Canada-Chile Free Trade Agreement

Decision of the Canada-Chile Free Trade Commission

Interpretation of Article G-10

The Canada-Chile Free Trade Commission, acting under Article N-Ol.2 of the Canada-Chile Free Trade Agreement (hereinafter, "the Agreement"), reviewed Chapter G of the Agreement. In this respect, the Free Trade Commission decided that Article G-l 0 be authoritatively interpreted as follows in order to clarify and reaffirm its meaning:

Indirect Expropriation

In regard to Article G-l 0 (Expropriation and Compensation), the Free Trade Commission confirms that:

1. The concept of a "measure tantamount to nationalization or expropriation" in paragraph 1 of Article G-l 0 can also be termed "indirect expropriation". Indirect expropriation results from a measure or series of measures of a Party that has an effect equivalent to direct expropriation without formal transfer of title or outright seizure;

2. The determination of whether a measure or series of measures of a Party constitutes an indirect expropriation requires a case-by-case, fact-based inquiry that considers, among other factors:

• i. the economic impact of the measure or series of measures, although the sole fact that a measure or series of measures of a Party has an adverse effect on the economic value of an investment does not establish that an indirect expropriation has occurred,
• ii. the extent to which the measure or series of measures interferes with distinct, reasonable investment-backed expectations, and
• iii. the character of the measure or series of measures; and

3. Except in rare circumstances, such as when a measure or series of measures is so severe in the light of its purpose that it cannot be reasonably viewed as having been adopted and applied in good faith, non-discriminatory measures of a Party that are designed and applied to protect legitimate public welfare objectives, such as health, safety and the environment, do not constitute indirect expropriations.

Closing Provision

The adoption by the Free Trade Commission of this or any future interpretation shall not be construed as indicating an absence of agreement between the Parties to the Agreement about other matters of interpretation of the Agreement.

Decided by the Free Trade Commission this 5th day of April 2010, and signed in duplicate in the English, French and Spanish languages.

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Representative of Canada on the Free Trade Commission

Peter Van Loan, Minister for International Trade

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Representative of Chile on the Free Trade Commission

Alfredo Moreno Charme, Minister of Foreign Affairs