CONFIDENTIAL DAFFE/MAI(97)1/REV2
   
   VII. FINANCIAL SERVICES[1](1),[2](2)
   
   PRUDENTIAL MEASURES
   
   1. Notwithstanding any other provisions of the Agreement, a
   Contracting Party shall not be
   
   prevented from taking prudential measures with respect to financial
   services, including measures for the
   
   protection of investors, depositors, policy holders or persons to whom
   a fiduciary duty is owed by an
   
   enterprise providing financial services. or to ensure the integrity
   and stability of its financial system.
   
   2. Where such measures do not conform with the provisions of the
   Agreement, they shall not be
   
   used as a means of avoiding the Contracting Party's commitments or
   obligations under the Agreement.
   
   RECOGNITION ARRANGEMENTS
   
   1. A Contracting Party may recognise prudential measures of any other
   Contracting Party or
   
   non-Contracting Party in determining how the Contracting Party's
   measures relating to financial services
   
   shall be applied. Such recognition, which may be achieved through
   harmonization or otherwise, may be
   
   bused on an agreement or arrangement with the other Contracting Party
   or non-Contracting Party
   
   concerned or may be accorded autonomously.
   
   2. A Contracting Party that is a party to such an agreement or
   arrangement referred to in paragraph 1, whether future or existing,
   shall afford adequate opportunity for other interested Contracting
   Parties to negotiate their accession to such agreements or
   arrangements, or to negotiate comparable ones with it, under
   circumstances in which there would be equivalent regulation,
   oversight, implementation of such regulation, and, if appropriate,
   procedures concerning the sharing of information between the parties
   to the agreement or arrangement. Where a Contracting Party accords
   recognition autonomously, it shall afford adequate opportunity for any
   other Contracting Party to demonstrate that such circumstances exist.
   
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   CONFIDENTIAL DAE:E:E/MAI(97) 1/REV2
   
   AUTHORISATION PROCEDURES
   
   1. Each Contracting Party's regulatory authorities shall make
   available to interested persons their
   
   requirements for completing applications relating to an investment in,
   or the operations of, a financial
   
   services enterprise.
   
   2. On the request of an applicant, the regulatory authority shall
   inform the applicant of the status of
   
   its application. If such authority requires additional information
   from the applicant, it shall notify the
   
   applicant without undue delay.
   
   3. A regulatory authority shall make an administrative decision on a
   completed application of an
   
   investor in a financial services enterprise or a financial services
   enterprise that is an investment of an
   
   investor of another Contracting Party within [120][180] days, and
   shall promptly notify the applicant of
   
   the decision. An application shall not be considered complete until
   [all relevant hearings are held and] all
   
   necessary information is received. Where it is not practicable for a
   decision to be made within [120][180]
   
   days, the regulatory authority shall notify the applicant without
   undue delay and shall endeavour to make
   
   the decision within a reasonable time thereafter.
   
   TRANSPARENCY[3](3)
   
   Nothing in this Agreement requires a Contracting Party to furnish or
   allow access to:
   
   a) information related to the financial affairs and accounts of
   individual customers of
   
   financial services enterprises; or
   
   b) any confidential or proprietary information, the disclosure of
   which would impede law
   
   enforcement or otherwise be contrary to the public interest or
   prejudice legitimate
   
   commercial interests of particular enterprises.
   
   73
   
   CONFIDENTIAL DAF]:E/\lAI(97)1/REV2
   
   INFORMATION TRANSFER AND DATA PROCESSING
   
   1. No Contracting Party shall take measures that prevent transfers of
   information or the processing
   
   of financial information outside the. territory of a Contracting
   Party, including transfers of data by
   
   electronic means, where such transfer of information or processing of
   financial information is:
   
   a) necessary for the conduct of the ordinary business of a financial
   services enterprise located
   
   in a Contracting Party that is the investment of an investor of
   another Contracting Party; or
   
   b) in connection with the purchase or sale by a financial services
   enterprise located in a
   
   Contracting Party that is the investment of an investor of another
   Contracting Party of:
   
   i) financial data processing services; or
   
   ii) financial information, including information provided to or by
   third parties. -'
   
   2. Nothing in paragraph 1:
   
   a) affects the financial service enterprise's obligation to comply
   with any record keeping and
   
   reporting requirements; or
   
   b) restricts the right of a Contracting Party to protect privacy,
   including the protection of
   
   personal data and the confidentiality of individual records and
   accounts, so long as such
   
   right is not used to circumvent the provisions of the Agreement.
   
   MEMBERSHIP OF SELF-REGULATORY BODIES AND ASSOCIATIONS
   
   When membership or participation in, or access to, any self-regulatory
   body, securities or futures
   
   exchange or market, clearing agency, or any other organization or
   association is required by a Contracting
   
   Party in order for investments of investors of any other Contracting
   Party in a financial services enterprise
   
   established in the territory of the Contracting Party to provide
   financial services on an equal basis with
   
   financial services enterprises of the Contracting Party, or when the
   Contracting Party provides directly or
   
   indirectly such entities, privileges or advantages in providing
   financial services, the Contracting Party
   
   shall ensure that such entities accord national treatment to such
   investments.
   
   PAYMENTS AND CLEARING SYSTEMS/LENDER OF LAST RESORT[4](4)
   
   1. Under terms and conditions that accord national treatment, each
   Contracting Party shall grant to
   
   financial services enterprises that are investments of investors of
   any other Contracting 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.
   
   2. The provisions of this Agreement are not intended to confer access
   to the Contracting Party's
   
   lender of last resort facilities.
   
   74
   
   CONFIDENTIAL DAFFE/MAI(97) 1/REV2
   
   DISPUTE SETTLEMENT
   
   DETERMINATION OF CERTAIN FINANCIAL SERVICES ISSUES IN INVESTOR TO
   STATE
   
   PROCEEDINGS
   
   The following text was considered in informal consultations on
   financial matters[5](5):
   
   "1. Where an investor of a Contracting Party submits a claim under
   Article D (Investor-State
   
   Procedures) against another Contracting Party and the disputing
   Contracting Party invokes Article xx
   
   (Prudential Measures) [Article xx (Temporary Safeguards)] [Article xx
   (Role of Monetary Authorities)], on
   
   request of the disputing Contracting Party, the Tribunal shall refer
   the matter in writing to [the authority
   
   responsible for financial services in each of] the Contracting Parties
   involved in the dispute for a decision.
   
   The Tribunal may not proceed pending receipt of a decision or report
   under this Article.
   
   2. In a referral pursuant to paragraph l, the [authorities referred to
   in paragraph 1] [Contracting
   
   Parties] shall consult with each other to decide the issue of whether
   and to what extent Article xx (Prudential
   
   Measures) [Article xx (Temporary Safeguards)] [Article xx (Role of
   Monetary Authorities)l, is a valid
   
   defence to the claim of the investor. The [authorities] [Contracting
   Parties] shall transmit a copy of their
   
   decision to the Tribunal [and to the Parties Group]. The decision
   shall be binding on the Tribunal.
   
   3. Where the [authorities] [Contacting Parties] have not decided the
   issue within 60 days of the
   
   receipt of the referral under paragraph 1, the disputing Contracting
   Party or the Contracting Party of the
   
   investor may request the establishment of an arbitral panel under
   Article xx (Request for a State to State
   
   Arbitral Tribunal) to determine whether, and to what extent, Article
   xx (Prudential Measures) [Article xx
   
   (Temporary Safeguards)1 [Article xx (Role of Monetary Authorities)l,
   is a valid defence to the claim of the
   
   investor. The Tribunal shall be constituted in accordance with
   [Article xx (see section A above on
   
   Composition of Dispute Settlement Panels in Financial Services
   Disputes)l. Further to Article xx (heal
   
   Report), the panel shall transmit its final report to the
   [authorities] [Contracting Parties] and to the Investor-
   
   State Tribunal. The report shall be binding on the Tribunal.
   
   4. Where no request for the establishment of a State to State Tribunal
   pursuant to paragraph 3 has
   
   been made within 10 days of the expiration of the 60-day period
   referred to in paragraph 3, the Investor-
   
   State Tribunal may proceed to decide the matter."
   
   75
   
   COMPOSITION OF DISPUTE SETTLEMENT PANELS IN FINANCIAL SERVICES
   DISPUTES
   
   The following proposals for text were considered in informal
   consultations on financial matters:
   
   Proposal 1
   
   "Panels for disputes on prudential issues and other financial matters
   shall have the necessary
   
   expertise relevant to the specific financial services under dispute."
   
   Proposal 2
   
   "Selection of the Panel
   
   1. Where a Party claims that a dispute involves financial [services]
   matters, Articles C.2 and D.7 as
   
   applicable (Panel Formation) shall apply, except that:
   
   (a) where the disputing Parties so agree, the tribunal panel shall be
   composed entirely of
   
   panellists meeting the qualifications in paragraph 2; and
   
   (b) where the disputing Parties do not agree that the panel be
   composed in accordance with (a),
   
   (i) each disputing Party may select panellists meeting the
   qualifications set out in
   
   paragraph 2, or in Article C.2.c or D.7.c as applicable
   (Qualifications of Panellists), and
   
   (ii) if the Party complained against invokes Article xx (Prudential
   Measures) [Article xx
   
   (Temporary Safeguards)] [Article xx (Role of Monetary Authorities)l,
   the chair of the
   
   panel shall meet the qualifications set out in paragraph 2.
   
   2. Financial services experts shall:
   
   (a)have expertise or experience in financial services law or practice,
   which may include the
   
   regulation of financial institutions;
   
   (b) be chosen strictly on the basis of objectivity, reliability and
   sound judgement; and
   
   (c) be independent of, and not be affiliated with or take instructions
   from, any Party."
   
   76 
   
   CONFIDENTIAL DAFFE/MAI(97) 1/REV2
   
   DEFINITION OF FINANCIAL SERVICES
   
   Financial services include all insurance and insurance-related
   services, and all banking and other
   
   financial services (excluding insurance). Financial services include
   the following activities:
   
   Insurance and insurance-related services
   
   (i) Direct insurance (including co-insurance):
   
   (A) life
   
   (B) non-life
   
   (ii) Reinsurance and retrocession;
   
   (iii) Insurance intermediation, such as brokerage and agency;
   
   (iv) Services auxiliary to insurance, such as consultancy, actuarial,
   risk assessment and claim
   
   settlement services.
   
   Banking and other financial services (excluding insurance)
   
   (v)Acceptance of deposits and other repayable funds from the public;
   
   (vi) Lending of all types, including consumer credit, mortgage credit,
   factoring and financing
   
   of commercial transaction;
   
   (vii) Financial leasing;
   
   (viii) All payment and money transmission services, including credit,
   charge and debit cards,
   
   travellers cheques and bankers drafts;
   
   (ix) Guarantees and commitments;
   
   (x)Trading for own account or for account of customers, whether on an
   exchange, in an
   
   over-the-counter market or otherwise, the following:
   
   (A) money market instruments (including cheques, bills, certificates
   of deposits);
   
   (B) foreign exchange;
   
   (C) derivative products including, but not limited to, futures and
   options;
   
   (D) exchange rate and interest rate instruments, including products
   such as swaps, forward
   
   rate agreements;
   
   (E) transferable securities;
   
   (F) other negotiable instruments and financial assets, including
   bullion.
   
                                     77
                                      
   CONFIDENTIAL DAFFE/MAI(97) 1/REV2
   
   (xi) Participation in issues of all kinds of securities, including
   underwriting and placement as
   
   agent (whether publicly or privately) and provision of services
   related to such issues;
   
   (xii) Money braking;
   
   (xiii) Asset management. such as cash or portfolio management, all
   forms of collective
   
   investment management. pension fund management, custodial, depository
   and trust
   
   services;
   
   (xiv) Settlement and clearing services for financial assets, including
   securities, derivative
   
   products, and other negotiable instruments;
   
   (xv) Provision and transfer of financial information, and financial
   data processing and related
   
   software by suppliers of other financial services;
   
   (xvi) Advisory, intermediation and other auxiliary financial services
   on all the activities listed in subparagraphs (v) through (xv),
   including credit reference and analysis, investment and portfolio
   research and advice, advice on acquisitions and on corporate
   restructuring and strategy.
   
                                     78
                                      
   1. EG5 agreed that the financial services sector, which is highly
   regulated for prudential reasons, is unique in some respects and to
   some extent calls for specific treatment. However, a number of
   delegations considered that the general provisions of the MAI are
   sufficient to meet the needs of the financial services sector in a
   number of potential areas. In some cases, proposals for text on
   financial services were considered to have more general application in
   the MAI. It was suggested that such text could be useful in the
   development of general disciplines in the MAI
   
   2. The Negotiating Group discussed financial services issues at its
   April 1997 meeting. Proposed text below on prudential measures and the
   definition of financial services were agreed. The Chairman found that
   there was broad support, but not consensus, for proposed text on
   recognition arrangements, authorization procedures, transparency,
   information transfer and data processing, and membership of
   self-regulatory bodies. The Negotiating Group invited Drafting Group
   No. 3 to consider the possibility of developing comparable provisions
   for the MAI as a whole. Proposed texts on payments and clearing
   systems/lender of last resort and dispute settlement have not yet been
   discussed by the Negotiating Group. Placement of financial services
   texts is to be decided. See also Commentary.
   
   3. The text proposed here by EG5 is additional to the text of the
   General Transparency provision (see
   
   Section III, Treatment of Investors and Investments). 
   
   4. These matters need further work with a view to finalizing text. See
   also Commentary. 
   
   5. An alternative text has also been proposed, under which a special
   panel of financial experts, consisting of 
   
   10 or perhaps 15 members, would decide by consensus or consensus minus
   one whether a Contracting 
   
   Party, in the case of a prudential measure, temporary safeguard or
   action taken in pursuit of monetary or 
   
   exchange rate policy, has acted in accordance with the MAI
   [DAFFE/MAI/RD(97)25]. 

References

   1. http://www.citizen.org/pctrade/maitext7.htm#N_1_
   2. http://www.citizen.org/pctrade/maitext7.htm#N_2_
   3. http://www.citizen.org/pctrade/maitext7.htm#N_3_
   4. http://www.citizen.org/pctrade/maitext7.htm#N_4_
   5. http://www.citizen.org/pctrade/maitext7.htm#N_5_