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Chapter 20: Financial Services – Text of the 2023 Canada - Ukraine Free Trade Agreement

The 2017 CUFTA will remain in force until entry into force of the 2023 modernized agreement. Until such time, please refer to the 2017 CUFTA text for information on the existing trade agreement between Canada and Ukraine.

Article 20.1: Definitions

For the purposes of this Chapter:

cross-border financial service supplier of a Party means a person of a Party that is engaged in the business of supplying a financial service within the territory of the Party and that seeks to supply or supplies a financial service through the cross-border supply of such a service;

cross-border trade in financial services or cross-border supply of financial services means the supply of a financial service:

but does not include the supply of a financial service in the territory of a Party by an investment in that territory;

financial institution means a financial intermediary or other enterprise that is authorized to do business and regulated or supervised as a financial institution under the law of the Party in whose territory it is located;

financial institution of the other Party means a financial institution, including a branch, located in the territory of a Party that is controlled by a person of the other Party;

financial service means a service of a financial nature. Financial services include all insurance and insurance-related services, and all banking and other financial services (excluding insurance), as well as services incidental or auxiliary to a service of a financial nature. Financial services include the following activities:

Insurance and insurance-related services

Banking and other financial services (excluding insurance)

financial service supplier of a Party means a person of a Party that is engaged in the business of supplying a financial service within the territory of that Party;

investment means "investment" as defined in Article 17.1 (Definitions), except that, with respect to "a loan to an enterprise" and "a debt instrument of an enterprise" referred to in that Article:

For greater certainty, a loan granted by or debt instrument owned by a cross-border financial service supplier, other than a loan to or debt instrument issued by a financial institution, is an investment for the purposes of Chapter 17 (Investment), if such loan or debt instrument meets the criteria for investments set out in Article 17.1 (Definitions);

investor of a Party means a Party, or a person of a Party, that attempts to makeFootnote 1, is making, or has made an investment in the territory of the other Party. For the purpose of this definition, a "person of a Party" that is an enterprise of a Party means:

new financial service means a financial service not supplied in the Party's territory that is supplied within the territory of the other Party, and includes any new form of delivery of a financial service or the sale of a financial product that is not sold in the Party's territory;

person of a Party means "person of a Party" as defined in Article 1.5 (Definitions of General Application) and, for greater certainty, does not include a branch of an enterprise of a non-Party;

public entity means a central bank or monetary authority of a Party, or a financial institution that is owned or controlled by a Party; and

self-regulatory organization means any non-governmental body, including any securities or futures exchange or market, clearing agency, or other organization or association, that exercises regulatory or supervisory authority over financial service suppliers or financial institutions by statute or delegation from central or regional government.

Article 20.2: Scope

1. This Chapter shall apply to measures adopted or maintained by a Party relating to:

2. Chapter 17 (Investment) and Chapter 18 (Cross-Border Trade in Services) shall apply to measures described in paragraph 1 only to the extent that those Chapters are incorporated into this Chapter.

3. This Chapter shall not apply to measures adopted or maintained by a Party relating to:

except that this Chapter applies to the extent that a Party allows any of the activities or services referred to in subparagraph (a) or (b) to be conducted by its financial institutions in competition with a public entity or a financial institution.

4. This Chapter does not apply to government procurement of financial services.

5. This Chapter does not apply to subsidies or grants with respect to the cross-border supply of financial services, including government-supported loans, guarantees, and insurance.

Article 20.3: National Treatment

1. Each Party shall accord to investors of the other Party treatment no less favourable than that it accords to its own investors, in like circumstances, with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of financial institutions and investments in financial institutions in its territory.

2. Each Party shall accord to financial institutions of the other Party, and to investments of investors of the other Party in financial institutions, treatment no less favourable than that it accords to its own financial institutions, and to investments of its own investors in financial institutions, in like circumstances, with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of financial institutions and investments.

3. The treatment accorded by a Party under paragraphs 1 and 2 means, with respect to a government other than at the central level of government, treatment accorded, in like circumstances, by that government to financial institutions of the Party, investors of the Party, and investments of those investors, in financial institutions, of the Party of which it forms a part.

4. For the purposes of the national treatment obligations in Article 20.6, a Party shall accord to cross-border financial service suppliers of the other Party treatment no less favourable than that it accords to its own financial service suppliers, in like circumstances, with respect to the supply of the relevant service.

5. Whether treatment is accorded in like circumstances depends on the totality of the circumstances, including whether the relevant treatment distinguishes between investors in financial institutions, investments in financial institutions, financial institutions, financial services, or financial service suppliers on the basis of legitimate public policy objectives.

6. Paragraphs 1 and 2 prohibit discrimination based on nationality. A difference in treatment accorded to an investor of another Party, or their investments, in a financial institution, or a financial institution of another Party and a Party's own investors, or their investments, in a financial institution, or financial institutions does not, in and of itself, establish discrimination based on nationality.

Article 20.4: Most-Favoured-Nation Treatment

1. Each Party shall accord to:

2. The treatment to be accorded by a Party under paragraph 1 means, with respect to a government other than at the central level, treatment accorded, in like circumstances, by that government to: financial institutions of a non-Party; investors of a non-Party, and investments of those investors, in financial institutions; or financial services or cross- border financial service suppliers of a non-Party.

3. The "treatment" referred to in paragraph 1 and 2 does not include procedures for the resolution of investment disputes between investors and states provided for in other international investment treaties and other trade agreements.

4. Substantive obligations in other international investment treaties and other trade agreements do not in themselves constitute "treatment", and thus cannot give rise to a breach of this Article, absent measures adopted or maintained by a Party pursuant to those obligations.

5. Whether treatment is accorded in like circumstances depends on the totality of the circumstances, including whether the relevant treatment distinguishes between investors in financial institutions, investments in financial institutions, financial institutions, financial services, or financial service suppliers on the basis of legitimate public policy objectives.

6. Paragraph 1 prohibits discrimination based on nationality. A difference in treatment accorded to an investor of another Party, or their investments, in a financial institution, or a financial institution of another Party and a Party's own investors, or their investments, in a financial institution, or financial institutions does not, in and of itself, establish discrimination based on nationality.

Article 20.5: Market Access for Financial Institutions

1. A Party shall not adopt or maintain with respect to financial institutions of the other Party or investors of the other Party seeking to establish those institutions, either on the basis of a regional subdivision or on the basis of its entire territory, measures that:

Article 20.6: Cross-Border Trade

1. Each Party shall permit, under terms and conditions that accord national treatment, cross-border financial service suppliers of the other Party to supply the financial services specified in Annex 20-A (Cross-Border Trade).

2. Each Party shall permit persons located in its territory, and its nationals wherever located, to purchase financial services from cross-border financial service suppliers of the other Party located in the territory of a Party other than the permitting Party. This obligation does not require a Party to permit those suppliers to do business or solicit in its territory. A Party may define "doing business" and "solicitation" for the purposes of this obligation provided that those definitions are not inconsistent with paragraph 1.

3. Without prejudice to other means of prudential regulation of cross-border trade in financial services, a Party may require the registration or authorization of cross-border financial service suppliers of the other Party and of financial instruments.

Article 20.7: New Financial ServicesFootnote 5

Each Party shall permit a financial institution of the other Party to supply a new financial service that the Party would permit its own financial institutions, in like circumstances, to supply without adopting a law or modifying an existing law.Footnote 6 Notwithstanding Article 20.5(1)(b), a Party may determine the institutional and juridical form through which the new financial service may be supplied, and may require authorization for the supply of the service. If a Party requires a financial institution to obtain authorization to supply a new financial service, the Party shall decide within a reasonable period of time whether to issue the authorization and may refuse the authorization only for prudential reasons.

Article 20.8: Treatment of Customer Information

This Chapter does not require a Party to disclose information related to the financial affairs and accounts of individual customers of financial institutions or cross- border financial service suppliers.

Article 20.9: Senior Management and Boards of Directors

1. A Party shall not require financial institutions of the other Party to engage natural persons of any particular nationality as senior managerial or other essential personnel.

2. A Party shall not require that more than a simple majority of the board of directors of a financial institution of the other Party be composed of nationals of the Party, persons residing in the territory of the Party, or a combination thereof.

3. A Party may require financial institutions operating within their territory, or subject to their jurisdiction, to nominate women to senior management positions or to boards of directors.

Article 20.10: Non-Conforming Measures

1. Articles 20.3 through 20.6 and Article 20.9 shall not apply to:

2. Articles 20.3 through 20.6 and Article 20.9 shall not apply to any measure that a Party adopts or maintains with respect to sectors, subsectors, or activities, as set out by that Party in Section B of its Schedule to Annex III.

3. A non-conforming measure, set out in a Party's Schedule to Annex I or II as not subject to Article 17.6 (National Treatment), Article 17.7 (Most-Favoured-Nation Treatment), Article 17.13 (Senior Management and Boards of Directors), Article 18.3 (National Treatment), or Article 18.4 (Most-Favoured-Nation Treatment), shall be treated as a non-conforming measure not subject to Article 20.3, Article 20.4, or Article 20.9, as the case may be, to the extent that the measure, sector, subsector, or activity set out in the entry is covered by this Chapter.

4. Article 20.3 shall not apply to any measure that falls within an exception to, or derogation from, the obligations which are imposed by Article 3 of the TRIPS Agreement, if the exception or derogation relates to matters not addressed by Chapter 12 (Intellectual Property).

5. Article 20.4 shall not apply to any measure that falls within Article 5 of the TRIPS Agreement, or an exception to, or derogation from, the obligations which are imposed by Article 4 of the TRIPS Agreement.

Article 20.11: Exceptions

1. Notwithstanding any other provisions of this Chapter and Agreement except for Chapter 2 (National Treatment and Market Access), Chapter 3 (Rules of Origin and Origin Procedures), Chapter 4 (Trade Facilitation), Chapter 5 (Trade Remedies), Chapter 6 (Sanitary and Phytosanitary Measures), and Chapter 7 (Technical Barriers to Trade), a Party shall not be prevented from adopting or maintaining measures for prudential reasonsFootnote 7,Footnote 8, including for the protection of investors, depositors, policy holders, or persons to whom a fiduciary duty is owed by a financial institution or cross-border financial service supplier, or to ensure the integrity and stability of the financial system. If these measures do not conform with the provisions of this Agreement to which this exception applies, they shall not be used as a means of avoiding the Party's commitments or obligations under those provisions.

2. Nothing in this Chapter, Chapter 17 (Investment), Chapter 18 (Cross-Border Trade in Services), Chapter 19 (Development and Administration of Measures), Chapter 22 (Telecommunications) including specifically Article 22.24 (Relation to Other Chapters), or Chapter 8 (Digital Trade), shall apply to non-discriminatory measures of general application taken by any public entity in pursuit of monetary and related credit policies or exchange rate policies. This paragraph shall not affect a Party's obligations under Article 17.12 (Performance Requirements) with respect to measures covered by Chapter 17 (Investment), under Article 17.11 (Transfer of Funds) or Article 18.10 (Payments and Transfers).

3. Notwithstanding Article 17.11 (Transfer of Funds) and Article 18.10 (Payments and Transfers), as incorporated into this Chapter, a Party may prevent or limit transfers by a financial institution or cross-border financial service supplier to, or for the benefit of, an affiliate of or person related to such institution or supplier, through the equitable, non- discriminatory, and good faith application of measures relating to maintenance of the safety, soundness, integrity, or financial responsibility of financial institutions or cross-border financial service suppliers. This paragraph does not prejudice any other provision of this Agreement that permits a Party to restrict transfers.

4. For greater certainty, nothing in this Chapter shall be construed to prevent a Party from adopting or enforcing measures necessary to secure compliance with laws or regulations that are not inconsistent with this Chapter, including those relating to the prevention of deceptive and fraudulent practices or to deal with the effects of a default on financial services contracts, subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between Parties or between Parties and non-Parties where like conditions prevail, or a disguised restriction on investment in financial institutions or cross-border trade in financial services as covered by this Chapter.

Article 20.12: Recognition

1. A Party may recognize prudential measures of the other Party or a non-Party in the application of measures covered by this Chapter. That recognition may be:

2. A Party that accords recognition of prudential measures under paragraph 1 shall provide adequate opportunity to the other Party to demonstrate that circumstances exist in which there are or would be equivalent regulation, oversight, implementation of regulation, and, if appropriate, procedures concerning the sharing of information between the relevant Parties.

3. If a Party accords recognition of prudential measures under subparagraph 1(c) and the circumstances set out in paragraph 2 exist, that Party shall provide adequate opportunity to the other Party to negotiate accession to the agreement or arrangement, or to negotiate a comparable agreement or arrangement.

4. For greater certainty, nothing in Article 20.4 requires a Party to accord recognition to prudential measures of any other Party.

Article 20.13: Transparency

1. Chapter 19 (Development and Administration Measures), Chapter 26 (Good Regulatory Practices), and paragraphs 2, 3, and 4 of Article 15.2 (Publication) do not apply to a measure relating to this Chapter.

2. The Parties recognize that transparent regulations and policies governing the activities of financial institutions and cross-border financial service suppliers are important in facilitating their ability to gain access to and operate in each other's markets. Each Party commits to promote regulatory transparency in financial services.

3. Each Party shall ensure that all measures of general application to which this Chapter applies are administered in a reasonable, objective, and impartial manner.

4. Each Party shall, to the extent practicable:

5. At the time that it adopts a final regulation, a Party should, to the extent practicable, address in writing the substantive comments received from interested persons with respect to the proposed regulation.Footnote 9

6. To the extent practicable, each Party should allow a reasonable period of time between publication of a final regulation of general application and the date when it enters into effect.

7. Each Party shall ensure that the rules of general application adopted or maintained by a self-regulatory organization of the Party are promptly published or otherwise made available in a manner that enables interested persons to become acquainted with them.

8. Each Party shall maintain or establish appropriate mechanisms for responding to inquiries from interested persons regarding measures of general application covered by this Chapter.

Article 20.14 Processing of Applications

1. If a Party requires authorization for the supply of a financial service, it shall ensure that its financial regulatory authorities:

2. Each Party shall ensure that its financial regulatory authorities, with respect to an authorization feeFootnote 16 they charge, provide an applicant with a schedule of fees or information on how fee amounts are calculated, and do not use the fees as a means of avoiding the Party's commitments or obligations under this Chapter.

3. If a Party adopts or maintains measures with respect to authorization requirements and procedures for the supply of a financial services, the Party shall ensure that:

Article 20.15: Self-Regulatory Organizations

If a Party requires a financial institution or a cross-border financial service supplier of the other Party to be a member of, participate in, or have access to a self‑regulatory organization in order to provide a financial service in or into its territory, it shall ensure that the self-regulatory organization observes the obligations contained in this Chapter.

Article 20.16: Payment and Clearing Systems

Under terms and conditions that accord national treatment, each Party shall grant financial institutions of the other Party established in its territory access to payment and clearing systems operated by public entities, and to official funding and refinancing facilities available in the normal course of ordinary business. This Article is not intended to confer access to the Party's lender of last resort facilities.

Article 20.17: Expedited Availability of Insurance Services

Parties recognize the importance of maintaining and developing regulatory procedures to expedite the offering of insurance services by licensed suppliers. These procedures may include: allowing introduction of products unless those products are disapproved within a reasonable period of time; not requiring product approval or authorization of insurance lines for insurance other than insurance sold to individuals or compulsory insurance; or not imposing limitations on the number or frequency of product introductions. If a Party maintains regulatory product approval procedures, that Party shall endeavour to maintain or improve those procedures.

Article 20.18: Performance of Back-Office Functions

1. The Parties recognize that the performance of the back-office functions of a financial institution in its territory by the head office or an affiliate of the financial institution, or by an unrelated service supplier, either inside or outside its territory, is important to the effective management and efficient operation of that financial institution. While a Party may require financial institutions to ensure compliance with any domestic requirements applicable to those functions, they recognize the importance of avoiding the imposition of arbitrary requirements on the performance of those functions.

2. For greater certainty, nothing in paragraph 1 prevents a Party from requiring a financial institution in its territory to retain certain functions.

Article 20.19 Cross-Border Electronic Payments

The Parties endeavour to support the development of efficient, safe and secure cross-border electronic payments by fostering the development and adoption of internationally accepted standards, promoting interoperability and the interlinking of payment infrastructures, and encouraging useful innovation and competition in the payments ecosystem.

Article 20.20: Transfer of Information

A Party shall not prevent a financial institution or a cross-border financial services supplier of the party from transferring information, including personal information, into and out of the Party's territory by electronic or other means when this activity is for the conduct of business within the scope of the license, authorization, or registration of that financial institution or cross-border financial services supplier of the other party. Nothing in this Article restricts the right of a Party to adopt or maintain measures to protect personal data, personal privacy, and the confidentiality of individual records and accounts, provided that such measures are not used to circumvent this Article.

Article 20.21: Financial Services Committee

1. The Parties hereby establish a Financial Services Committee. The principal representative of each Party shall be an official of the Party's authority responsible for financial services set out in Annex 20-B (Authorities Responsible for Financial Services).

2. The Financial Services Committee shall:

3. The Financial Services Committee shall meet as the Parties decide to assess the functioning of this Agreement as it applies to financial services. The Financial Services Committee shall inform the Commission of the results of any meeting.

4. The Financial Services Committee shall endeavour to encourage the participation of women when undertaking its functions, such as by seeking to establish a gender balance among their membership.

Article 20.22: Consultations

1. A Party may request, in writing, consultations with the other Party regarding any matter arising under this Agreement that affects financial services. The other Party shall give sympathetic consideration to the request to hold consultations. The consulting Parties shall report the results of their consultations to the Financial Services Committee.

2. Consultations under this Article shall include officials of the authorities specified in Annex 20-B (Authorities Responsible for Financial Services).

3. For greater certainty, nothing in this Article shall be construed to require a Party to derogate from its law regarding sharing of information between financial regulators or the requirements of an agreement or arrangement between financial authorities of the Parties, or to require a regulatory authority to take any action that would interfere with specific regulatory, supervisory, administrative, or enforcement matters.

Article 20.23: Dispute Settlement

1. Chapter 28 (Dispute Settlement) shall apply as modified by this Article to the settlement of disputes arising under this Chapter.

2. For disputes arising under this Chapter or a dispute in which a Party invokes Article 20.11, when selecting panellists to compose a panel under Article 28.7 (Establishment of a Panel), each disputing Party shall select panellists so that:

3. A Party may request the establishment of a panel pursuant to Article 20.24(3) to consider whether and to what extent Article 20.11 is a valid defence to a claim without having to request consultations under Article 28.5 (Consultations). The panel shall endeavour to present its initial report pursuant to Article 28.11 (Panel Reports) within 120 days of the selection of the last panellist.

4. If a Party seeks to suspend benefits in the financial services sector, a panel that reconvenes to make a determination on the proposed suspension of benefits, in accordance with Article 28.13 (Non-Implementation – Suspension of Benefits), shall seek the views of financial services experts, as necessary.

5. Notwithstanding Article 28.13 (Non-Implementation – Suspension of Benefits), when a panel's determination is that a Party's measure is inconsistent with this Agreement and the measure affects:

Article 20.24: Investment Disputes in Financial Services

1. If a dispute under Section D of Chapter 17 (Investment) involves a measure referred to in Article 20.2 (Scope), arbitrators shall be selected in accordance with Article 17.26 (Arbitrators) as modified in this Article, such that:

2. If a dispute under Section E of Chapter 17 (Investment) involves a measure referred to in Article 20.2, the arbitrator shall have expertise or experience in financial services law or practice, such as the regulation of financial institutions.

3. If an investor of a Party submits a claim to arbitration under Section D of Chapter 17 (Investment), and the respondent asserts a defence under Article 20.11, the respondent shall, no later than the date the tribunal fixes for the respondent to submit its principal submission on the merits, such as the counter-memorial, submit in writing to the authorities responsible for financial services of the Party of the claimant, as set out in Annex 20-B (Authorities Responsible for Financial Services), a request for a joint determination by the financial authorities of the Parties on the issue of whether and to what extent Article 20.11 is a valid defence to the claim. The respondent shall provide the tribunal, if constituted, a copy of its request. The tribunal may proceed to hear the claim only as provided in paragraphs 5, 6, and 7.

4. With respect to the joint determination by the financial authorities of the Parties referred to in paragraph 3:

5. If it is determined in the joint determination referred to in subparagraph 4(b) or the decision of the arbitral panel referred to in subparagraph 4(d) that the paragraph asserted is a valid defence to all parts of the claim, the investor is deemed to have withdrawn its claim and to have discontinued the proceeding, with prejudice. The tribunal, if constituted, shall take note of the discontinuance in an order, after which the authority of the tribunal shall cease.

6. If it is determined the joint determination referred to in subparagraph 4(b) or the decision of the arbitral panel referred to in subparagraph 4(d) that the paragraph asserted is only a valid defence to a part of the claim, the investor is deemed to have withdrawn that part of the claim and to have discontinued that part of the proceedings, with prejudice. The tribunal shall take note of the discontinuance of that part of the claim in an order and shall not proceed with the part of the claim for which the paragraph asserted is determined to be a valid defence.

7. If the financial authorities of the Parties do not make a joint determination under subparagraph 4(b) and no request for the establishment of an arbitral panel has been made under subparagraph 4(d), the tribunal may decide the matter, provided that:

8. For the purposes of this Article, the definitions of the following terms set out in Article 17.1 (Definitions) are incorporated, mutatis mutandis: "claimant", "disputing parties", "disputing party", "non-disputing Party", and "respondent".

Annex 20-A: Cross-Border Trade

CanadaFootnote 20

Insurance and insurance-related services

1. Article 20.6 (Cross-Border Trade) shall apply to the cross-border supply of or trade in financial services, as defined in subparagraph (a) of the definition of "cross‑border supply of financial services" in Article 20.1 (Definitions), with respect to:

Banking and other financial services (excluding insurance)

2. Article 20.6. (Cross-Border Trade) shall apply to the cross-border supply of or trade in financial services, as defined in subparagraph (a) of the definition of "cross‑border supply of financial services" in Article 20.1 (Definitions), with respect to:

Portfolio Management Services

3. Article 20.6 (Cross-Border Trade) shall apply to the cross-border supply of or trade in financial services, as defined in subparagraph (a) of the definition of "cross‑border supply of financial services" in Article 20.1 (Definitions), with respect to the following services if they are provided to a collective investment scheme located in Canada:

4. For the purposes of paragraph 3, in Canada, a collective investment scheme means, an "investment fund"Footnote 22as defined under the relevant Securities Act.

Ukraine

Insurance and insurance-related services

1. Article 20.6 (Cross-Border Trade) shall apply to the cross-border supply of or trade in financial services, as defined in subparagraph (a) of the definition of "cross‑border supply of financial services" in Article 20.1 (Definitions), with respect to:

Banking and other financial services (excluding insurance)

2. Article 20.6 (Cross-Border Trade) shall apply to the cross-border supply of or trade in financial services, as defined in subparagraph (a) of the definition of "cross‑border supply of financial services" in Article 20.1 (Definitions), with respect to:

Portfolio Management Services

3. Article 20.6 (Cross-Border Trade) shall apply to the cross-border supply of or trade in financial services, as defined in subparagraph (a) of the definition of "cross‑border supply of financial services" in Article 20.1 (Definitions), with respect to the following services if they are provided to a collective investment scheme located in Ukraine:

4. For the purposes of paragraph 3, in Ukraine, a collective investment scheme means collective investment institutions that operate in accordance with the legislation on collective investment institutions.

Annex 20-B: Authorities Responsible for Financial Services

Authorities Responsible for Financial Services

The authorities for each Party responsible for financial services are:

Date Modified: