Scope of Application [Return to the top of the page]

DEFINITION OF INVESTMENT

The term “investment” means any kind of asset owned or controlled either directly, or indirectly through an investor of a third State, by an investor of one Contracting Party in the territory of the other Contracting Party in accordance with the latter’s laws.

This general definition is illustrated by a non exhaustive list of groups of specific rights, including:

• traditional property rights;

• rights in companies;

• goodwill;

• money, claims to money, and claims to performance under contract having a financial value;

• intellectual property rights; and

• rights, conferred by law or under contract, to undertake any economic and commercial activity, including any rights to search for, cultivate, extract or exploit natural resources.

An “investment” does not include real estate or other property, tangible or intangible, not acquired in the expectation or used for the purpose of economic benefit or other business purposes. (Article I (f)).

An investment shall be considered to be controlled by an investor if the investor demonstrably controls, directly or indirectly, the enterprise which owns the asset. (Annex 1 (1)).

DEFINITION OF INVESTOR

Nationals

The term “investor” means:

• in the case of Canada, any natural person possessing the citizenship of or permanently residing in Canada in accordance with its laws, and who makes the investment in the territory of Venezuela and who does not possess the citizenship of Venezuela;

• in the case of Venezuela, any natural person possessing the citizenship of or permanently residing in Venezuela in accordance with its laws, and who makes the investment in the territory of Canada and who does not possess the citizenship of Canada. (Article I (g)).

The term “natural person possessing the citizenship of Canada” shall include a natural person permanently residing in Canada in accordance with the laws of Canada, including the provisions of the Immigration Act of Canada and includes a natural person who has been granted landing status under the Act, has not become a Canadian citizen, and has not ceased to be a permanent resident of Canada pursuant to the provisions of the Act. (Annex 1 (2)).

Companies

The term “investor” means:

• in the case of Canada, any enterprise incorporated or duly constituted in accordance with applicable laws of Canada and who makes the investment in the territory of Venezuela, and
• in the case of Venezuela, any enterprise incorporated or duly constituted in accordance with applicable laws of Venezuela and who makes the investment in the territory of Canada. (Article I (g)).

Application in Time (Entry into Force and Duration: Applicability to Investments made Prior to Entry into Force)

Date of signature: July 1, 1996
Entry into force: January 28, 1998
Duration: The Agreement shall remain in force unless either Contracting Party notifies the other Contracting Party in writing of its intention to terminate it. The termination of this Agreement shall become effective one year after notice of termination has been received by the other Contracting Party. In respect of investments or commitments to invest made prior to the date when the termination of this Agreement becomes effective, the provisions of Articles I to XVI inclusive of, and the Annex to, this Agreement shall remain in force for a period of fifteen years.

Admission [Return to the top of the page]

Each Contracting Party shall permit establishment of a new business enterprise or acquisition of an existing business enterprise or a share of such enterprise by investors or prospective investors of the other Contracting Party, in accordance with its laws and regulations, but in all cases on a basis no less favourable than that which, in like circumstances, it permits such acquisition or establishment by investors or prospective investors of any third state. (Article II (3))

Paragraph 3 of Article II does not apply in respect of financial services. (Article 5 of Annex).

Decisions by either Contracting Party, pursuant to measures not inconsistent with this Agreement, as to whether or not to permit an acquisition shall not be subject to the provisions of Articles XII or XIV. Article II (3) (a) of Annex).

Decisions by either Contracting Party not to permit establishment of a new business enterprise or acquisition of an existing business enterprise or a share of such enterprise by investors or prospective investors shall not be subject to the provisions of Article XII of this Agreement. (Article II (3) (b) of Annex).

Neither Contracting Party may impose any of the following requirements in connection with permitting the establishment or acquisition of an investment or enforce any of the following requirements in connection with the subsequent regulation of that investment:

1. The purchase or use by an enterprise of products of domestic origin or from domestic source, whether specified in terms of particular products, in terms of volume or value of products, or in terms of a proportion of volume or value of its local production.
2. That an enterprise’s purchase or use of imported products be limited to an amount related to the volume or value of local products that it exports;
3. Restrictions on the importation by an enterprise of products used in or related to its local production by restricting its access to foreign exchange to an amount related to the foreign exchange inflows attributable to the enterprise;
4. Restrictions on exportation or sale for export by an enterprise of products, whether specified in terms of particular products, in terms of volume or value of products, or in terms of a proportion of volume of its local production; and
5. Requirements that an investor of the other Contracting Party transfer technology, a production process or other proprietary knowledge to a person in its territory unaffiliated with the transferor, except when the requirement is imposed or the commitment or undertaking is enforced by a court, administrative tribunal or competition authority, either to remedy an alleged violation of competition laws or acting in manner not inconsistent with other provisions of this Agreement. (Article II (6) of Annex).

Articles II [Establishment, Acquisition and Protection of Investments], III [Most-Favoured-Nation (MFN) Treatment after Establishment and Exception to MFN], IV [National Treatment after Establishment] and V [Other Measures] of this Agreement and the related provisions of this Annex do not apply to:

1. Procurement by a government or state enterprise;
2. Subsidies or grants provided by a government or a state enterprise, including government-supported loans, guarantees and insurance;
3. Any measure denying investors of one Contracting Party and their investments any rights or preferences provided to the aboriginal peoples of either country; or
4. Any current or future foreign aid program to promote economic development, whether under a bilateral agreement, or pursuant to a multilateral arrangement or agreement, such as the OECD Agreement on export credits. (Article II (8) of Annex).

Investments in cultural industries are exempt from the provision of this Agreement. “Cultural industries” means natural persons or enterprises engaged in any of the following activities:

1. The publication, distribution, or sale of books, magazines, periodicals, or newspapers in print or machine readable form but not including the sole activity of printing or typesetting any of the foregoing;
2. The production, distribution, sale or exhibition of film or video recordings;
3. The production, distribution, sale or exhibition of audio or video music recordings;
4. The publication, distribution, sale or exhibition of music in print or machine readable form; or
5. Radiocommunications in which the transmission are intended for direct reception by the general public, and all radio, television, or cable broadcasting undertakings and all satellite programming and broadcast network services. (Article II (9) of Annex).

Treatment [Return to the top of the page]

STANDARDS

Fair and Equitable Treatment

Yes. Each Contracting Party shall, in accordance with the principles of international law, accord investments or returns of investors of the other Contracting Party fair and equitable treatment and full protection and security. (Article II (2)).

Full Protection and Security

Yes. Each Contracting Party shall, in accordance with the principles of international law, accord investments or returns of investors of the other Contracting Party fair and equitable treatment and full protection and security. (Article II (2)).

Non-Discrimination

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National Treatment

Each Contracting Party shall grant to investments or returns of investors of the other Contracting Party treatment no less favourable than that which, in like circumstances, it grants to investments or returns of its own investors. (Article IV (1)).

Each Contracting Party shall grant to investors of the other Contracting Party treatment no less favourable than that which, in like circumstances, it grants its own investors with respect to the expansion, management, conduct, operation, use, enjoyment, sale or disposal of the investment or returns. (Article IV (2)).

Most-Favored Nation Treatment

Each Contracting Party shall grant to investments, or returns of investors of the other Contracting Party, treatment no less favourable than that which, in like circumstances, it grants to investments or returns of investors of any third State. (Article III (1)).

Each Contracting Party shall grant investors of the other Contracting Party, as regards their expansion, management, conduct, operation, use, enjoyment, sale, or disposal of their investments or returns, treatment no less favourable than that which, in like circumstances, it grants to investors of any third State. (Article III (2)).

Each Contracting Party shall permit establishment of a new business enterprise or acquisition of an existing business enterprise or a share of such enterprise by investors or prospective investors of the other Contracting Party, in accordance with its laws and regulations, but in all cases on a basis no less favourable than that which, in like circumstances, it permits such acquisition or establishment by investors or prospective investors of any third state. (Article II (3)).

EXCEPTIONS

Paragraph (3) of Article II and paragraphs (1) and (2) of this Article do not apply to treatment by a Contracting Party pursuant to any existing or future bilateral or multilateral agreement establishing, strengthening or expanding a free trade area or customs union. (Article III (3)).

Nothing in this Agreement shall be interpreted to require a Contracting Party to extend to the other Contracting Party, any investor of the other Contracting Party, or to any investment, any right, privilege, preference or treatment more favourable than required to be extended by that Contracting Party in the case of Canada, under the North American Free Trade Agreement (the "NAFTA") to any state, investor or investment to which the NAFTA applies; in the case of Venezuela, under the Free Trade Treaty of the Group of Three (the "G-3 Agreement") to any state, investor or investment to which the G-3 Agreement applies. (Article II (1) of the Annex).

Paragraph I alone shall not be interpreted to require a Contracting Party to extend to the other Contracting Party, or to any investor of the other Contracting Party, or to any investment, any right, privilege, preference or treatment which it extends in the case of Canada, under the NAFTA to any state, investor or investment to which the NAFTA applies; in the case of Venezuela, under G-3 Agreement to any state, investor or investment to which the G-3 Agreement applies. (Article II (2) of the Annex).

Paragraph (3) of Article II and paragraphs (1) and (2) of Article III do not apply to treatment by a Contracting Party pursuant to any existing or future bilateral or multilateral agreement:

1. negotiated within the framework of the GATT or its successor organization and liberalizing trade in services, or
2. relating to aviation; telecommunications transport networks and telecommunications transport services; fisheries; maritime matters, including salvage; or financial services. (Article II (4)) of the Annex).

Paragraph 3 of Article II does not apply in respect of financial services. (Article II (5) of the Annex). Articles II, III, IV and V of this Agreement and the related provisions of this Annex do not apply to:

1. procurement by a government or state enterprise;
2. subsidies or grants provided by a government or a state enterprise, including government-supported loans, guarantees and insurance;
3. any measure denying investors of the other Contracting Party and their investments any rights or preferences provided to the aboriginal peoples of either country; or
4. any current or future foreign aid program to promote economic development, whether under a bilateral agreement, or pursuant to a multilateral arrangement or agreement, such as the OECD Agreement on Export Credits. (Article II (8)) of the Annex).

Investments in cultural industries are exempt from the provisions of this Agreement. "Cultural industries" means natural persons or enterprises engaged in any of the following activities:

1. the publication, distribution, or sale of books, magazines, periodicals or newspapers in print or machine readable form but not including the sole activity of printing or typesetting any of the foregoing;
2. the production, distribution, sale or exhibition of film or video recordings;
3. the production, distribution, sale or exhibition of audio or video music recordings;
4. the publication, distribution, sale or exhibition of music in print or machine readable form; or
5. radiommunications in which the transmissions are intended for direct reception by the general public, and all radio, television or cable broadcasting undertakings and all satellite programming and broadcast network services. (Article II (9) of the Annex).

Nothing in this Agreement shall be construed to prevent a Contracting Party from adopting, maintaining or enforcing any measure otherwise consistent with this Agreement that it considers appropriate to ensure that investment activity in its territory is undertaken in a manner sensitive to environmental concerns. (Art. II (10) (a) of the Annex).

Provided that such measures are not applied in an arbitrary or unjustifiable manner, or do not constitute a disguised restriction on international trade or investment, nothing in this Agreement shall be construed to prevent a Contracting Party from adopting or maintaining measures, including environmental measures:

1. necessary to ensure compliance with laws and regulations that are not inconsistent with the provisions of this Agreement;
2. necessary to protect human, animal or plant life or health; or
3. relating to the conservation of living or non-living exhaustible natural resources. (Article II (10) (b) of the Annex).

Paragraphs (1) and (2) of Article IV. paragraph (1) of Article V, and paragraph 6 of Part II of this Amex do not apply to:

1.  
   1. any existing non-conforming measures maintained within the territory of a Contracting Party; and
   2. any measure maintained or adopted after the date of entry into force of this Agreement that, at the time of sale or other disposition of a government's equity interests in, or the assets of, an existing state enterprise or an existing governmental entity, prohibits or imposes limitations on the ownership of equity interests or assets or impose nationality requirements relating to senior management or members of the board of directors;
2. the continuation or prompt renewal of any non-conforming measure referred to in subparagraph (a);
3. an amendment to any non-conforming measure referred to in subparagraph (a), to the extent that the amendment does not decrease the conformity of the measure, as it existed immediately before the amendment, with those obligations;
4. the right of each Contracting Party to make or maintain exceptions within the sectors or matters listed below:
   1. Canada reserves the right to make and maintain exceptions in the sectors or matters listed below:
      • social services (i.e. public law enforcement; correctional services; income security or insurance; social security or insurance; social welfare; public education; public training; health and child care);
      • services in any other sector;
      • government securities - as described in SIC 8152;
      • residency requirements for ownership of oceanfront land;
      • measures implementing the Northwest Territories and the Yukon Oil and Gas Accords. For the purpose of this Annex, "SIC" means, with respect to Canada, Standard Industrial Classification numbers as set out in Statistics Canada, Standard Industrial Classification, fourth edition, 1980.
   2. Venezuela reserves the right to make and maintain exceptions in the sectors or-matters listed below:
      • Social services (i.e., public law enforcement; correctional services; income security or insurance; social security or insurance; social welfare; public education; public training; health and child care.)
      • Services in any other sector;
      • Ownership of vessels or airplanes registered in Venezuela; transportation by water or air within its territory; fishing in waters under its jurisdiction.
      • Ownership of land in areas that has been declared by Venezuela security areas; ownership of land by foreign states.
      • Debt-equity swaps.
      • Private enterprises for protection and security that are authorized to bear arms.
      • Venezuela may require that up to 90 percent of manual labourers and 90 percent of non-manual labourers employed by an enterprise in its territory be nationals of Venezuela provided that the requirement does not materially impair the ability of the investor to exercise control over its investment. (Article II (11) of the Annex).

The Contracting Parties shall, within a two year period after the entry into force of this Agreement, exchange letters listing, to the extent possible, any existing measures that do not conform to the obligations in Art. IV, Art. V (1), or paragraph 6 of Section II of this Annex. (Art. II (12) of the Annex).

In respect of intellectual property rights, a Contracting Party may derogate from Articles III and IV in a manner that is consistent with the Agreement Establishing the World Trade Organization done at Marrakesh, April 1994. (Art. II (7) ( a) of the Annex).

This Agreement shall apply to taxation measures only to the extent set out in this Article and in paragraph (14) of Article XII. (Article XI (1)).

Nothing in this Agreement shall be construed to prevent a Contracting Party from adopting or maintaining reasonable measures for prudential reasons, such as:

1. the protection of investors, depositors, financial market participants, policy-holders, policy-claimants, or persons to whom a fiduciary duty is owed by a financial institution;
2. the maintenance of the safety, soundness, integrity or financial responsibility of financial institutions; and
3. ensuring the integrity and stability of a Contracting Party's financial system. (Article X (1)).

OTHER ASPECTS

Performance Requirements

Neither Contracting Party may impose any of the following requirements in connection with permitting the establishment or acquisition of an investment or enforce any of the following requirements in connection with the subsequent regulation of that investment:

1. the purchase or use by an enterprise of products of domestic origin or from any domestic source, whether specified in terms of particular products, in terms of volume or value of products, or in terms of a proportion of volume or value of its local production;
2. that an enterprise's purchase or use of imported products be limited to an amount related to the volume or value of local products that it exports;
3. restrictions on the importation by an enterprise of products used in or related to its local production by restricting its access to foreign exchange to an amount related to the foreign exchange inflows attributable to the enterprise;
4. restrictions on exportation or sale for export by an enterprise of products, whether specified in terms of particular products, in terms of volume or value of products, or in terms of a proportion of volume of its local production; and
5. requirements that an investor of the other Contracting Party transfer technology, a production process or other proprietary knowledge to a person in its territory unaffiliated with the transferor, except when the requirement is imposed or the commitment or undertaking is enforced by a court, administrative tribunal or competition authority, either to remedy an alleged violation of competition laws or acting in a manner not inconsistent with other provisions of this Agreement. (Article II (6) of the Annex).

Others

Investors of one Contracting Party who suffer losses because their investments or returns on the territory of the other Contracting Party are affected by an armed conflict, a national emergency or a natural disaster on that territory, shall be accorded by such latter Contracting Party, in respect of restitution, indemnification, compensation or other settlement, treatment no less favourable than that which it accords to its own investors or to investors of any third State. (Article VI).

A Contracting Party may not require that an enterprise of that Contracting Party, that is an investment under this Agreement, appoint to senior management positions individuals of any particular nationality. (Article V (1) (a)).

A Contracting Party may require that a majority of the board of directors, or any committee thereof, of an enterprise that is an investment under this Agreement be of a particular nationality, or resident in the territory of the Contracting Party, provided that the requirement does not materially impair the ability of the investor to exercise control over its investment. (Article V (1) (b)).

Subject always to its laws, regulations and policies relating to the entry of aliens, each Contracting Party shall grant temporary entry to citizens of the other Contracting Party employed by an enterprise who seeks to render services to that enterprise or a subsidiary or affiliate thereof, in a capacity that is managerial, executive or involves specialized knowledge. (Article V (2)).

Transfers [Return to the top of the page]

TYPES OF PAYMENT

Returns

Yes. Each Contracting Party shall guarantee to an investor of the other Contracting Party the unrestricted transfer of investments and returns. Without limiting the generality of the foregoing, each Contracting Party shall also guarantee to the investor the unrestricted transfer of:

1. funds in repayment of loans related to an investment;
2. the proceeds of the total or partial liquidation of any investment;
3. wages and other remuneration accruing to a citizen of the other Contracting Party who was permitted to work in a capacity that is managerial, executive or involves specialized knowledge in connection with an investment in the territory of the other Contracting Party;
4. any compensation owed to an investor by virtue of Articles VI or VII of the Agreement. (Article VIII (1)).

Neither Contracting Party may require its investors to transfer, or penalize its investors that fail to transfer, the returns attributable to investments in the territory of the other Contracting Party. (Article VIII (3)).

Repayment of Loans

Yes. (Article VIII (1) (a)).

Proceeds of the Total or Partial Liquidation of an Investment

Yes. (Article VIII (1) (b).

Licenses and Other Fees

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Other Categories of Payment

Yes. (Article VIII (1) (c ) (d)).

CONVERTIBILITY, EXCHANGE RATES, AND TIMES OF TRANSFER

Currency

Transfers shall be effected without delay in the convertible currency in which the capital was originally invested or in any other convertible currency agreed by the investor and the Contracting Party concerned. Unless otherwise agreed by the investor, transfers shall be made at the rate of exchange applicable on the date of transfer. (Article VIII (2)).

Exchange Rates

Unless otherwise agreed by the investor, transfers shall be made at the rate of exchange applicable on the date of transfer. (Article VIII (2)).

Time of Transfer

Transfers shall be effected without delay. (Article VIII (2)). Notwithstanding paragraphs 1, 2 and 3, a Contracting Party may prevent a transfer through the equitable, non-discriminatory and good faith application of its laws relating to:

1. bankruptcy, insolvency or the protection of the rights of creditors;
2. issuing, trading or dealing in securities;
3. criminal or penal offenses;
4. reports of transfers of currency or other monetary instruments; or
5. ensuring the satisfaction of judgments in adjudicatory proceedings. (Article VIII (4)).

Paragraph 3 shall not be construed to prevent a Contracting Party from imposing any measure through the equitable, non-discriminatory and good faith application of its laws relating to the matters set out in subparagraphs (a) through (e) of paragraph 4. (Article VIII (5)).

Notwithstanding paragraphs 1, 2 and 3 and without limiting the applicability of paragraph 4, a Contracting Party may prevent or limit transfers by a financial institution to, or for the benefit of, an affiliate of or person related to such institution, 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. (Article VIII (6)).

Expropriation [Return to the top of the page]

DEFINITION

Covered Expropriatory Measures

Expropriation, nationalization or measures having an effect equivalent to nationalization or expropriation. (Article VII (1)).

CONDITIONS

Public Purpose and Non-Discrimination

Yes. (Article VII (1)).

Due Process of Law and Judicial Review

Yes. (Article VII (1) (2)).

Other

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Compensation Standard; Form and Time of Payment

“Prompt, adequate and effective compensation”

Compensation shall be based on the genuine value of the investment or returns expropriated immediately before the expropriation or at the time the proposed expropriation became public knowledge, whichever is earlier, shall be payable from the date of expropriation with interest at a normal commercial rate, shall be paid without delay and shall be effectively realizable and freely transferable. (Article VII (1)).

Settlement of Disputes between Contracting Parties
[Return to the top of the page]

PRE-ARBITRATION NEGOTIATIONS

Any dispute between the Contracting Parties concerning the interpretation or application of this Agreement shall, whenever possible, be settled amicably through consultations. (Article XIV (1)).

If a dispute cannot be settled through consultations, it shall, at the request of either Contracting Party, be submitted to an arbitral tribunal for decision. (Article XIV (2)).

ARBITRATION

Constitution of the Tribunal

An arbitral tribunal shall be constituted for each dispute. Within two months after receipt through diplomatic channels of the request for arbitration, each Contracting Party shall appoint one member to the arbitral tribunal. The two members shall then select a national of a third State who, upon approval by the two Contracting Parties, shall be appointed Chairman of the arbitral tribunal. The Chairman shall be appointed within two months from the date of appointment of the other two members of the arbitral tribunal. (Article XIV (3)).

If within the periods specified in paragraph (3) of this Article the necessary appointments have not been made, either Contracting Party may, in the absence of any other agreement, invite the President of the International Court of Justice to make the necessary appointments. (There are also additional provisions to cover cases when the President is a national of either Contracting Party or is otherwise prevented from fulfilling this function). (Article XIV (4)).

Each Contracting Party shall bear the costs of its own member of the tribunal and of its representation in the arbitral proceedings; the costs related to the Chairman and any remaining costs shall be borne equally by the Contracting Parties. The arbitral tribunal may, however, in its decision direct that a higher proportion of costs shall be borne by one of the two Contracting Parties, and this award shall be binding on both Contracting Parties. (Article XIV (6)).

Procedural Rules of the Tribunal

The arbitral tribunal shall determine its own procedure. The arbitral tribunal shall reach its decision by a majority of votes. Such decision shall be binding on both Contracting Parties. Unless otherwise agreed, the decision of the arbitral tribunal shall be rendered within six months of the appointment of the Chairman in accordance with paragraphs (3) or (4) of this Article. (Article XIV (5)).

The Contracting Parties shall endeavour to reach agreement, within 60 days of the decision of a tribunal, on the manner in which to resolve their dispute in conformity with such decision. (Article XIV (7)).

Applicable Law

No reference.

Settlement of Disputes between a Contracting Party and an Investor [Return to the top of the page]

DEFINITION

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PREARBITRAL CONSULTATIONS AND DISPUTE SETTLEMENT MECHANISMS

Any dispute between one Contracting Party and an investor of the other Contracting Party, relating to a claim by the investor that a measure taken or not taken by the former Contracting Party is in breach of this Agreement, and that the investor has incurred loss or damage by reason of, or arising out of, that breach, shall, to the extent possible, be settled amicably between them. (Article XII (1)).

If a dispute has not been settled amicably within a period of six months from the date on which it was initiated, it may be submitted by the investor to arbitration (see paragraph 4). (Article XII (2)).

ARBITRAL SETTLEMENT OF DISPUTES

Conditions

An investor may submit a dispute as referred to in paragraph (1) to arbitration in accordance with paragraph (4) only if:

1. the investor has consented in writing thereto;
2. the investor has waived its right to initiate or continue any other proceedings in relation to the measure that is alleged to be in breach of this Agreement before the courts or tribunals of the Contracting Party concerned or in a dispute settlement procedure of any kind;
3. if the matter involves taxation, the conditions specified in Article XII (14) have been fulfilled; and
4. not more than three years have elapsed from the date on which the investor first acquired, or should have first acquired, knowledge of the alleged breach and knowledge that the investor has incurred loss or damage. (Article XII (3)).

Consent

Consent set out explicitly in Article XII (5).

Forms of Arbitration

The dispute may, by the investor concerned, be submitted to arbitration under:

1. ICSID, provided that both the disputing Contracting Party and the Contracting Party of the investor are parties to the ICSID Convention; or
2. the Additional Facility Rules of ICSID, provided that either the disputing Contracting Party or the Contracting Party of the investor, but not both, is a party to the ICSID Convention; or In case neither of the procedures mentioned above is available, the investor may submit the dispute to an international arbitrator or ad hoc arbitration tribunal established under the Arbitration Rules of UNCITRAL. (Article XII (4)).

Applicable Law

A tribunal established under this Article shall decide the issues in dispute in accordance with this Agreement and applicable rules of international law. An interpretation of this Agreement to which both Contracting Parties have agreed shall be binding upon the tribunal. (Article XII (7)).