PART FIVE

FINANCIAL SERVICES

Chapter Seventeen

Financial Services

Article 1701: Scope and Coverage

1. This Part and Articles 1601, 2001, 2002, 2003, 2010, 2101, 2104, 2105 and 2106 shall apply to financial services and constitute the entirety of the agreement between the Parties with respect to financial services. No other provision of this Agreement confers rights or imposes obligations on the Parties with respect to financial services.

2. The provisions of this Part, with the exception of Article 1601 as referred to in paragraph 1, shall not apply to any measure of a political subdivision of either Party.

Article 1702: Commitments of the United States of America

1. To the extent that domestic and foreign banks, including bank holding companies and affiliates thereof, are permitted to engage in the dealing in, underwriting, and purchasing of debt obligations backed by the full faith and credit of the United States of America or its political subdivisions, the United States of America shall permit domestic and foreign banks, including bank holding companies and affiliates thereof, to engage in the dealing in, underwriting, and purchasing of debt obligations backed to a comparable degree by Canada or its political subdivisions, which include, but are not limited to, obligations of or guaranteed by Canada or its political subdivisions, and obligations of agents thereof where the obligations of the agents are incurred in their capacity as agents for their principals and the principals are ultimately and unconditionally liable in respect of the obligations.

2. The United States of America shall not adopt or apply any measure under federal law that would accord treatment less favourable to Canadian-controlled banks than that accorded on October 4, 1987, with respect to their ability to establish and operate, outside their home states, any state branch, state agency or bank or commercial lending company subsidiary.

3. The United States of America shall accord Canadian-controlled financial institutions the same treatment as that accorded United States financial institutions with respect to amendments to the Glass-Steagall Act and associated legislation and resulting amendments to regulations and administrative practices.

4. This Part shall not be construed as representing the mutual satisfaction of the Parties concerning the treatment of their respective financial institutions. Accordingly, the United States of America shall, subject to Canada's commitment to consult and to liberalize further the rules governing its markets and to extend the benefits of such liberalization to United States-controlled financial institutions established under the laws of Canada, continue to provide Canadian- controlled financial institutions established under the laws of the United States of America with the rights and privileges they now have in the United States market as a result of existing laws, regulations, practices and stated policies of the United States of America. The continued provision of such rights and privileges shall be subject to normal regulatory and prudential considerations.

Article 1703: Commitments of Canada

1. United States persons ordinarily resident in the United States of America shall not be subject to restrictions that limit foreign ownership of Canadian-controlled financial institutions and, in accordance with this obligation, such United States persons shall not be subject to:

a) subsection 110(1) of the Bank Act;

b) subsections 19(1) and 20(2) of the Canadian and British Insurance Companies Act;

c) subsections 11(1) and 12(2) of the Investment Companies Act;

d) subsections 45(1) and 46(2) of the Loan Companies Act (Canada); or

e) subsections 38(1) and 39(2) of the Trust Companies Act (Canada).

 

This paragraph shall not apply to provincially constituted financial institutions.

2. Canada shall exempt United States-controlled Canadian bank subsidiaries, individually and collectively, from the limitations on the total domestic assets of foreign bank subsidiaries in Canada and, in accordance with this obligation, Canada shall:

a) not refuse to incorporate a United States-controlled Canadian bank subsidiary, nor refuse to increase the authorized capital of such subsidiaries solely on the ground that such incorporation or increase would contravene subsection 302(7) of the Bank Act;

b) not apply the provisions of subsection 174(6) of the Bank Act to such subsidiaries;

c) exempt such subsidiaries from the requirement to obtain approval of the Minister of Finance prior to opening additional branches within Canada; and

d) permit, subject to prudential requirements of general application, including measures regarding transactions between related parties, a United States-controlled Canadian bank subsidiary to transfer loans to its parent.

3. Canada shall not use review powers governing the entry of United States-controlled financial institutions in a manner inconsistent with the aims of this Part.

4. This Part shall not be construed as representing the mutual satisfaction of the Parties concerning the treatment of their respective financial institutions. Accordingly, Canada shall, subject to the United States commitment to consult and to liberalize further the rules governing its markets and to extend the benefits of such liberalization to Canadian-controlled financial institutions established under the laws of the United States of America, continue to provide United States-controlled financial institutions established under the laws of Canada with the rights and privileges they now have in the Canadian market as a result of existing laws, regulations, practices and stated policies of Canada. The continued provision of such rights and privileges is subject to normal regulatory and prudential considerations.

 

Article 1704: Notification and Consultation

1. To the extent possible, each Party shall make public, and allow opportunity for comment on, legislation and proposed regulations regarding any matter covered by this Part.

2. Either Party may request consultations at any time regarding a matter covered by this Part. Any consultations under this Part shall be between the Canadian Department of Finance and the United States Department of the Treasury.

Article 1705: General Provisions

1. Any reference to a specific Act or portion thereof in this Part, shall be deemed to include a reference to any successor Act or portion thereof.

2. Each Party may deny the benefits of this Part to a company of the other Party if the Party establishes that such company is controlled by a person of a third country.

Article 1706: Definitions

For purposes of this Part:

administrative practices means all actions, practices and procedures by any federal agency having regulatory responsibility over the activities of financial institutions, including but not limited to rules, orders, directives, and approvals;

Canadian-controlled means controlled, directly or indirectly, by one or more individuals who are ordinarily resident in Canada;

A company is controlled by one or more persons if

a) shares of the company to which are attached more than 50 percent of the votes that may be cast to elect directors of the company are beneficially owned by the person or persons; and the votes attached to those shares are sufficient to elect a majority of the directors of the company, or

 

b) the person or persons has or have, directly or indirectly, control in fact of the company;

company means any kind of corporation, company, association, or other organization, legally authorized to do business under the laws and regulations of a Party or a political subdivision thereof;

existing means in effect at the time of the entry into force of this Agreement;

financial institution is any company authorized to do business under laws of a Party or its political subdivisions relating to financial institutions as defined by a Party, or a holding company thereof;

financial service is a service of a financial nature offered by a financial institution excluding the underwriting and selling of insurance policies;

measure includes any law, regulation, procedure, requirement or practice;

ordinarily resident in a country generally means sojourning in that country for a period of, or periods the aggregate of which is, 183 days or more during the relevant year;

political subdivision includes a province, state, and local government;

third country means any country other than Canada or the United States of America or any territory not a part of the territory of either Party;

United States-controlled means controlled, directly or indirectly, by one or more United States nationals;

United States national means an individual who is a United States citizen or permanent resident of the United States of America; and

 

United States persons ordinarily resident in the United States of America, for purposes of paragraph 1 of Article 1703, means:

a) in the case of a company, a company legally constituted or organized under the laws of the United States of America and controlled, directly or indirectly, by one or more United States individuals described in subparagraph (b), and

b) in the case of an individual, one who is ordinarily resident in the United States of America.