Text of the Comprehensive Economic and Trade Agreement – Chapter twenty-eight: Exceptions

Article 28.1 – Definitions

For the purposes of this Chapter:

residence means residence for tax purposes;

tax convention means a convention for the avoidance of double taxation or other international taxation agreement or arrangement; and

tax and taxation measure includes an excise duty, but does not include:

1. a customs duty as defined in Article 1.1 (General definitions), and
2. a measure listed in exceptions (b) or (c) in the definition of "customs duty" in Article 1.1 (General definitions).

Article 28.2 – Party specific definitions

For the purposes of this Chapter:

competition authority means:

1. for Canada, the Commissioner of Competition or a successor notified to the other Party through the CETA contact points; and
2. for the European Union, the Commission of the European Union with respect to its responsibilities pursuant to the competition laws of the European Union;

competition laws means:

1. for Canada, the Competition Act, R.S.C. 1985, c. C-34; and
2. for the European Union, Articles 101, 102 and 106 of the Treaty on the Functioning of the European Union, of 13 December 2007, Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings, and their implementing regulations or amendments; and

information protected under its competition laws means:

1. for Canada, information within the scope of Section 29 of the Competition Act, R.S.C. 1985, c. C-34; and
2. for the European Union, information within the scope of Article 28 of Council Regulation (EC) No. 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty or Article 17 of Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings.

Article 28.3 – General exceptions

1. For the purposes of Article 30.8.5 (Termination, suspension or incorporation of other existing agreements), Chapters Two (National Treatment and Market Access for Goods), Five (Sanitary and Phytosanitary Measures), and Six (Customs and Trade Facilitation), the Protocol on rules of origin and origin procedures and Sections B (Establishment of investment) and C (Non-discriminatory treatment) of Chapter Eight (Investment), Article XX of the GATT 1994 is incorporated into and made part of this Agreement. The Parties understand that the measures referred to in Article XX (b) of the GATT 1994 include environmental measures necessary to protect human, animal or plant life or health. The Parties understand that Article XX(g) of the GATT 1994 applies to measures for the conservation of living and non-living exhaustible natural resources.

2. For the purposes of Chapters Nine (Cross-Border Trade in Services), Ten (Temporary Entry and Stay of Natural Persons for Business Purposes), Twelve (Domestic Regulation), Thirteen (Financial Services), Fourteen (International Maritime Transport Services), Fifteen (Telecommunications), Sixteen (Electronic Commerce), and Sections B (Establishment of investments) and C (Non-discriminatory treatment) of Chapter Eight (Investment), subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between the Parties where like conditions prevail, or a disguised restriction on trade in services, nothing in this Agreement shall be construed to prevent the adoption or enforcement by a Party of measures necessary:

1. to protect public security or public morals or to maintain public order;^{Footnote 1}
2. to protect human, animal or plant life or health;^{Footnote 2} or
3. to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement including those relating to:
   1. the prevention of deceptive and fraudulent practices or to deal with the effects of a default on contracts;
   2. the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts; or
   3. safety.

Article 28.4 – Temporary safeguard measures with regard to capital movements and payments

1. Where, in exceptional circumstances, capital movements and payments, including transfers, cause or threaten to cause serious difficulties for the operation of the economic and monetary union of the European Union, the European Union may impose safeguard measures that are strictly necessary to address such difficulties for a period not to exceed 180 days.

2. Measures imposed by the European Union pursuant to paragraph 1 shall not constitute a means of arbitrary or unjustifiable discrimination in respect of Canada or its investors compared to a third country or its investors. The European Union shall inform Canada forthwith and present, as soon as possible, a schedule for the removal of such measures.

Article 28.5 – Restrictions in case of serious balance of payments and external financial difficulties

1. Where Canada or a Member State of the European Union that is not a member of the European Monetary Union experiences serious balance-of-payments or external financial difficulties, or threat thereof, it may adopt or maintain restrictive measures with regard to capital movements or payments, including transfers.

2. Measures referred to in paragraph 1 shall:

1. not treat a Party less favourably than a third country in like situations;
2. be consistent with the Articles of Agreement of the International Monetary Fund, done at Bretton Woods on 22 July 1944, as applicable;
3. avoid unnecessary damage to the commercial, economic and financial interests of a Party;
4. be temporary and phased out progressively as the situation specified in paragraph 1 improves and shall not exceed 180 days. If extremely exceptional circumstances arise such that a Party seeks to extend such measures beyond a period of 180 days, it will consult in advance with the other Party regarding the implementation of any proposed extension.

3. In the case of trade in goods, a Party may adopt restrictive measures in order to safeguard its balance-of-payments or external financial position. Such measures shall be in accordance with the GATT 1994 and the Understanding on the Balance-of-Payments Provisions of the General Agreement on Tariffs and Trade 1994, contained in Annex 1A to the WTO Agreement.

4. In the case of trade in services, a Party may adopt restrictive measures in order to safeguard its balance-of-payments or external financial position. Such measures shall be in accordance with the GATS.

5. A Party that adopts or maintains a measure referred to in paragraph 1 shall promptly notify the other Party and provide, as soon as possible, a schedule for its removal.

6. Where the restrictions are adopted or maintained under this Article, consultations between the Parties shall be held promptly in the CETA Joint Committee, if such consultations are not otherwise taking place in a forum outside of this Agreement. The consultations held under this paragraph shall assess the balance-of-payments or external financial difficulty that led to the respective measures, taking into account, among other things, such factors as:

1. the nature and extent of the difficulties;
2. the external economic and trading environment; or
3. the availability of alternative corrective measures.

7. The consultations pursuant to paragraph 6 shall address the compliance of any restrictive measures with paragraphs 1 through 4. The Parties shall accept all findings of statistical and other facts presented by the International Monetary Fund ("IMF") relating to foreign exchange, monetary reserves, balance-of-payments, and their conclusions shall be based on the assessment by the IMF of the balance-of-payments and the external financial situation of the Party concerned.

Article 28.6 – National security

Nothing in this Agreement shall be construed:

1. to require a Party to furnish or allow access to information if that Party determines that the disclosure of this information would be contrary to its essential security interests; or
2. to prevent a Party from taking an action that it considers necessary to protect its essential security interests:
   1. connected to the production of or traffic in arms, ammunition and implements of war and to such traffic and transactions in other goods and materials, services and technology undertaken, and to economic activities, carried out directly or indirectly for the purpose of supplying a military or other security establishment;^{Footnote 3}
   2. taken in time of war or other emergency in international relations; or
   3. relating to fissionable and fusionable materials or the materials from which they are derived; or
3. prevent a Party from taking any action in order to carry out its international obligations for the purpose of maintaining international peace and security.

Article 28.7 – Taxation

1. Nothing in this Agreement shall be construed to prevent a Party from adopting or maintaining any taxation measure that distinguishes between persons who are not in the same situation, in particular with regard to their place of residence or with regard to the place where their capital is invested.

2. Nothing in this Agreement shall be construed to prevent a Party from adopting or maintaining any taxation measure aimed at preventing the avoidance or evasion of taxes pursuant to its tax laws or tax conventions.

3. This Agreement does not affect the rights and obligations of a Party under a tax convention. In the event of inconsistency between this Agreement and a tax convention, that convention prevails to the extent of the inconsistency.

4. Nothing in this Agreement or in any arrangement adopted under this Agreement shall apply:

1. to a taxation measure of a Party that provides a more favourable tax treatment to a corporation, or to a shareholder of a corporation, on the basis that the corporation is wholly or partly owned or controlled, directly or indirectly, by one or more investors who are residents of that Party;
2. to a taxation measure of a Party that provides an advantage relating to the contributions made to, or income of, an arrangement providing for the deferral of, or exemption from, tax for pension, retirement, savings, education, health, disability or other similar purposes, conditional on a requirement that that Party maintains continuous jurisdiction over such arrangement;
3. to a taxation measure of a Party that provides an advantage relating to the purchase or consumption of a particular service, conditional on a requirement that the service be provided in the territory of that Party;
4. to a taxation measure of a Party that is aimed at ensuring the equitable and effective imposition or collection of taxes, including a measure that is taken by a Party in order to ensure compliance with the Party's taxation system;
5. to a taxation measure that provides an advantage to a government, a part of a government, or a person that is directly or indirectly owned, controlled or established by a government;
6. to an existing non-conforming taxation measure not otherwise covered in paragraphs 1, 2 and 4(a) through (e), to the continuation or prompt renewal of such a measure, or an amendment of such a measure, provided that the amendment does not decrease its conformity with the provisions of this Agreement as it existed immediately before the amendment.

5. For greater certainty, the fact that a taxation measure constitutes a significant amendment to an existing taxation measure, takes immediate effect as of its announcement, clarifies the intended application of an existing taxation measure, or has an unexpected impact on an investor or covered investment, does not, in and of itself, constitute a violation of Article 8.10 (Treatment of investors and of covered investments).

6. Articles 8.7 (Most-favoured-nation treatment), 9.5 (Most-favoured-nation treatment) and 13.4 (Most-favoured-nation treatment) do not apply to an advantage accorded by a Party pursuant to a tax convention.

7.

1. Where an investor submits a request for consultations pursuant to Article 8.19 (Consultations) claiming that a taxation measure breaches an obligation under Sections C (Non-discriminatory treatment) or D (Investment protection) of Chapter Eight (Investment), the respondent may refer the matter for consultation and joint determination by the Parties as to whether:
   1. the measure is a taxation measure;
   2. the measure, if it is found to be a taxation measure, breaches an obligation under Sections C (Non-discriminatory treatment) or D (Investment protection) of Chapter Eight (Investment); or
   3. there is an inconsistency between the obligations in this Agreement that are alleged to have been breached and those of a tax convention.
2. A referral pursuant to subparagraph (a) cannot be made later than the date the Tribunal fixes for the respondent to submit its counter-memorial. Where the respondent makes such a referral the time periods or proceedings specified in Section F (Resolution of investment disputes between investors and states) of Chapter Eight (Investment) shall be suspended. If within 180 days from the referral the Parties do not agree to consider the issue, or fail to make a joint determination, the suspension of the time periods or proceedings shall no longer apply and the investor may proceed with its claim.
3. A joint determination by the Parties pursuant to subparagraph (a) shall be binding on the Tribunal.
4. Each Party shall ensure that its delegation for the consultations to be conducted pursuant to subparagraph (a) shall include persons with relevant expertise on the issues covered by this Article, including representatives from the relevant tax authorities of each Party. For Canada, this means officials from the Department of Finance Canada.

8. For greater certainty,

1. taxation measure of a Party means a taxation measure adopted at any level of government of a Party; and
2. for measures of a sub-national government, resident of a Party, means either resident of that sub-national jurisdiction or resident of the Party of which it forms a part.

Article 28.8 – Disclosure of information

1. This Agreement does not require a Party to furnish or allow access to information which, if disclosed, would impede law enforcement or the disclosure of which is prohibited or restricted under its law.

2. In the course of a dispute settlement procedure under this Agreement,

1. a Party is not required to furnish or allow access to information protected under its competition laws; and
2. a competition authority of a Party is not required to furnish or allow access to information that is privileged or otherwise protected from disclosure.

Article 28.9 – Exceptions applicable to culture

The Parties recall the exceptions applicable to culture as set out in the relevant provisions of Chapters Seven (Subsidies), Eight (Investment), Nine (Cross-Border Trade in Services), Twelve (Domestic Regulation) and Nineteen (Government Procurement).

Article 28.10 – WTO waivers

If a right or obligation in this Agreement duplicates one under the WTO Agreement, the Parties agree that a measure in conformity with a waiver decision adopted by the WTO pursuant to Article IX of the WTO Agreement is deemed to be also in conformity with the duplicated provision in this Agreement.