indo- sri lanka economic & technology cooperation ... · indo- sri lanka economic &...

Without Prejudice

Draft as at 22.10.2015

………………………………………………………………………………………………

Negotiations on

Indo- Sri Lanka Economic & Technology Cooperation

Agreement (ETCA)

Between India and Sri Lanka

Sri Lanka reserves the right to propose amendments and deletions to this text, Annexes referred therein and to

propose additional provisions for consideration by the Parties at any time before the conclusion of negotiations of

India-Sri Lanka ETCA

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Contents

CHAPTER SUBJECT

Preamble

1 Establishment, Objectives and General Definitions

2 Trade in Goods

3 Trade in Services

4 Movement of Natural Persons (Dropped from CEPA text)

5 Investment (Updated Chapter was Not Available)

6 Air Services

7 Customs

8 Standards and Technical Regulations, Sanitary and Phyto-sanitary

Measures

9 Economic Cooperation

10 Consultations and Dispute Settlement

11 Final Provisions

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PREAMBLE:

The Government of the Republic of India and the Government of the Democratic

Socialist Republic of Sri Lanka (hereinafter referred to as “Parties”),

Recognising the desire for closer economic integration to achieve the shared goalsof alleviating poverty, creating wealth and bringing about progress and prosperity for the people of the two countries, underlined in the Joint Declaration by the president of Sri Lanka and the Prime Minister of India in June 2010

Recognising the considerable benefits from greater economic cooperation betweenthe two countries

Recalling the historic India-Sri Lanka Free Trade Agreement (herein after

referredto as “ISLFTA”) signed between the two Parties on 28th December, 1998 and came into operation in the year 2000;

Acknowledging; the progress achieved under the India-Sri Lanka Free Tradeagreement.

Acknowledging further that the ISLFTA has laid a robust foundation of economicintegration between the Parties;

Recognising that further economic and trade liberalization allow for the optimaluse of natural resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment;

Desiring to further minimize and, wherever possible, eliminate barriers and deepeneconomic linkages between the Parties; lower costs; increase bilateral trade and investment; increase economic efficiency; create a larger market with greater opportunities and larger economies of scale for the business activities of the Parties; and enhance the attractiveness of the Parties to capital and talent;

Reaffirming that regional trade arrangements can contribute towards acceleratingregional and global liberalisation and as building blocks in the framework of the multilateral trading system; and also believing that their cooperative framework could serve as a template for future integration with other SAARC countries;

Reaffirming the rights, obligations and undertakings of the Parties as DevelopingCountry Members of the World Trade Organisation (WTO), and other multilateral, regional and bilateral agreements and arrangements;

Desiring to promote mutually beneficial economic relations, taking into account theasymmetry of their respective economies;

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……………………………………………………………………………………………… Reaffirming their right to pursue economic philosophies suited to theirdevelopment goals and their right to regulate activities to realise their national policy objectives;

Recognising that it would be timely to build on this achievement through a morecomprehensive Economic & Technology Cooperation Agreement, best suited to the two countries.

Have agreed as follows:

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………………………………………………………………………………………………

Chapter 1

Establishment, Objectives and General Definitions

Article I: Establishment

The Parties hereby establish a Economic & Technology Cooperation Agreement (ETCA) in conformity with relevant provisions of the Marrakesh Agreement Establishing the World Trade Organisation, 1994 (WTO Agreement), especially the Enabling Clause.

Article II: Objectives

The objectives of this ETCA are to:

a) Further strengthen and enhance economic, trade and investment co-operation between the Parties by developing a policy framework encompassing trade in goods and services, investment and other areas of economic cooperation with a view to maximizing the benefits of geographical proximity and integrating the economies of the Parties;

b) Further develop and enhance the scope of the ISLFTA building upon the past experience, improve the operation, clarify specific areas and disciplines of the ISLFTA;

c) Liberalise and promote trade in services on a progressive and sequential basis, in accordance with the provisions of the General Agreement on Trade in Services (GATS), while respecting the national objectives of the Parties and recognizing the rights of Parties to regulate on the supply of services based on their level of development;

d) Establish a transparent, predictable and facilitative investment regime;

e) Explore new areas of opportunities for economic cooperation, and develop appropriate measures for closer economic cooperation between the Parties.

Article III: General Definitions (a) “Agreement” or ETCA means the Economic & Technology Cooperation Agreement between India and Sri Lanka ;

b) “Authorities” means central, state, regional or local governments or any entity / body within the territory of a Party, which exercises powers delegated to them by central, state, regional or local governments;

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c) “Committee” means the Joint Committee referred to in Article I of Chapter 11 (Final Provisions) d) “Measure” includes any law, regulation, rule, governmental procedure or requirement, decision or administrative action;

e) “Measure by a Party” means any measure taken by the authorities of a Party; f) “Standing Committee” means the Standing Committee referred to in Article I of Chapter 11 (Final Provisions) g) “Territory” means the territory of a Party including internal waters, the territorial sea and airspace above it, as well as the exclusive economic zone and the continental shelf over which a Party has / exercises sovereign rights or jurisdiction in accordance with its domestic law and international law; and

h) “WTO” means the World Trade Organization.

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……………………………………………………………………………………………… Chapter 2

Trade in Goods

Article I: Definitions

For the purposes of this Chapter, the following definitions shall apply:

“Tariffs” means basic customs duties included in the national schedules of theContracting Parties; “Anti-Dumping Agreement” means the Agreement on Implementation of Article VI of the GATT 1994;

“Customs Administration/Authority” means the competent authority that is responsible under the laws of a Party for the administration of customs laws, regulations and policies;

“Customs Duties”1 means duties imposed in connection with the importation of a good provided that such customs duties shall not include:

i) Other Duties and Charges (ODCs) imposed consistent with Article II:1(b) of the GATT 1994;

ii) charges equivalent to internal taxes, including excise duties and value added taxes imposed consistent with Article III (2) of GATT 1994;

iii) any anti-dumping, countervailing duty or other duties applied consistent with the provisions of GATT 1994, the WTO Anti-dumping Agreement, the WTO Agreement on Subsidies and Countervailing Measures and the WTO Agreement on Safeguards; and

iv) fees or other charges that are limited in amount to the approximate cost of services rendered, and do not represent a direct or indirect protection for domestic goods or a taxation of imports for fiscal purposes;

“Customs Value” means value as determined by the customs authorities of each Party in conformity with the provisions of Article VII of the GATT 1994 and the WTO Agreement on Implementation of Article VII of the GATT 1994.

1 Customs duties for India refer to basic customs duties as included in the National Customs Schedules of India and for Sri Lanka Customs duties refer to General customs duties as described in the Schedule A to the Customs Ordinance.

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……………………………………………………………………………………………… “GATT 1994” means the General Agreement on Tariffs and Trade 1994, which is part of the WTO Agreement, including Annex I (Notes and Supplementary Provisions);

“Harmonized System” means the Harmonized Commodity Description and CodingSystem (HS), as may be amended from time to time by the World CustomsOrganisation (WCO) and implemented by the parties to the HS Convention, including its General Rules for Interpretation, Section Notes and Chapter Notes, as adopted by the Parties in their respective tariff laws;

“MFN” means “most favoured nation” treatment in accordance with Article I of GATT 1994; “Originating Goods” has the same meaning as defined in Rule 4 of Rules of Origin as at Annex 2C. “Preferential Treatment” means any concession or privilege granted under thisChapter by a Party, including the elimination of tariffs on the movement of goods. “Products” means all products including manufactures and commodities in theirraw, semi-processed and processed forms. “Preferential Safeguard Measures” means the measures referred to in Article XVI of this Chapter;

“SPS Agreement” means the WTO Agreement on the Application of Sanitary and

Phyto-sanitary Measures; and

“TBT Agreement” means the WTO Agreement on Technical Barriers to Trade.

Article II: Tariff Liberalisation

1. Trade in goods between the Parties shall be governed by this Chapter. The Free Trade Agreement between the Republic of India and the Democratic Socialist

Republic of Sri Lanka (ISLFTA) signed on 28th of December 1998 together with all the related Notifications, Protocols, Side Letters, Understandings etc., governing ISLFTA’s implementation, is deemed to be incorporated into this Chapter.

2. The Parties shall continue to fulfil their respective obligations under the tariff liberalisation programme (TLP) of the ISLFTA. The Parties, however, with a view to adopting more trade liberalisation measures under the TLP, shall revise their

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……………………………………………………………………………………………… respective negative lists together with TLP within [sixty (60)] days of signing of this

Agreement.2 3. Goods which are covered under the Negative List (NL) of each Party shall not be subject to tariff concessions referred to above, except for items that are subject to preferential tariffs and tariff rate quotas.

4. Goods listed in the Negative Lists, including the items that are subject to Tariff Rate Quotas (TRQs) / Margin of Preferences (MOPs) shall be subject to review every four years, or earlier as mutually agreed, with the objective of promoting free trade between both the Parties. The first such review shall take place within one (1) year after signing of this Agreement

5. In the event of any inconsistency between the provisions of the ISLFTA and this Chapter, the latter shall prevail to the extent of inconsistency.

Article III: General Exceptions

Nothing in this Chapter shall prevent either Party from taking action and adopting measures, which it considers necessary for the protection of its national security, the protection of public morals, the protection of human, animal or plant life and health, and the protection of articles of artistic, historic and archaeological value, as provided for in Articles XX and XXI of the GATT 1994.

Article IV: National Treatment

The Parties affirm their commitments under Article III of GATT 1994.

Article V: State Trading Enterprises

1. Nothing in this Chapter shall be construed to prevent a Party from maintaining or establishing a State Trading Enterprise as understood in Article XVII of GATT 1994.

2. Each Party shall ensure that any State enterprise that it maintains or establishes, acts in a manner that is consistent with the obligations of the Parties under this Chapter and accords non-discriminatory treatment in the import from and export to the other Party. 2 India’s revised Negative List and the TLP are contained in the Annex 2A. Sri Lanka’s revised Negative

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Article VI: Rules of Origin

1. Products covered by the provisions of this Chapter shall be eligible for preferential treatment provided they satisfy the Rules of Origin set out in Annex 2C to this Agreement.

2. For the development of specific sectors of the industry of either Party, specific derogations in respect of products manufactured or produced by those sectors may be considered through mutual negotiations.

3. The Parties shall apply Product Specific Rules (PSRs) in respect of the products listed in Annex 2D to this Agreement.

4. The PSRs in Annexes 2D to this Agreement shall be reviewed and may be amended at the request of either Party. Any new proposals on PSRs may be mutually considered for inclusion in the Annexes as and when the need arises.

5. Operational Certification Procedures for implementing the rules of origin are at Annex 2E to this Agreement.

Article VII: Non-Tariff Measures

Neither Party shall adopt or maintain any non-tariff measures which are inconsistent with the provisions of the WTO Agreements except as otherwise provided in this Chapter and in conformity with Articles XI, XIII and XVIII of GATT 1994.

Article VIII: Balance of Payment Measures

1. Notwithstanding the provisions of this Chapter, any Party facing balance of payments difficulties may suspend provisionally the preferential treatment as to the quantity and value of merchandise permitted to be imported under the Chapter. When such action is taken, the Party, which initiated such action, shall immediately notify the other Party.

2. Any Party, which takes action under paragraph 1 of this Article, shall afford, upon request from the other Party, adequate opportunities for consultations with a view to preserving the stability of the preferential treatment provided under this Agreement.

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……………………………………………………………………………………………… Article IX: Anti–Dumping Measures

Each Party retains its rights and obligations under Article VI of GATT 1994 and the Anti-dumping Agreement and any amendment thereto. To this end, the provisions of the WTO Agreement on Anti-Dumping shall apply, mutatis mutandis, to the extent not specifically provided for in this Agreement. Article X: Notification of petition for investigation, exchange of information and consultations

1. The investigating authority of a Party shall, before proceeding to initiate an anti-dumping investigation, notify the other Party at least seven (7) working days in advance of the date of initiation of such investigation.

2. The purpose of notification requirement referred to in paragraph 1 is to accord an opportunity for consultations between the Parties prior to the initiation of any anti-dumping investigation against the products originating from the territory of the other Party.

3. In addition to the usual practice regarding notification in anti-dumping investigations, each Party shall, for the purposes of paragraph 1, designate a contact point to which such notification shall be conveyed through electronic means. Having recognized that it may not always be practicable for such notification to include attachments and enclosures referred to therein, both Parties agree, to the extent possible, to provide the following information:

a) the name of the petitioner; b) the complete description of the imported product under investigation,

which is sufficient for customs purposes and its classification in accordance with the Harmonized System;

c) the name, address and telephone number of the authority where request or other documents related to the investigation can be examined and further information can be obtained; and

d) a summary of the facts upon which the initiation of the investigation is to be based, including data on imports that have supposedly increased in absolute or relative terms to total production.

4. A Party, whose product is subject to an anti-dumping investigation by the other

Party, may by the due date for the submission of the response to the questionnaire3, inform, where applicable, the investigating Party in the importing country that there are no significant exports of that product to the investigating Party. Such information, together with all relevant information on record, shall be taken into 3 This relates to the questionnaire referred to in Article 6 of the WTO Anti-Dumping Agreement.

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……………………………………………………………………………………………… account by the investigating authority of the other Party in its findings. The purpose of this provision, among others, is to determine whether that the volume of dumped imports is negligible or not.

Article XI: Incomplete information

Where the information provided by the exporter or producer under anti-dumping investigation is not ideal in all respects, but the producer or exporter concerned has acted to the best of his ability, the investigating authority of a Party shall, before rejecting the information, use its best endeavours to obtain more complete information for the purposes of the investigation including, where requested, granting a reasonable extension of time to the producer or exporter concerned to make a more detailed and proper response in accordance with Article 6.1.1 of the Anti-Dumping Agreement.

Article XII: Use of Information

1. Where originating goods are subject to an anti-dumping investigation, the export price of such goods before adjustment for fair comparison in accordance with Article 2.4 of the Anti-Dumping Agreement shall, subject to paragraph 2, where appropriate, be based on the value, which appears in relevant documents, including the Certificate of Origin for the goods.

2. Where the investigating authority of a Party determines that the value referred

to in paragraph 1 is unreliable because of association or a compensatory

arrangement between the exporter and the importer or a third party, the export

price may be constructed in accordance with Article 2.3 of the Anti-Dumping

Agreement. In such instances, the investigating authority may rely on other sources

of information4, in accordance with its practice5, to arrive at the export price. Article XIII: Recommendations of the WTO Committee on Anti-Dumping Practices

Each Party may, in all anti-dumping investigations take into account the recommendations of the WTO Committee on Anti-Dumping Practices.

4 “Other source of information” means the sources identified in Article 2.3 of the Anti-Dumping

Agreement. 5 “In accordance with practice” means any determination by the Competent Authority on reasonable basis

as stated in Article 2.3 of the Anti-Dumping Agreement.

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Article XIV: Subsidies and Countervailing Measures

Each Party retains its rights and obligations under the Part V of the WTO Agreement on Agriculture as well as under Articles VI and XVI of GATT 1994 and the WTO Agreement on Subsidies and Countervailing Measures, or any amendments thereto.

Article XV: Global Safeguard Measures

Each Party retains its rights and obligations under Article XIX of GATT 1994 and the WTO Agreement on Safeguards.

Article XVI: Preferential Safeguard Measures

Clause 1: Scope

1. These provisions shall be known as Preferential Safeguards Measures. The Parties can apply preferential safeguard measures under this Chapter subject to the provisions hereunder.

2. Preferential safeguard measures shall not be applied to a product after three (3) years from the date on which tariff on that product has reached zero.

Clause 2: Definitions

For the purposes of this Article:

(a) “domestic industry” shall be understood to mean the producers as a whole of the like or directly competitive products operating within the territory of a Party or those producers whose collective output of the like or directly competitive products constitutes a major proportion of the total domestic production of such products;

(b) “serious injury” shall be understood to mean a significant overall impairment in the position of a domestic industry;

(c) “threat of serious injury” shall be understood to mean the serious injury that is clearly imminent, based on facts and not merely on allegation, conjecture or remote possibility;

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……………………………………………………………………………………………… (d) “critical circumstances” means the emergence of an exceptional situation where massive preferential imports are causing or threatening to cause “serious injury” difficult to repair and which calls for immediate action.

Clause 3: Conditions for Application of Preferential Safeguard Measures

1. The Parties may apply preferential safeguard measures subject to the conditions specified in this Article, when a product under preferential terms is being imported into a territory of a Party in such increased quantities, absolute and relative to, domestic production of the importing Party, and under such conditions as to cause or threaten to cause serious injury to the domestic industry in the importing country that produces like or directly competitive products.

2. A Party may apply or extend a preferential safeguard measure only following an investigation by that Party’s competent authorities pursuant to procedures as established in this Article.

Clause 4: Application of Preferential Safeguard Measures

1. The importing country may apply preferential safeguard measures only if the increase in the imports of the products from the exporting Party alone constitutes a substantial cause of serious injury, or threat thereof, to the domestic industry of the importing country that produces like or directly competitive products.

2. Preferential safeguard measures shall not be applied against a product originating in either Party as long as its share of imports (import share calculated on the basis of both preferential and non-preferential imports) of the product concerned in the importing country does not exceed six (6) percent.

3. A Party may not apply or continue to apply a preferential or provisional safeguard measure on a product that has been subjected to a measure under Article XIX of GATT 1994 and the WTO Agreement on Safeguards.

4. The preferential safeguard measure applied in accordance with this Article shall not affect the imports, which have been cleared by the Customs Authority of the importing Party prior to the date of entry into force of the measure.

Clause 5: Types of Preferential Safeguard Measures

1. The importing country may, subject to the conditions provided in Clauses 3 and 4, to the extent necessary to prevent or remedy serious injury and facilitate adjustment, apply a preferential safeguard measure, consisting of:

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……………………………………………………………………………………………… (a) Temporary suspension of the further reduction of any rate of customs duty

provided for under this Chapter for the product from the date on which the action to apply the preferential safeguard measure is taken; or

(b) Temporary partial suspension of the tariff preferences already granted in

accordance with this Chapter for the product subject to the measure; or

(c) An increase of the rate of customs duty of the product to a level not to exceed a level, which is lesser of:

(i) the most-favoured-nation (MFN) applied rate of customs duty in effect

on the date on which the action to apply the Preferential Safeguard measure is taken; or

(ii) the MFN applied rate of customs duty in effect on the day immediately

preceding the date of entry into force of this Agreement;

(d) Imposition of quantitative restriction which shall not reduce the quantity of imports below the level of a recent period which shall be the average of imports in the last three (3) years for which statistics are available, unless clear justification is given that a different level is necessary to prevent or remedy serious injury.

2. The Parties shall choose, in consultation with each other, one or a combination of the above measures most suitable for the achievement of the objectives of Clauses 3 and 4 of this Article.

Clause 6: Investigation

1. Each Party shall ensure the consistent, impartial and reasonable administration of its laws, regulations, decisions and rulings governing all safeguard investigation proceedings. To this end, each Party shall establish or maintain transparent, effective and equitable procedures for the impartial and reasonable investigation proceedings and application of preferential safeguard measures, in compliance with the provisions established in this Article.

2. Each Party shall entrust determinations of serious injury or threat thereof in safeguard investigation proceedings to a competent investigating authority, subject to review by judicial or administrative tribunals, to the extent provided by domestic law.

3. A Party may initiate a safeguard investigation at the request of the domestic producers of the importing Party of the like or directly competitive products.

4. The purpose of the investigation shall be:

(a) to assess the quantities and conditions under which the product is being

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……………………………………………………………………………………………… imported;

(b) to determine the existence of serious injury or threat of serious injury to the domestic industry; and

(c) to determine the causal link between the increased preferential imports of the product concerned and the serious injury or threat thereof to the domestic industry, in compliance with the provisions of this Article.

5. Pursuant to the provisions of Clause 9 of this Article, the investigation shall include reasonable public notice to all interested parties and public hearings or other appropriate means in which importers, exporters and other interested parties could present evidence and their views, including the opportunity to respond to the presentations of other party and to submit their views, inter alia, as to whether or not the application of a preferential safeguard measure would be in the public interest.

6. The period between the date of publication of the decision to initiate the investigation and the publication of the final decision shall not exceed one (1) year.

7. In the investigation to determine whether increased imports of an originating product of the other Party have caused or are threatening to cause serious injury to a domestic industry under the terms of this Article, the competent authorities shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry, in particular:

a) the rate and amount of the increase in preferential imports concerned in absolute and relative terms;

b) the share of the domestic market taken by such increased preferential

imports;

c) the consequent impact on the domestic industry of the like or directly competitive products, based on factors, including: production, productivity, capacity utilisation, the level of stocks, sales, market share, prices, profits, losses and employment;

d) the relationship between the preferential and non-preferential imports; as

well as between the increase of one and the other.

8. The determination referred to in paragraph 6 of this Article shall not be made unless the investigation demonstrates, on the basis of objective evidence, the existence of a causal link between the increased preferential imports of the product concerned and the serious injury or threat thereof.

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……………………………………………………………………………………………… 9. When factors other than increased preferential imports of the other Party resulting from the reduction or elimination of a customs duty pursuant to this Chapter are at same time causing serious injury, such injury shall not be attributed to such increased imports.

10. Any information which is by nature confidential or which is provided on a confidential basis shall, upon cause being shown, be treated as such by the

competent authorities. Such information shall not be disclosed without permission of the party submitting it. Parties providing confidential information may be requested to furnish non-confidential summaries thereof or, if such Party indicates

that such information cannot be summarised, the reasons why a summary cannot be provided. However, if the competent authorities find that a request for confidentiality is not warranted and if the Party concerned is either unwilling to make the information public or to authorise its disclosure in generalised or

summary form, the authorities may disregard such information unless it can be demonstrated to their satisfaction from appropriate sources that the information is correct.

Clause 7: Duration of Preferential Safeguard Measures

1. A Party shall apply a preferential safeguard measure only for such period of time as may be necessary to prevent or remedy serious injury and to facilitate adjustment. The total period of the application of a preferential safeguard measure including the period of application of any provisional measure shall not exceed one (1) year.

2. The period of a Preferential safeguard measure, referred to in paragraph 1 above, may be extended by up to one (1) more year, provided that the conditions of this Article are met and that the preferential safeguard measure continues to be applied to the extent necessary to prevent or remedy serious injury and that there is evidence that the industry is adjusting and the pertinent provisions of Clauses 9 (Notification & Consultations) and 11 (Compensation) are observed. A measure extended under this paragraph shall not be more restrictive than it was at the end of the initial period, and should continue to be liberalized.

3. The total period of a preferential safeguard measure, including the period of application of any provisional measures, shall not exceed two (2) years.

4. In order to facilitate adjustment in a situation where the proposed duration of a preferential safeguard measure is over one (1) year, the Party applying the measure shall progressively liberalise it at regular intervals during the application of the measure, including the time of any extension.

5. A Party shall not apply a preferential safeguard or provisional measure again to the import of a product, which has been subjected to a measure until two (2) years

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……………………………………………………………………………………………… have elapsed since the date of the termination of the earlier preferential safeguard or provisional measure.

6. Upon the termination of a preferential safeguard measure, the Party that applied the measure shall apply the rate of customs duty set out in its Tariff Schedule as specified in Annex 2A and 2B on the date of termination as if the preferential safeguard measure had never been applied.

Clause 8: Provisional Measures

1. In critical circumstances where delay would cause damage which would be difficult to repair, , a Party may, after due notification, apply a provisional preferential safeguard measure pursuant to a preliminary determination that there is clear evidence that increased preferential imports of the other Party as a result of the reduction or elimination of a duty pursuant to this Agreement have caused or are threatening to cause serious injury to the domestic industry in the importing country that produces like or directly competitive products.

2. The duration of such a provisional measure shall not exceed 120 days, during which period the pertinent requirements of Clauses 3, 4, 5, 6, 7, 8 and 9 shall be met. The duration of any such provisional measure shall be counted as part of the total period referred to in Clause 7 (3).

3. Any additional customs duties collected as a result of such a provisional measure shall be promptly refunded if the subsequent investigation under Clause 6 determines that increased imports of an originating product of the other Party have not caused or threatened to cause serious injury to a domestic industry. In such a case, the Party that applied the measure shall apply the rate of customs duty set out in its Tariff Schedule as specified in Annex 2A and 2B as if the provisional measure had never been applied.

Clause 9: Notification

1. A Party shall promptly notify the other Party, in writing, of its:

a) decision to initiate the investigation under this Article; b) findings of serious injury or threat thereof caused by increased imports

of an originating product of the other Party as a result of the reduction or elimination of a customs duty on the product pursuant to this Chapter;

c) decision to apply a provisional preferential safeguard measure; d) decision to apply a definitive preferential safeguard measure or to extend

an existing preferential safeguard measure; e) decision to suspend any provisional or definitive preferential safeguard

measure; and

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……………………………………………………………………………………………… f) decision to progressively liberalise a preferential safeguard measure

previously applied.

2. Any of the decisions referred to in paragraph 1 shall be notified by the Party within a period of seven (7) days from the date of publication. The Party shall provide an appropriate public version of the reports of its competent authorities required under paragraphs 4 and 5 of Clause 6.

3. The notification(s) under paragraphs 1 and 2 shall include the following information:

a) the name of the petitioner;

b) the complete description of the imported product under investigation, which is sufficient for customs purposes and its classification in accordance with the Harmonized System;

c) the deadline for the request for hearings and the venue where hearings will be held;

d) the deadline for the submission of information, statements and other documents;

e) the name, address and telephone number(s) of the authority where the request or other documents related to the investigation can be examined and further information can be obtained; and

f) a summary of the facts upon which the initiation of the investigation was based, including data on imports that have supposedly increased in absolute and relative terms to total production.

4. The Party proposing to apply or extend a provisional or definitive preferential safeguard measure shall also provide the following information in the notification(s) under paragraphs 1 and 2:

a) the complete description of the imported product under investigation, which is sufficient for customs purposes and its classification in accordance with the Harmonized System;

b) a summary of the facts upon which the initiation of the investigation was

based, including data on imports that have supposedly increased in

absolute and relative terms to total production and evidence of serious

injury or threat thereof caused by increase in preferential imports of the other Party as a result of the reduction or elimination of a customs duty pursuant to this Chapter; c) information and evidence leading to the decision, such as, the increasing

or increased preferential imports; the situation of the domestic industry; the fact that the increasing preferential imports are causing or threatening to cause serious injury to the domestic industry;

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……………………………………………………………………………………………… d) in the case of preliminary determination, the existence of critical

circumstances; e) other reasoned findings and conclusions on all relevant issues of fact and

law; f) In the case of an extension of a measure, evidence that the domestic

industry concerned is adjusting shall also be provided; g) the details of the proposed measure including as appropriate the grounds

for not selecting the measures described in Clause 5.1 (a) and (b); and h) the date of introduction, duration and timetable for progressive

liberalisation of the measure in case of extension, if such timetable is applicable.

5. Upon request, the Party applying or extending a preferential safeguard measure shall provide additional information as the other Party may consider necessary.

Clause 10: Consultation

1. A Party proposing to apply or extend a preferential safeguard measure shall provide adequate opportunity for prior consultations with the other Party, with a view to, inter alia, reviewing the information provided under paragraphs 3 and 4 of Clause 9, exchanging views on the measure and reaching an agreement on compensation as set forth in Clause 11 (1).

2. Where a Party applies a provisional safeguard measure referred to in Clause 8, on request of the other Party, consultations shall be initiated immediately after such application.

3. The Party shall notify the other Party of its decision or proposal by the competent authority to apply a definitive preferential safeguard measure. The notification shall be provided no less than thirty (30) days before the measure comes into force.

4. The notification referred to in paragraph 3 above shall include:

a) evidence of the existence of serious injury or threat of serious injury to the

domestic industry caused by the increased imports;

b) the complete description of the product subjected to the measure, which is sufficient for customs purposes, including its tariff classification under the Harmonised System;

c) description of the measure proposed;

d) the date of entry into force of the measure and its duration;

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……………………………………………………………………………………………… e) the period for consultations; and

f) the criteria employed or any objective information proving that the conditions established in this Article for the application of a measure have been met.

5. Notwithstanding the provisions of paragraphs 1, 2 and 3 of this Clause, at any stage of the investigation, the Parties may request consultations with each other to seek any additional information that they consider necessary.

Clause 11: Compensation

1. A Party extending a safeguard measure for an overall period beyond one (1) year shall, in consultation with the other Party, provide to the other Party mutually agreed compensation in the form of substantially equivalent concessions during the period of extension of the measure beyond the aforementioned one (1) year. The consultations shall take place at least 30 days prior to the extension of the measure.

2. The Parties may agree on any adequate means of trade compensation for the adverse effects of the measure on their trade.

3. If the Parties are unable to reach agreement on compensation, the affected exporting Party shall give a written notice, at least 30 days before suspending concessions, to the other Party of its decision to suspend the application of substantially equivalent concessions to the trade of the Party applying the safeguard measure.

4. The written notice shall include relevant details of the proposed suspension of substantially equivalent concessions or any other adequate means of trade compensation for the adverse effects of the measure on the trade of the affected exporting Party.

5. The affected exporting Party shall be free to suspend the application of substantially equivalent concessions to the trade of the Party applying the safeguard measure upon the expiry of thirty (30) days from the day on which the written notice of suspension is received by the Party applying the preferential safeguard measure.

6. The obligation to provide compensation under paragraphs 1 and 2, and the right to suspend substantially equivalent concessions under paragraph 5 shall terminate on the date of the termination of the preferential safeguard measure.

7. Notwithstanding the provisions in paragraph 1 of this Clause, if the preferential safeguard measure has been taken as a result of an absolute increase in imports and such a measure is consistent with the provisions of this Article, the right of suspension referred to in paragraph 5 of this Clause shall not be exercised for the

20

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……………………………………………………………………………………………… period referred to in paragraph 1 of Clause 7 (one year), and for the first two (2) years that a preferential safeguard measure is in effect as per the provisions in paragraph 3 of Clause 7 (two years) of this Article.

Clause 12: Review

1. Within 5 years after entry into force of this Agreement, the Parties shall meet to review this Article with a view to determining whether there is a need to maintain any preferential safeguard mechanism.

2. If the Parties do not agree to remove the preferential safeguard mechanism during the review pursuant to paragraph (1) above, they shall thereafter conduct reviews, as mutually agreed upon, to determine the necessity of a preferential safeguard mechanism.

Clause 13: Competent Authority

Each Party shall within a period of three months of the signing of this Agreement, notify the other Party of the competent investigating authorities referred to in this Article.

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……………………………………………………………………………………………… Chapter 3

Trade in Services

Article I: Definitions

For the purposes of this Chapter:

(a) “a service supplied in the exercise of governmental authority” meansany service which is supplied neither on a commercial basis nor in competition with one or more service suppliers;

(b) “commercial presence” means any type of business or professionalestablishment, including through:

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

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

within the territory of a Party for the purpose of supplying a service;

(c) “direct taxes” comprise all taxes on total income, on total capital or onelements of income or of capital, including taxes on gains from the alienation of property, taxes on estates, inheritances and gifts, and taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation;

(d) “juridical person” means any legal entity duly constituted or otherwiseorganised under applicable law, whether for profit or otherwise, and whether privately-owned or governmentally-owned, including any corporation, trust, partnership, joint venture, sole proprietorship or association, cooperative or society;

(e) “juridical person of the other Party” means a juridical person which iseither:

(i) constituted or otherwise organised under the law of the other Party or

(ii) in the case of the supply of a service through commercial presence, owned or controlled by:

(1) natural persons of the other Party; or

(2) juridical persons of the other Party identified under paragraph (e)(i);

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……………………………………………………………………………………………… (f) “measure” means any measure by a Party, whether in the form of a

law,regulation, rule, procedure, decision, administrative action, or any other form;

(g) “measures by Parties” 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;

(h) “measures by Parties affecting trade in services” include measures

inrespect of:

(i) the purchase, payment or use of a service; (ii) the access to and use of, in connection with the supply of a service,

services which are required by the Parties to be offered to the public generally;

(iii) the presence, including commercial presence, of persons of a Party for the supply of a service in the territory of the other Party;

(i) “monopoly supplier of a service” means any person, public or private,which in the relevant market of the territory of a Party is authorised or established formally or in effect by that Party as the sole supplier of that service;

(j) “natural person of a Party” means a natural person who resides in theterritory of the Party or elsewhere and who under the law of that Party is a national of that Party;

(k) a “juridical person” is:

(i) owned by persons of a Party if more than 50 per cent of the equityinterest in it is beneficially owned by persons of that Party;

(ii) controlled by persons of a Party if such persons have the power toname a majority of its directors or otherwise to legally direct its actions;

(iii) affiliated with another person when it controls, or is controlled by,that other person, or when it and the other person are both controlled by the same person;

(l) “person” means either a natural person or a juridical person;

(m) “services” means all services except services supplied in the exercise ofgovernmental authority;

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……………………………………………………………………………………………… (n) “service consumer” means any person that receives or uses a service;

(o) “service of the other Party” means a service which is supplied:

(i) from or in the territory of the other Party, or in the case of maritime transport, by a vessel registered under the laws of the other Party, or by a person of the other Party which supplies the service through the operation of a vessel and/or its use in whole or in part; or

(ii) in the case of the supply of a service through commercial presence or through the presence of natural persons, by a service supplier of the other Party;

(p) “service supplier” means any person that supplies a service;7-1 (q) “supply of a service” includes the production, distribution, marketing,

saleand delivery of a service; and

(r) “trade in services” is defined as the supply of a service:

(i) from the territory of a Party into the territory of the other Party (cross-border);

(ii) in the territory of a Party to the service consumer of the other Party (consumption abroad);

(iii) by a service supplier of a Party, through commercial presence in the

territory of the other Party (commercial presence);

(iv) by a service supplier of a Party, through presence of natural persons of that Party in the territory of the other Party (presence of naturalpersons).

Article II: Scope and Coverage

1. This Chapter applies to measures by a Party affecting trade in services.

2. In accordance with the provisions of Article XV, this Chapter shall not apply to subsidies or grants provided by a Party or to any conditions attached to the receipt or continued receipt of such subsidies or grants, whether or not

7-1

Where the service is not supplied directly by a juridical person but through other forms of commercial presence such as a branch or a representative office, the service supplier (i.e. the juridical person) shall, nonetheless, through such presence be accorded the treatment provided for service suppliers under this Chapter. Such treatment shall be extended to the presence through which the service is supplied and need not be extended to any other parts of the supplier located outside the territory where the service is supplied.

24

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……………………………………………………………………………………………… such subsidies or grants are offered exclusively to domestic services, service consumers or service suppliers.

3. This Chapter shall not apply to:

(a) a service supplied in the exercise of governmental authority; and (b) a shell company, which is any legal entity falling within the definition

of “juridical person” in this Chapter which is established and located in the territory of either Party with negligible or nil business operations or with no real and continuous business activities carried out in the territory of either Party.

4. New services, including new financial services, may be considered for possible incorporation into this Chapter at future reviews held in accordance with Article IX, or at the request of either Party immediately. The supply of services which are not technically or technologically feasible when this Agreement comes into force shall, when they become feasible, also be considered for possible incorporation at future reviews or at the request of either Party immediately.

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

6. Nothing in this Chapter shall prevent a Party from applying measures to regulate the entry of natural persons of the other Party 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 the other Party under the terms of this Chapter as well as the terms of specific commitments undertaken.

Article III: Market Access

1. With respect to market access through the modes of supply defined in paragraph

(r) of Article I, each Party shall accord services and service suppliers of the other

Party treatment no less favourable than that provided for under the terms,

limitations and conditions agreed and specified in its Schedule of specific

commitments.7-2 7-2

If a Party undertakes a market-access commitment in relation to the supply of a service through the mode of supply referred to in Article I(r)(i) and if the cross-border movement of capital is an essential part of the service itself, that Party is thereby committed to allow such movement of capital. If a Party undertakes a market-access commitment in relation to the supply of a service through the mode of supply referred to in Article I(r)(iii), it is thereby committed to allow related transfers of capital into its territory.

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……………………………………………………………………………………………… 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 of specific commitments, are defined as:

(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;

(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 service operations or on 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

test7-3;

(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;

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

Article IV: National Treatment

1. In the sectors inscribed in its Schedule, and subject to any conditions and

qualifications set out therein, each Party shall accord 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 service suppliers7-4.

7-3

paragraph 2(c) of Article III does not cover measures of a Party which limit inputs for the supply of services. 7-4

Specific commitments assumed under this Article shall not be construed to require any Party to compensate for any inherent competitive disadvantages which result from the foreign character of the relevant services or service suppliers.

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……………………………………………………………………………………………… 2. Any subsequent establishment, acquisition and expansion of investments by

a service supplier that is incorporated, constituted, set up or otherwise duly

organized under the law of a Party, and which is owned by a service supplier

of the other Party, shall be regarded as an investment of the other Party, for

the purpose of determining the applicable treatment to be accorded under

this Article7-5. 3. The treatment to be accorded by a Party under paragraph 1 means, with

respect to a regional or local level, treatment no less favourable than the most favourable treatment accorded by that regional or local level to like service suppliers of the Party of which it forms a part.

4. 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.

5. 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.

Article V: Additional Commitments

The Parties may negotiate commitments with respect to measures affecting trade in services not subject to scheduling under Articles III or IV, including those regarding qualifications, standards or licensing matters. Such commitments shall be inscribed in a Party's Schedule of specific commitments.

Article VI: Review of Most Favoured Nation Commitments

If, after this Agreement enters into force, a Party enters into any agreement on trade in services with a non-Party, it shall give consideration to a request by the other Party for the incorporation herein of treatment no less favourable than that provided under the aforesaid agreement. Any such incorporation should maintain the overall balance of commitments undertaken by each Party under this Chapter.

Article VII: Schedules of Specific Commitments

7-5

The Parties understand that such service suppliers may be entitled to be accorded any better treatment which is available under the regime of that Party, at the time of such subsequent establishment, acquisition and expansion of investments. Any such better treatment accorded shall not be construed as an automatic addition to the commitments scheduled in India's Schedule of Specific Commitments in Annex 3A or Sri Lanka’s Schedule of Specific Commitments in Annex 3B.

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………………………………………………………………………………………………

1. Each Party shall set out in a Schedule the specific commitments it undertakes under Articles III, IV and V. With respect to sectors where such commitments are undertaken, each Schedule of specific commitments shall specify:

(a) terms, limitations and conditions on market access;

(b) conditions and qualifications on national treatment; (c) undertakings relating to additional commitments; (d) where appropriate the time frame for implementation of such

commitments; and (e) the date of entry into force of such commitments.

2. Measures inconsistent with both Articles III and IV shall be inscribed in both the columns relating to Article III and Article IV.

3. Schedules of specific commitments shall be annexed to this Chapter as Annex

-3A and Annex 3B and shall form an integral part of this Agreement.

Article VIII: Modification of Schedules

1. A Party may modify or withdraw any commitment in its Schedule, at any time after three years have elapsed from the date on which that commitment entered into force, in accordance with the provisions of this Article. It shall notify the other Party of its intent to so modify or withdraw a commitment no later than three months before the intended date of implementation of the modification or withdrawal.

2. At the request of the other Party, the modifying Party shall enter into negotiations with a view to reaching agreement on any necessary compensatory adjustment. In such negotiations and agreement, the Parties shall endeavour to maintain a general level of mutually advantageous commitments not less favourable to trade than that provided for in Schedules of specific commitments prior to such negotiations. The Parties shall endeavour to conclude negotiations on such compensatory adjustment to mutual satisfaction within six months, failing which recourse may be had to the provisions of Chapter 10 of this Agreement.

Article IX: Progressive Liberalisation

The Parties shall hold first review of their Schedules of specific commitments one year after signing of the Agreement which would be based on the requests made to each other before the review. The parties, thereafter, shall review their Schedule of specific commitments at least once every three years, or earlier, at the request of either Party, with a view to facilitating the elimination of substantially all remaining

28

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……………………………………………………………………………………………… discrimination between the Parties with regard to Trade in Services covered in this Chapter over a period of time. In this process, there shall be due respect for the national policy objectives and the level of development of the Parties, both overall and in individual sectors.

Article X: Domestic Regulation

1. In sectors where specific commitments are undertaken, each Party shall ensure that all measures of general application affecting trade in services are administered in a reasonable, objective and impartial manner.

2. Each Party shall maintain or institute as soon as practicable, judicial, arbitral or administrative tribunals or procedures which provide, at the request of an affected service supplier of the other Party, for the prompt review of, and where justified, appropriate remedies for, administrative decisions affecting trade in services. Where such procedures are not independent of the agency entrusted with the administrative decision concerned, the Party shall ensure that the procedures in fact provide for an objective and impartial review.

3. The provisions of paragraph 2 shall not be construed to require a Party to institute such tribunals or procedures where this would be inconsistent with its constitutional structure or the nature of its legal system.

4. Where authorisation is required for the supply of a service on which a specific commitment has been made, the competent authorities of a Party shall, within a reasonable period of time after the submission of an application considered complete under domestic laws and regulations, inform the applicant of the decision concerning the application. At the request of the applicant, the competent authorities of the Party shall provide, without undue delay, information concerning the status of the application.

5. With the objective of ensuring that domestic regulation, including measures relating to qualification requirements and procedures, technical standards and licensing requirements, do not constitute unnecessary barriers to trade in services, the Parties shall jointly review the results of the negotiations on disciplines on these measures, pursuant to Article VI.4 of the WTO General Agreement on Trade in Services (GATS), with a view to their incorporation into this Chapter. The Parties note that such disciplines shall aim to ensure that such requirements are inter alia:

(a) based on objective and transparent criteria, such as competence and the ability to supply the service;

(b) not more burdensome than necessary to ensure the quality of the service;

(c) in the case of licensing procedures, not in themselves a restriction on the supply of the service.

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………………………………………………………………………………………………

6. Pending the incorporation of disciplines pursuant to paragraph 5, for sectors where a Party has undertaken specific commitments and subject to any terms, limitations, conditions or qualifications set out therein, such Party shall not apply licensing and qualification requirements and technical standards that nullify or impair such specific commitments in a manner which:

(a) does not comply with the criteria outlined in paragraphs 5(a), 5(b) or

5(c); and (b) could not reasonably have been expected of that Party at the time the

specific commitments in those sectors were made.

7. In determining whether a Party is in conformity with the obligation under

paragraph 6, account shall be taken of international standards of relevant

international organisations7-6 applied by that Party. 8. In sectors where specific commitments regarding professional services are

undertaken, each Party shall provide for adequate procedures to verify the competence of professionals of the other.

Article XI: Recognition

1. For the purposes of the fulfilment, in whole or in part, of its standards or criteria for the authorisation, licensing or certification of services suppliers, a Party may recognise the education or experience obtained, requirements met, or licenses or certifications granted in the other Party. Such recognition, which may be achieved through harmonization or otherwise, may be based upon an agreement or arrangement with the other Party or may be accorded autonomously.

2. In accordance with their prior agreement, the Parties shall ensure that their

respective professional bodies in the service sectors negotiate and conclude, within a reasonable time of the date of entry into force of this Agreement, any such agreements or arrangements providing for mutual recognition of the

education or experience obtained, requirements met, or licenses or certifications in those service sectors, the details of such agreements or arrangements, including the exact extent and scope of recognition. Any delay or failure by these professional bodies to reach and conclude agreement on

the details of such agreements or arrangements shall not be regarded as a breach of a Party's obligations under this paragraph and shall not be subject to the Chapter 10 (Dispute Settlement) of this Agreement. Progress in this

7-6

The term "relevant international organisations" refers to international bodies whose membership is open to the relevant bodies of both Parties.

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……………………………………………………………………………………………… regard will be continually reviewed by the Parties in the course of the review envisaged in Article XXIV (c) of this Chapter.

3. After the entry into force of this Agreement, upon a request being made in writing by a Party to the other Party in any regulated service sector not

covered in paragraph 2, the requested Party shall encourage its relevant

professional, standard-setting or self- regulatory body in that service sector to enter into negotiations, within a reasonable period of time from the date of

the request being received in writing, to negotiate agreements or

arrangements providing for mutual recognition of education, or experience

obtained, requirements met, or licenses or certifications granted in that

service sector, with a view to the achievement of early outcomes. Any delay or failure by these professional, standard-setting or self- regulatory bodies to

reach and conclude agreement on the details of such agreements or

arrangements shall not be regarded as a breach of a Party’s obligations under this paragraph and shall not be subject to the Dispute Settlement Chapter of this Agreement. Progress in this regard will be continually reviewed by the

Parties in the course of the review envisaged in Article XXIV (c) of this

Chapter.

4. Where a Party recognises, by agreement or arrangement, the education or experience obtained, requirements met or licenses or certifications granted in the territory of a country that is not a Party to this Agreement, that Party

shall accord the other Party, upon request, adequate opportunity to negotiate its accession to such an agreement or arrangement or to negotiate comparable ones with it. Where a Party accords recognition autonomously, it

shall afford adequate opportunity for the other Party to demonstrate that the education or experience obtained, requirements met or licenses or certifications granted in the territory of that other Party should also be recognised.

5. The Parties agree that they shall not be responsible in any way for the settlement of disputes arising out of or under the agreements or arrangements for mutual recognition concluded by their respective professional, standard-setting or self-regulatory bodies under the provisions of this Article and that the provisions of Chapter 10 (Dispute Settlement) shall not apply to disputes arising out of, or under, the provisions of such agreements or arrangements.

Article XII: Monopolies and Exclusive Service Suppliers

1. Each Party shall ensure that any monopoly supplier of a service in its territory does not, in the supply of the monopoly service in the relevant market, act in a manner inconsistent with that Party's Schedule of specific commitments.

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………………………………………………………………………………………………

2. Where a Party's monopoly supplier competes, either directly or through an affiliated company, in the supply of a service outside the scope of its monopoly rights and which is subject to that Party's Schedule of specific commitments, the Party shall ensure that such a supplier does not abuse its monopoly position to act in its territory in a manner inconsistent with such commitments.

3. If a Party has reason to believe that a monopoly supplier of a service of the other Party is acting in a manner inconsistent with paragraph 1 or 2 above, it may request that Party establishing, maintaining or authorising such supplier to provide specific information concerning the relevant operations.

4. The provisions of this Article shall also apply to cases of exclusive service

suppliers, where a Party, formally or in effect:

(a) authorises or establishes a small number of service suppliers; and (b) substantially prevents competition among those suppliers in its

territory.

Article XIII: Business Practices

1. The Parties recognise that certain business practices of service suppliers, other than those falling under Article XII, may restrain competition and thereby restrict trade in services.

2. A Party shall, at the request of the other Party, enter into consultations with a view to eliminating practices referred to in paragraph 1. The requested Party shall accord full and sympathetic consideration to such a request and shall co-operate through the supply of publicly available non-confidential information of relevance to the matter in question. The requested Party shall also provide other information available to the requesting Party, subject to its domestic law and to the conclusion of satisfactory agreement concerning the safeguarding of its confidentiality by the requesting Party.

Article XIV: Safeguard Measures

1. A Party proposing to undertake emergency safeguard measures due to serious injury in a services sector committed by it under its schedule of commitments which are annexed to this Chapter it may take measures to the extent and for such period as may be necessary to prevent or to remedy such injury in the affected sector. Provided, the Party proposing to take such measures shall notify to the other Party at least 14 days before it proposes to

32

Without Prejudice


……………………………………………………………………………………………… undertake emergency safeguard measures and provides all relevant information on the serious injury on the affected sector.

2. Parties may enter into consultations to arrive at a mutually acceptable solution. Parties agree that during any such consultations priority shall be given to any measure that will least disturb the functioning of this Agreement.

3. Only in the event that no solution can be reached, the affected Party may take such measures for a period of not more than three months in the first instance and may, thereafter extend the period for another three months provided it may satisfy the other Party with evidence that the continuation of measures is required as the conditions prompting the measures have not changed. However, such measure shall be applied in the affected sector for a maximum period of six months.

4. Parties agree to review and amend this Article, based on the decision on emergency safeguard measures as reached in the international Agreements, to which they are Parties.

Article XV: Subsidies

1. The Parties shall review the treatment of subsidies in the context of developments in multilateral fora of which both Parties are Members.

2. In the event that either Party considers that its interests have been adversely affected by a subsidy or grant provided by the other Party, upon request, the other Party shall enter into consultations with a view to resolving the matter.

3. During the consultations referred to in paragraph 2, the subsidising Party may, as it deems fit, consider a request of the other Party for information relating to the subsidy scheme or programme such as:

(a) domestic laws or regulations under which the measure is introduced; (b) form of the measure (e.g. grant, loan, tax concession);

(c) policy objective and/or purpose of the measure; (d) dates and duration of the programme or subsidy and any other time

limits attached to it; and (e) eligibility requirements of the measure (e.g. criteria applied with

respect to the potential population of beneficiaries).

4. The provisions of Chapter 10 of this Agreement shall not apply to any requests made or consultations held under the provisions of this Article or to any disputes that may arise between the Parties out of, or under, the provisions of this Article.

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……………………………………………………………………………………………… Article XVI: Payments and Transfers

1. Except under the circumstances envisaged in Article XVII a Party shall not apply restrictions on international transfers and payments for current transactions relating to its specific commitments.

2. Nothing in this Chapter shall affect the rights and obligations of the Parties as members of the International Monetary Fund under the Articles of Agreement of the Fund, including the use of exchange actions which are in conformity with the Articles of Agreement, provided that a Party shall not impose restrictions on any capital transactions inconsistently with its specific commitments regarding such transactions, except under Article XVII or at the request of the Fund.

Article XVII: Restrictions to Safeguard the Balance of Payments

1. In the event of serious balance of payments and external financial difficulties or threat thereof, a Party may adopt or maintain restrictions on trade in services in respect of which it has obligations under Articles III and IV or has made Additional Commitments including on payments or transfers for transactions related to such obligations. It is recognised that particular pressures on the balance of payments of a Party in the process of economic development may necessitate the use of restrictions to ensure, inter alia, the maintenance of a level of financial reserves adequate for the implementation of its programme of economic development.

2. The restrictions referred to in paragraph 1 shall: (a) be consistent with the Articles of Agreement of the International

Monetary Fund; (b) avoid unnecessary damage to the commercial, economic and financial

interests of the other Party; (c) not exceed those necessary to deal with the circumstances described

in paragraph 1; (d) be temporary and be phased out progressively as the situation

specified in paragraph 1 improves; (e) be applied such that the other Party is treated no less favourably than any non-party.

3. Any restrictions adopted or maintained under paragraph 1, or any changes

therein, shall be promptly notified to the other Party.

4. The Party adopting any restrictions under paragraph 1 shall commence consultations with the other Party in order to review the restrictions adopted by it.

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……………………………………………………………………………………………… Article XVIII: Transparency

1. Each Party shall publish promptly and, except in emergency situations, at the latest by the time of their entry into force, all relevant measures of general application which pertain to or affect the operation of this Chapter. International agreements pertaining to or affecting trade in services to which a Party is a signatory shall be made available to the other Party upon request.

2. Where publication as referred to in paragraph 1 is not practicable, such

information shall be made otherwise publicly available. 3. Each Party shall respond promptly to all requests by the other Party for

specific information on any of its measures of general application or international agreements within the meaning of paragraph 1. Each Party shall without undue delay also establish one or more enquiry points to provide specific information to other Party, upon request, on all such matters.

Article XIX: Disclosure of Confidential Information

Nothing in this Chapter shall require any Party to provide confidential information, the disclosure of which would impede law enforcement, or otherwise be contrary to the public interest, or which would prejudice legitimate commercial interests of particular enterprises, public or private.

Article XX: Government Procurement

Articles III and IV shall not apply to laws, regulations or requirements governing the procurement by governmental agencies of services purchased for governmental purposes and not with a view to commercial resale or with a view to use in the supply of services for commercial sale.

Article XXI: General Exceptions

1. Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination against the other Party, or a disguised restriction on trade in services, nothing in this Chapter shall be construed to prevent the adoption or enforcement by either Party of measures:

(a) necessary to protect public morals or to maintain public order;7-7 7-7

The public order exception may be invoked by a Party, including its legislative, governmental, regulatory or judicial bodies, only where a genuine and sufficiently serious threat is posed to one of the fundamental interests of society.

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

(c) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Chapter 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;

(d) inconsistent with Article IV, provided that the difference in treatment

is aimed at ensuring the equitable or effective7-8 imposition or collection of direct taxes in respect of services or service suppliers of the other Party.

2. Nothing in this Chapter shall prevent a Party from adopting or maintaining

measures under which it accords more favourable treatment to persons of a non-Party than that accorded to persons of the other Party to this Agreement

7-8

Measures that are aimed at ensuring the equitable or effective imposition or collection of direct taxes include measures taken by a Party under its taxation system which: (i) apply to non-resident service suppliers in recognition of the fact that the tax obligation of non residents

is determined with respect to taxable items sourced or located in the Party's territory; or

(ii) apply to non-residents in order to ensure the imposition or collection of taxes in the Party's territory; or

(iii) apply to non-residents or residents in order to prevent the avoidance or evasion of taxes, including

compliance measures; or

(iv) apply to consumers of services supplied in or from the territory of the other Party in order to ensure the

imposition or collection of taxes on such consumers derived from sources in the Party's territory; or

(v) distinguish service suppliers subject to tax on world-wide taxable items from other service suppliers, in recognition of the difference in the nature of the tax base between them; or

(vi) determine, allocate or apportion income, profit, gain, loss, deduction or credit of resident persons or

branches, or between related persons or branches of the same person, in order to safeguard the Party's tax base.

Tax terms or concepts in paragraph 1(d) of Article XXI and in this footnote are determined according to tax definitions and concepts, or equivalent or similar definitions and concepts, under the domestic law of the Party taking the measure.

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……………………………………………………………………………………………… as a result of a bilateral double taxation avoidance agreement between the Party and such non-Party.

Article XXII: Security Exceptions

1. Nothing in this Chapter shall be construed:

(a) to require a Party to furnish any information, the disclosure of which

it considers contrary to its essential security interests; or

(b) to prevent a Party from taking any action which it considers necessary

for the protection of its essential security interests:

(i) relating to the supply of services as carried out directly or indirectly for the purpose of provisioning a military establishment;

(ii) relating to fissionable and fusionable materials or the materials from which they are derived;

(iii) taken in time of war or other emergency in international

relations;

(iv) relating to protection of critical public infrastructure, including communications, power and water infrastructure from deliberate attempts intended to disable or degrade such infrastructure; or

(c) to prevent a Party from taking any action in pursuance of its obligations under the United Nations Charter for the maintenance of international peace and security.

2. Each Party shall inform the other Party to the fullest extent possible of

measures taken under paragraphs 1(b) and (c) and of their termination.

3. Nothing in this Chapter shall be construed to require a Party to accord the benefits of this Chapter to a service supplier of the other Party where a Party adopts or maintains measures in any legislation or regulations which it considers necessary for the protection of its essential security interests with respect to a non-Party or a service supplier of a non-Party that would be violated or circumvented if the benefits of this Chapter were accorded to such a service supplier.

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……………………………………………………………………………………………… Article XXIII: Denial of Benefits

1. Subject to prior notification and consultation, a Party may deny the benefits of this Chapter:

(a) to the supply of a service, if it establishes that the service is supplied

from or in the territory of a non-Party;

(b) in the case of the supply of a maritime transport service, if it

establishes that the service is supplied:

(i) by a vessel registered under the laws of a non-Party, and (ii) by a person of a non-Party which operates and/or uses the

vessel in whole or in part;

(c) to the supply of a service through commercial presence, if the Party establishes at any time that persons of a non-Party own or control the service supplier, and that it has no real and continuous business activities in the territory of the other Party as referred to in Article II.3(b)

(d) to the supply of a service from or in the territory of the other Party, if the Party establishes that the service is supplied by a service supplier that is owned or controlled by a person of the denying Party and that it has no real and continuous business activities in the territory of either Party as referred to in Article II.3(b).

Article XXIV: Sub-Committee on Trade in Services

1. For the purpose of effective implementation and operation of this Chapter, a Sub-Committee on Trade in Services (hereinafter referred to in this Article as “the Sub-Committee”) is established. The terms of reference of the Sub-Committee shall include:

(a) Reviewing commitments, with respect to measures affecting trade in services in this Chapter, with a view to achieving further liberalisation on a mutually advantageous basis and securing an overall balance of rights and obligations;

(b) Reviewing the implementation and operation of this Chapter;

(c) Reviewing and discussing issues concerning the effective

implementation of Articles XI (Recognition);XIV (Safeguard Measures)

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……………………………………………………………………………………………… (d) Reporting the outcome of discussions of the Sub-Committee to

the Committee; and

(e) Carrying out any other functions as may be delegated by the Committee.

2. The Sub-Committee shall be :

(a) composed of representatives of the Parties, and where appropriate, may

invite representatives of relevant entities other than of the Parties with the necessary expertise relevant to the issues to be discussed; and

(b) co-chaired by officials of the Parties

3. This Sub-Committee shall hold its inaugural meeting within one year of the entry into force of this Chapter. Subsequent meetings shall be held at such venues and times as the Parties may mutually agree.

Article XXV: Services-Investment Linkage

1. For the avoidance of doubt, the Parties confirm, in respect of Chapter 5

(Investment), that:-

(a) the following Articles of Chapter 5 (Investment) apply, mutatismutandis, to measures affecting the supply of service by a service supplier ofa Party through commercial presence in the territory of the other Party, only to the extent that they relate to an investment, regardless of whether or not such service sector is scheduled in a Party's Schedule of specific commitments in Annex 3A or 3B :

3. Article IV (Compensation for Losses);

4. Article V (Expropriation);

5. Article VI (Repatriation);

6. Article VIII (Subrogation);

7. Article X (Measures in the Public Interest);

8. Article XIV (Special Formalities and Information Requirements);

9. Article XVIII (Access to Courts of Justice); and

10. Article XX (Other Obligations);

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………………………………………………………………………………………………

(b) Article XIX (Investment Disputes) apply, mutatis mutandis, to measures affecting the supply of service by a service supplier of a Party through commercial presence in the territory of the other Party, only to the extent that they relate to an investment and an obligation under Chapter 5 (Investment), regardless of whether or not such service sector is scheduled in a Party's Schedule of Specific Commitments in Annex 3A or 3B; and

(c) the provisions relating to duration and termination in Article XXI (Duration and Termination) shall apply to the provisions of Chapter 5 (Investment) that are made applicable under paragraphs (a) and (b) above.

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……………………………………………………………………………………………… Chapter 4

Movement of Natural Persons

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………………………………………………………………………………………………

Chapter 5

Investment

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………………………………………………………………………………………………

Chapter 6

Air Services

1. The Parties affirm their rights and obligations under the Air Services Agreement between the Government of Ceylon and the Government of India

for Air Services between and beyond their respective territories dated 21st

December 1948 (ASA), as amended by and read with subsequent Memoranda of Understanding, Confidential Memoranda of Understanding, Record of Discussion, Agreed Minutes and Exchange of Letters entered into between their respective Governments.

2. The Parties recognize the strategic partnership in civil aviation and the importance of air connectivity to support the expansion of tourism, trade and investment between the Parties. To fully harness the benefits of Air Transportation, the Parties agree to further liberalize their Air Services Agreements and to establish and implement a fully liberalized Air Services Agreement between the parties by the end of year 2012.

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……………………………………………………………………………………………… Chapter 7

Customs

Article I: Scope

This Chapter shall apply, in accordance with the Parties’ respective national laws, rules and regulations, to customs procedures required to facilitate clearance of goods traded between the Parties.

Article II: Transparency

1. The Parties shall promptly publish or otherwise make publicly available its laws, regulations, administrative procedures and administrative rulings of general application on respective customs matters that pertain to or affect the operation of this Chapter, so as to enable interested persons and parties to become acquainted with them.

2. Nothing in this Article or in any part of this Agreement shall require either Party to publish law enforcement procedures and internal operational guidelines including those related to conducting risk analysis and targeting methodologies.

Article III: Risk Management

1. The Parties shall adopt the risk management approach in its customs compliance activities based on its identified risks of goods in order to facilitate the clearance of low risk consignments, while focusing its inspection activities on high-risk goods.

2. The Parties shall cooperate to further develop risk management techniques in

the performance of their customs compliance activities.

Article IV: Paperless Trading

1. Recognizing that trading using electronic filing and transfer of trade-related information and electronic versions of documents, as an alternative to paper-based methods, will significantly enhance the efficiency of trade through reduction of cost and time, the Parties shall co-operate with a view to realising and promoting paperless trading between their respective customs administrations and trading community.

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……………………………………………………………………………………………… 2. Parties shall exchange views and information on realising, promoting and

developments in paperless trading.

Article V: Verification of Certificates of Origin and Denial of Preferential Tariff Treatment

1. The Parties shall co-operate with each other to verify the truth and accuracy of the information given in the certificates of origin.

2. The provisions of Article 15 of the (Operational Certification Procedures) of the Rules of Origin which is annexed to this Agreement shall be followed for verification of Certificate of Origin and for denial of Preferential Tariff Treatment.

Article VI: Advance Rulings

Each Party shall endeavour to provide for the system of advance rulings on customs matters to the extent possible.

Article VII: Sharing of Best Practices

The Customs Administrations of both Parties shall endeavour within their respective available resources, to actively encourage exchange of information on best practices on customs procedures and techniques for the purpose of improving risk assessment techniques, simplifying customs procedures and expediting customs clearance. Article VIII: Administrative Assistance for the Proper Application of Customs Laws

The Customs Administrations of both Parties may request assistance for proper application of customs laws and for the prevention, investigation and combating of customs offences, in accordance with the SAARC Agreement on Mutual Administrative Assistance in Customs Matters.

Article IX: Confidentiality

Nothing in this Chapter shall require a Party to provide or allow access to information, the disclosure of which would impede law enforcement or otherwise be contrary to the public interest.

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……………………………………………………………………………………………… Article X:Working Group on Customs Related Matters 1. In order to facilitate cooperation in customs matters, the Parties agree to

establish a Working Group on Customs related matters.

2. The first meeting of the Working Group shall be held within one year after the Agreement enters into force and formalise the Rules of Procedure and shall meet thereafter as often as required and at least once in a year and shall report to the Committee on its deliberations.

Article XI: Implementation and Dispute Settlement

1. The Customs Administration shall endeavour to resolve by mutual accord any issues arising from the implementation of this Chapter.

2. The Customs Administration shall designate an official nodal point(s) for this

purpose and shall provide details thereof to each other, with a view to facilitate the effective implementation of this Chapter. The issues would be referred to the Working Group, if required, for discussion and appropriate action.

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……………………………………………………………………………………………… Chapter 8

Standards and Technical Regulations, Sanitary and Phyto-sanitary Measures

Article I: Sanitary and Phytosanitary (SPS) Measures

1. Parties shall ensure implementation of the WTO Agreement on Sanitary and Phytosanitary Measures (SPS) and applicable international standards, guidelines and recommendations developed by relevant international organizations including the Codex Alimentarius Commission (CODEX), the International Office of Epizootics (OIE), and the International Plant Protection Convention (IPPC) with respect to

food and processed food products, animal and animal products6, plant

and products of plant origin, and other agricultural and related items.

2. Parties shall exchange information on the existing, new or proposed changes on their SPS measures at an early appropriate stage with a view to facilitate trade and strengthen co-operation between the Parties. The Parties shall also exchange information on provisional urgent measures necessary for the protection of lives or health of human beings, animals or plants with a view to facilitate trade and strengthen cooperation between the Parties.

3. Parties shall hold consultations to find appropriate solutions whenever either Party’s SPS related regulations / measures are likely to create or have created an obstacle to bilateral trade.

4. Parties shall try and explore the possibility of technical cooperation including training programme and technical assistance based on mutual understanding.

5. Parties shall establish, if not already established, National Enquiry Point(s) to reply and deal with all reasonable queries on Sanitary and Phytosanitary related issues from the other Party. Parties shall also inform and notify such National Enquiry Point(s) to each other. Parties shall also nominate National Focal Points to ensure better coordination and faster disposal of reasonable queries.

6. Parties shall establish a Working Group on SPS Measures for examination and acceptance of views, carrying out consultations or seeking clarification on any other subject related to SPS related measures for food and processed food products, animal and animal

6 As contained in Section 1 of the “Harmonized Commodity Description and Coding System (HS)” as

amended in 2007, set out in the Annex to the International Convention on the Harmonized Commodity Description and Coding System.

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……………………………………………………………………………………………… products7, plant and products of plant origin, and other agricultural and related items, and to explore the possibility of Mutual Recognition Agreements (MRAs) in mutually agreed areas.

Article II: Technical Barriers to Trade (TBT)

1. The rights and obligations of the Parties in respect of technical regulations, standards and conformity assessment procedures shall be governed by the WTO Agreement on Technical Barriers to Trade (TBT).

2. Parties shall exchange information on the existing, new or proposed changes on their TBT related regulations / measures including conformity assessment procedures at the early appropriate stage with a view to facilitate trade and strengthen co-operation between Parties. Parties shall also exchange information on provisional urgent measures necessary for the protection of lives or health of human beings, animals or plants, environment and deceptive practices with a view to facilitate trade and strengthen co-operation between them.

3. Parties shall hold consultations to find appropriate solutions whenever either Party’s TBT related regulations / measures are likely to create or have created an obstacle to bilateral trade.

4. Parties shall try and explore the possibility of technical cooperation including training programme and technical assistance in a mutually agreed way.

5. Parties shall strengthen their co-operation in the field of technical regulations, standards and conformity assessment with a view to increase mutual understanding of systems of the other Party so as to facilitate bilateral trade.

6. Each Party shall ensure, whenever possible, that results of conformity assessment procedures in other Party are accepted, even when those procedures differ from their own, provided it is satisfied that those procedures offer an assurance of conformity with applicable technical regulations or standards equivalent to their own procedures.

7. Parties shall establish, if not already established, National Enquiry Point (s) to reply and deal with all reasonable queries on Technical Barriers to Trade (TBT) related issues from the other Party. Parties shall also inform and notify such National Enquiry Point(s) to each other.

7 As contained in Section 1 of the “Harmonized Commodity Description and Coding System (HS)” as

amended in 2007, set out in the Annex to the International Convention on the Harmonized Commodity Description and Coding System.

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………………………………………………………………………………………………

8. Parties shall establish a Working Group on TBT related issues for examination and acceptance of views, carrying out consultations or seeking clarification on any other subject related to TBT related regulations and conformity assessment procedures in the field of agricultural and non-agricultural products, and to explore the possibility of Mutual Recognition Agreements (MRAs) in mutually agreed areas.

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………………………………………………………………………………………………

Chapter 9

Economic Cooperation

Article I: Objectives

Parties shall seek to:

(i) Strengthen and enhance economic co-operation between them on the basis of equality and mutual benefit;

(ii) Explore new areas of and develop appropriate measures for closer economic co-operation as a means to greater economic integration between the two countries; and

(iii) Support and augment economic cooperation in accordance with developmental needs of each other and the welfare of their respective peoples.

Article II: Scope of Cooperation 1. Parties shall promote economic cooperation between them in various fields,

and encourage exchange of information and technical expertise in those fields. Such economic cooperation may include all possible areas that the Parties may deem fit and beneficial to their citizens and to which both Parties have agreed through mutual consent.

2. All cooperative activities under this Chapter shall be carried out in accordance with the applicable laws and regulations of each Party and shall be subject to the availability of funds and other resources of the Parties.

Article III: Implementation of Cooperation

1. Cooperation between the Parties in various areas identified under this Chapter shall be effected, where applicable, through relevant Memoranda of Understanding, Agreements or Protocols that have been concluded between the Parties and so long as they remain in force.

2. Where such Memoranda of Understanding, Agreements or Protocols do not cover areas of cooperation identified in Article V, the Parties shall consult in good faith concerning the making of arrangements for such activities, through conclusion of appropriate Memoranda of Understanding, Agreements or Protocols between authorized institutions or bodies in

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……………………………………………………………………………………………… accordance with the laws and regulations in force from time to time in each country.

Article IV: Aid to Sri Lanka and Lines of Credit

1. Government of India may undertake small projects in the area of socio-economic development of Sri Lanka, including creation of infrastructure in education, health or community development sectors, livelihood activity, conservation of environmental and cultural heritage, empowerment of women and child welfare.

2. These projects shall be carried out in accordance with the Memorandum of Understanding (MoU) between the Parties regarding Indian Grant Assistance for Implementation of Small Development Projects through Local Bodies, Non-Governmental Organisations, Charitable Trusts and Educational and Vocational Institutions signed on 10 June 2005.

3. Government of India may also consider, at its sole discretion and in accordance with its national laws and regulations, provision of concessional lines of credit for specific developmental projects in Sri Lanka at the request of the Government of Sri Lanka.

Article V: Areas of Cooperation

1. The areas of cooperation may cover the fields, including, but not limited to:

(i) Agriculture, fisheries and forestry; (ii) Energy: oil and natural gas, power generation and supply; (iii) Manufacturing: drugs and pharmaceuticals, textiles, petrochemicals,

garments, food processing, leather goods, light engineering goods, gems and jewellery processing;

(iv) Services: media and entertainment, health and indigenous medicine, financial, construction, business process outsourcing;

(v) Transport and infrastructure: transport and communication; (vi) Science and technology: information and communications technology

electronic-commerce, bio-technology; …………. (vii) Tourism;

(viii) The protection of the environment;

(ix) Human resource development: capacity building, education; (x) Increasing the competitiveness of SMEs (xi) Meteorology and natural disaster preparedness.

2. The areas of cooperation may be reviewed, expanded and updated through

mutual consultation between the Parties.

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……………………………………………………………………………………………… 3. Proposal(s) for review, expansion and update may be submitted for

consideration by either Party to the Standing Committee. The Standing Committee may after due deliberations, refer the proposal(s) for the approval of the Committee. However, implementation of cooperation in such new areas shall proceed in accordance with and subject to fulfilment of requirements outlined in Article III of this Chapter.

4. Nothing in this Chapter shall be construed as preventing the Parties from entering into new economic cooperation agreements and/or programmes, with a view to further enhancing the economic cooperation between the Parties.

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……………………………………………………………………………………………… Chapter -10

Consultations and Dispute Settlement

Article I: Scope and Coverage

1. Unless otherwise provided elsewhere in this Agreement, the provisions of this Chapter shall apply with respect to the avoidance or settlement of disputes between the Parties concerning their rights and obligations under this Agreement.

2. The rules and procedures set out in this Chapter may be waived, varied or

modified by mutual agreement.

3. The provisions of this Chapter may be invoked in respect of any measure(s) affecting the observance of this Agreement taken by the authorities of a Party. When an arbitral tribunal has ruled that a provision of this Agreement has not been observed, the Party concerned shall take such measures as may be required to ensure its observance within its territory.

4. Arbitral tribunals shall interpret the provisions of this Agreement in accordance with customary rules of interpretation of public international law.

Article II: Definition

For the purposes of this Chapter, the term “award” shall, unless the context otherwise requires, mean findings, recommendations and/or rulings, as the case may be, of arbitral tribunal constituted under this Chapter.

Article III: Consultations

1. Each Party shall accord adequate opportunity for consultations regarding any representations made by the other Party with respect to any measure affecting the implementation, interpretation or application of this Agreement. Any differences shall, as far as possible, be settled by consultations between the Parties.

2. Either Party which considers that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of this Agreement is being impeded, as a result of the

(a) failure of the other Party to carry out its obligations under this 53

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……………………………………………………………………………………………… Agreement, or

(b) application by the other Party of any measure, whether or not it conflicts with the provisions of this Agreement,

may, with a view to achieving satisfactory settlement of the matter, make representations to the other Party, which shall give consideration to the representations made to it.

3. Any request for consultations shall be submitted in writing and shall give the

reasons for the request, including identification of the measure(s) at issue and an indication of the legal basis of the complaint.

4. If a request for consultations is made pursuant to this Article, the Party to which the request is made shall respond within 10 days after the date of its receipt and shall enter into consultations within a period of no more than 30 days after the date of receipt of the request, with a view to reaching a mutually satisfactory solution.

5. The Parties shall make every effort to reach a mutually satisfactory resolution of any matter through consultations. To this end, the Parties shall:

(a) provide sufficient information as may be reasonably available at the stage of consultations to enable a full examination of how the measure might affect the operation of the Agreement; and

(b) treat as confidential any information exchanged in the consultations.

Article IV: Good Offices, Conciliation or Mediation

1. The Parties may at any time agree to good offices, conciliation or mediation. They may begin at any time and be terminated by either Party at any time. They may also agree upon the person, who should conduct good offices, conciliation or mediation proceedings.

2. If the Parties agree, procedures for good offices, conciliation or mediation may continue while the dispute proceeds for resolution before an arbitral tribunal established under Article V.

3. All proceedings under this Article shall be confidential and without prejudice to the rights of either Party in any proceedings under the provisions of this Chapter.

Article V: Request for Arbitral Tribunals 54

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………………………………………………………………………………………………

If the consultations fail to settle a dispute within 60 days after the date of receipt of the request for consultations, the Party, which made the request for consultations, may make a written request to the other Party for the establishment of an arbitral tribunal under this Article. The request shall identify the specific measure(s) at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly.

Article VI Choice of Forum

1. Nothing in this Chapter shall prejudice the rights of either Party to have recourse to dispute settlement procedures available under any other agreement to which both are parties.

2. Notwithstanding paragraph 1, once a dispute settlement procedure has been initiated under this Chapter or under any other international agreement to which both are parties with respect to a particular dispute that procedure shall be used to the exclusion of any other procedure for that particular dispute. However, this shall not apply if substantially separate and distinct rights or obligations arising under this Agreement and under different international agreements are in dispute.

3. If a request for the establishment of an arbitral tribunal under Article V of this Chapter or for establishment of dispute settlement panel/tribunal under any other agreement is made, the complaining Party is deemed to have chosen the forum for settlement of the dispute."

Article VII: Composition and Appointment of Arbitral Tribunals

1. The arbitral tribunal referred to in Article V shall consist of three (3) members. Each Party shall appoint an arbitrator within 20 days after the receipt of the request under Article V. If either Party fails to appoint an arbitrator within such period, then the arbitrator appointed by the other Party shall act as the sole arbitrator of the tribunal.

2. Upon appointment of their respective arbitrators, the Parties shall endeavour to agree on a third arbitrator who shall serve as chair. If the Parties are unable to agree on the chair of the arbitral tribunal within 30 days after the date on which the second arbitrator has been appointed, they shall, within the next ten (10) days, exchange their respective lists comprising four (4) nominees each who shall not be nationals of either Party. The chair shall be appointed in the presence of Parties by a draw of lot from the nominees of both the Parties within 10 days after the date on which both the Parties have exchanged the lists. If either Party fails to submit its list of four (4) nominees

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……………………………………………………………………………………………… within 10 days, the chair shall be appointed by a draw of lot from the nominees already submitted by the other Party.

3. Any person appointed as a member or chair of the arbitral tribunal shall have expertise or experience in law, international trade, other matters covered by this Agreement or the resolution of disputes arising under international trade agreements, and shall be chosen strictly on the basis of objectivity, reliability, sound judgment and independence. Except in the case of a sole arbitrator appointed in accordance with paragraph 1, the chair shall not be a national of either Party or nor have his or her usual place of residence in the territory of, nor be employed by either Party, nor have dealt with the case in any capacity.

4. If an arbitrator appointed under this Article resigns or becomes unable to act, a successor shall be appointed in the same manner as prescribed for the appointment of the original arbitrator and the successor shall have all the powers and duties of the original arbitrator.

5. If the sole arbitrator or the chair appointed in accordance with paragraph 1 or 2 is replaced, any hearings held previously shall be repeated. If any other member of arbitral tribunal is replaced, such hearings may be repeated at the discretion of the arbitral panel.

6. The arbitral tribunal is deemed to have been established upon the

appointment of the chair or the sole arbitrator, as the case may be.

Article VIII: Functions of Arbitral Tribunals

1. The function of an arbitral tribunal is to make an objective assessment of the dispute before it, including an examination of the facts of the case and the applicability of and conformity with this Agreement. Where the arbitral tribunal concludes that a measure is inconsistent with a provision of this

Agreement, it shall recommend that the Party concerned shall bring the measure into conformity with that provision. Where the arbitral tribunal concludes that a measure nullifies or impairs the benefits under, or impedes

the attainment of objectives of this Agreement without violation thereof, it shall recommend that the Party concerned make a mutually satisfactory adjustment.

2. An arbitral tribunal shall notwithstanding the non-participation of a Party commence or continue with the arbitration proceedings and make its award. The award of the arbitral tribunal shall be set out in a report released to the Parties, which shall include the reasons for the award.

3. An arbitral tribunal shall take its decisions by consensus, provided that

where an arbitral tribunal is unable to reach consensus, it may take its 56

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……………………………………………………………………………………………… decisions by majority vote. Opinions expressed in the report by individual arbitrators shall be anonymous.

4. Except in respect of the matters set out in Article IX, the arbitral tribunal shall regulate its own procedures in relation to the rights of the Parties to be heard and its deliberations, unless the Parties agree otherwise in writing.

Article IX: Proceedings of Arbitral Tribunals

1. An arbitral tribunal shall meet in closed session(s). The Parties shall be present at the meetings only when invited by the arbitral tribunal to appear before it.

2. The venue for the proceedings of the arbitral tribunal shall be decided by mutual agreement between the Parties. If there is no agreement, the venue shall alternate between the capitals of the two countries with the venue of the first sitting to be decided by a draw of lot in the presence of the Parties.

3. The deliberations of an arbitral tribunal and the documents submitted to it shall be kept confidential. Nothing in this Article shall preclude a Party from disclosing statements of its own positions or its submissions to the public, provided that a Party shall treat as confidential information submitted by the other Party to the arbitral tribunal which that Party has designated as confidential. Where a Party submits a confidential version of its written submissions to the arbitral tribunal, it shall, upon request of the other Party, provide a non-confidential summary of the information contained in its submissions that could be disclosed to the public.

4. Before the first substantive meeting of the arbitral tribunal with the Parties,

the Parties shall transmit to the arbitral tribunal written submissions in which they may present the facts of their case and their arguments.

5. At its first substantive meeting with the Parties, the arbitral tribunal shall ask

the Party which has brought the complaint to present its submission. Subsequently, and still at the same meeting, the Party against which the complaint has been brought shall be asked to present its submission.

6. Formal rebuttals shall be made at the second substantive meeting of the arbitral tribunal. The Party complained against shall have the right to present its submission first, and shall be followed by the complaining Party. The Parties shall submit, prior to the meeting, written rebuttals to the arbitral tribunal.

7. The arbitral tribunal may at any time put questions to the Parties and seek

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……………………………………………………………………………………………… explanations from them orally or in writing.

8. The Parties shall make available to the arbitral tribunal a written version of their oral statements.

9. In the interest of full transparency, the presentations, rebuttals, statements and explanations referred to in paragraphs 4 to 7 shall be made in the presence of the Parties. Moreover, each Party’s written submissions, including any comments on the report, any written version of oral statements and responses to questions put by the arbitral tribunal, shall be made available to the other Party simultaneously. There shall be no ex parte communications with the arbitral tribunal concerning matters under consideration by it.

10. At the request of either Party or on its own initiative, the arbitral tribunal may seek information and technical advice from any person or body that it deems appropriate subject to such terms and conditions as the Parties may agree.

11. The report of the arbitral tribunal shall be drafted without the presence of the Parties.

12. Unless the Parties otherwise agree, the arbitral tribunal shall base its report on the relevant provisions of this Agreement, on the submissions, statements and arguments of the Parties, and on any other information before it pursuant to paragraph 10 of Article IX.

13. Unless the Parties otherwise agree, the arbitral tribunal shall, within 40 days

of its establishment, present to the Parties an interim report containing:

(a) findings of facts as well as law pursuant to the request under Article

V; (b) its determination as to whether the measure(s) at issue is inconsistent

with the obligations of this Agreement; and (c) recommendations to bring the measure(s) into compliance with the

Agreement.

14. The Parties may submit written comments on the interim report within 10 days of its presentation. The final report shall include a discussion of any comments made by the Parties on the interim report.

15. Unless the Parties otherwise agree, the arbitral tribunal shall release to the Parties its final report on the dispute referred to it within 60 days after its establishment. The final report of the arbitral tribunal shall become a public document within 10 days after its release to the Parties.

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……………………………………………………………………………………………… Article X: Suspension and Termination of Proceedings

1. Where the Parties agree, the arbitral tribunal may suspend its work at any time for a period not exceeding 12 months from the date of such agreement.

2. The Parties may agree to terminate the proceedings of an arbitral tribunal established under this Agreement, in the event a mutually satisfactory solution to the dispute has been found.

3. Before the arbitral tribunal makes its decision, it may at any stage of the

proceedings propose to the Parties that the dispute be settled amicably.

Article XI: Time Frames

All time frames stipulated in this Chapter may be reduced, waived or extended by mutual agreement of the Parties or by the arbitral tribunal upon application by either Party.

Article XII: Implementation

1. The Party concerned shall comply with the arbitral tribunal’s award within a reasonable period of time. The reasonable period of time shall be mutually agreed by the Parties. Where the Parties fail to agree on the reasonable period of time within 45 days of the release of the arbitral tribunal’s report, either Party may refer the matter to the arbitral tribunal, which shall determine the reasonable period of time following consultation with the Parties within 15 days of the reference made to it.

2. Where there is disagreement as to the existence or consistency with this Agreement of measures taken within the reasonable period of time to comply with the award of the arbitral tribunal, such dispute shall be decided through recourse to the dispute settlement procedures in this Chapter, including resort to the arbitral tribunal. Unless the Parties otherwise agree, the arbitral tribunal shall provide its report to the Parties within 60 days after the date of the referral of the matter to it.

3. The arbitral tribunal that is established for the purposes of this Article shall, wherever possible, have, as its arbitrators, the arbitrators of the original arbitral tribunal. If this is not possible, then the arbitrators shall be appointed in accordance with Article VII.

Article XIII: Compensation and Suspension of Benefits

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……………………………………………………………………………………………… 1. If the Party concerned fails to bring the measure found to be inconsistent

with the Agreement into compliance with the award of the arbitral tribunal under paragraph 2 of Article XII within 20 days of the report of that arbitral tribunal being provided to the Parties, that Party shall, if so requested, enter into negotiations with the complaining Party with a view to reaching a mutually acceptable compensation or solution.

2. If no mutually acceptable compensation or solution has been reached within 20 days after the request of the complaining Party to enter into negotiations on compensatory adjustment, the complaining Party may request the arbitral tribunal to determine the appropriate level of any suspension of benefits conferred on the other Party under this Agreement.

3. Any suspension of benefits shall be restricted to benefits accruing to the other party under this Agreement.

4. In considering what benefits to suspend under paragraph 2:

(a) the complaining Party should first seek to suspend benefits in the same sector(s) as that affected by the measure or other matter that the arbitral tribunal has found to be inconsistent with this Agreement or to have caused nullification or impairment; and

(b) the complaining Party may suspend benefits in other sectors if it considers that it is not practicable or effective to suspend benefits in the same sector(s).

5. The suspension of benefits shall be temporary and shall only be applied until such time as the measure found to be inconsistent with this Agreement has been removed, or the Party that must implement the arbitral tribunal’s award has done so, or a mutually acceptable compensation or solution is reached.

6. With respect to paragraph 5, any dispute between the Parties on whether a particular measure found by the arbitral tribunal to be inconsistent with this Agreement has been removed or brought into conformity with the arbitral tribunal’s award shall be referred to the same tribunal for a final decision. The complaining Party shall refer the matter to the arbitral tribunal together with its submissions and the other Party shall respond within 15 days thereafter so that the arbitral tribunal can give its final decision within 15 days of the latter Party’s response.

7. The arbitral tribunal that is established for the purposes of this Article shall, wherever possible, have, as its arbitrators, the arbitrators of the original arbitral tribunal. If this is not possible, then the arbitrators shall be appointed in accordance with Article VII.

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………………………………………………………………………………………………

Article XIV: Expenses

Each Party shall bear the costs of its appointed arbitrator and its own expenses and legal costs. The costs of the Chair of the arbitral tribunal and other expenses associated with the conduct of arbitral proceedings shall be borne in equal parts by both Parties, unless determined otherwise by the arbitral tribunal.

Article XV: Effect of Arbitral Awards

The awards rendered by the arbitral tribunals established under this Chapter shall be final and binding on the Parties.

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………………………………………………………………………………………………

Chapter 11

Final Provisions

Article I: Joint Committee

1. A Joint Committee shall be established at Ministerial level. The Committee will meet at least once a year to review the commitments and other obligations of the Parties as envisaged in this Agreement and the progress made in the implementation of this Agreement and to ensure that benefits of trade expansion emanating from this Agreement accrue to both Parties equitably.

2. A Standing Committee shall be established at the level of Senior Officials, preferably Secretaries to the respective Governments, which will meet at least once in six months to monitor the operationalisation of ETCA and prepare for the meeting of the Joint Committee. The Standing Committee may set up Working Groups as considered necessary.

3. The Standing Committee shall nominate one apex chamber of trade and industry in each country as the nodal chamber to represent the views of the trade and industry on matters relating to this Agreement.

Article II: Consultations

1. Each Party shall accord sympathetic consideration to and shall afford adequate opportunity for consultations regarding such representations as may be made by the other Party with respect to any matter affecting the operation of this Agreement.

2. The Standing Committee may meet at the request of a Party to consider any matter for which it has not been possible to find a satisfactory solution through consultations under paragraph 1 above.

Article III: Amendments

This Agreement may be modified or amended by mutual agreement of the Parties. Proposals for such modifications or amendments shall be submitted to the Committee. Upon acceptance by the Committee of such proposals, they may be approved in accordance with the applicable legal procedures of each Party. Such modifications or amendments shall become effective when confirmed by an exchange of diplomatic notes.

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Without Prejudice


……………………………………………………………………………………………… Provided however that in emergency situations, proposals for modifications may be considered by the Parties and if agreed, given effect to by an exchange of diplomatic notes and in accordance with the applicable legal procedures of each Party.

Article IV: Annexes, Appendices, etc

All Annexes to this Agreement and Side Letters exchanged under this Agreement shall form an integral part of this Agreement.

Article V: Duration and Termination of Agreement

Unless otherwise provided for, this Agreement shall remain in force until either Party terminates by giving six months written notice to the other Party of its intention to terminate the Agreement.

Article VI: Entry into Force

The Agreement shall enter into force on the thirtieth (30) day after the Parties notify each other that their respective constitutional requirements and procedures have been completed.

In witness whereof the undersigned being duly authorised thereto by their respective Governments, have signed this Agreement.

Done in duplicate at …. on this .... day of ..... 20... in two originals in the English

language.

Sd/- Sd/-

For the Government of the For the Government of the Republic of India Democratic Socialist Republic of Sri

Lanka

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