings in accordance with the principles of due process
embodied in the principal legal systems of the world, including that of the United States.
Performance Requirements and Incentives
This article disciplines particular types of mandatory performance requirements, as well as certain performance
requirements that are conditions for receiving incentives. The rules prohibiting performance requirements apply with respect to all investments, whether by non-Party investors or domestic investors.
The first paragraph of this article imposes disciplines on “mandatory” performance requirements. Under the first paragraph, a government may not, as a condition for the establishment or operation of an investment, require a firm to:
advantage, such as a tax holiday.
The third paragraph of this article states explicit exceptions to some of these disciplines. For example, government procurement, qualification requirements for export and foreign aid programs, and nondiscriminatory health, safety, and environmental requirements are excluded from some of the performance requirements disciplines. With regard to the transfer of technology, a Party’s authorized use of an intellectual property right in accordance with Article 31 of the TRIPs Agreement are excepted, as are measures requiring the disclosure of proprietary information that fall within the scope of, and are consistent with, Article 39 of the TRIPs Agreement, and enforcement measures by competition authorities.
Senior Management and Boards of Directors
This article prohibits governments from requiring local firms owned by investors from the other country to fill senior management positions based on nationality. A government may require a simple majority of the board
of directors to be local nationals, however, as long as the requirement does not materially impair the investor's
control over its investment.
This article creates a system of limited, country-specific exemptions (“non-conforming measures”) for specified laws and regulations that are not in conformity with the non-discrimination, performance requirements, and senior management obligations described above. The article also excepts government procurement and subsidies and grants from such obligations.
The non-conforming measures referred to above are recorded in either of two schedules, Annex I or Annex II.
Annex I is for existing measures and Annex II is for future measures. These two annexes are also used to list
measures relating to services that are inconsistent with particular provisions of the services chapter.
Annex I: Annex I sets out each government's non-conforming measures for existing, inconsistent measures at
the federal or regional level. Existing measures at the local level are generally exempted or “grandfathered” for
both Parties without having to be specifically listed.
Laws and regulations that are "grandfathered" or listed as a reservation in Annex I are exempt from challenge
under the chapter, even if they are amended or renewed, so long as they are not made more inconsistent with
the Agreement. If a measure is liberalized, however, any such liberalization may not be reversed by a
For its part, the United States exempted existing, non-conforming legislation in respect of such matters as
nuclear power, broadcasting, mining, customs brokers, and air transportation. The United States also took an
exemption for all existing measures at the state level.
Annex II: The two governments also recorded a limited number of broader exemptions for measures falling
into certain sectors, such as basic telecommunications, broadcasting, and maritime trade. Those exemptions,
listed as reservations in Annex II, allow a government to maintain existing and adopt new laws and regulations
that vary from the chapter’s rules regarding non-discrimination, performance requirements, and senior management.
This article requires each government to permit transfers relating to an investment covered by the chapter to be
made freely and without delay, into and out of its territory, including transfers of profits, royalties, sales
proceeds, and other remittances relating to an investment. Exceptions permit a government to prevent transfers
under certain laws of general application, such as bankruptcy laws and other law enforcement purposes.
There is an annex that is unique to Chile that, for certain types of speculative capital, allows Chile to impose
capital transfer restrictions for 12 months, as long as those restrictions do not substantially impede transfers. If
Chile’s capital transfer restrictions are found to substantially impede transfers, then damages would accrue
from the date of the initiation of the measure. If Chile imposes any restrictions on any transfers for longer than
12 months, it may be required to compensate the investors for the extent and loss of asset value beginning in
the second year.
Expropriation and Compensation
This article contains the classic customary international law obligations with respect to expropriation. Under
this article, a government may not expropriate, directly or indirectly, an investment made by an investor from
the other Party other than for a public purpose, on a non-discriminatory basis, and in accordance with due
process of law. Compensation must be paid without delay at the fair market value of the expropriated investment, plus any applicable interest, and must be freely realizable and transferable. Pursuant to the
directives of the Trade Promotion Act of 2002, the article is supplemented by an annex that elaborates on
relevant principles of United States takings law and clarifies the relationship of indirect expropriations and
This article permits a Party to adopt or maintain "special formalities" in connection with the establishment of
an investment, so long as such requirements do not materially impair the substance of any right accorded by the chapter. Special formalities include requirements such as typical incorporation requirements. The article also permits a government to seek information and data from investments covered by the chapter.
Denial of Benefits
This article describes those circumstances under which a government may refuse to apply the protection of the
chapter to firms, or their investments, that otherwise qualify for coverage under the chapter, where the firms are
owned or controlled by investors from a non-Party.
The article preserves the foreign policy prerogative of each government to deny benefits to firms owned or
controlled by nationals of a non-Party with which it does not have diplomatic relations or to which it is
applying economic sanctions.
It also permits each government to deny benefits to firms owned by nationals of non-Parties and of the denying
Party, if they have no substantial business activities in the territory of the Party where they are established.
Thus shell companies could be denied benefits but not, for example, firms that maintain their central
administration or principal place of business in the territory of, or have a real and continuous link with, the
country where they are established.
Investment and the Environment
This article affirms that the chapter does not preclude a government from adopting, maintaining, or enforcing
measures otherwise consistent with the chapter to ensure investment is consistent with its environmental
Section C - Investor - State Dispute Settlement
Section C provides a mechanism for an investor to pursue a claim against a host government that it has
breached its obligations under Section B or that it has breached an investment agreement or an investment
authorization. Like other provisions in the chapter, these provisions draw from the NAFTA and U.S. bilateral
investment treaties. However, this section incorporates a number of innovations responsive to new objectives
in the Trade Promotion Act of 2002 that are intended to increase public access to information regarding
proceedings under the chapter (“transparency”) and to enhance the proper application of the provisions.
Nature of Claims
Investors may bring claims for allegations of direct injury to an investor, and allegations of indirect injury to an
investor caused by injury to a firm in the host country that is owned or controlled by the investor, where the
injury results from an alleged breach of Section B or for a breach of an investment agreement or investment
authorization. An investment agreement is a written agreement between a national authority of a Party and an
investor or investment of the other Party that grants rights with respect to assets that a national authority control and that the investor relies on in making an investment. An investment authorization is an authorization
granted by a foreign investment authority of a Party to an investor or investment. The provisions also make
clear that claims for breaches of Section B may be brought where governmental authority has been delegated to designated monopolies and state enterprises.
Choice of Arbitral Rules
The investor may choose the arbitral forum, including the International Centre for Settlement of Investment
Disputes (“ICSID”), the Additional Facility of the Centre, under the UNCITRAL arbitration rules, or any other
mutually agreed arbitral institution. The rules chosen will govern the proceedings except to the extent modified
by the Agreement
Six months must elapse since the events giving rise to a claim before initiating the proceedings, and all claims
must be brought within three years of the date that the claimant acquired, or should have acquired, knowledge
of the breach and injury. The claimant may not initiate or continue any domestic proceedings arising out of the
Initiation of Dispute Settlement Proceedings
The settlement of claims through consultation or negotiation is encouraged. Should such consultations fail to
resolve the matter, an investor must provide written notice of its intention to submit a claim to arbitration at
least 90 days before doing so, and specify the breach of Section B, the investment agreement, or the investment authorization.
The provisions establish the requisite mutual consent for arbitration. The rules require the investor (and, in
certain cases, the enterprise that is owned or controlled by the investor) to consent in writing to arbitration, and
to waive the right to initiate or continue any actions in local courts or other fora relating to the disputed
measure, except for actions for injunctive or other extraordinary relief. To ensure that a host country cannot
frustrate an arbitration by withholding its own consent, an article expressly states that it constitutes advance
consent by the governments to arbitration.
Appointment of Arbitrators
Section C provides generally for the establishment of three-member arbitral tribunals, one member to be
appointed by each of the disputants, and the presiding arbitrator to be appointed by agreement between the
disputants. If, within seventy-five days of the submission of the claim to arbitration, a disputant fails to appoint
an arbitrator, or the two disputants fail to agree on a presiding arbitrator, arbitrators may be named by the
The articles ensure that the government that is not involved in the arbitration will be apprised of relevant facts
and other information and, if it wishes, to submit views to the tribunal on questions of interpretation. To help
ensure the enforceability of an award, an article provides that unless otherwise agreed, the arbitration must take place in a country that is a party to the United Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (“New York Convention”).
The provisions ensure that the proceedings are transparent by requiring that all documents submitted to or
issued by a tribunal be available to the public, except for certain business proprietary and other confidential
information, and requiring that the proceedings be open to the public. The public is also able to give its views
on the proceedings through a provision expressly enabling the tribunal to accept amicus curiae submissions.
To make the proceedings more efficient and to dismiss frivolous claims, tribunals may decide the preliminary
question of whether the investor has made out a claim under the Agreement and whether the tribunal has
jurisdiction. Upon written request of the respondent, these questions may be answered on an expedited basis
within 150 days, or if a hearing is requested, within 180 days of receipt of the request. For the purpose of
discouraging frivolous filings, including frivolous claims, the chapter expressly authorizes the tribunal to award
costs and attorney’s fees in connection with submitting or opposing an objection to a claim.
The provisions allow all Parties, including the Party that is not a party to the dispute, to review a draft panel
decision. The litigants to the dispute, including the defending government, are also given the opportunity to
comment on a draft decision by the tribunal. This mechanism is not intended to substitute for an appellate
body, but is intended to improve the consistency and coherence of arbitral decisions.
Section C also addresses the substantive law to be applied in arbitral proceedings. It provides that arbitral
tribunals are to decide disputes in accordance with the Agreement and applicable international law rules. In the
case of investment agreements and investment authorizations, the tribunal shall apply the domestic law of the
respondent, the terms of such investment agreements and authorizations, applicable international law rules, and the Agreement. All interpretations by the Commission of the Parties are binding on tribunals and decisions
must be consistent with such interpretations.
Interpretation of Annexes
A Party’s defense that an alleged breach falls within the scope of a reservation set forth in an annex must, at the Party’s request, be referred to the Commission, and any decision it makes on the issue will be binding on the tribunal. If the Commission does not make a decision within sixty days, however, the question is referred back to the tribunal.
A tribunal may seek advice from experts on environmental, health, safety, or other scientific matters under
The provisions address the possibility that more than one investor might submit to arbitration claims arising out
of the same event. It provides for the establishment of a special three-member tribunal to consider whether
such multiple claims have questions of fact or law in common and that they arise out of the same events or
circumstances, in which case that tribunal may assume jurisdiction over, and decide, all or part of any such
Nature of Relief
A tribunal may order interim protective measures to preserve existing rights of the disputants, including the
preservation of evidence. A tribunal cannot, however, order attachment of assets or enjoin the government
from applying any measure that is the subject of the dispute.
Final awards are limited to money damages or restitution, or a combination of both; awards of restitution must
offer the alternative of paying damages. No punitive damages may be awarded.
Enforcement of Arbitral Awards
The chapter includes the traditional rule that an arbitral award is binding only on the particular disputants in the
matter. Another provision obliges a disputant to abide by and comply with the award. A disputant has the
opportunity to seek revision or annulment of the award before enforcement may be sought.
Section C requires each Party to provide for enforcement of an award in its territory. In the event that a country
does not comply with an award, an investor’s government may request a government-to-government arbitration
panel under the general dispute settlement chapter to consider the matter. The initiation of such proceedings
would not prevent the investor from seeking enforcement of the award.
By declaring that claims submitted to arbitration under Section C will be considered to arise out of a
commercial relationship or transaction, the Agreement satisfies prerequisites of the New York Convention and
the Inter-American Convention on International Commercial Arbitration for the enforcement of awards under
Section C, together with an annex, contemplates the establishment of an appellate mechanism to review awards made under the chapter, permitting the Parties to either establish a bilateral appellate mechanism or to access a future multilateral appellate mechanism.
Scope, Coverage and Definitions: The scope of the FTA Services Chapter applies to measures by a Party affecting cross-border trade in services. The Chapter includes an illustrative but non-exhaustive list of such measures.
One of the most basic definitions of the Chapter is that of cross-border trade or cross-border supply of services, which is defined as: from the territory of one party into the territory of another party (example: electronic delivery of services from the U.S. to Chile -- or vice versa); in the territory of a Party by one person of that Party to a person of the other Party (example: Chile commits to allow its nationals to travel to the U.S. to buy services -- or vice versa); and by a national of a party in the territory of another Party (for example, when a national from the U.S. enters Chilean economic space on a temporary basis to supply services B or vice versa).
The definition of cross-border supply of services does not include investment to supply services; such investment is governed by the rules in a separate FTA Chapter on Investment. However, the cross-border service chapter does extend its provisions on transparency, domestic regulation and "market access" (detail on these provisions below) to investment to supply services which otherwise would not benefit from such obligations.
The scope provision contains additional definitions of: enterprise; enterprise of a Party; professional services; service supplier of a Party; and specialty air services. Other definitions found in the General Definitions for the FTA as a whole also are pertinent to the services chapter.
The scope provision affirms that the chapter pertains to central, regional and local governments and authorities and any non-governmental bodies in the exercise of powers delegated by such governments.
The FTA Services Chapter excludes financial services and government procurement of services. It also excludes services supplied in the exercise of governmental authority. To qualify as a service supplied in the exercise of governmental authority, the service may not be supplied on a commercial basis or under conditions of competition. Air transportation is not covered although the chapter does apply to specialty air services and to aircraft repair and maintenance services.
The FTA Services Chapter does not include subsidies under its scope provision. However, it was clear during negotiations that the treatment of subsidies must be explored on a country and sector-specific basis, and the Parties eventually agreed on the importance of an additional commitment relating to express delivery services.
National treatment: The FTA Services Chapter contains provisions on national treatment that require each government to accord service suppliers of the other Party treatment no less favorable than that government accords, in like circumstances, to its own service suppliers. Reflecting the particular context and developments in the Chile negotiations, the national treatment provision also affirms that a Party shall accord treatment by a regional level that is no less favorable than the most favorable treatment accorded, in like circumstances, by that regional level to service suppliers of which it forms a part.
Most-favored-nation treatment: The FTA Services Chapter contains provisions on national treatment that require each government to accord service suppliers of the other Party treatment no less favorable than that government accords, in like circumstances, to the service supplier of a non-Party.
Both the national treatment and most-favored-nation treatment articles contain a footnote that affirms that the use of "service suppliers" is understood to have the same meaning as the use of "services and service suppliers" as found in the equivalent GATS provisions.
Market access: The FTA Services Chapter contains a core provision on "market access," drawn from GATS, that pertains to non-discriminatory quantitative restrictions (for example, limitations on the number of service suppliers through numerical quotas, monopolies, exclusive service suppliers or economic needs tests) and any measures which restrict or require specific types of legal entity through which a service supplier may supply a service (for example: if a Party prohibited subsidiaries as a form of supplying a service). Unlike the NAFTA, this article is a core provision that must be matched up with countries' regimes and appropriate non-conforming
measures taken (it is not just a transparency obligation).
No local presence: The FTA Services Chapter prohibits governments from requiring a Party to incorporate or make any form of local investment to supply on a cross-border basis. It also prohibits residency requirements as a condition for supplying a service.
Non-conforming measures: The article on non-conforming measures provides the mechanism whereby each Party is responsible for reviewing its cross-border services regime for conformity with the core obligations on national treatment, most-favored-nation treatment, "market access,""and no local presence. Under the structure of the Article, non-conforming measures at the central and regional level must be set out in accompanying annexes. Annex I pertains to existing non-conforming measures and Annex II pertains to existing or future non-conforming measures or sectors. Non-conforming local level measures existing at the time of entry into force of the FTA are "grandfathered" (exempt from dispute settlement challenge) through language in the Article itself.
The Annex entries are subject to negotiation to obtain an outcome that is supportive of free trade while recognizing country-specific sensitivities. For example, the U.S. includes an Annex I "grandfather" for regional level (state level) non-conforming measures existing at the time of entry into force of the FTA.
Annex I also contains an important provision that binds any subsequent liberalization of a non-conforming
measure for the purposes of the FTA.
Transparency of domestic regulatory frameworks: The article on transparency of domestic regulatory frameworks, including regulations that pertain to licensing authorization or criteria, provides obligations that are in addition to those found in the FTA-wide Chapter on Transparency. The article requires each Party to maintain or establish appropriate mechanisms to respond to enquiries from interested persons on regulations and their requirements. The FTA-wide Chapter on Transparency provides procedures for advance notice and comment on draft regulations. The Services article complements this by requiring that at the time it adopts final
regulations, each Party shall, to the extent possible, address in writing substantive comments received from interested persons on the draft regulations. Another objective for the U.S. in FTAs is that when the advance notice and comment procedures cannot be met, to the extent possible, each Party provides the reasons therefore. The article also spells out that to the extent possible, a Party shall allow a reasonable time between publication of final regulations and their effective date.
Domestic Regulation: This article builds on the GATS (Article VI) and NAFTA (Article on Licensing and Certification) approaches. The provision on domestic regulation does not repeat the GATS article VI requirement that measures of general application should be applied on a reasonable, objective and impartial basis B but only because these principles already are captured in the FTA-wide Chapter on Transparency. For the same reason, the article does not include requirements to ensure access to judicial, arbitral or administrative tribunals or procedures.
The article includes requirements relating to the interaction between the competent authorities of a Party and those suppliers seeking authorization to supply a service. The competent authorities must inform the applicant of the decision concerning the application within a reasonable period of time and, at the request of the applicant, provide information concerning the status of the application.
In addition, regarding qualification requirements and procedures, technical standards and licensing requirements, each Party shall endeavor to ensure, as appropriate for individual sectors, that any such measure is based on objective and transparent criteria, is not more burdensome than necessary to ensure the quality of the service; and in the case of licensing procedures, does not constitute a restriction on the supply of a service.
Finally, a mechanism ensures that if the results of any negotiations related to GATS VI:4 or any similar negotiations in other multilateral fora enter into effect, the outcome will be brought into the Services Chapter after appropriate consultations between the Parties.
Mutual recognition: Each Party is enabled to negotiate recognition of the standards or criteria for authorization, licensing or certification of service suppliers but cannot provide such recognition in a manner which would constitute discrimination between countries or a disguised restriction on trade. It is made clear that if one Party accords such recognition to a non-Party, such recognition does not have to be provided to its FTA partner.
Implementation: The Parties will meet annually or as otherwise agreed on implementation of the Chapter's obligations and any issues of mutual interest, with a few such issues specified in advance.
Denial of Benefits: The provision is subject to the Consultation article that applies to the FTA as a whole. The provision permits each Party to deny benefits of the Chapter to service suppliers of the other Party where the service is being supplied by an enterprise that is owned or controlled by persons of a non-Party but only if that non-Party does not have substantial business activities in place (cannot be a shell investment).
The provision also preserves the foreign policy prerogative of each Party to deny benefits to enterprises owned or controlled by nationals of a non-Party with which it does not have diplomatic relations or to which it is applying economic sanctions.
Annex on Professional Services: This Annex highlights that the Parties shall encourage the relevant bodies in their respective territories to develop mutually acceptable criteria for licensing and certification of professional service suppliers. It provides a list of the types of issues that could be considered for such recognition. In addition, it contains a few elaborations of a sectoral nature relating to engineering and foreign legal consultancy.
Certain provisions from the Investment Chapter, such as those relating to transfers and expropriation, are incorporated by reference into the financial services provisions.
The U.S. pursued a comprehensive negative list approach to the investment obligations.
National Treatment: National treatment is extended to financial institutions of the other Party, investors and investments of the other Party in financial institutions and cross-border financial service suppliers. For investment, the national treatment obligation tracks the analogous obligation in the Investment Chapter and applies, in like circumstances, for the entire life cycle of the investment in a financial institution. For cross-border supply (with a cross-reference to a separate provision on cross-border supply), a Party is required to accord cross-border financial service suppliers of the other Party treatment no less favorable than it accords to its own financial service suppliers in like circumstances.
MFN: MFN also applies to financial institutions of the other Party, investors and investments of the other Party in financial institutions and cross-border financial service suppliers. A Party is required to accord each of these cases treatment no less favorable than it accords a non-Party, in like circumstances. As in NAFTA, the provision contains a rule enabling a Party to recognize prudential measures of a non-Party in the application of the financial services chapter. Such recognition may be accorded unilaterally, achieved through harmonization, or based on an agreement or arrangement with a non-Party. A Party according such recognition shall provide opportunities for the other Party to demonstrate that certain regulatory circumstances exist and if that is the case, the Party shall provide adequate opportunity for the other Party to negotiate similar recognition.
Market Access: The Financial Services Chapter includes an article to ensure that measures, such as non-discriminatory quantitative restrictions and restrictions on juridical form, do not undermine market access. These concepts are contained in GATS Article XVI. The FTA article, however, applies only to investment (and not cross-border trade) and does not include a prohibition against limiting foreign shareholding since this obligation is already covered by the national treatment obligation. The Article fully applies for insurance. For banking and securities, we used an alternative approach that combined obligations for right of establishment and juridical form in order to achieve more extensive sectoral coverage.
Cross-Border Trade: The article requires a Party to permit persons located in its territory, and nationals wherever located, to purchase financial services from cross-border financial service suppliers of the other Party located in the territory of that other Party. The cross-border article extends national treatment to supply financial services cross-border (for example, through electronic means or supply by nationals in the territory of
the other Party) for those financial services set out in a related Annex. In light of the sensitivity of cross-border supply for the banking and securities sectors, there are more limited commitments in this area for these subsectors. The cross-border insurance commitments are as extensive as possible while taking into account regulatory sensitivities as appropriate for particular means of supply, for example, for electronic supply.
Transparency and Administration of Approval Procedures: Because of the importance of regulatory transparency to the highly regulated financial services sector, the Parties recognize the importance of transparent regulations and policies and reasonable, objective and impartial administration governing financial activities. The Financial Services Chapter contains additional rules for financial services to ensure that market
access can be realized. These provisions build on the FTA's general provisions on transparency. The chapter includes a requirement that Parties provide opportunities for advance notice and comment on new or amended regulations, to the extent practicable. It acknowledges that Parties should address substantive comments in writing and should allow reasonable time between publication of final regulations and their effective date, to
the extent practicable.
The transparency provisions require authorities to make available their requirements for completing applications, and on request, to inform the applicant of the status of its application. It also provides for an administrative decision on a completed application within 120 days, or where it is not practicable within this timeframe, notification to the applicant without undue delay.
Non-Conforming Measures: The chapter includes flexibility for the Parties to record limited measures that do not conform with the financial services obligations of national treatment, most-favored-nation treatment, cross-border trade, market access and senior management and board of directors. To maintain any non-conforming measure at the central and regional levels, a Party needs to list them in an annex. Subsequent liberalization of measures related to certain of these obligations establishes a commitment at that new level of openness.
Exceptions: To ensure adequate regulatory flexibility, the Financial Services Chapter contains an exception for prudential measures based on the GATS. It also includes an exception for certain measures in pursuit of monetary and related credit or exchange rate policies. This second exception does not affect a Party's commitments on transfers and performance requirements under the Investment Chapter.
Disclosure of Information: The chapter lists the types of information that need not be disclosed.
Financial Services Committee, Consultations & Dispute Settlement: The Financial Services Chapter provides for a Financial Services Committee and special procedures for use of financial experts to resolve disputes involving the financial sector. It also provides for investor-state arbitration for certain provisions such as expropriation and free transfers. Where these cases involve prudential measures, the Parties may elect to use
state-to-state dispute settlement first.
Senior Management and Boards of Directors: A rule is established that neither Party may require financial institutions of the other Party to meet national requirements for nationality requirements for senior managerial or other essential personnel. A Party also may not impose certain nationality and residency requirements for the board of directors of the other Party's financial institutions.
New Financial Services: A special rule for new financial services strengthens and broadens financial markets by providing rights to financial institutions of the other Party to introduce new financial services when certain conditions are met. (For example, a certain insurance product may be available in the U.S. but may not yet have been introduced in an FTA partner country.) However, the Chapter also makes clear that a financial institution also could apply to be considered for authorization to supply a financial service that is supplied in the territory of neither Party.
Self-Regulatory Organizations: In cases where financial institutions of the other Party or cross-border suppliers are required to be members of a self-regulatory organization, each Party ensures that these service suppliers do not face discriminatory treatment by such self-regulatory organizations.
Payment and Clearing Systems: Each Party agrees to grant on a national treatment basis financial institutions of the other Party (and thus established in their territory) access to payment and clearing systems operated by public entities.
Expedited Availability of Insurance Services: A provision and related specific commitments highlight the importance of enabling licensed insurance suppliers to make insurance services available on an expedited basis, including examination of product approval practices.
Specific Commitments: Each Party agrees to allow certain asset managers established in their territory to obtain investment advice and portfolio management services, with limited exceptions, from financial institutions outside their respective territories.
Chile agrees, after March 1, 2005, to extend national treatment and most favored nation treatment to financial institutions of the United States with respect to its voluntary savings plans. Investment by a U.S. investor in Administradoras de Fondos de Pensiones is not subject to an economic needs test. As required by its domestic law, Chile will not establish arbitrary differences with respect to U.S. investors in Administradoras de Fondos de Pensiones.
For insurance, Chile agreed to provide branching rights within four years of entry into force of the FTA. Chile notes that it may apply certain regulatory requirements to such branches.
Telecommunications Chapter: The telecommunications chapter covers access to and
use of the public telecommunications network for the provision of services. It
providers of public telecommunications service providers, with a focus on the
major supplier of those services. Thus, it combines elements of NAFTA Chapter
13, the GATS
Telecommunications Annex, and the WTO Reference Paper to form a comprehensive
access to and use of chapter.
Grant of Temporary Entry
Provision of Information
Subcommittee on Temporary Entry
Relation to Other Chapters
Transparency in development and application of regulations affecting temporary entry for business persons
The annex sets out commitments regarding the specific admission categories covered in the agreement, with a section devoted to each. In Chile, there are four sections covering the following admission categories: 1) Business Visitors, 2) Traders and Investors, 3) Intra-Company Transferees, and 4) Professionals.
Definitions (key definitions include):
Electronic Commerce (E-commerce) Chapter: The
E-commerce chapter is a breakthrough in achieving certainty and predictability
in ensuring access for products such as computer programs, video images, sound
recordings and other products that are digitally encoded. This is the first such
agreement with a country in the Western Hemisphere. The United States is a
leader is the creation and distribution of digital products throughout the
The Competition Policy Chapter will help to ensure that the opportunities
created by trade liberalization are supported by healthy competitive domestic
markets, allowing the firms of each
Party to compete freely and unhampered by anticompetitive business conduct in
the other Party's
territory. Firms that are subject to antitrust enforcement action will be
guaranteed some basic
procedural safeguards. Although state monopolies and state enterprises do not
account for a
significant portion of either Party's economy, the provisions governing these
entities will also
help to ensure that they do not abuse their special status to harm the trade and
interests of the other Party, for example by favoring domestic firms in the sale
or purchase of
goods and services.
The Chapter recognizes that the conduct that it covers has the potential to
restrict bilateral trade
and investment, and seeks to secure the benefits of the FTA by prohibiting such
encouraging economically sound competition policies, and furthering cooperation.
expands on the NAFTA by affirming that the Parties' antitrust enforcement policy
is not to
discriminate on the basis of nationality. The Chapter also guarantees some basic
rights for firms that are subject to antitrust enforcement actions: each Party
will provide a right to
be heard and to present evidence before imposing a sanction or remedy, and will
ensure that any
sanctions or remedies are imposed by or subject to review by an independent
court or tribunal.
Summary: The Labor Chapter is a carefully crafted and intensely negotiated text
incorporates the labor-related negotiating objectives of TPA. The Labor Chapter
and its Annex
draw from, but do not replicate, prior U.S. linkages of labor to trade in the
Agreement on Labor Cooperation (NAALC, the labor Aside agreement@ to NAFTA) and
General Chile FTA background
The Environment Chapter aims to improve the mutually supportive relationship between the Parties' trade liberalization and environmental protection policies while cooperating to promote sustainable development. It also seeks to strengthen the trade-expanding effects of the Chile FTA.
This Article, while recognizing that the Parties can set their own levels of environmental protection and adopt or modify their environmental laws accordingly, requires the Parties to guarantee high levels of environmental protection and to strive to improve their environmental laws.
This Article deals with the enforcement of environmental laws. It obligates the
Parties to ensure
that they will not fail to effectively enforce their environmental laws by
either commission or
omission in ways that affect trade between them. It explicitly states that a
Party shall be
considered to be in compliance with this provision if any particular failure to
enforce the law is
based upon a reasonable exercise of enforcement discretion or bona fide decision
allocation of enforcement resources. A Party's failure to observe this
obligation may be subject to
This Article deals with the establishment of an Environment Affairs Council. In
it, the Parties
agree to create a ministerial-level Council that will meet at least annually to
implementation of the Environment Chapter. The Article then lays out a number of
ways that the
Council is expected to promote public participation and dialogue regarding the
These include commitments to: a) receive, share, consider, and respond to public
the Environment Chapter; b) make good-faith efforts to consult with interested
members of the
public on implementation of the Environment Chapter; c) look for ways to include
the public in
the bilateral environmental cooperation process; and d) seek advice on the
implementation of the
Chapter from new or existing national advisory bodies.
This Article deals with environmental cooperation. In it, the Parties recognize the importance of building environmental protection capacity and agree to start negotiating an Environmental Cooperation Agreement for further bilateral cooperation. They also note the ongoing importance of bilateral environmental cooperation activities that are conducted outside of the Agreement. The Parties agree to consider public comment on the cooperation undertaken under this Chapter. They also commit to discussing, to the extent they see fit, their experiences in conducting assessments of the environmental impacts of trade agreements and policies.
This Article deals with environmental consultations, and allows a Party to request consultations with the other Party at any time regarding any matter relevant to the Environment Chapter. If, after making every attempt to settle the matter at hand, the Parties remain unable to resolve the matter, either Party may request in writing to the other Party that the Environmental Affairs Council be convened. If the matter involves the obligation from Article 2 on not failing to effectively enforce a Party's environmental laws, and if 60 days have elapsed since the complaining Party first requested consultations to resolve the matter, then the complaining Party may resort to the Chile FTA's dispute settlement proceedings. This Article leaves open the option of resolving the matter under another agreement if both Parties agree that would be more appropriate.
This Article on the establishment of an environment roster replaces Article 8 of the Dispute Settlement Chapter for resolution of disputes regarding the failure to effectively enforce a Party's environmental laws (Article 2). It obligates the Parties to select by mutual agreement individuals with relevant experience and not affiliated with either Party's government to form a roster from which, if the Parties so agree, Dispute Settlement panelists can be drawn to resolve cases regarding failure to effectively enforce a Party's environmental laws.
This Article concerns procedural matters. Under it, the Parties agree to ensure that their procedures for the enforcement of environmental laws and regulations are fair, open, and equitable, and that violations are subject to effective remedies or sanctions. Each Party commits to ensure appropriate public access to judicial and administrative procedures for the enforcement of its environmental laws. Such access may include the right to: a) request investigation of alleged violations of the law; b) request government action to enforce its environmental law; c) sue another person under that Party's jurisdiction for environmental damages; and d) seek injunctions to prevent personal harm or loss from someone acting contrary to that Party's environmental laws.
This Article on the relationship to environmental agreements acknowledges the importance of multilateral environmental agreements, recognizes the negotiations underway within the World Trade Organization under Paragraph 31 (i) of the Doha Declaration, and provides for consultations between the Parties on the applicability of any outcome of those negotiations to the Chile FTA.
This Article recognizes the benefits of international trade and investment and notes the role corporations can play in achieving sustainable development. The Article encourages Parties to promote corporate stewardship.
This Article defines the term "environmental law" for the purposes of the Environment Chpater.
The Annex on Environmental Cooperation provides guidance on various cooperative mechanisms, including specific projects and the negotiations of a separate bilateral cooperation agreement.
This Chapter sets out a number of requirements designed to foster openness,
fairness in the adoption and application of the administrative measures covered
by the agreement.
It should be noted that various other chapters of the agreement provide
specific, detailed rules in
this area. The Chapter is similar to Chapter 18 of the NAFTA.
This Chapter establishes the Free Trade Commission, the institution responsible
the implementation of the agreement. The Free Trade Commission comprises
cabinet-level officials designated by each country.
This Chapter sets out detailed procedures for government-to-government dispute
procedures established in the chapter are based in large part on Chapter Twenty
of the NAFTA.
Article 1 provides that the parties shall endeavor to agree on the
implementation and application
of the agreement, and shall attempt through cooperation and consultations to
arrive at a mutually
satisfactory resolution of any matter.
Article 4 provides that either party may request consultations with respect to
any actual or
proposed measure that it considers might affect the operation of the agreement.
The request must
identify the measure and the legal basis for the complaint. A party may request
that the other
party make available personnel of government agencies or other regulatory bodies
expertise in the subject matter of the consultations. The agreement places
priority on reaching an
Under Article 5, if the parties cannot resolve the matter through consultations
within a specified
period (generally 60 days (15 days in cases involving perishable goods)), a
party may request a
meeting of the Commission, which will occur within 10 days unless the Commission
otherwise. To help resolve the dispute, the Commission may employ technical
offices, conciliation, mediation or other dispute resolution procedures.
Article 6 provides that if the Commission is unable to resolve a dispute within a specified period (generally 30 days), either party may request the establishment of an arbitral panel. Only actual measures are subject to panel review.
Articles 7 through 9 set out procedures governing the establishment and operation of three-member arbitral panels. The parties will jointly establish and maintain a roster of 20, well- qualified individuals to serve as panelists. Normally, panelists will be drawn from the roster.
Pursuant to Article 10, the Commission will establish Rules of Procedure that panels must follow unless the parties decide otherwise. Subject to the requirement to protect confidential information, the Rules of Procedure will provide for open hearings and public release of submissions. The Rules of Procedure will also provide an opportunity for the panel to accept submissions from non-governmental entities.
Under Article 12, unless the parties decide otherwise, the panel must present
its initial report within 120 days of the selection of the last panelist. The
initial report must contain findings of fact and a determination on whether a
party has not conformed with its obligations or that a Party's measure nullifies
or impairs benefits that the complaining government could reasonably have
anticipated under the agreement. The parties are allowed 14 days to provide
written comments to the panel on the initial report. Upon receipt of such
comments, the panel may reconsider its report and make any further examination
that it considers appropriate.
Article 13 requires the panel to present its final report to the parties within
30 days of the presentation of its initial report, unless the governments agree
otherwise. The parties must release the report to the public, subject to the
protection of confidential information.
Under Article 15, if the parties are unable to reach agreement on a resolution
pursuant to Article 14 within 45 days of receipt of the final report, the
parties shall enter into negotiations to develop mutually acceptable
compensation. If the parties are unable to agree on compensation within 30 days,
or if the complaining party considers that the defending party has failed to
implement the agreed resolution, the complaining party may provide notice that
it intends to suspend the application of benefits of equivalent effect.
Article 19 establishes a procedure under which the parties jointly or
individually may submit their views to a court or administrative body of a party
if an issue of interpretation or application of the agreement arises in any
domestic judicial or administrative proceeding.
Article 20 prohibits either party from providing a right of action in its
domestic law to challenge the consistency of another government's actions under
Article 21 requires the parties to encourage and facilitate the use of arbitration and other alternative dispute mechanisms to settle international commercial disputes between private parties. Each country must provide procedures to ensure observance of agreements to arbitrate and for recognition and enforcement of arbitral awards, for example by complying with the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards or the 1975 Inter-American Convention on International Commercial Arbitration.
This Chapter provides for various exceptions that apply to all or large portions
of the agreement.
The Chapter is similar to Chapter 21 of the NAFTA.
This Chapter sets forth the agreement's final provisions. The Chapter is similar
to Chapter 22 of
1 Excludes articles added for least developed beneficiaries only.