Canada: The International Treaty Co-Production Vehicle: Legal Framework

Last Updated: October 3 2002
Article by Arthur Evrensel

The treaty co-production vehicle is an efficient, complex and viable alternative for producing quality film and television productions with Canadian co-producers, and an effective financing alternative to the studio system.

The increase in the last 10 years of the use of the international treaty co-production mechanism is attributable to technological advances resulting in increased domestic and international satellite and television broadcast outlets, and an unprecedented increase in consumer demand for quality film and television programming. However, the increased choices fragmented audiences and reduced advertising revenues to broadcasters. At the same time, the relative cost of production increased, with the result that producers required alternative sources of financing to produce their productions. Concurrently, a worldwide fear of being overwhelmed by American programming encouraged many countries to enter into audio-visual treaties, as a defensive mechanism to offset the American dominance in the area. In this environment, Canada has become a world leader in co-productions to address this state of affairs, and to reduce the risks inherent in film and television production through the pooling of both creative and financial resources.

According to the Canadian Film and Television Production Association ("CFTPA"), the film and television production industry in Canada grew to $4.9 billion of expenditures in 2001. The three largest production centres were Montreal, Toronto and Vancouver. According to Telefilm Canada, France and the United Kingdom are Canada’s leading co-production partners. In recent years the number of co-productions between UK and Canadian producers has increased dramatically, due mainly to the development of the sale and leaseback transaction in the UK, which can be dovetailed into a treaty co-production, albeit with some complexity.

As of January 1, 2002, Canada has signed 55 co-production treaty agreements with 52 countries1.

Co-production agreements signed by Canada with foreign countries are binding international legal accords ("treaties") between governments. These treaties are the product of increasing globalization in the film and television industry. The International Monetary Fund defines "globalization" as: "the increasing integration of economies around the world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labour) and knowledge (technology) across international borders"2.

As the demand for audio-visual production explodes worldwide, causing film and television production to increase dramatically, Canada and its partners have developed both the infrastructure and technological expertise required to build and sustain an indigenous film industry through the genius of the co-production vehicle. The treaties are designed to assist Canadian producers and their counterparts in other countries to collaborate on a production. The industry has become global, and co-productions are the answer to rising costs and risks of production in a global environment.

An official co-production, is treated as a "national product" in both co-production countries, and are entitled to government financial incentives, tax credits and cultural subsidies. In Canada, the product of a co-production is deemed to be a "Canadian Film or Video Production", which makes the co-production eligible for federal and provincial tax credits, cultural subsidies, and funding from a variety of support mechanisms such as the Canadian Television Fund, Telefilm Canada and the Independent Production Fund. In addition, the finished product which qualifies as "Canadian Content", would also be eligible for higher license fees from Canadian broadcasters, as well as being eligible for higher license fees from European broadcasters for productions which qualify as "national product" of such European nations.

The federal government in Canada announced that it has renewed funding for the Canadian Television Fund for one year, for 2001/2002, which with the contribution of the private sector shall aggregate over $200 million, a portion of which will be earmarked for treaty co-productions. In addition, the CTF-Equity Investment Program and the Feature Film Fund, both administered by Telefilm Canada, also contributed substantial sums to treaty co-productions. In addition, treaty co-productions are also eligible to receive federal and provincial tax credits on the Canadian portion of the labour costs spent on the production.

Relationships & Co-productions

In its essence, a co-production is both a legal relationship and a process. The legal relationship is a form of joint venture, which is fluid in its implementation. Co-productions are essentially a collaboration between two or more producers from two or more countries, the essence of which is set out in a written co-production agreement. The co-production agreement contains the financial, creative, technical, cultural, legal, immigration and budgetary relationship between the co-producers, as well as their respective responsibilities, liabilities, requirements, rights, obligations and financial participation.

A co-production should only be entertained by a producer after an assessment is made of the requirements and the objectives of the production, including the benefits to be derived by each party from participating in the co-production. The personal relationships between co-producers cannot be understated, as it is the cornerstone of every other element of the co-production. Therefore, the relationship between the parties is as important as the benefits to be derived by each party.

Other advantages of co-productions which are produced within the framework of co-production treaties, is that they simplify administrative and regulatory procedures by which goods, services, performers, technicians and equipment used for a production can travel easier between the two co-producing countries. A co-production agreement between a Canadian producer and a producer in a country with which Canada has a co-production treaty, is negotiated between private parties, and the co-production agreement sets out the basic terms of the production including minimum financial, creative and technical participation from each country, conditions for participation by third parties and procedures for entry and exit of all personnel and equipment from participating countries.

Legal Framework

There are three (3) essential source materials which constitute the legal framework of co-productions. They are:

  1. The governing treaty between the two countries: One should examine the terms of the applicable treaty as no two are alike, however, they are very similar in their essential components.
  2. Telefilm Canada Rules Regarding Co-Productions: Heritage Canada has delegated to Telefilm Canada, the responsibility for administering the approval process for co-production agreements negotiated between Canadian producers and producers with countries with whom Canada has a treaty. As a result, the Telefilm Canada rules regarding co-productions should be reviewed to understand the principles governing the agreements.
  3. Rights: The chain-of-title with regards to the sources of the rights, namely the acquisition agreement and the co-production agreement which will determine the respective participation of the parties, including the granting of the rights to each, is the key document and must be crafted carefully to ensure each party’s basic requirements, concerns and needs are addressed.

Essential Principles

There are four (4) key principles which are set out in the Rules of Telefilm Canada governing co-productions, and which must be enshrined in the agreements entered into by the co-producers. They are:

  1. Creative, Artistic and Technical Contributions.
  2. The co-producers from each country must each make a real and substantial creative, artistic and technical contribution to the production and which must be in proportion to the financial participation of each co-producer. The co-producers must comply with the minimum requirements set out in each treaty and all participants in the co-production must be nationals from the co-producing countries, subject to certain exceptions.

  3. Minimum Financial Participation.
  4. Each producer must contribute towards the creative, artistic, technical and financial aspects of the co-production. No producer may provide less than a specified percentage of the total budget, which minimum participation may vary between 15% and 30%, depending on the co-production agreement.

  5. Sharing Markets and Potential Revenues.
  6. Depending on the percentage of their respective investment in the co-production, producers must negotiate equitable sharing of markets as well as potential revenues therefrom.

  7. Copyright Ownership.

The copyright ownership of the co-production produced under the treaty, must be equal to the proportion of the financial contribution made by each co-producer, subject to the minimums.

In structuring a co-production agreement, the parties must be aware that the financial, artistic, technical and creative benefits and ownership of the co-production must reflect an overall balance, equitable to both parties, if it is to obtain the approval of the authorities in both countries. There must be a proportionate ratio of risk/reward between the parties.

Co-production treaties also require that all services on the production are to be provided by nationals of the two (2) countries, which is a requirement of each treaty. In general, the production must be filmed in one or both of the countries, however approval of filming in a third country is granted in limited circumstances. In addition, the authorities may also approve the participation of a performer who is not a national of either co-producing country but is required by the distributors, as a condition of license. In addition, a co-production agreement with a member state of the European Union ("EU") provides for further flexibility by permitting the participation in the co-production of nationals of any member state of the EU, as well as any performer from those countries. Therefore, the pool of technical and creative talent is larger.

Generally, co-producers share responsibility for the exploitation of the completed production. Exploitation within a producer’s home country is the responsibility of that producer and the proceeds from such exploitation generally belong to that producer. Receipts from exploitation in other countries are customarily split between co-producers in proportion to their contribution to the production budget. Typically, the copyright is shared in proportion to contribution to the financing, while domestic use of the copyright is owned by the respective co-producers exclusively.

In order for an international co-production to achieve official treaty co-production status, a co-production must be approved in Canada by the Co-production Office of Telefilm Canada which has been delegated the responsibility to administer the approval process for co-production agreements individually negotiated between Canadian co-producers and foreign co-producers. The approval process begins when the co-production agreement and the supporting material required to be submitted to Telefilm Canada for an Advance Ruling, is filed with Telefilm Canada within the delays prescribed by the guidelines. A similar procedure is adhered to by the foreign co-producer with the applicable agency in their home country. The Canadian producer will then apply to the Canadian Audio-Visual Certification Office ("CAVCO") for a Part "A" Certificate and CAVCO will provide a calculation of the amount of labour expenditures that qualify for federal tax credits. If the production is financed and made in accordance with the co-production agreement, Telefilm Canada will generally grant "final approval" within the delays set out in the rules and regulations. Any changes to a project may result in the loss of official treaty co-production status and the consequential loss of eligibility for tax credits. Once the final approval is obtained, it is filed with CAVCO and the Part "B" Certificate of Completion is obtained.

If Canada is not a party to a co-production treaty with a specific country, the Canadian producer may nevertheless obtain ad hoc approval from Telefilm Canada for official treaty co-production status. In order for the Canadian authorities to grant such approval, it must be shown that official treaty co-production status would be beneficial. There is no co-production treaty between Canada and the United States and ad hoc approval is not granted for a Canada/US co-production.

To ensure that there is an overall balance in the financial, creative and technical participation in co-production agreements, Canada and its partner countries call for joint commissions to convene (usually every two to four years) to review the operation of the specific co-production treaty and to address any imbalances or other problems which may have arisen in the past.

Content of the Co-Production Agreement

As stated earlier, the co-production agreement sets out the essence of the relationship between the co-producers and their respective responsibilities, liabilities, requirements, rights, obligations and financial participation. As a result, the negotiation and finalization of the co-production agreement is the core of the relationship between the co-producers and should be carefully negotiated and crafted in the context of each co-production, since no two co-productions are alike.

The following are some of the essential terms which should be incorporated in a co-production agreement. There are two competing thoughts in negotiating and drafting co-production agreements. The first approach is to have an agreement which contains the essential provisions but which is not detailed, to permit the parties to be flexible to address and resolve issues as they arise during the development, production and exploitation of the production. The second approach is to detail, in the co-production agreement, every conceivable matter and comprehensively deal with all issues. The methodology adopted will depend on the familiarity of the co-producers and the level of trust and ability of the parties.

The key elements which should be incorporated into a co-production agreement are the following:

    1. The amount of the budget, which should also fix an exchange rate between the currencies of the two co-producing countries and each producer should ensure that they purchase "forwards" to hedge against the risk of fluctuations in the exchange rate.
    2. The dates and places of principal photography of the production.
    3. The issue of which co-producer shall have final approval in the event of dispute, as well as the identity of the individual who will drive the creative process. Where there are broadcasters or distributors, they may also have approval rights and these should be enshrined in the agreement.
    4. The respective financial contributions of the co-producers.
    5. The responsibility for the completion of the production, which in the ordinary course will require a third party completion guarantor.
    6. A cash flow schedule to ensure that each party is aware of the dates on which funding will be required from each.
    7. The identity and role of key creative individuals, such as producers and their respective screen credits.
    8. Essential creative elements such as actors, directors and the screenplay on which the production is to be based.
    9. A provision providing for the types of insurance for the production.
    10. The respective fees and expenses of the co-producers which should also be enshrined in the budget.
    11. The division of distribution rights in the territories, as well as the respective distribution fees and expenses permitted to be charged by third parties.

    12. Chain of title issues dealing with which party is to provide the production with the underlying rights.
    13. The share of copyright ownership of the respective co-producers.
    14. The establishment of dates by which certain events are to be satisfied, such as the obtaining of the approval of the respective co-production authorities in the respective co-production countries or the ability to demonstrate closing of the financing for the production. In the event the pre-conditions are not satisfied by the dates established, then the co-production agreement should permit either party to terminate the agreement.
    15. Accounting provision to ensure that accounts are prepared by the parties and there is an obligation to deliver them to each other on a semi-annual basis.
    16. Responsibility for rights ownership to sequels, remakes, prequels and television series based on the production, and a description of the basis of the involvement of the co-producers in such productions.
    17. Termination provision to ensure that if there is a breach, the party who is in violation of the terms of the co-production agreement can be replaced within a reasonable period of time.
    18. Customary mutual indemnifications, representations and warranties.


    While complicated, co-productions present opportunities for producers to pool capital, share risk and benefit from the creative talents of foreign producers and performers.

    The challenges to maintaining effective co-productions, are an attempt to balance the diverse interests of the co-production partners, while recognizing that the ultimate benefit to both parties is achieved by co-operation between the co-producers.

    1 For an up to date list of the co-production treaties between Canada and other countries visit

    2 IMF Staff, "Globalization: Threat or Opportunity?" Issues Brief, April 12, 2000.

    The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

  • To print this article, all you need is to be registered on

    Click to Login as an existing user or Register so you can print this article.

    In association with
    Up-coming Events Search
    Font Size:
    Mondaq on Twitter
    Register for Access and our Free Biweekly Alert for
    This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
    Email Address
    Company Name
    Confirm Password
    Mondaq Topics -- Select your Interests
     Law Performance
     Law Practice
     Media & IT
     Real Estate
     Wealth Mgt
    Asia Pacific
    European Union
    Latin America
    Middle East
    United States
    Worldwide Updates
    Check to state you have read and
    agree to our Terms and Conditions

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    If you do not want us to provide your name and email address you may opt out by clicking here .

    If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.