CETA and
Financial Services
Patrick Leblond
CETA Conference
Faculty of Law, McGill University
October 31, 2014
Introduction
• CETA contains a whole chapter devoted to
financial services
• It was apparently one of the last parts of
the agreement to be settled
– Prudential carve-out was the issue
• The provisions are mostly aligned with the
GATS and NAFTA
– But a bit different for prudential carve-out
© Patrick Leblond – CETA Conference 2014
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Financial Services in CETA
• Cross-border trade in financial services
– National treatment
– MFN treatment
– Market access
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Effective and transparent regulation
Access to payment and clearing systems
Prudential carve-out
Financial Services Committee
Dispute settlement
ISDS
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What does it mean?
• Cross-border selling of financial services in
the other party’s jurisdiction (mode 1)
– E.g., loans, deposits, insurance
• Travel to the other party’s jurisdiction to
obtain financial services (mode 2)
– E.g., financial advice
• Set up operations in the other party’s
jurisdiction (e.g., branch, subsidiary) (mode
3)
• Cross-border movement of natural persons
as financial service suppliers (mode 4)
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Implications for selling financial
services in Canada
• Wide ownership remains
– No one shareholder can own more than 20% of
outstanding voting shares (30% non-voting) if
equity is more than $12 billion
• An acquisition of 10% or more of assets needs the
approval of the finance minister if equity is $2 billion or
more
• If equity is less than $12 billion, then shareholding can
be higher
– No longer tied to foreign ownership (since 1995
as a result of GATS)
• Branches by foreign entities are limited to
deposits of $150,000 or more
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Prudential Carve-out (1)
• The issue: can prudential regulation be
weakened because of ISDS?
– Financial institutions can challenge the “fair and
equitable treatment” by the financial regulator
• What will be the meaning of “reasonable
measures for prudential reasons” (Article 15.1
of the FS chapter)?
– How useful are the “high-level principles” in the in
the Annex providing “guidance” on Article 15.1 (an
innovation)?
• If regulation is in line with international
standards under the FSB, then it should be
okay
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Prudential Carve-out (2)
• Financial Services Committee to act as a “filter
mechanism”
– Respondent “may” refer to the FSC
– If the FSC decides that the prudential carve-out (PCO)
applies, then that’s the end of the process
– If the PCO does not apply or only in part, then it
proceeds to the tribunal
– If no agreement at the FSC, then it goes to the Trade
Committee before going to the tribunal
• Alleged compromise: the EU originally wanted the
traditional approach (i.e. leave it to the independent
tribunal) while Canada wanted only FSC to decide
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TTIP and Financial Services
• Both sides want greater market access but
they disagree on regulatory cooperation:
at the international level or within TTIP?
– EU wants to protect the position of European
banks in the US
• Threatened to remove financial services altogether
– US is not interested in harmonization
• No regulatory cooperation in CETA
– But the stakes are not as high!
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Conclusions
• How will CETA affect the financial services
sector in Canada and the EU?
– Impact will probably be marginal
– Barriers to trade and market access are not high to
begin with because of commitments under the
GATS
• In Canada, lack of internal free trade for some
financial services represents an obstacle for
EU suppliers
– E.g., insurance, securities brokerage, personal
financial advice
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THANK YOU!
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