European Commission's provisions on establishment for a ...establishment to be included in the template for a title on "Establishment, Trade in Services and E-commerce". These provisions,

COMMISSION EUROPÉENNE Direction générale du commerce Direction G - Services. Questions commerciales agricoles. Développement durable. Commerce des services; GATS. Investissement.

Brussels, le 28 July 2006 D (2006) 9219

LIMITED

Council of the EU General Secretariat

133 COMMITTEE MD : 381/06 SOURCE Commission FOR : Discussion DATE : 31 - 07 - 2006

NOTE FOR THE ATTENTION OF THE 133 COMMITTEE

SUBJECT: Minimum platform on investment for EU FTAs – Provisions on establishment in template for a Title on "Establishment, trade in services and e-commerce"

ORIGIN: DG Trade G.1

Mr Carlos Gimeno Verdejo (Tel: + 322 295 87 59) Ms Julie Raynal (Tel: +322 296 65 77) Fax: +322 299 24 35

OBJECTIVE: For discussion

REMARKS: With a view to develop an ambitious investment policy, an objective supported by Member States in the meetings of the 133 Full Members of 2 June and 7 July 2006, the European Commission has described at the last of these meetings the minimum platform on which to build that policy. On that occasion, the Commission also announced the presentation of a draft legal text reflecting that platform, as well as an explanatory note.

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In line with that announcement, Member States will find attached the provisions on establishment to be included in the template for a title on "Establishment, Trade in Services and E-commerce". These provisions, intended to better serve EU interests, put an end to the artificial distinction between establishment in the services sector (so called commercial presence) and establishment in other economic sectors.

Member States will also find attached the draft clause on non-lowering of standards to be included in the Preambles of FTAs or other sorts of preferential agreements.

Finally, Member States will find attached a short explanatory memorandum of the provisions included in the above-mentioned documents.

As for any template, case-by-case adaptations will have to be made depending on the specificity of each FTA. For example, the artificial distinction between establishment in services and non-services sectors, may have to be maintained in cases where the negotiation of a specific Title on Trade in Services, covering commercial presence, is well advanced (e.g. Mercosur or GCC) or in cases where the liberalisation of services is not foreseen (e.g. China). In those cases, it may be necessary to develop a separate Title or Chapter on Establishment limited to non-services sectors.

Member Stats are kindly invited to provide the Commission with their comments on these documents prior to the next meeting of the 133 Full members, where the Establishment provisions are to be discussed.

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TITLE […]

ESTABLISHMENT, TRADE IN SERVICES AND E-COMMERCE

CHAPTER I

GENERAL PROVISIONS

Article […]

Objective, scope and coverage

1. The Parties, reaffirming their respective commitments under the WTO Agreement [and with a view to facilitate the increasing participation of [COUNTRY] [REGION] in the world economy], hereby lay down the necessary arrangements for the progressive reciprocal liberalisation of establishment and trade in services.

2. Nothing in this Title shall be construed to impose any obligation with respect to government procurement.

3. The provisions of this Title shall not apply to subsidies granted by the Parties.

4. Without prejudice to the provisions of this Title, each Party retains the right to regulate and to introduce new regulations to meet legitimate policy objectives.

5. This Title shall not apply to measures affecting natural person seeking access to the employment market of a Party, nor shall it apply to measures regarding citizenship, residence or employment on a permanent basis.

Nothing in this Title shall prevent a Party from applying measures to regulate the entry of natural persons into, or their temporary stay in, its territory, including those measures necessary to protect the integrity of, and to ensure the orderly movement of natural persons across, its borders, provided that such measures are not applied in such a manner as to nullify or impair the benefits accruing to any Party under the terms of a specific commitment.

Article […]

Definitions

For the purposes of this Title:

(a) measures adopted or maintained by a Party means measures taken by:

(i) central, regional or local governments and authorities; and

(ii) non-governmental bodies in the exercise of powers delegated by central, regional or local governments or authorities;

2

(b) ‘natural person’ means a national of one of the Member States of the Community or of [COUNTRY][A “REGION” COUNTRY] according to their respective legislation;

(c) a ‘Community juridical person’ or a ‘[COUNTRY] [REGION] juridical person’ means a juridical person set up in accordance with the laws of a Member State of the Community or of [COUNTRY] [A “REGION” COUNTRY] respectively, and having its registered office, central administration, or principal place of business in the territory of the Community or of [COUNTRY] [A “REGION” COUNTRY], respectively;

Should the juridical person have only its registered office or central administration in the territory of the Community or [COUNTRY] [A “REGION” COUNTRY] respectively, it shall not be considered as a Community or [COUNTRY][REGION] juridical person respectively, unless its operations possess a real and continuous link with the economy of the Community or [COUNTRY] [A “REGION” COUNTRY], respectively;

(d) Notwithstanding the preceding paragraph, shipping companies established outside the Community or [COUNTRY] [REGION] and controlled by nationals of a Member State of the Community or of [COUNTRY] [[A “REGION” COUNTRY], respectively, shall also be beneficiaries of the provisions of this Agreement, if their vessels are registered in accordance with their respective legislation, in that Member State or in [COUNTRY] [A “REGION” COUNTRY]and carry the flag of a Member State or [COUNTRY] [A “REGION” COUNTRY].

CHAPTER II

ESTABLISHMENT

Article […]

Definitions

For purposes of this Chapter

(a) ‘establishment’ means any type of business or professional establishment through:

(i) the constitution, acquisition or maintenance of a juridical person, or

(ii) the creation or maintenance of a branch or representative office

within the territory of a Party for the purpose of performing an economic activity;

(b) ‘investor’ of a Party means any natural or juridical person that seeks to perform or performs an economic activity through setting up an establishment;

(c) ‘subsidiary’ of a juridical person of a Party means a juridical person which is effectively controlled by another juridical person of that Party;

(d) ‘branch’ of a juridical person means a place of business not having legal personality which has the appearance of permanency, such as the extension of a parent body, has a management and is materially equipped to negotiate business with third parties so that the latter, although knowing that there will if necessary be a legal link with the parent body, the head office of

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which is abroad, do not have to deal directly with such parent body but may transact business at the place of business constituting the extension.

Article […]

Coverage

This Chapter applies to measures by the Parties affecting establishment in all economic sectors with the exception of:

(a) audio-visual services1;

(b) national maritime cabotage, and;

(c) air transport services, including domestic and international air transportation services, whether scheduled or non-scheduled, and services directly related to the exercise of traffic rights2, other than:

(i) aircraft repair and maintenance services during which an aircraft is withdrawn from service;

(ii) the selling and marketing of air transport services;

(iii) computer reservation system (CRS) services;

(iv) other ancillary services that facilitate the operation of air carriers, such as groundhandling services, rental services of aircraft with crew, and airport management services.

Article […]

Market Access

1. With respect to market access through establishment, each Party shall accord to investors of the other Party a treatment no less favourable than that provided for in the specific commitments contained in Annex […] (lists of commitments on establishment).

2. In sectors where market access commitments are undertaken, the measures which a Party shall not maintain or adopt, unless otherwise specified in Annex […] (lists of commitments on establishment), are defined as:

(a) limitations on the number of establishments whether in the form of numerical quotas, monopolies, exclusive rights or other establishment requirements such as economic needs tests3;

1 [Audiovisual services are the subject of [Title ...] [Chapter ...]

2 [These services are/may be the subject of an open skies agreement between the Parties]

3 Subparagraph 2(a) does not cover measures taken in order to limit the production of an agricultural product.

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(b) limitations on the total value of transactions or assets in the form of numerical quotas or the requirement of an economic needs test4;

(c) limitations on the total number of operations or on the total quantity of output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test5.

(d) limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment; and

(e) measures which restrict or require specific types of establishment (subsidiary, branch, representative office) 6 or joint ventures through which an investor of the other Party may establish its activities.

Article […]

National Treatment

1. In the sectors inscribed in Annex [] (lists of commitments on establishment), and subject to any conditions and qualifications set out therein, with respect to all measures affecting establishment, each Party shall grant to investors of the other Party treatment no less favourable than that it accords to its own like investors.

2. A Party may meet the requirement of paragraph 1 by according to investors of the other Party, either formally identical treatment or formally different treatment to that it accords to its own like investors.

3. Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of competition in favour of investors of the Party compared to like investors of the other Party.

Article […]

Lists of commitments

The sectors liberalised by each of the Parties pursuant to this Chapter and, by means of reservations, the market access and national treatment limitations applicable to investors of the other Party in those sectors are set out in lists of commitments included in Annex […] (lists of commitments on establishment).

4 Subparagraph 2(b) does not cover measures taken in order to limit the production of an agricultural product.

5 Subparagraph 2(c) does not cover measures taken in order to limit the production of an agricultural product.

6 Each Party may require that in the case of incorporation under its own law, investors must adopt a specific legal form. To the extent that such requirement is applied in a non-discriminatory manner, it does not need to be specified in Annex […] (lists of commitments on establishment) in order to be maintained or adopted by the Parties.

Article […]

Most-favoured-nation treatment

1. With respect to any measures affecting establishment covered by this Chapter, each Party shall accord to investors of the other Party a treatment no less favourable than that it accords to like investors of any third country.

2. Treatment granted to investors of a third country by either Party arising from a regional economic integration agreement requiring the Parties thereto to approximate their legislation shall be excluded from the obligation of this provision. Treatment granted under measures benefiting from the coverage of an MFN exemption listed in accordance with Article II.2 of the General Agreement on Trade in Services shall also be excluded from this provision.

Article […]

Review

The Parties affirm their commitment to review the investment legal framework, the investment environment, and the flow of investment between them consistent with their commitments in international agreements no later than […] years after the entry into force of this chapter.

CHAPTER III

CROSS BORDER SUPPLY OF SERVICES

[…]

CHAPTER IV

TEMPORARY PRESENCE OF BUSINESS NATURAL PERSONS

Article […]

Coverage

1. This Chapter applies to measures of the Parties concerning the entry and temporary stay into their territories of key personnel, […] in accordance with Article […], paragraph 6, of this Agreement.

2. For the purpose of this Chapter:

(a) ‘Key personnel’ means natural persons employed within a juridical person other than a non-profit organisation and whose work and temporary stay is necessary for the setting-up or the proper control, administration and operation of an establishment. ‘Key personnel’ comprises ‘business visitors’ responsible for setting up an establishment and ‘intra-corporate transfers’.

(i) ‘Business visitors’ means natural persons working in a senior position who are responsible for setting up an establishment. They do not engage in making

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direct sales to the general public and do not receive remuneration from a source located within the host Party.

(ii) ‘Intra-corporate transfers’ means natural persons who have been employed by a juridical person or have been partners in it (other than as majority shareholders) for at least one year and who are temporarily transferred to an establishment in the territory of the other Party. The natural person concerned must belong one of the following categories:

1. Managers:

Persons working in a senior position within a juridical person, who primarily direct the management of the establishment, receiving general supervision or direction principally from the board of directors of stockholders of the business or their equivalent, including:

– directing the establishment or a department or sub-division thereof;

– supervising and controlling the work of other supervisory, professional or managerial employees;

– having the authority personally to recruit and dismiss or recommend recruiting, dismissing or other personnel actions.

2. Specialists:

Persons working within a juridical person who possess uncommon knowledge essential to the establishment’s production, research equipment, techniques or management. In assessing such knowledge, account will be taken not only of knowledge specific to the establishment, but also of whether the person has a high level of qualification referring to a type of work or trade requiring specific technical knowledge, including membership of an accredited profession.

3. Graduate trainees:

Persons working within a juridical person who possess a university degree and are transferred for career development purposes or to obtain training in business techniques or methods7

[…]

Article […]

Key personnel

1. For every sector liberalised in accordance with Chapter II of this Title and subject to any reservations listed in Annex […] (list of commitments on establishment) or in Annex […] (reservations on key personnel), each Party shall allow investors of the other Party to employ in their establishment natural persons of that other Party provided that such employees are key

7 The recipient establishment may be required to submit a training programme covering the duration of stay for prior approval, demonstrating that the purpose of the stay is for training.

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personnel as defined in Article […]. The temporary entry and stay of key personnel shall be for a period of up to […]

2. For every sector liberalised in accordance with Chapter II of this Title, the measures which a

Party shall not maintain or adopt, unless otherwise specified in Annex [ ] (reservations on key personnel), are defined as limitations on the total number of natural persons that an investor may employ as key personnel in a specific sector in the form of numerical quotas or a requirement of an economic needs test.

[…]

CHAPTER V

REGULATORY FRAMEWORK

[…]

CHAPTER VI

ELECTRONIC COMMERCE

[…]

CHAPTER VII

FINAL PROVISIONS

[…]

Article […]

Exceptions

1 Without prejudice to general exceptions set in Articles […] of this Agreement the provisions of this Title and of Annexes […] (lists of commitments on establishment and […]) are subject to the exceptions contained in this Article.

2. Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, or a disguised restriction on establishment […], nothing in this Title shall be construed to prevent the adoption or enforcement by any Party of measures:

(a) necessary to protect public morals or to maintain public order and public security;

(b) necessary to protect human, animal or plant life or health;

(c) relating to the conservation of exhaustible natural resources if such measures are applied in conjunction with restrictions on domestic investors;

(d) necessary for the protection of national treasures of artistic, historic or archaeological value;

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(e) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Title including those relating to:

(i) the prevention of deceptive and fraudulent practices or to deal with the effects of a default on services contracts;

(ii) 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;

(iii) safety;

(f) inconsistent with Articles […] on National Treatment, provided that the difference in treatment is aimed at ensuring the effective or equitable imposition or collection of direct taxes in respect of economic activities or investors of the other Party.

(g) inconsistent with Articles […] (Most Favoured Nation Treatment), provided that the difference in treatment is the result of an agreement on the avoidance of double taxation or provisions on the avoidance of double taxation in any other international agreement or arrangement by which the Party is bound.

3. The provisions of this Title and of Annexes [ ] (lists of commitments on establishment, […]) shall not apply to the Parties’ respective social security systems or to activities in the territory of each Party, which are connected, even occasionally, with the exercise of official authority

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ANNEX […]

LISTS OF COMMITMENTS ON ESTABLISHMENT

(referred to in Article […])

PART A

COMMUNITY AND ITS MEMBER STATES

[…]

Sector or Subsector Reservations

[…] […]

[…] […]

[…] […]

[…] […]

[…] […]

PART B

[COUNTRY] [“REGION” AND “REGION” COUNTRIES]

[…]


[…] […]

[…] […]

[…] […]

[…] […]

[…] […]

10

ANNEX […]

RESERVATIONS ON KEY PERSONNEL

(referred to in Article […])

PART A

COMMUNITY AND ITS MEMBER STATES

[…]


[…] […]

[…] […]

[…] […]

[…] […]

[…] […]

PART B

[COUNTRY] [“REGION” AND “REGION” COUNTRIES]

[…]


[…] […]

[…] […]

[…] […]

[…] […]

[…] […]

Non-lowering of standards clause

(to be inserted in the preamble of the Agreement)

1. The Parties shall not encourage foreign direct investment by lowering domestic environmental, labour or occupational health and safety legislation and standards or by relaxing core labour standards or laws aimed at protecting and promoting cultural diversity.

2. Accordingly, a Party shall not waive or otherwise derogate from, or offer to waive or otherwise derogate from such legislation and standards as an encouragement for the establishment, acquisition, expansion or retention of an investment or an investor in its territory.

3. Where a Party considers that an actual or proposed measure of another Party is or would be inconsistent with this provision, it may request consultations with that Party. The Parties shall consult in an effort to avoid any such encouragement.

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EXPLANATORY MEMORANDUM

I- ESTABLISHMENT PROVISIONS IN TEMPLATE FOR "ESTABLISHMENT, TRADE IN SERVICES AND E-COMMERCE" TITLE IN EU FTAS Chapter I (GENERAL PROVISIONS), following existing precedents:

excludes subsidies and procurement, which are normally addressed in separate Titles/Chapters of the FTAs;

reproduces language from the GATS Annex on the Movement of Natural Persons intended to clarify that the Title concerns trade and not immigration;

reminds the Parties' right to regulate;

reproduces definitions currently used in international agreements concluded by the EU.

Chapter II (ESTABLISHMENT) reproduces what amounts to the minimum platform on which to build step by step an ambitious investment policy. That minimum platform takes as a basis EC Treaty provisions1 and is without prejudice to a separate Title / Chapter on capital movements and payments. It also builds on GATS provisions (or similar provisions in Trade in services Titles in EU FTAs) applicable to commercial presence in services sectors and extends them to establishment in non services sectors. Thus,

"establishment" is defined along the lines of the commercial presence definition in Article XXVIII (d) of GATS and adapted replacing "supply a service" by "perform an economic activity";

"investor" is defined along the lines of the service supplier definition of GATS Article XXVIII (g) and similar provisions in FTAs and adapted replacing "supply of a service" by "perform an economic activity through setting up an establishment";

the market access provision follows GATS Article XVI, with the following adaptations: on one side, "with regard to market access through the modes of supply identified in Article I, each member shall accord to services and services suppliers" becomes "with regard to market access through establishment, each party shall accord to investors", and, on the other side, the references to services in the list of limitations, as well as the limitations concerning natural persons (GATS Article XVI.2 (d)) are removed ;

The national treatment provision follows GATS Article XVII, which applies both to pre-establishment and to post-establishment. However, instead of referring to service supplier, it refers to investors, and, instead of referring to measures affecting the supply of a service, it refers to measures affecting establishment;

The most-favoured-nation (MFN) provision, in line with the scope of the Chapter, is limited to measures affecting establishment. It is based on GATS Article II, which refers to all measures covered by the GATS (and therefore to all measures affecting commercial presence in services sectors). Like for the MFN provision in GATS, this MFN provision does not cover dispute settlement provisions issues or protection against expropriation. And also, like in the GATS, derogations to the MFN provision

1Article 48 EC; Annex I to Directive 88/361/CEE.

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are foreseen for integration agreements, for MRAs and for measures covered by MFN exemptions listed under GATS.

The Chapter does not include ad-hoc dispute settlement (DS) mechanisms, and will therefore be subject to the standard DS mechanism of the FTA (i.e. conciliation procedures + State-to-State DS).

The only novelties in the "Establishment" Chapter are the following:

Insertion in the market access provision of footnotes clarifying that certain common agricultural policy (CAP) measures are not to be considered as Market access limitations within the meaning of that provision;

Redrafting, in the market access provision, of the limitation taken from GATS Article XVI.2 e), with a view to avoid the need to list non-discriminatory requirements to adopt a specific legal form in case of incorporation2;

The derogation to the MFN provision foreseen for economic integration agreements is limited to regional economic integration agreements requiring the Parties thereto to approximate their legislation3. By doing so, the EU is in a position to obtain as many advantages as possible that could stem from other preferential agreements to which one of the EU's contracting parties would also be a party (the EU should at least obtain the treatment granted by US FTAs) without prejudicing some EU preferential policies (ex: in the framework of the EEA or of EU-accession processes).

The provision on Lists of Commitments prepares the ground for simplified lists of commitments compared to the more than 400 pages EU list under GATS, following the model used in the EU-Mexico FTA

A review clause is introduced, with a view to allow in the future a possible upgrading of establishment provisions.

With regard to the relationship of this Chapter with BITs provisions, without prejudice to Community law, EU agreements will not seek to affect the rights of European investors from benefiting from any more favourable treatment provided for in any bilateral investment agreement to which a Member State is a Party.

Chapter IV (TEMPORARY MOVEMENT OF BUSINESS NATURAL PERSONS) defines the different categories covered along the lines of definitions used in the GATS or in EU FTAs in the past.

As regards key personnel, the category is intended to cover establishment in both services and non-services sectors and the liberalisation should go hand in hand with the liberalisation of establishment, subject to limits on the length of stay (to be determined in the text) or to possible quantitative limitations (GATS Article XVI.2. d)) to be listed in an Annex.

Chapter VII (FINAL PROVISIONS) reproduces exceptions that can be found in previous FTAs or in the GATS text, adjusting them to cover all types of establishment.

2 This is in line with Article 12 of the EU-Mexico FTA on financial services. 3 A classical GATS-type REIO clause is not appropriate, in the sense that it would usually exclude from the scope of MFN treatment any FTA, which constitutes especially the EU target.


THE NON-LOWERING OF STANDARDS CLAUSE The purpose of such clause is to implement EU Treaties core principles and European Council decisions that aim at fostering sustainable development. The European Council approved the "Declaration on guiding principles for Sustainable Development" at its meeting of June 2005, which lays emphasis on this point by stating that sustainable development “seeks to promote a dynamic economy with full employment and a high level of education […] in a peaceful and secure world, respecting cultural diversity”. Besides, such reference is also in conformity with various EC Treaty requirements and EU policies. Finally, the objective to preserve and promote cultural diversity in EC policies stems from the EC Treaty Article 151-4 and is also mentioned in Article 22 of the EU Charter of Fundamental Rights.


Illustrative list of EC agreements with provisions on establishment

Agreement Type of provision

EEA Pre-establishment and post-establishment in all sectors - Freedom of establishment

European Agreements Pre-establishment and post-establishment in all sectors – Freedom of establishment

Cf. Article 45 of Agreement between EC and Bulgaria

Stabilisation and Association Agreements

Pre-establishment and post-establishment in all sectors - MFN & NT

Cf. Article 48 of Agreement between EC and FYROM

Partnership and Cooperation Agreements with CIS countries

Pre-establishment in all sectors - MFN

Post-establishment in all sectors – MFN & NT

Cf. for example Article 23 of the PCA with Kazakhstan

Some Euromed agreements

Pre-establishment in all sectors - MFN

Post-establishment in all sectors – MFN for branches & NT for subsidiaries

Cf. for example Article 30 of Association Agreement with Jordan

EC-Mexico Pre-establishment and post-establishment in services sectors - MFN, MA and NT

Cf. Articles 4, 5 and 6 of Decision Nº 2/2001 of the EU-Mexico Joint Council

EC-Chile Pre-establishment and post-establishment in services sectors - MA and NT

Cf. Articles 97 and 98 of the Agreement

Pre-establishment and post-establishment in primary and secondary sector - NT

Cf. Article 132 of the Agreement

Draft EC-Mercosur text Pre-establishment and post-establishment in services – MA & NT

Cf. note to 133 services M.D. 91/04

Pre-establishment and post-establishment in primary and secondary sector - MA and NT

Cf. note to 133 deputies M.D. 269/04


COMPARISON BETWEEN DRAFT ESTABLISHMENT CHAPTER AND OTHER AGREEMENTS

DRAFT PROVISIONS ON

ESTABLISHMENT

GATS PROVISIONS

ON COMMERCIAL

PRESENCE

CHILE FTA PROVISIONS

ON COMMERCIAL PRESENCE IN

SERVICES

CHILE FTA PROVISIONS ON

ESTABLISHMENT IN NON-

SERVICES SECTORS

RUSSIA PCA PROVISIONS ON

ESTABLISHMENT

Scope Scope Art. I.1, I.2.(c),

XIII, XV + Annex on

Natural Persons (points 2 & 4)

Scope Art. 95.1 (c),

95.2, 95.3, 95.4 & 135.3

Scope Art. 130, 131 (d)

and 135.3

Scope Heading of Chapter

II of Title IV and Art. 48

This Chapter applies to measures by the Parties affecting establishment in all economic sectors [with the exception of services sectors]

This Agreement applies to measures by Members affecting the supply of a service by a service supplier of one Member, through commercial presence in the territory of any other Member

This Chapter applies to the supply of a service by a service supplier of a Party, through commercial presence in the territory of the other Party, in all services sectors […]

This Chapter shall apply to establishment in all sectors with the exception of all services sectors […]

Conditions affecting the establishment and operation of companies

Nothing in this Title shall be construed to impose any obligation with respect to government procurement, […].

[Pending multilateral negotiations, government procurement is not subject to MFN, MA and NT]

Nothing in this Chapter shall be construed to impose any obligation with respect to government procurement […]

The provisions of this Title shall not apply to subsidies granted by the Parties

[Subsidies covered by GATS but, pending multilateral negotiations, not subject to anti-trade-distortive disciplines]

The provisions of this Chapter shall not apply to subsidies granted by the Parties. The Parties shall review the issue of disciplines on subsidies related to trade in services in the context of the review of this Chapter […] with a view to incorporating any


disciplines agreed under Article XV of the GATS.

This Title shall not apply to measures affecting natural person seeking access to the employment market of a Party, nor shall it apply to measures regarding citizenship, residence or employment on a permanent basis.

Nothing in this Title shall prevent a Party from applying measures to regulate the entry of natural persons into, or their temporary stay in, its territory, including those measures necessary to protect the integrity of, and to ensure the orderly movement of natural persons across, its borders, provided that such measures are not applied in such a manner as to nullify or impair the benefits accruing to any Party under the terms of a specific commitment.

The Agreement shall not apply to measures affecting natural persons seeking access to the employment market of a Member, nor shall it apply to measures regarding citizenship, residence or employment on a permanent basis.

The Agreement shall not prevent a Member from applying measures to regulate the entry of natural persons into, or their temporary stay in, its territory, including those measures necessary to protect the integrity of, and to ensure the orderly movement of natural persons across, its borders, provided that such measures are not applied in such a manner as to nullify or impair the benefits accruing to any Member under the terms of a specific commitment (GATS Annex on natural persons, points 2 & 4)

Nothing in this Title shall prevent a Party from applying its laws, regulations and requirements regarding entry and stay, work, labour conditions, and establishment of natural persons provided that, in so doing, it does not apply to them in a manner as to nullify or impair the benefits accruing to the other Party under the terms of a specific provision of this Title

As regards natural persons, establishment shall not extend to seeking or taking employment in the labour market or confer a right of access to the labour market of a Party

Nothing in this Title shall prevent a Party from applying its laws, regulations and requirements regarding entry and stay, work, labour conditions, and establishment of natural persons provided that, in so doing, it does not apply to them in a manner as to nullify or impair the benefits accruing to the other Party under the terms of a specific provision of this Title

For the purpose of this Title, nothing in the Agreement shall prevent the Parties from applying their laws and regulations regarding entry and stay, work, labour conditions and establishment of natural persons and supply of services, provided that, in so doing, they do not apply them in a manner as to nullify or impair the benefits accruing to any Party under the terms of a specific provision of the Agreement […]


Definitions Definitions Art. XXVIII (d)

and (g)

Definitions Art. 96 (c) and

(d)

Definitions Art. 131 (d)

Definitions Art. 30 (a)

‘establishment’ means any type of business or professional establishment through:


(ii) the creation or maintenance of a branch or representative office

within the territory of a Party for the purpose of performing an economic activity.

‘commercial presence’ means any type of business or professional establishment, including through


(ii) the creation or maintenance of a branch or a representative office,

within the territory of a Member for the purpose of supplying a service (Art. XXVIII (d))

‘commercial presence’ means any type of business or professional establishment, including through:

(i) the constitution, acquisition or maintenance of a legal person, or


within the territory of a Party for the purpose of supplying a service (Art. 96 (d)

‘establishment’ means:

(i) the constitution, acquisition or maintenance of a legal person, or


within the territory of a Party for the purpose of performing an economic activity (Art 131 (d)

‘Establishment’ shall mean the right of Community or Russian companies […] to take up economic activities by means of the setting up of subsidiaries and branches in Russia or in the Community respectively.

‘investor’ of a Party means any natural or juridical person that seeks to perform or performs an economic activity through setting up an establishment

‘service supplier’ means any person that supplies a service (Art. XXVIII (g))

‘service supplier’ means any legal or natural person that seeks to supply or supplies a service (Art. 96 (c))

Market Access Market Access Art. XVI

Market Access Art. 97

Market Access Market Access

With respect to market access through establishment, each Party shall accord to investors of the other Party a treatment no less favourable than that provided for in the specific commitments contained in Annex […] (lists of

1. With respect to market access through [commercial presence], each Member shall accord services and service suppliers of any other Member treatment no less favourable than that provided for

1. With respect to market access through [commercial presence], each Party shall accord services and service suppliers of the other Party treatment no less favourable than that provided for under the terms,


commitments on establishment).

under the terms, limitations and conditions agreed and specified in its Schedule.

limitations and conditions agreed and specified in its Schedule referred to in […]

In sectors where market access commitments are undertaken, the measures which a Party shall not maintain or adopt, unless otherwise specified in Annex […] (lists of commitments on establishment), are defined as:

2. In sectors where market-access commitments are undertaken, the measures which a Member shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory, unless otherwise specified in its Schedule, are defined as:

2.In sectors where market-access commitments are undertaken, the measures which a Party shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory, unless otherwise specified in its Schedule, are defined as:

(a) limitations on the number of establishments whether in the form of numerical quotas, monopolies, exclusive rights or other establishment requirements such as economic needs tests*;

(a) limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test;

(a) limitations on the number of services suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test;

(b) limitations on the total value of transactions or assets in the form of numerical quotas or the requirement of an economic needs test;

(b) limitations on the total value of service transactions or assets in the form of numerical quotas or the requirement of an economic needs test;

(b) limitations on the total value of service transactions or assets in the form of numerical quotas or the requirement of an economic needs test;

(c) limitations on the total number of operations or on the total quantity of

(c) limitations on the total number of service operations or on

(c) limitations on the total number of service operations or on


output expressed in terms of designated numerical units in the form of quotas or the requirements of an economic needs test*.

the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test;

the total quantity of service output expressed in the terms of designated numerical units in the form of quotas or the requirement of an economic needs test;

(d) limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment; and

(f) limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment.

(f) limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment.

(e) measures which restrict or require specific types of establishment (subsidiary, branch, representative office)** or joint ventures through which an investor of the other Party may establish its activities.

(e) measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service; and

(e) measures which restrict or require specific types of legal entities or joint ventures through which a service supplier of the other Party may supply a service; and

* Subparagraphs (a) and (c) do not cover measures taken in order to limit the production of an agricultural product

** Each Party may require that in the case of incorporation under its own law, investors must adopt a specific legal form. To the extent that such requirement is applied in a non-discriminatory manner, it does not


need to be specified in Annex […] (lists of commitments on establishment) in order to be maintained or adopted by the Parties

National Treatment

National treatment Art. XVII

National treatment

Art. 98

National treatment Art. 132

National treatmentArt. 28.2, 28.3 & 33

In the sectors inscribed in Annex [] (lists of commitments on establishment), and subject to any conditions and qualifications set out therein, with respect to all measures affecting establishment, each Party shall grant to investors of the other Party treatment no less favourable than that it accords to its own like investors.

1. In the sectors inscribed in its Schedule, and subject to any conditions and qualifications set out therein, each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers.

1. In the sectors inscribed in its Schedule, and subject to the conditions and qualifications set out therein, each Party shall grant to services and service suppliers of the other Party, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and services suppliers.

In the sectors inscribed in Annex […], and subject to any conditions and qualifications set out therein, with respect to establishment, each Party shall grant to legal and natural persons of the other Party treatment no less favourable than that it accords to its own legal and natural persons performing a like economic activity.

2. Without prejudice to the reservations listed in Annex […], the Community and its Member States shall grant to Community subsidiaries of Russian companies a treatment no less favourable than that granted to other Community companies or to […] whichever is the better, in respect of their operation and this in conformity with their legislation and regulations. 3. Without prejudice to the reservations listed in Annex […], Russia shall grant to Russian subsidiaries of Community companies a treatment no less favourable than that granted to other Russian companies or to […] companies whichever is the better, in respect of their operation and this in conformity with its legislation and regulations. The Parties recognize the importance of granting each other national treatment with regard to the establishment and, where not so foreseen herein, operation of


each other's companies in their territories and agree to consider the possibility of movement towards this end on a mutually satisfactory basis, and in the light of any recommendations by the Cooperation Council.

A Party may meet the requirement of paragraph 1 by according to investors of the other Party, either formally identical treatment or formally different treatment to that it accords to its own like investors.

2. A Member may meet the requirement of paragraph 1 by according to services and service suppliers of any other Member, either formally identical treatment or formally different treatment to that it accords to its own like services and service suppliers.

2. A Party may meet the requirement of paragraph 1 by according to services and service suppliers of the other Party, either formally identical treatment or formally different treatment to that it accords to its own like services and service suppliers.

Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of competition in favour of investors of the Party compared to like investors of the other Party.

Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of competition in favour of services or service suppliers of the Member compared to like services or service suppliers of any other Member.

3. Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of competition in favour of services or service suppliers of a Party compared to like services or service suppliers of the other Party.

MFN treatment

MFN treatment Art. II, V & VII

MFN treatment MFN treatment MFN treatment Art. 28.2, 28.3 &

28.4

With respect to any measures affecting

1. With respect to any measure

1. The Community and its Member


establishment covered by this Chapter, each Party shall accord to investors of the other Party a treatment no less favourable than that it accords to like investors of any third country.

covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country.

States of the one part and Russia of the other part, shall grant to each other treatment no less favourable than that accorded to any third country, with regard to conditions affecting the establishment of companies in their territories and this in conformity with the legislation and regulations applicable in each Party. 2. Without prejudice to the reservations listed in Annex […], the Community and its Member States shall grant to Community subsidiaries of Russian companies a treatment no less favourable than that granted to […] or to Community companies which are subsidiaries of any third country companies whichever is the better, in respect of their operation and this in conformity with their legislation and regulations. 3. Without prejudice to the reservations listed in Annex […], Russia shall grant to Russian subsidiaries of Community companies a treatment no less favourable than that granted to […] or to Russian companies which are subsidiaries of any third country companies whichever is the better, in respect of their operation and this in


conformity with its legislation and regulations. 4. The Community and its Member States of the one part and Russia of the other part shall grant to branches of Russian and Community companies respectively a treatment no less favourable than that accorded to branches of companies of any third country, in respect of their operation and this in conformity with their legislation and regulations.

Treatment granted to investors of a third country by either Party arising from a regional economic integration agreement requiring the Parties thereto to approximate their legislation shall be excluded from the obligation of this provision. Treatment granted under measures benefiting from the coverage of an MFN exemption listed in accordance with Article II.2 of the General Agreement on Trade in Services shall also be excluded from this provision.

[Exemptions possible when listed + derogations for REI agreements and for MRAs]

For the purposes of Chapters II, III and of Title V, no account shall be taken of treatment accorded by the Community, its Member States or Russia pursuant to commitments entered into in economic integration agreements.

Key Personnel Key Personnel Key Personnel Key Personnel Key Personnel

Art. 32

For the purpose of this Chapter:

(a) ‘Key personnel’ means natural persons employed within a juridical

[Definitions provided in schedules]

[Definitions provided in schedules]

Key personnel of the above mentioned companies herein referred to as "organizations" are "intra-corporate transferees" as defined in (c) in the


person other than a non-profit organisation and whose work and temporary stay is necessary for the setting-up or the proper control, administration and operation of an establishment. ‘Key personnel’ comprises ‘business visitors’ responsible for setting up an establishment and ‘intra-corporate transfers’.

(i) ‘Business visitors’ means natural persons working in a senior position who are responsible for setting up an establishment. They do not engage in making direct sales to the general public and do not receive remuneration from a source located within the host Party.

(ii) ‘Intra-corporate transfers’ means natural persons who have been employed by a juridical person or have been partners in it (other than as majority shareholders) for at least one year and who are temporarily transferred to an establishment in the territory of the other Party. The natural person concerned must belong one of the following categories:

1. Managers:

Persons working in a senior position within a juridical person, who primarily direct

following categories, provided that the organization is a legal person and that the persons concerned have been employed by it or have been partners in it (other than as majority shareholders), for at least the year immediately preceding such movement:

(a) Persons working in a senior position with an organization, who primarily direct the management of the establishment (branch, subsidiary or joint venture), receiving general supervision or direction principally from the board of directors or stockholders of the business or their equivalent, including:

– directing the establishment or a department or subdivision of the establishment;

– supervising and controlling the work of other supervisory, professional or managerial employees;

– having the authority personally to engage and dismiss or recommend engaging, dismissing or other personnel actions.

(b) Persons working within an organization who possess uncommon knowledge essential


the management of the establishment, receiving general supervision or direction principally from the board of directors of stockholders of the business or their equivalent, including:

– directing the establishment or a department or sub-division thereof;

– supervising and controlling the work of other supervisory, professional or managerial employees;having the authority personally to recruit and dismiss or recommend recruiting, dismissing or other personnel actions.

2. Specialists:

Persons working within a juridical person who possess uncommon knowledge essential to the establishment’s production, research equipment, techniques or management. In assessing such knowledge, account will be taken not only of knowledge specific to the establishment, but also of whether the person has a high level of qualification referring to a type of work or trade requiring specific technical knowledge, including membership of an accredited profession.

3. Graduate trainees:

to the establishment's service, research equipment, techniques or management. The assessment of such knowledge may reflect, apart from knowledge specific to the establishment, a high level of qualification referring to a type of work or trade requiring specific technical knowledge, including membership of an accredited profession.

(c) An "intra-corporate transferee" is defined as a natural person working within an organization in the territory of a Party, and being temporarily transferred in the context of pursuit of economic activities in the territory of the other Party; the organization concerned must have its principal place of business in the territory of a Party and the transfer be to an establishment of that organization, effectively pursuing like economic activities in the territory of the other Party.


Persons working within a juridical person who possess a university degree and are transferred for career development purposes or to obtain training in business techniques or methods

For every sector liberalised in accordance with Chapter II of this Title, the measures which a Party shall not maintain or adopt, unless otherwise specified in Annex [ ] (reservations on key personnel), are defined as limitations on the total number of natural persons that an investor may employ as key personnel in a specific sector in the form of numerical quotas or a requirement of an economic needs test.

(d) limitations on the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test;

(d) limitations on the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or a requirement of an economic needs test;

Notwithstanding the provisions of Chapter I of this Title, a Community company and a Russian company established in the territory of Russia or the Community respectively shall be entitled to employ, or have employed by one of its subsidiaries, branches or joint ventures, in accordance with the legislation in force in the host country of establishment, in the territory of Russia and the Community respectively, employees who are nationals of Member States and Russia respectively, provided that such employees are key personnel as defined in paragraph 2 of this Article, and that they are employed exclusively by companies, subsidiaries, branches or joint ventures. The residence and work permits of such employees shall only cover the period of such employment.
