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XIX. Article XV back to top
A. Text of Article XV
Article XV: Subsidies
1. Members recognize that, in certain circumstances, subsidies may
have distortive effects on trade in services. Members shall enter into
negotiations with a view to developing the necessary multilateral
disciplines to avoid such trade-distortive effects.(7) The negotiations
shall also address the appropriateness of countervailing procedures.
Such negotiations shall recognize the role of subsidies in relation to
the development programmes of developing countries and take into account
the needs of Members, particularly developing country Members, for
flexibility in this area. For the purpose of such negotiations, Members
shall exchange information concerning all subsidies related to trade in
services that they provide to their domestic service suppliers.
(footnote original)
7 A future work programme shall determine how,
and in what time-frame, negotiations on such multilateral disciplines
will be conducted.
2. Any Member which considers that it is adversely affected by a
subsidy of another Member may request consultations with that Member on
such matters. Such requests shall be accorded sympathetic consideration.
B. Interpretation and Application of
Article XV
1. Working Party on GATS Rules
(a) Report by the Chairperson
66. Negotiations on subsidies have been carried out in the Working
Party on GATS Rules, established on 30 March 1995 by the Council for
Trade in Services. (79)
A Report by the Chairperson was circulated on 30 June 2003(80) summarizing the progress made in the negotiations.
(b) Checklist on subsidies
67. The Report(81) draws attention to a Checklist of
Issues,(82) prepared
by the Chairperson at the request of the Working Party, in order to help
Members to address in a more systematic manner relevant questions under
this agenda item. Members proceeded on the basis of the Checklist until
July 2001, taking one item at each successive meeting. On 17 March 2003,
the Chairperson circulated a revised version of the Checklist on
Subsidies, as agreed by the Working Party at its February meeting.(83) The
Chairperson invited Members to continue using the revised Checklist as a
guide for identifying the content of possible disciplines.
Part III: Specific Commitments
XX. Article XVI
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A. Text of Article XVI
Article XVI: Market Access
1. With respect to market access through the modes of supply
identified in Article I, each Member shall accord services and service
suppliers of any other Member treatment no less favourable than that
provided for under the terms, limitations and conditions agreed and
specified in its Schedule.(8)
(footnote original) 8 If a Member undertakes a market-access
commitment in relation to the supply of a service through the mode of
supply referred to in subparagraph 2(a) of Article I and if the
cross-border movement of capital is an essential part of the service
itself, that Member is thereby committed to allow such movement of
capital. If a Member undertakes a market-access commitment in relation
to the supply of a service through the mode of supply referred to in
subparagraph 2(c) of Article I, it is thereby committed to allow related
transfers of capital into its territory.
2. In sectors where market-access commitments are undertaken, the
measures which a Member 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, 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 test;(9)
(footnote original)
9 Subparagraph 2(c) does not cover measures of a
Member which limit inputs for the supply of services.
(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 share-holding or the total value of
individual or aggregate foreign investment.
B. Interpretation and Application of Article XVI
1. General
(a) Electronic commerce
68. With respect to application of
Article XVI to electronic
commerce, see the Progress Report adopted by the Council for Trade in
Services in the context of the Work Programme on Electronic Commerce on
19 July 1999.(84)
2. Article XVI:2
(a) “Temporal” qualifications
69. The Panel on
Mexico
— Telecoms, in examining a market access
commitment made subject to a permit which would not be granted “until
the corresponding regulations are issued”, found:
“The wording of the limitation, that ‘permits for the
establishment of a commercial agency [will not be issued] until the
corresponding regulations are issued’, does not specify that a
numerical quota was to be imposed on the issuance of permits. Rather,
the sentence seems to introduce a temporal qualification as to when
establishment will be permitted — namely, after the issuance of the
regulations.
The six categories of measures in Article XVI:2 refer to the types of
market access limitations that can be imposed on the supply of a
service. However, none of the six categories relate to temporal
limitations — such as dates for entry into force or for the
implementation of commitments. This suggests that temporal limitations
cannot constitute limitations on market access under Article XVI:2 of
the GATS.”(85)
70. The Panel on
Mexico
— Telecoms went on to say that the temporal
qualifications in Mexico’s scheduled commitments did not meet the
requirements under Article XX:1(d) and (e), because a time frame was not
specified.(86) In this regard, see
Section XXIV. B.2 below.
(b) Routing requirement in telecommunications
71. The Panel on
Mexico
— Telecoms, observing that Mexico’s GATS
Schedule required that international telecommunications traffic “must
be routed through the facilities” of a Mexican concessionaire, found
that this “refers not to a requirement simply to use the equipment or
physical assets of a Mexican concessionaire, but to supply the service
on a facilities-basis, and not through capacity leased to the
cross-border supplier”.(87) With respect to the cross-border supply of
telecommunications services, therefore:
“This element of the routing restriction means, therefore, that
supply of the service by means of one of the categories (over leased
capacity) within Mexico is prohibited, and is subject to a zero quota in
the sense of Article XVI:2(a), (b) and
(c). We note that, while this
limitation prohibits services that originate on a facilities basis from
being terminated over leased circuits, it does not prevent these
services from being supplied when they fall within the facilities-based
category with respect to termination.”(88)
72. Likewise, with respect to non-facilities-based services supplied
cross-border, the Panel on Mexico — Telecoms found that the routing
requirement “prohibits the cross-border supply upon termination within
Mexico by means of the very ‘leased capacity’ which defines this
type of service”. The Panel therefore found:
“While this element of the routing restriction does not expressly
prohibit cross-border supply over leased capacity on the originating
segment, it means that supply over leased capacity on the terminating
segment is prohibited. Therefore, this element of the routing
restriction prohibits end-to-end International Simple Resale (ISR), and
effectively eliminates the possibility of any cross-border supply of
services over leased capacity. In this sense, with respect to cross
border services supplied by commercial agencies, the routing restriction
falls within the scope of Article XVI:2(a),
(b) and (c).”(89)
3. Relationship with Article VI:4
73. With respect to the relationship between
Articles VI:4 and XVI,
see paragraph 52 above.
XXI. Article XVII
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A. Text of Article XVII
Article XVII: National Treatment
1. In the sectors inscribed in its Schedule, and subject to any
conditions and qualifications set out therein, each Member shall accord
to services and service suppliers of any other Member, 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 suppliers.(10)
(footnote original) 10 Specific commitments assumed under this
Article shall not be construed to require any Member to compensate for
any inherent competitive disadvantages which result from the foreign
character of the relevant services or service suppliers.
2. A Member may meet the requirement of
paragraph 1 by according to
services and service suppliers of any other Member, either formally
identical treatment or formally different treatment to that it accords
to its own like services and service suppliers.
3. 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 the Member
compared to like services or service suppliers of any other Member.
B. Interpretation and Application of Article XVII
1. General
(a) Electronic commerce
74. With respect to application of
Article XVII to electronic
commerce, see the Progress Report adopted by the Council for Trade in
Services in the context of the Work Programme on Electronic Commerce on
19 July 1999.(90)
2. Likeness of
Services and Service Suppliers
75. The Panel on EC
— Bananas
III, in a finding not reviewed by the
Appellate Body, addressed the issue of likeness under Article
XVII:
“[T]he nature and the characteristics of wholesale transactions as
such, as well as of each of the different subordinated services
mentioned in the headnote to section 6 of the CPC, are ‘like’ when
supplied in connection with wholesale services, irrespective of whether
these services are supplied with respect to bananas of EC and
traditional ACP origin, on the one hand, or with respect to bananas of
third-country or non-traditional ACP origin, on the other. Indeed, it
seems that each of the different service activities taken individually
is virtually the same and can only be distinguished by referring to the
origin of the bananas in respect of which the service activity is being
performed. Similarly, in our view, to the extent that entities provide
these like services, they are like service suppliers.”(91)
3. “aims and effects” test
76. In EC
— Bananas III, the Appellate Body rejected the alleged
relevance of the so-called “aims-and-effects” test in the context of
Article XVII:
“We see no specific authority either in Article II or in
Article
XVII of the GATS for the proposition that the ‘aims and effects’ of
a measure are in any way relevant in determining whether that measure is
inconsistent with those provisions. In the GATT context, the ‘aims and
effects’ theory had its origins in the principle of Article III:1 that
internal taxes or charges or other regulations ‘should not be applied
to imported or domestic products so as to afford protection to domestic
production’. There is no comparable provision in the GATS.
Furthermore, in our Report in Japan — Alcoholic Beverages the
Appellate Body rejected the ‘aims and effects’ theory with respect
to Article III:2 of the GATT
1994. The European Communities cites an
unadopted panel report dealing with Article III of the GATT
1947, United
States — Taxes on Automobiles, as authority for its proposition,
despite our recent ruling.”(92)
4. Footnote 10
77. In Canada
— Autos, one of the measures at issue was the
so-called Canada Value Added (CVA) requirement, according to which a tax
duty exemption was granted, inter alia, only if the amount of Canadian
value added in a manufacturer’s local production of motor vehicles
exceeded a certain level. One component of this CVA requirement was “maintenance
and repair work executed in Canada on buildings, machinery and equipment
used for production purposes”. Canada argued that there can be no
discrimination against these services supplied through modes 1 and 2, as
cross-border supply and consumption abroad of these services are not
technically feasible. Further, Canada pointed out that “the
competitive disadvantage in the foreign provision of many services
listed by the complainants as being affected by the CVA requirements is
inherent in the foreign character of these services and, as stated in
footnote 10 to Article XVII, should not be regarded as a national
treatment restriction”.(93) The Panel, in a finding not reviewed by the
Appellate Body, disagreed with Canada:
“We consider that, although the supply of some repair and
maintenance services on machinery and equipment through modes 1 and 2
might not be technically feasible, as they require the physical presence
of the supplier, all other services listed by the complainants as being
affected by the CVA requirements, including some consulting and advisory
services relating to repair and maintenance of machinery, can be
supplied through modes 1 and 2. We further consider that treatment less
favourable granted to services supplied outside Canada cannot be
justified on the basis of inherent disadvantages due to their foreign
character. Footnote 10 to Article XVII only exempts Members from having
to compensate for disadvantages due to foreign character in the
application of the national treatment provision; it does not provide
cover for actions which might modify the conditions of competition
against services and service suppliers which are already disadvantaged
due to their foreign character.
We therefore find that lack of technical feasibility only excludes
the supply of some repair and maintenance services on machinery and
equipment through modes 1 and 2 from Canada’s national treatment
obligation. We also find that any eventual inherent disadvantages due to
the foreign character of services supplied through modes 1 and 2 do not
exempt Canada from its national treatment obligation with respect to the
CVA requirements.”(94)
5. Relationship with Article VI:4
78. With respect to the relationship with
Article VI:4, see paragraph
52 above.
XXII. Article XVIII
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A. Text of Article XVIII
Article XVIII: Additional Commitments
Members may negotiate commitments with respect to measures affecting
trade in services not subject to scheduling under Articles XVI or
XVII,
including those regarding qualifications, standards or licensing
matters. Such commitments shall be inscribed in a Member’s Schedule.
B. Interpretation and Application of Article XVIII
1. “Reference Paper” on Basic Telecommunications
79. Special GATS negotiations in basic telecommunications, in
which
Members made commitments in market access and national treatment, were
concluded in 1997. Many Members also took additional commitments under
Article XVIII, by drawing upon the provisions of a negotiated “Reference
Paper” containing pro-competitive regulatory principles applicable to
the telecommunications sector. In the negotiations, Members could elect
to insert any or all of the provisions of the model Reference Paper in
their schedules, and could also insert modified versions of these
provisions. The Reference Paper provisions contained in the schedules of
individual Members may therefore differ from the model provisions below.
(a) Text of model Reference Paper
“Reference Paper
Scope
The following are definitions and principles on the regulatory
framework for the basic telecommunications services.
Definitions
Users mean service consumers and service suppliers.
Essential facilities mean facilities of a public
telecommunications transport network or service that
(a) are exclusively or predominantly provided by a single or limited
number of suppliers; and
(b) cannot feasibly be economically or technically substituted in
order to provide a service.
A major supplier is a supplier which has the ability to
materially affect the terms of participation (having regard to price and
supply) in the relevant market for basic telecommunications services as
a result of:
(a) control over essential facilities; or
(b) use of its position in the market.
1. Competitive safeguards
1.1 Prevention of anti-competitive practices in telecommunications
Appropriate measures shall be maintained for the purpose of
preventing suppliers who, alone or together, are a major supplier from
engaging in or continuing anticompetitive practices.
1.2 Safeguards
The anti-competitive practices referred to above shall include in
particular:
(a) engaging in anti-competitive cross-subsidization;
(b) using information obtained from competitors with anti-competitive
results; and
(c) not making available to other services suppliers on a timely
basis technical information about essential facilities and commercially
relevant information which are necessary for them to provide services.
2. Interconnection
2.1 This section applies to linking with suppliers providing public
telecommunications transport networks or services in order to allow the
users of one supplier to communicate with users of another supplier and
to access services provided by another supplier, where specific
commitments are undertaken.
2.2 Interconnection to be ensured
Interconnection with a major supplier will be ensured at any
technically feasible point in the network. Such interconnection is
provided:
(a) under non-discriminatory terms, conditions (including technical
standards and specifications) and rates and of a quality no less
favourable than that provided for its own like services or for like
services of non-affiliated service suppliers or for its subsidiaries or
other affiliates;
(b) in a timely fashion, on terms, conditions (including technical
standards and specifications) and cost-oriented rates that are
transparent, reasonable, having regard to economic feasibility, and
sufficiently unbundled so that the supplier need not pay for network
components or facilities that it does not require for the service to be
provided; and
(c) upon request, at points in addition to the network termination
points offered to the majority of users, subject to charges that reflect
the cost of construction of necessary additional facilities.
2.3 Public availability of the procedures for interconnection
negotiations
The procedures applicable for interconnection to a major supplier
will be made publicly available.
2.4 Transparency of interconnection arrangements
It is ensured that a major supplier will make publicly available
either its interconnection agreements or a reference interconnection
offer.
2.5 Interconnection: dispute settlement
A service supplier requesting interconnection with a major supplier
will have recourse, either:
(a) at any time or
(b) after a reasonable period of time which has been made publicly
known
to an independent domestic body, which may be a regulatory body as
referred to in paragraph 5 below, to resolve disputes regarding
appropriate terms, conditions and rates for interconnection within a
reasonable period of time, to the extent that these have not been
established previously.
3. Universal service
Any Member has the right to define the kind of universal service
obligation it wishes to maintain. Such obligations will not be regarded
as anti-competitive per se, provided they are administered in a
transparent, nondiscriminatory and competitively neutral manner and are
not more burdensome than necessary for the kind of universal service
defined by the Member.
4. Public availability of licensing criteria
Where a licence is required, the following will be made publicly
available:
(a) all the licensing criteria and the period of time normally
required to reach a decision concerning an application for a licence and
(b) the terms and conditions of individual licences.
The reasons for the denial of a licence will be made known to the
applicant upon request.
5. Independent regulators
The regulatory body is separate from, and not accountable to, any
supplier of basic telecommunications services. The decisions of and the
procedures used by regulators shall be impartial with respect to all
market participants.
6. Allocation and use of scarce resources
Any procedures for the allocation and use of scarce resources,
including frequencies, numbers and rights of way, will be carried out in
an objective, timely, transparent and non-discriminatory manner. The
current state of allocated frequency bands will be made publicly
available, but detailed identification of frequencies allocated for
specific government uses is not required.”
(b) Section 1.1 —
Anti-competitive practices
(i) Concept of “anti-competitive practices”
80. In examining the meaning of “anti-competitive practices”, the
Panel on Mexico — Telecoms stated that, on its own, the term is “broad
in scope, suggesting actions that lessen rivalry or competition in the
market”.(95) Referring to the three examples ((a)-(c)) of such
practices set out in Section 1.2 of the model Reference Paper, the Panel
stated:
“All three examples show that ‘anti-competitive practices’ may
also include action by a major supplier without collusion or agreement
with other suppliers. Cross-subsidization, misuse of competitor
information, and withholding of relevant technical and commercial
information are all practices which a major supplier can, and might
normally, undertake on its own.”(96)
81. The Panel on
Mexico
— Telecoms also supported its reasoning in
paragraph 80 above by considering the concept of “major supplier”:
“The use of the term ‘major supplier’ in Section 1, examined in
the light of the definition of this term, suggests that the focus of ‘anti-competitive
practices’ is on a supplier’s ‘ability to materially affect the
terms of participation (having regard to price and supply)’ — in
other words, on monopolization or the abuse of a dominant position in
ways that affect prices or supply. The definition of a major supplier in
terms of suppliers ‘alone or together’ and the requirement in
Section 1.1 of ‘preventing suppliers from engaging in or continuing
anti-competitive practices’ also suggests that horizontal coordination
of suppliers may be relevant. This is supported by the requirement in
Section 1.1 of ‘preventing suppliers from engaging in or continuing
anti-competitive practices’.”(97)
82. The Panel on Mexico
— Telecoms was thus able to find that the
term “anti-competitive practices” in Section 1 of Mexico’s
Reference Paper “includes practices in addition to those listed in
Section 1.2, in particular horizontal practices related to price-fixing
and market-sharing agreements”.(98)
(ii) Practices required under a Member’s law
83. In determining whether or not the actions by
the major supplier
of telecommunications services in Mexico constituted “anti-competitive
practices” because it was required under national law to act in this
way, the Panel on Mexico — Telecoms found that Section 1.2 contains an
explicit example of an anticompetitive practice, cross-subsidization,
which has typically been a government requirement. The Panel stated:
“Cross-subsidization was and is a common practice in monopoly
regimes, whereby the monopoly operator is required by a government to
cross subsidize, either explicitly or in effect, usually through
government determination or approval of rates or rate structures. Once
monopoly rights are terminated in particular services sectors, however,
such cross-subsidization assumes an anticompetitive character. This
provision, therefore, provides an example of a practice, sanctioned by
measures of a government, that a WTO Member should no longer allow an
operator to ‘continue’. Accordingly, to fulfil its commitments with
respect to ‘competitive safeguards’ in Section 1 of the Reference
Paper, a Member would be obliged to revise or terminate the measures
leading to the cross-subsidization. This example clearly suggests that
not all acts required by a Member’s law are excluded from the scope of
anti-competitive practices.”(99)
84. The Panel on
Mexico — Telecoms pointed out further that
obligations in the Reference Paper could and did refer to practices that
were not dependent on their consistency with a Member’s national law.
The Panel stated:
“Section 2.1 illustrates that Members did not hesitate to undertake
obligations, with respect to a major supplier, that defined an objective
outcome — ‘cost-oriented’ interconnection. There is no reason to
suppose, and no language to suggest, that the desired outcome in Section
1 — preventing major suppliers from engaging in anti-competitive
practices — should depend entirely on whether a Member’s own laws
made such practices legal.”(100)
85. The Panel on
Mexico — Telecoms observed further that, although
legal doctrines applicable under national law might protect a firm in
compliance with a specific legislative requirement from the application
of national competition law, these doctrines did not provide cover from
international obligations. The Panel stated that:
“[P]ursuant to doctrines applicable under the competition laws of
some Members, a firm complying with a specific legislative requirement
of such a Member (e.g. a trade law authorizing private market-sharing
agreements) may be immunized from being found in violation of the
general domestic competition law. The reason for these doctrines is
that, in most jurisdictions, domestic legislatures have the legislative
power to limit the scope of competition legislation. International
commitments made under the GATS ‘for the purpose of preventing
suppliers … from engaging in or continuing anti-competitive practices’(101)
are, however, designed to limit the regulatory powers of WTO Members.
Reference Paper commitments undertaken by a Member are international
obligations owed to all other Members of the WTO in all areas of the
relevant GATS commitments. In accordance with the principle established
in Article 27 of the Vienna Convention,(102) a requirement imposed by a
Member under its internal law on a major supplier cannot unilaterally
erode its international commitments made in its schedule to other WTO
Members to prevent major suppliers from ‘continuing anti-competitive
practices’.(103) The pro-competitive obligations in Section 1 of the
Reference Paper do not reserve any such unilateral right of WTO Members
to maintain anti-competitive measures.”(104)
86. The Panel on
Mexico — Telecoms emphasized, however, that
particular measures addressed in the case were exceptional, and that the
autonomy of Members under Section 1 was not unduly circumscribed:
“Although we find that measures required by a Member under its
internal laws may fall within the scope of Section 1, the measures
addressed in the case before us are exceptional, and require a major
supplier to engage in acts which are tantamount to anti-competitive
practices which are condemned in domestic competition laws of most WTO
Members, and under instruments of international organizations to which
both parties are members. Section 1 is a voluntary, additional
commitment to maintain certain ‘appropriate’ measures, which
reserves a degree of flexibility for Members in accepting and
implementing such an additional commitment.”(105)
(iii) Types of measures constituting “anticompetitive practices”
Setting of uniform price by the major supplier
87. The Panel on
Mexico — Telecoms, in examining the specific
practices of the major supplier, stated that:
“the removal of price competition by the Mexican authorities,
combined with the setting of the uniform price by the major supplier,
has effects tantamount to those of a price-fixing cartel. We have
previously found that horizontal practices such as price-fixing among
competitors are ‘anti-competitive practices’ under Section 1 of
Mexico’s Reference Paper.”(106)
Proportionate return system
88. The Panel on
Mexico — Telecoms, in further examining the
specific practices of the major supplier, found that “the allocation
of market share between Mexican suppliers imposed by the Mexican
authorities, combined with the authorization of Mexican operators to
negotiate financial compensation between them instead of physically
transferring surplus traffic, has effects tantamount to those of a
market sharing arrangement between suppliers”.
(iv) Maintaining “appropriate measures”
89. The Panel on
Mexico — Telecoms described the meaning of “appropriate
measures” in the following terms:
“We recognize that measures that are ‘appropriate’ in the sense
of Section 1 of Mexico’s Reference Paper would not need to forestall
in every case the occurrence of anticompetitive practices of major
suppliers. However, at a minimum, if a measure legally requires certain
behaviour, then it cannot logically be ‘appropriate’ in preventing
that same behaviour.”
(c) Section 2.1 —
Interconnection
(i) “on the basis of the specific commitments undertaken”
90. The Panel on
Mexico — telecoms, in examining whether certain
commitments triggered the interconnection obligation, found that:
“The wording of Section 2 of the Reference Paper as a whole
suggests that the purpose of the interconnection obligation is to enable
suppliers supplying a basic telecommunications service committed by a
Member in its schedule not to be restricted by unduly onerous
interconnection terms, conditions and rates imposed by a major supplier.
It would not appear to be the purpose of Section 2 to provide the
benefits of the interconnection to a supplier in any telecommunications
subsector or mode of supply, simply because other subsectors and modes
of supply have been committed. It would seem reasonable to conclude,
therefore, that the right to interconnect accorded by Section 2.2 should
apply where, with respect to a particular subsector and mode of
supply,
a Member’s market access and national treatment commitments
specifically accords the right to supply that service.”(107)
(ii) Applicability to cross-border supply
91. The Panel on
Mexico — Telecoms found that there was no language
in Section 2 to suggest that interconnection obligations did not apply
to the cross-border supply of international telecommunications services.
The Panel noted that in Section 2 there is
“no reference to the entity that is entitled to be linked to the
public telecommunications transport networks or services; no language
thus exists that would circumscribe the scope, geographic or otherwise,
of the basic telecommunications suppliers to be linked. This provision
therefore could not be read to exclude suppliers outside of Mexico from
‘linking’ to public telecommunications transport networks and
services in Mexico.”(108)
92. The Panel on
Mexico — Telecoms supported the above observation
by noting that from legislative, commercial, contractual or technical
points of view, there was no fundamental difference between national and
international interconnection:
“In sum the ordinary meaning, in the heading of Section 2 of Mexico’s
Reference Paper, of the term ‘interconnection’ — that it does not
distinguish between domestic and international interconnection,
including through accounting rate regimes — is confirmed by an
examination of any ‘special meaning’ that the term ‘interconnection’
may have in telecommunications legislation, or by taking into account
potential commercial, contractual or technical differences inherent in
international interconnection. We find that any ‘special meaning’ of
the term ‘interconnection’ in Section 2 of Mexico’s Reference
Paper does not justify a restricted interpretation of interconnection,
or of the term ‘linking’, which would exclude international
interconnection, including accounting rate regimes, from the scope of
Section 2 of the Reference Paper.”(109)
93. Further, the Panel on
Mexico — Telecoms considered that the
object and purpose of the GATS supported the inclusion of international
interconnection within the disciplines of the Reference Paper:
“Trade in services is defined in Article I:2 to include the
cross-border supply of a service ‘from the territory of one Member
into the territory of any other Member’. This mode of supply, together
with supply through commercial presence, is particularly significant for
trade in international telecommunications services. There is no reason
to suppose that provisions that ensure interconnection on reasonable
terms and conditions for telecommunications services supplied through
the commercial presence should not benefit the cross-border supply of
the same service, in the absence of clear and specific language to that
effect.”(110)
94. The Panel on
Mexico — Telecoms found also that the existence of
an explicitly non-binding understanding on accounting rates contained
in the Report of the negotiating group report did not support the notion
that international interconnection was excluded from the scope of the
interconnection obligations in the Reference Paper. The Panel stated:
“In sum, the Understanding seeks to exempt a very limited category
of measures, temporarily, and on a non-binding basis, from the scope of
WTO dispute settlement. Simply because Members wished to shield a
certain type of cross-border interconnection from dispute settlement,
because of possible MFN inconsistencies (with respect to differential
rates), it does not follow that they wished to shield all forms of
cross-border interconnection from dispute settlement. The clear
intention to do so is not expressed in the Understanding. This suggests
that the content and purpose of the Understanding is of limited
assistance in interpreting the scope of application of the term ‘interconnection’
in Section 2.1 of Mexico’s Reference Paper.”(111)
(iii) “major supplier”
95. In examining whether Telmex was a “major supplier”, the Panel
on Mexico — Telecoms analysed first whether there was a “relevant
market”:
“The fact that arrangements for interconnection and termination may
take the form of ‘joint service’ agreements, and may not be
price-oriented, does not change the fact that the market exists. Nor is
it pertinent to the determination of the ‘relevant market’, as
Mexico suggests, that most WTO Members have not undertaken market access
commitments specifically in ‘termination services’; facilities for
the termination and interconnection are essential to the supply of the
services at issue in this case.
Is this market for termination the ‘relevant’ market? For the
purposes of this case, we accept the evidence put forward by the United
States, and uncontested by Mexico, that the notion of demand
substitution — simply put, whether a consumer would consider two
products as ‘substitutable’ — is central to the process of market
definition as it is used by competition authorities. Applying that
principle, we find no evidence that a domestic telecommunications
service is substitutable for an international one, and that an outgoing
call is considered substitutable for an incoming one. One is not a
practical alternative to the other. Even if the price difference between
domestic and international interconnection would change, such a price
change would not make these different services substitutable in the eyes
of a consumer. We accept, therefore, that the ‘relevant market for
telecommunications services’ for the services at issue — voice,
switched data and fax — is the termination of these services in
Mexico.”(112)
(iv) “the ability to materially affect the terms of participation
(having regard to price and supply)”
96. In examining further whether Telmex could affect the market to
the extent required to be a major supplier, the Panel on Mexico — Telecoms found:
“[S]ince Telmex is legally required to negotiate settlement rates
for the entire market for termination of the services at issue from the
United States, we find that it has patently met the definitional
requirement in Mexico’s Reference Paper that it have ‘the ability to
materially affect the terms of participation’, particularly ‘having
regard to price’.”(113)
(v) “control over essential facilities” or “use of its position
in the market”
97. The Panel on
Mexico — Telecoms found that “The ability to
impose uniform settlement rates on its competitors is the ‘use’ by
Telmex of its special ‘position in the market’, which is granted to
it under the ILD Rules.”(114)
(d) Section 2.2(b)
— Interconnection rates
(i) “cost-oriented”
98. In examining the ordinary meaning of the term “cost-oriented”,
the Panel on Mexico — Telecoms stated:
“Rates that are ‘cost-oriented’ thus suggest rates that are
brought into a defined relation to known costs or cost principles. Rates
that are ‘cost-oriented’ would not need to equate exactly to cost,
but should be founded on cost. The degree of flexibility inherent in the
term ‘cost-oriented’ suggests, moreover, that more than one costing
methodology could be used to calculate ‘cost-oriented’ rates.”(115)
99. The Panel on
Mexico — Telecoms found that the ordinary meaning
of the phrase “cost-oriented” was confirmed by its special meaning
in the telecommunications sector, in particular as expressed in a key
ITU recommendation. The Panel stated:
“In sum, Recommendation D.140 requires in its present form that the
cost elements and the cost model both be clearly related to the cost of
delivering the service. This special meaning of ‘cost-orientated’,
in the context of the ITU, is thus consistent with the ordinary meaning
of the term as it appears in Section 2.2(b) of Mexico’s Reference
Paper. As both parties to this dispute as well as most WTO Members are
also members of the ITU, the special definition adds precision to the
ordinary meaning by classifying allowable cost elements, and
establishing the causality between the cost elements and the services
provided. While leaving a margin of discretion to national authorities
to choose the precise cost method by which to arrive at ‘cost-oriented’
rates, the ITU recommendations indicate that the term ‘cost-oriented
rates’ can be understood as rates related to the cost incurred in
providing the service.” (116)
100.
The Panel on Mexico — Telecoms further noted that the ITU
stated in a report that “incremental cost methodologies are becoming
the de facto standard for interconnection pricing around the world”.(117)
The Panel explained:
“These methods focus on the additional future fixed and variable
costs that are attributable to the service. Setting rates in line with
long run incremental costs reflects the view that the regulator should
require prices from dominant or major suppliers that most closely
imitate a fully competitive market, where prices are driven down towards
marginal or incremental costs.(118) The increasing use of incremental cost
methodologies indicates the special meaning that the term ‘cost-oriented’
is acquiring among WTO Members.”(119)
(ii) “reasonable”
101.
In examining the further requirement that cost-oriented rates be
“reasonable”, the Panel on Mexico — Telecoms found that this term
suggested something “judged to be appropriate or suitable to the
circumstances or purpose”.(120) The Panel explained that this meant that
interconnection rates should
“[r]eflect the overall objectives of the provision that the rates
represent the costs incurred in providing the service. The word ‘reasonable’
thus emphasizes that the application of the cost model chosen by the
Member reflects the costs incurred for the interconnection service.
Flexibility and balance are also part of the notion of ‘reasonable’.”(121),
(122)
(iii) “having regard to economic feasibility”
102.
The Panel on Mexico — Telecoms found that the phrase “having
regard to economic feasibility”, which qualifies “cost-oriented
rates”,
“[s]erves merely to underline that the major supplier is entitled
to rates that allow it to undertake interconnection on an ‘economic’
basis, that is, to make a reasonable rate of return.”(123)
(iv) Evaluating whether rates are “cost-oriented”
103.
In evaluating whether in fact the rates were “cost-oriented”,
the Panel on Mexico — Telecoms found:
“We think it is justified to presume that the aggregate price
charged by Telmex for the use of network components, when used for
purely domestic traffic, is an indication of the cost-oriented rate, in
the sense of Section 2.2(b) of Mexico’s Reference Paper, for the use
of these same network components in terminating an international call.”(124)
104.
Applying this methodology (the difference between the aggregate
price charged for the use of network components when used for purely
domestic traffic, and the price charged for the use of these same
network components in terminating an international call), the Panel on
Mexico — Telecoms found:
“The evidence reveals that the blended average difference in costs
is in the order of 77%. Mindful of the fact that the cost-ceiling
figures used are conservative (since they are based in part on retail
rates for private lines, and Telmex’s interconnection rates to cities
without competition in call origination), we find that a difference of
over 75% above Telmex’s demonstrated cost-ceiling is unlikely to be
within the scope of regulatory flexibility allowed by the notion of ‘cost-oriented’
rates, in the sense of Section 2.2(b) of Mexico’s Reference Paper.”(125)
105.
In examining other methodologies for determining whether
interconnection rates were “cost-oriented”, the Panel on Mexico
— Telecoms was not convinced that a comparison of international greymarket
rates was “fully warranted”. It reasoned that “such capacity may
be priced at short-term incremental cost (well below long-term
incremental cost as required under Mexican law for calculating
interconnection charges) and may also result in lower service
reliability and quality”, even though any “substantial difference in
costs” could go some way to support findings under other
methodologies.(126) On the other hand, the Panel found that benchmarking
which involved a “comparison of the market for wholesale
transportation and termination of international calls” in different
countries was a “valid method” for examining whether interconnection
rates were cost-oriented. (127)
Part IV: Progressive Liberalization
XXIII. Article XIX
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A. Text of Article XIX
Article XIX: Negotiations on Specific Commitments
1. In pursuance of the objectives of this Agreement, Members shall
enter into successive rounds of negotiations, beginning not later than
five years from the date of entry into force of the WTO Agreement and
periodically thereafter, with a view to achieving a progressively higher
level of liberalization. Such negotiations shall be directed to the
reduction or elimination of the adverse effects on trade in services of
measures as a means of providing effective market access. This process
shall take place with a view to promoting the interests of all
participants on a mutually advantageous basis and to securing an overall
balance of rights and obligations.
2. The process of liberalization shall take place with due respect
for national policy objectives and the level of development of
individual Members, both overall and in individual sectors. There shall
be appropriate flexibility for individual developing country Members for
opening fewer sectors, liberalizing fewer types of transactions,
progressively extending market access in line with their development
situation and, when making access to their markets available to foreign
service suppliers, attaching to such access conditions aimed at
achieving the objectives referred to in Article
IV.
3. For each round, negotiating guidelines and procedures shall be
established. For the purposes of establishing such guidelines, the
Council for Trade in Services shall carry out an assessment of trade in
services in overall terms and on a sectoral basis with reference to the
objectives of this Agreement, including those set out in paragraph 1 of
Article IV. Negotiating guidelines shall establish modalities for the
treatment of liberalization undertaken autonomously by Members since
previous negotiations, as well as for the special treatment for
least-developed country Members under the provisions of paragraph 3 of
Article IV.
4. The process of progressive liberalization shall be advanced in
each such round through bilateral, plurilateral or multilateral
negotiations directed towards increasing the general level of specific
commitments undertaken by Members under this Agreement.
B. Interpretation and Application of Article XIX
1. Article XIX:1
(a) Information exchange
106.
On 9-13 December 1996 in Singapore, the Ministerial Conference
endorsed the recommendation that the Council for Trade in Services would
develop an information exchange programme,(128) as part of the requisite
work to facilitate the negotiations of progressive liberalization of
trade in services as mandated by paragraph 1 of Article
XIX.(129) On 11
May 1998, the Council on Trade in Services agreed, on an ad referendum
basis, on certain aspects concerning the structure and content of the
exchange of information exercise.(130)
(b) GATS 2000 negotiations
107.
At its meeting on 7—8 February 2000, the General Council took
note of a statement by the Chairman recalling that the mandated
negotiations had begun on 1 January 2000. The Council agreed that the
negotiations be conducted in Special Sessions of the Council for Trade
in Services.(131)
(c) Doha Declaration
108.
On 9—14 November 2001 in Doha Ministers took note that work
had already been undertaken in the negotiations, initiated in January
2000. They agreed that the conduct, conclusion and entry into force of
the services negotiations would be treated as one part of the single
undertaking.(132)
2. Article XIX:3
(a) GATS 2000 negotiations
109. At its meeting on 28 March 2001, the Council for Trade in
Services adopted the Guidelines and Procedures for the Negotiations on
Trade in Services,(133) which were subsequently reaffirmed by Ministers
meeting in Doha on 9—14 November 2001.(134)
(b) Assessment of trade in services
110. At its meeting on 25 February 2000, the Council decided that the
assessment of trade in services should be moved to the agenda of the
Special Session. It was agreed that the assessment should be regarded as
an on-going process rather than a one-off exercise.(135)
3. Negotiations in specific services sectors
(a) Movement of natural persons
111. At its meeting of 21 July 1995,(136) the Council for Trade in
Services decided to adopt the Third Protocol to the General Agreement on
Trade in Services,(137) which had been proposed by the Negotiating Group
on Movement of Natural Persons.
(b) Financial services
112. At its meeting of 21 July 1995, the Committee on Trade in
Financial Services decided to adopt the Second Protocol to the General
Agreement on Trade in Services.(138) Following the adoption of the Second
Protocol, at its meeting of 21 July 1995, the Council for Trade in
Services, so as to address the situation where the Second Protocol would
not enter into force, adopted the Decision on Commitments in Financial
Services(139) and the Second Decision on Financial
Services,(140) both of
which had been proposed by the Committee on Trade in Financial Services.(141)
113. On 12 and 14 November 1997, the Committee on Trade in Financial
Services approved the final results of the negotiations on financial
services, and adopted the Fifth Protocol to the General Agreement on
Trade in Services.(142) Following the adoption of the Fifth Protocol, the
Council for Trade in Services, at its meeting of 12 December 1997, so as
to address the situation where the Fifth Protocol would not enter into
force, adopted the Decision of December 1997 on Commitments in Financial
Services,(143) which had been proposed by the Committee on Trade in
Financial Services. The Fifth Protocol entered into force on 1 March
1999 and remained open for acceptance by the Members concerned until 15
June 1999.(144) However, some of those Members failed to accept the
Protocol by that date. In order to allow for the acceptance of the
Protocol after the expiry of the deadline, the Council for Trade in
Services has periodically opened the Fifth Protocol for acceptance upon
request by a Member. From September 1999 until 31 December 2004, nine
WTO Members have accepted the Protocol. (145)
(c) Maritime transport services
114. At its meeting of 28 June 1996, the Council for Trade in
Services adopted a Decision to suspend the negotiations on maritime
transport services and to resume them with the commencement of
comprehensive negotiations on services, in accordance with Article XIX
of GATS, and to conclude them no later than at the end of this first
round of progressive liberalization.(146) The Group was to resume “with
the commencement of comprehensive negotiations on Services”.(147) A
Special Session of the Council for Trade in Services formally launched
the new negotiations on services on 25 February 2000.(148)
(d) Basic telecommunications
115. On 30 April 1996, the Council for Trade in Services decided to
adopt the Decision on Commitments in Basic Telecommunications and the
Fourth Protocol to the General Agreement on Trade in Services,(149) both
of which had been proposed by the Negotiating Group on Basic
Telecommunications.
(e) Professional services
116.
With respect to the establishment of the Working Party on
Professional Services, and its successor, the Working Party on Domestic
Regulation, see paragraphs 132–134
below.
(i) Disciplines on domestic regulation
117.
With respect to disciplines on domestic regulation, see
paragraph 51 above.
XXIV. Article XX
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A. Text of Article XX
Article XX: Schedule of Specific Commitments
1. Each Member shall set out in a schedule the specific commitments
it undertakes under Part III of this Agreement. With respect to sectors
where such commitments are undertaken, each Schedule 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 XVI and XVII shall be
inscribed in the column relating to Article XVI. In this case the
inscription will be considered to provide a condition or qualification
to Article XVII as well.
3. Schedules of specific commitments shall be annexed to this
Agreement and shall form an integral part thereof.
B. Interpretation and Application of Article XX
1. General
(a) Committee on Specific Commitments
118.
With regard to the establishment and terms of reference of the
Committee on Specific Commitments under the GATS, see paragraph 137
below.
(b) Guidelines for Scheduling of Specific Commitments
119. At its meeting of 23 March 2001, the Council for Trade in
Services adopted the Guidelines for the Scheduling of Specific
Commitments.(150)
2. Article XX:1(d)
120.
The Panel on Mexico — Telecoms, in examining a market access
commitment made subject to a permit that would not be granted “until
the corresponding regulations are issued”, explained the role and
application of paragraph (d):
“We therefore consider that subparagraph (d) of Article XX:1
requires the specification of a time-frame for implementation should a
Member wish to implement a commitment after its entry into force. Where
a Member does not specify a time-frame, implementation must be deemed to
be concurrent with the entry into force of the commitment.”(151)
121.
Referring to the circumstances of the case, the Panel on Mexico — Telecoms then pointed out that:
“[E]ven if Mexico had needed time to complete the issuance of the
regulations beyond the time of entry into force of its commitment on 5
February 1998, Mexico should, at the very minimum, have initiated that
process leading to the issuance of the regulations. There is no
evidence, however, that Mexico has taken any steps to comply with its
commitment.”(152)
122.
With respect to the length of time in which implementation by
Mexico could reasonably have been concluded, the Panel on Mexico —
Telecoms stated:
“We do not consider it necessary to rule on the length of a time
period within which the implementation of Mexico’s commitment might
reasonably have been concluded, as more than five years have passed
since the entry into force of Mexico’s commitment, and Mexico still
has indicated no date by which it intends to issue the relevant
regulations and permits.”(153)
123.
The Panel on Mexico — Telecoms found that Mexico’s refusal
to authorize the supply of services by commercial agencies was
inconsistent with the market access commitment inscribed in its
schedule.
XXV. Article XXI
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A. Text of Article XXI
Article XXI: Modification of Schedules
1. (a)
A Member (referred to in this Article as the “modifying
Member”) 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.
(b)
A modifying Member shall notify its intent to modify or withdraw
a commitment pursuant to this Article to the Council for Trade in
Services no later than three months before the intended date of
implementation of the modification or withdrawal.
2. (a)
At the request of any Member the benefits of which under this
Agreement may be affected (referred to in this Article as an “affected
Member”) by a proposed modification or withdrawal notified under
subparagraph 1(b), the modifying Member shall enter into negotiations
with a view to reaching agreement on any necessary compensatory
adjustment. In such negotiations and agreement, the Members concerned
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.
(b)
Compensatory adjustments shall be made on a most-favoured-nation
basis.
3. (a)
If agreement is not reached between the modifying Member and
any affected Member before the end of the period provided for
negotiations, such affected Member may refer the matter to arbitration.
Any affected Member that wishes to enforce a right that it may have to
compensation must participate in the arbitration.
(b)
If no affected Member has requested arbitration, the modifying
Member shall be free to implement the proposed modification or
withdrawal.
4. (a)
The modifying Member may not modify or withdraw its commitment
until it has made compensatory adjustments in conformity with the
findings of the arbitration.
(b)
If the modifying Member implements its proposed modification or
withdrawal and does not comply with the findings of the arbitration, any
affected Member that participated in the arbitration may modify or
withdraw substantially equivalent benefits in conformity with those
findings. Notwithstanding Article II, such a modification or withdrawal
may be implemented solely with respect to the modifying Member.
5. The Council for Trade in Services shall establish procedures for
rectification or modification of Schedules. Any Member which has
modified or withdrawn scheduled commitments under this Article shall
modify its Schedule according to such procedures.
B. Interpretation and Application of Article XXI
1. Article XXI:1(b)
(a) Format for notifications
124. With respect to the format for notifications under
paragraph 1(b), see the Guidelines for Notifications under the General Agreement
on Trade in Services.(154)
2. Article XXI:5
(a) Procedures for the rectification or modification of schedules
125.
Since the conclusion of the Uruguay Round, an ad hoc
certification procedure had been applied for the purpose of introducing
changes or adding new commitments to Members’ schedules, pending the
adoption of a formal set of procedures under Article XXI (Modification
of Schedules). On 20 July 1999, the Council for Trade in Services
adopted the Procedures for the Implementation of Article XXI upon the
recommendation of the Committee on Specific Commitments. (155)
The
Procedures are to be used whenever a Member intends to modify or
withdraw a scheduled commitment.
126. On 14 April 2000, upon a recommendation of the Committee on
Specific Commitments, the Council for Trade in Services adopted the
Procedures for the Certification of Rectifications or Improvements to
Schedules of Specific Commitments.(156) These Procedures are to be used
whenever a Member intends to undertake new commitments, improve existing
ones, or introduce rectifications or changes of a purely technical
nature that do not alter the scope or the substance of the existing
commitments.
Part V : Institutional Arrangements
XXVI. Article XXII
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A. Text of Article XXII
Article XXII: Consultation
1. Each Member shall accord sympathetic consideration to, and shall
afford adequate opportunity for, consultation regarding such
representations as may be made by any other Member with respect to any
matter affecting the operation of this Agreement. The Dispute Settlement
Understanding (DSU) shall apply to such consultations.
2. The Council for Trade in Services or the Dispute Settlement Body (DSB)
may, at the request of a Member, consult with any Member or Members in
respect of any matter for which it has not been possible to find a
satisfactory solution through consultation under paragraph
1.
3. A Member may not invoke
Article XVII, either under this Article or
Article XXIII, with respect to a measure of another Member that falls
within the scope of an international agreement between them relating to
the avoidance of double taxation. In case of disagreement between
Members as to whether a measure falls within the scope of such an
agreement between them, it shall be open to either Member to bring this
matter before the Council for Trade in Services.(11) The Council shall
refer the matter to arbitration. The decision of the arbitrator shall be
final and binding on the Members.
(footnote original) 11 With respect to agreements on the avoidance
of double taxation which exist on the date of entry into force of the
WTO Agreement, such a matter may be brought before the Council for Trade
in Services only with the consent of both parties to such an agreement.
B. Interpretation and Application of Article XXII
No jurisprudence or decision of a competent WTO body.
XXVII. Article XXIII
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A. Text of Article XXIII
Article XXIII: Dispute Settlement and Enforcement
1. If any Member should consider that any other Member fails to carry
out its obligations or specific commitments under this Agreement, it may
with a view to reaching a mutually satisfactory resolution of the matter
have recourse to the DSU.
2. If the DSB considers that the circumstances are serious enough to
justify such action, it may authorize a Member or Members to suspend the
application to any other Member or Members of obligations and specific
commitments in accordance with Article 22 of the
DSU.
3. If any Member considers that any benefit it could reasonably have
expected to accrue to it under a specific commitment of another Member
under Part III of this Agreement is being nullified or impaired as a
result of the application of any measure which does not conflict with
the provisions of this Agreement, it may have recourse to the DSU. If
the measure is determined by the DSB to have nullified or impaired such
a benefit, the Member affected shall be entitled to a mutually
satisfactory adjustment on the basis of paragraph 2 of Article XXI,
which may include the modification or withdrawal of the measure. In the
event an agreement cannot be reached between the Members concerned,
Article 22 of the DSU shall apply.(157),
(158)
B. Interpretation and Application of Article XXIII
1. Article XXIII:1
(a) Relationship with Article 3.8 of the DSU
127.
In EC — Bananas
III, the Appellate Body considered that the
Panel had erred in extending the scope of the presumption of
nullification or impairment in Article 3.8 of the
DSU to violation
claims made under the GATS:
“We observe, first of all, that the European Communities attempts
to rebut the presumption of nullification or impairment with respect to
the Panel’s findings of violations of the GATT 1994 on the basis that
the United States has never exported a single banana to the European
Community, and therefore could not possibly suffer any trade damage. The
attempted rebuttal by the European Communities applies only to one
complainant, the United States, and to only one agreement, the GATT
1994. In our view, the Panel erred in extending the scope of the
presumption in Article 3.8 of the DSU to claims made under the GATS as
well as to claims made by the Complaining Parties other than the United
States.”(159)
2. Disputes under GATS
128.
The following table lists the disputes in which Panel and/or
Appellate Body reports have been adopted where the provisions of GATS
were invoked:
|
|
Case Name
|
Case Number
|
Invoked Articles
|
|
1 |
EC — Bananas III |
WT/DS27 |
Articles II and XVII |
|
2 |
Canada — Autos |
WT/DS139,WT/DS142 |
Articles II, V and XVII |
|
3 |
Mexico — Telecoms |
WT/DS204 |
Articles I:2(a), I:2(c),XVI XVIII, XX, Annex on
Telecommunications |
3. Decision on Certain Dispute Settlement Procedures for the General
Agreement on Trade in Services
129.
On 1 March 1995, pursuant to the Ministers’ Decision on
Certain Dispute Settlement Procedures for the General Agreement on Trade
in Services, the Council for Trade in Services adopted the Decision on
Certain Dispute Settlement Procedures for the General Agreement on Trade
in Services,(160) which called for the establishment of a roster of
panellists.(161) The text of the decision is as follows:
“Decision on Certain Dispute Settlement Procedures for the General
Agreement on Trade in Services
Ministers,
Decide to recommend that the Council for Trade in Services at its
first meeting adopt the decision set out below.
The Council for Trade in Services,
Taking into account the specific nature of the obligations and
specific commitments of the Agreement, and of trade in services, with
respect to dispute settlement under Articles XXII and
XXIII,
Decides as follows:
1. A roster of panellists shall be established to assist in the
selection of panellists.
2. To this end, Members may suggest names of individuals possessing
the qualifications referred to in Paragraph 3 for inclusion on the
roster, and shall provide a curriculum vitae of their qualifications
including, if applicable, indication of sector-specific expertise.
3. Panels shall be composed of well-qualified governmental and/or
non-governmental individuals who have experience in issues related to
the General Agreement on Trade in Services and/or trade in services,
including associated regulatory matters. Panellists shall serve in their
individual capacities and not as representatives of any government or
organisation.
4. Panels for disputes regarding sectoral matters shall have the
necessary expertise relevant to the specific services sectors which the
dispute concerns.
5. The Secretariat shall maintain the roster and shall develop
procedures for its administration in consultation with the Chairman of
the Council.”
130.
On 4 October 1995, the Council for Trade in Services decided
that, given the comprehensive nature of the indicative list established
by the DSB pursuant to Article 8(4) of the DSU, there was no need for
the Council to establish a separate roster of serving panellists.(162)
XXVIII. Article XXIV
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A. Text of Article XXIV
Article XXIV: Council for Trade in Services
1. The Council for Trade in Services shall carry out such functions
as may be assigned to it to facilitate the operation of this Agreement
and further its objectives. The Council may establish such subsidiary
bodies as it considers appropriate for the effective discharge of its
functions.
2. The Council and, unless the Council decides otherwise, its
subsidiary bodies shall be open to participation by representatives of
all Members.
3. The Chairman of the Council shall be elected by the Members.
B. Interpretation and Application of Article XXIV
1. Article XXIV.1
(a) Establishment of subsidiary bodies
(i) Committee on Trade in Financial Services
131.
On 1 March 1995, pursuant to the Ministers’ Decisions in
Marrakesh, the Council for Trade in Services adopted the Decision on
Institutional Arrangements for the General Agreement on Trade in
Services,(163) thereby establishing the Committee on Trade in Financial
Services.(164) Its responsibilities are listed in
paragraph 2 of the
Decision and comprise, inter alia, the duty:
“(a) to keep under continuous review and surveillance the
application of the Agreement with respect to the sector concerned;
(b) to formulate proposals or recommendations for consideration by
the Council in connection with any matter relating to trade in the
sector concerned;
(c) if there is an annex pertaining to the sector, to consider
proposals for amendment of that sectoral annex, and to make appropriate
recommendations to the Council;
(d) to provide a forum for technical discussions, to conduct studies
on measures of Members and to conduct examinations of any other
technical matters affecting trade in services in the sector concerned;
(e) to provide technical assistance to developing country Members and
developing countries negotiating accession to the Agreement Establishing
the World Trade Organization in respect of the application of
obligations or other matters affecting trade in services in the sector
concerned; and
(f) to cooperate with any other subsidiary bodies established under
the General Agreement on Trade in Services or any international
organizations active in any sector concerned.”(165)
(ii) Working Party on Professional Services and Working Party on
Domestic Regulation
132. On 1 March 1995, pursuant to
paragraph 2 of the Decision on
Professional Services, the Council for Trade in Services established a
Working Party on Professional Services. (166)
With respect to disciplines
on domestic regulation and mutual recognition guidelines, see paragraph
51 above.
133. The Working Party reported to the Council for Trade in Services
on an annual basis.(167)
134. On 26 April 1999, the Council for Trade in Services discussed
the issue of how to manage the two overlapping mandates under Article
VI:4 which called upon the Council to develop disciplines on domestic
regulation in all services sectors, and the Decision on Professional
Services which called upon the Working Party on Professional Services
(WPPS) to fulfill the same task for professional services.(168) For this
purpose, at the same meeting, the Council for Trade in Services adopted
a decision establishing the Working Party on Domestic Regulation
(WPDR).(169) The WPDR would replace the WPPS and would be responsible for
carrying out all the work foreseen under Article
VI:4. It would give
priority to the development of horizontal disciplines applicable to all
services sectors, while retaining the possibility of developing further
disciplines applicable to specific sectors or groups of sectors,
including the development of general disciplines for professional
services.(170)
135. The WPDR reports to the Council for Trade in Services on an
annual basis.(171)
(iii) Working Party on GATS Rules
136.
At its meeting of 30 March 1995, the Council for Trade in
Services established a Working Party on GATS Rules to carry out the
negotiating mandates contained in the GATS on “Emergency Safeguard
Measures” (Article X), “Government Procurement”
(Article XIII) and
“Subsidies” (Article XV).(172)
(iv) Committee on Specific Commitments
137. On 4 October 1995, the Council for Trade in Services established
the Committee on Specific Commitments. (173)
At its meeting on 22 November
1995, the Council for Trade in Services adopted the Decision on the
Terms of Reference for the Committee on Specific Commitments.(174)
(v) Negotiating Groups on Natural Persons, Maritime Transport
Services and Basic Telecommunications
138.
The Negotiating Group on Natural Persons, the Negotiating Group
on Maritime Transport Services and the Negotiating Group on Basic
Telecommunications were established by Ministerial Decisions at
Marrakesh.
2. Rules of procedure of the Council for Trade in Services
(a) Rules of procedure
139. On 4 October 1995, the Council for Trade in Services
adopted(175)
the Rules of Procedure of the General Council, along with appropriate
modifications. (176)
See also the Chapter on the WTO
Agreement, Section V.B.5(b).
(b) Observer status
140. At its meeting of 1 March 1995, the Council for Trade in
Services took note of the decision by the General Council of 31 January
1995(177) in which it granted observer status to a number of governments
and separate territories and also covered observership to the subsidiary
bodies to the General Council, including the Council for Trade in
Services. (178) The Council for Trade in Services also took note of the
decision of the General Council which agreed on an ad hoc arrangement
whereby the IMF, the World Bank, the UN and UNCTAD were invited to
participate as observers in the first meetings of the General Council
and its subsidiary Councils.(179)
141. At its meeting on 14 April 2000, the Council for Trade in
Services agreed to grant the World Health Organization and the World
Tourism Organization observer status on an ad hoc basis.(180)
C. Decision on Institutional Arrangements for the
General Agreement
on Trade in Services
142.
With respect to institutional arrangements for the GATS,
Ministers at the 1994 Marrakesh Ministerial conference adopted the
following Decision:
“Decision on Institutional Arrangements for the General Agreement
on Trade in Services
Ministers,
Decide to recommend that the Council for Trade in Services at its
first meeting adopt the decision on subsidiary bodies set out below.
The Council for Trade in Services,
Acting pursuant to Article XXIV with a view to facilitating the
operation and furthering the objectives of the General Agreement on
Trade in Services,
Decides as follows:
1.
Any subsidiary bodies that the Council may establish shall report
to the Council annually or more often as necessary. Each such body shall
establish its own rules of procedure, and may set up its own subsidiary
bodies as appropriate.
2.
Any sectoral committee shall carry out responsibilities as
assigned to it by the Council, and shall afford Members the opportunity
to consult on any matters relating to trade in services in the sector
concerned and the operation of the sectoral annex to which it may
pertain. Such responsibilities shall include:
(a)
to keep under continuous review and surveillance the application
of the Agreement with respect to the sector concerned;
(b)
to formulate proposals or recommendations for consideration by
the Council in connection with any matter relating to trade in the
sector concerned;
(c)
if there is an annex pertaining to the sector, to consider
proposals for amendment of that sectoral annex, and to make appropriate
recommendations to the Council;
(d)
to provide a forum for technical discussions, to conduct studies
on measures of Members and to conduct examinations of any other
technical matters affecting trade in services in the sector concerned;
(e)
to provide technical assistance to developing country Members and
developing countries negotiating accession to the Agreement Establishing
the World Trade Organization in respect of the application of
obligations or other matters affecting trade in services in the sector
concerned; and
(f)
to cooperate with any other subsidiary bodies established under
the General Agreement on Trade in Services or any international
organizations active in any sector concerned.”
XXIX. Article XXV
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A. Text of Article XXV
Article XXV: Technical Cooperation
1. Service suppliers of Members which are in need of such assistance
shall have access to the services of contact points referred to in
paragraph 2 of Article IV.
2. Technical assistance to developing countries shall be provided at
the multilateral level by the Secretariat and shall be decided upon by
the Council for Trade in Services.
B. Interpretation and Application of Article XXV
No jurisprudence or decision of a competent WTO body.
XXX. Article XXVI
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A. Text of Article XXVI
Article XXVI: Relationship with Other International Organizations
The General Council shall make appropriate arrangements for
consultation and cooperation with the United Nations and its specialized
agencies as well as with other intergovernmental organizations concerned
with services.
B. Interpretation and Application of Article XXVI
1. Agreement between the International Telecommunication Union and
the World Trade Organization
143. On 26 May 2000, the Council for Trade in Services adopted the
Cooperation Agreement between the International Telecommunication Union
and the World Trade Organization.(181) At its meeting on
10 October 2000,
the General Council approved the Agreement between the ITU and WTO
contained in document S/C/11 and consequently authorized the WTO
Director-General to sign this Agreement.(182)
144.
With respect to the relationship of the WTO with other
international organizations in general, see the Chapter on the WTO
Agreement, Section VI.B.
Part V : Final
Provisions
XXXI. Article XXVII
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A. Text of Article XXVII
Article XXVII: Denial of Benefits
A Member may deny the benefits of this Agreement:
(a) to the supply of a service, if it establishes that the service is
supplied from or in the territory of a non-Member or of a Member to
which the denying Member does not apply the WTO Agreement;
(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-Member or of a
Member to which the denying Member does not apply the WTO Agreement, and
(ii) by a person which operates and/or uses the vessel in whole or in
part but which is of a non-Member or of a Member to which the denying
Member does not apply the WTO Agreement;
(c) to a service supplier that is a juridical person, if it
establishes that it is not a service supplier of another Member, or that
it is a service supplier of a Member to which the denying Member does
not apply the WTO Agreement.
B. Interpretation and Application of Article XXVII
No jurisprudence or decision of a competent WTO body.
XXXII. Article XXVIII
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A. Text of Article XXVIII
Article XXVIII: Definitions
For the purpose of this Agreement:
(a) “measure” means any measure by a Member, whether in the form
of a law, regulation, rule, procedure, decision, administrative action,
or any other form;
(b) “supply of a service” includes the production, distribution,
marketing, sale and delivery of a service;
(c) “measures by Members affecting trade in services” include
measures in respect 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 those Members to be offered to
the public generally;
(iii) the presence, including commercial presence, of persons of a
Member for the supply of a service in the territory of another Member;
(d) “commercial presence” means any type of business or
professional establishment, 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 Member for the purpose of supplying a
service;
(e) “sector” of a service means,
(i) with reference to a specific commitment, one or more, or all,
subsectors of that service, as specified in a Member’s Schedule,
(ii) otherwise, the whole of that service sector, including all of
its subsectors;
(f) “service of another Member” means a service which is
supplied,
(i) from or in the territory of that other Member, or in the case of
maritime transport, by a vessel registered under the laws of that other
Member, or by a person of that other Member 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 that other Member;
(g) “service supplier” means any person that supplies a
service;(12)
(footnote original)
12 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 the Agreement. 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.
(h) “monopoly supplier of a service” means any person, public or
private, which in the relevant market of the territory of a Member is
authorized or established formally or in effect by that Member as the
sole supplier of that service;
(i) “service consumer” means any person that receives or uses a
service;
(j) “person” means either a natural person or a juridical person;
(k) “natural person of another Member” means a natural person who
resides in the territory of that other Member or any other Member, and
who under the law of that other Member:
(i) is a national of that other Member; or
(ii) has the right of permanent residence in that other Member, in
the case of a Member which:
1. does not have nationals; or
2. accords substantially the same treatment to its permanent
residents as it does to its nationals in respect of measures affecting
trade in services, as notified in its acceptance of or accession to the
WTO Agreement, provided that no Member is obligated to accord to such
permanent residents treatment more favourable than would be accorded by
that other Member to such permanent residents. Such notification shall
include the assurance to assume, with respect to those permanent
residents, in accordance with its laws and regulations, the same
responsibilities that other Member bears with respect to its nationals;
(l) “juridical person” means any legal entity duly constituted or
otherwise organized 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;
(m) “juridical person of another Member” means a juridical person
which is either:
(i) constituted or otherwise organized under the law of that other
Member, and is engaged in substantive business operations in the
territory of that Member or any other Member; or
(ii) in the case of the supply of a service through commercial
presence, owned or controlled by:
1. natural persons of that Member; or
2. juridical persons of that other Member identified under
subparagraph (i);
(n) a juridical person is:
(i) “owned” by persons of a Member if more than 50 per cent of
the equity interest in it is beneficially owned by persons of that
Member;
(ii) “controlled” by persons of a Member if such persons have the
power to name 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;
(o) “direct taxes” comprise all taxes on total income, on total
capital or on elements 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.
B. Interpretation and Application of Article XXVIII
1. Article XXVIII(k)(ii)2
145. On 1 March 1995, the Council for Trade in Services took note of
four communications to the effect that the concerned Members accord
substantially the same treatment to their permanent residents as they
accord to their nationals with respect to measures affecting trade in
services and that they assume, with respect to those permanent
residents, the same responsibilities that other members bear with
respect to their nationals.(183) At its meeting of 2, 9 and 24 October
2003 the Council took note of a similar notification.(184)
XXXIII. Article XXIX
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A. Text of Article XXIX
Article XXIX: Annexes
The Annexes to this Agreement are an integral part of this Agreement.
B. Interpretation and Application of Article XXIX
No jurisprudence or decision of a competent WTO body.
XXXIV. Annex on Article II Exemptions
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A. Text of the Annex on Article II exemptions
Annex on Article II Exemptions: Scope
1. This Annex specifies the conditions under which a Member, at the
entry into force of this Agreement, is exempted from its obligations
under paragraph 1 of Article II.
2. Any new exemptions applied for after the date of entry into force
of the WTO Agreement shall be dealt with under paragraph 3 of Article IX
of that Agreement.
Review
3. The Council for Trade in Services shall review all exemptions
granted for a period of more than 5 years. The first such review shall
take place no more than 5 years after the entry into force of the WTO
Agreement.
4. The Council for Trade in Services in a review shall:
(a) examine whether the conditions which created the need for the
exemption still prevail; and
(b) determine the date of any further review.
Termination
5. The exemption of a Member from its obligations under
paragraph 1
of Article II of the Agreement with respect to a particular measure
terminates on the date provided for in the exemption.
6. In principle, such exemptions should not exceed a period of 10
years. In any event, they shall be subject to negotiation in subsequent
trade liberalizing rounds.
7. A Member shall notify the Council for Trade in Services at the
termination of the exemption period that the inconsistent measure has
been brought into conformity with paragraph 1 of Article II of the
Agreement.
List of Article II Exemptions
[The agreed list of exemptions under paragraph 2 of Article II is
omitted.]
B. Interpretation and Application of the Annex on Article II
Exemptions
1. Paragraph 3
146. At the meeting of the Council for Trade in Services of 18
October 1999, it was agreed that the first review of Article II (MFN)
Exemptions had begun.(185)
2. Paragraph 4
147. The Council conducted a review of MFN exemptions at meetings
held on 29 May 2000, 5 July 2000 and 5 October 2000.(186) The Council
decided that a further review of MFN exemptions should take place no
later than June 2004.(187)
3. Paragraph 7
148. With respect to the format for notifications required under
paragraph 7 of the Annex on Article II Exemptions, see the Guidelines
for Notifications under the General Agreement on Trade in Services.(188)
4. Terminations, reductions and rectifications of MFN exemptions
149. At its meeting of 5 June 2002, the Council for Trade in Services
adopted Procedures for the Certification of Terminations, Reductions and
Rectifications of Article II (MFN) Exemptions.(189)
XXXV. Annex on Movement of Natural Persons Supplying Services under
the Agreement back to top
A. Text of the Annex on Movement of Natural Persons Supplying
Services under the Agreement
Annex on Movement of Natural Persons: Supplying Services under the Agreement
1. This Annex applies to measures affecting natural persons who are
service suppliers of a Member, and natural persons of a Member who are
employed by a service supplier of a Member, in respect of the supply of
a service.
2. The Agreement shall not apply to measures affecting natural
persons seeking access to the employment market of a Member, nor shall
it apply to measures regarding citizenship, residence or employment on a
permanent basis.
3. In accordance with Parts III and
IV of the Agreement, Members may
negotiate specific commitments applying to the movement of all
categories of natural persons supplying services under the Agreement.
Natural persons covered by a specific commitment shall be allowed to
supply the service in accordance with the terms of that commitment.
4. The Agreement shall not prevent a Member from applying measures to
regulate the entry of natural persons 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 any Member
under the terms of a specific commitment.(13)
(footnote original) 13 The sole fact of requiring a visa for natural
persons of certain Members and not for those of others shall not be
regarded as nullifying or impairing benefits under a specific
commitment.
B. Interpretation and Application of the Annex on Movement of Natural
Persons Supplying Services under the Agreement
1. Measures Relating to the
Entry and Stay of Natural Persons
150. At its meeting of 1 March 1995, the Council for Trade in
Services adopted a conclusion of the Sub-Committee on Services
concerning measures relating to the entry and stay of natural persons.(190) The Sub-Committee had dealt with the question on what basis
a distinction between “temporary” and “permanent” residency and
employment should be made. The Sub-Committee, however, ultimately
decided that the commitments set out in the individual countries’
schedules were sufficiently clear, so that there was no need for further
multilateral work on this issue.(191)
XXXVI. Annex on Air Transport Services
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A. Text of the Annex on Air Transport Services
Annex on Air Transport Services
1. This Annex applies to measures affecting trade in air transport
services, whether scheduled or non-scheduled, and ancillary services. It
is confirmed that any specific commitment or obligation assumed under
this Agreement shall not reduce or affect a Member’s obligations under
bilateral or multilateral agreements that are in effect on the date of
entry into force of the WTO Agreement.
2. The Agreement, including its dispute settlement procedures, shall
not apply to measures affecting:
(a) traffic rights, however granted; or
(b) services directly related to the exercise of traffic rights,
except as provided in paragraph 3 of this Annex.
3. The Agreement shall apply to measures affecting:
(a) aircraft repair and maintenance services;
(b) the selling and marketing of air transport services;
(c) computer reservation system (CRS) services.
4. The dispute settlement procedures of the Agreement may be invoked
only where obligations or specific commitments have been assumed by the
concerned Members and where dispute settlement procedures in bilateral
and other multilateral agreements or arrangements have been exhausted.
5. The Council for Trade in Services shall review periodically, and
at least every five years, developments in the air transport sector and
the operation of this Annex with a view to considering the possible
further application of the Agreement in this sector.
6. Definitions:
(a) ‘Aircraft repair and maintenance services’ mean such
activities when undertaken on an aircraft or a part thereof while it is
withdrawn from service and do not include so-called line maintenance.
(b) ‘Selling and marketing of air transport services’ mean
opportunities for the air carrier concerned to sell and market freely
its air transport services including all aspects of marketing such as
market research, advertising and distribution. These activities do not
include the pricing of air transport services nor the applicable
conditions.
(c) ‘Computer reservation system (CRS) services’ mean services
provided by computerised systems that contain information about air
carriers’ schedules, availability, fares and fare rules, through which
reservations can be made or tickets may be issued.
(d) ‘Traffic rights’ mean the right for scheduled and
non-scheduled services to operate and/or to carry passengers, cargo and
mail for remuneration or hire from, to, within, or over the territory of
a Member, including points to be served, routes to be operated, types of
traffic to be carried, capacity to be provided, tariffs to be charged
and their conditions, and criteria for designation of airlines,
including such criteria as number, ownership, and control.
B. Interpretation and Application of the Annex on Air Transport
Services
1. Paragraph 5
151.
The Council conducted the review mandated under paragraph 5 of
the Air Transport Annex at meetings held on 28–29 September 2000, 4
December 2000, 9 October 2001 and 18 March 2002.(192) The Council decided
at its meeting of 2, 9 and 24 October 2003 on the conclusion of the
review and the start-date for the next one:
“The Council decides to conclude the first review mandated under
paragraph 5 of the Annex on Air Transport Services. While noting that
the Annex requires that a review be conducted at least every five years,
the Council decides that the formal commencement of the second review
shall take place at the last regular meeting of the Council for Trade in
Services of 2005. This shall not prejudge Members’ interpretation of
paragraph 5 of the Annex.”(193)
XXXVII. Annex on Financial Services
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A. Text of the Annex on Financial Services
Annex on Financial Services
1. Scope and Definition
(a) This Annex applies to measures affecting the supply of financial
services. Reference to the supply of a financial service in this Annex
shall mean the supply of a service as defined in paragraph 2 of Article I of the Agreement.
(b) For the purposes of
subparagraph 3(b) of Article I of the
Agreement, ‘services supplied in the exercise of governmental
authority’ means the following:
(i) activities conducted by a central bank or monetary authority or
by any other public entity in pursuit of monetary or exchange rate
policies;
(ii) activities forming part of a statutory system of social security
or public retirement plans; and
(iii) other activities conducted by a public entity for the account
or with the guarantee or using the financial resources of the
Government.
(c) For the purposes of subparagraph 3(b) of Article I of the
Agreement, if a Member allows any of the activities referred to in
subparagraphs (b) (ii) or (b) (iii) of this paragraph to be conducted by
its financial service suppliers in competition with a public entity or a
financial service supplier, ‘services’ shall include such
activities.
(d) Subparagraph 3(c) of Article I of the Agreement shall not apply
to services covered by this Annex.
2. Domestic Regulation
(a) Notwithstanding any other provisions of the Agreement, a Member
shall not be prevented from taking measures for prudential reasons,
including for the protection of investors, depositors, policy holders or
persons to whom a fiduciary duty is owed by a financial service
supplier, or to ensure the integrity and stability of the financial
system. Where such measures do not conform with the provisions of the
Agreement, they shall not be used as a means of avoiding the Member’s
commitments or obligations under the Agreement.
(b) Nothing in the Agreement shall be construed to require a Member
to disclose information relating to the affairs and accounts of
individual customers or any confidential or proprietary information in
the possession of public entities.
3. Recognition
(a) A Member may recognize prudential measures of any other country
in determining how the Member’s measures relating to financial
services shall be applied. Such recognition, which may be achieved
through harmonization or otherwise, may be based upon an agreement or
arrangement with the country concerned or may be accorded autonomously.
(b) A Member that is a party to such an agreement or arrangement
referred to in subparagraph (a), whether future or existing, shall
afford adequate opportunity for other interested Members to negotiate
their accession to such agreements or arrangements, or to negotiate
comparable ones with it, under circumstances in which there would be
equivalent regulation, oversight, implementation of such regulation,
and, if appropriate, procedures concerning the sharing of information
between the parties to the agreement or arrangement. Where a Member
accords recognition autonomously, it shall afford adequate opportunity
for any other Member to demonstrate that such circumstances exist.
(c) Where a Member is contemplating according recognition to
prudential measures of any other country, paragraph 4(b) of Article VII
shall not apply.
4. Dispute Settlement
Panels for disputes on prudential issues and other financial matters
shall have the necessary expertise relevant to the specific financial
service under dispute.
5. Definitions
For the purposes of this Annex:
(a)
A financial service is any service of a financial nature offered
by a financial service supplier of a Member. Financial services include
all insurance and insurance-related services, and all banking and other
financial services (excluding insurance). Financial services include the
following activities:
Insurance and insurance-related services
(i) Direct insurance (including co-insurance) :
(A) life
(B) non-life
(ii) Reinsurance and retrocession;
(iii) Insurance intermediation, such as brokerage and agency;
(iv) Services auxiliary to insurance, such as consultancy, actuarial,
risk assessment and claim settlement services.
Banking and other financial services (excluding insurance)
(v) Acceptance of deposits and other repayable funds from the public;
(vi) Lending of all types, including consumer credit, mortgage
credit, factoring and financing of commercial transactions;
(vii) Financial leasing;
(viii) All payment and money transmission services, including credit,
charge and debit cards, travellers’ cheques and bankers’ drafts;
(ix) Guarantees and commitments;
(x) Trading for own account or for account of customers, whether on
an exchange, in an over-the-counter market or otherwise, the following:
(A) money market instruments
(including cheques, bills, certificates
of deposits);
(B) foreign exchange;
(C) derivative products including, but not limited to, futures and
options;
(D) exchange rate and interest rate instruments, including products
such as swaps, forward rate agreements;
(E) transferable securities;
(F) other negotiable instruments and financial assets, including
bullion.
(xi) Participation in issues of all kinds of securities, including
underwriting and placement as agent (whether publicly or privately) and
provision of services related to such issues;
(xii) Money broking;
(xiii) Asset management, such as cash or portfolio management, all
forms of collective investment management, pension fund management,
custodial, depository and trust services;
(xiv) Settlement and clearing services for financial assets,
including securities, derivative products, and other negotiable
instruments;
(xv) Provision and transfer of financial information, and financial
data processing and related software by suppliers of other financial
services;
(xvi) Advisory, intermediation and other auxiliary financial services
on all the activities listed in subparagraphs (v) through
(xv),
including credit reference and analysis, investment and portfolio
research and advice, advice on acquisitions and on corporate
restructuring and strategy.
(b)
A financial service supplier means any natural or juridical
person of a Member wishing to supply or supplying financial services but
the term ‘financial service supplier’ does not include a public
entity.
(c)
‘Public entity’ means:
(i) a government, a central bank or a monetary authority, of a
Member, or an entity owned or controlled by a Member, that is
principally engaged in carrying out governmental functions or activities
for governmental purposes, not including an entity principally engaged
in supplying financial services on commercial terms; or
(ii) a private entity, performing functions normally performed by a
central bank or monetary authority, when exercising those functions.
B. Interpretation and Application of the Annex on Financial Services
No jurisprudence or decision of a competent WTO body.
XXXVIII. Second Annex
on Financial Services back to top
A. Text of the Second
Annex on Financial Services
Second Annex on Financial Services
1. Notwithstanding Article II of the Agreement and
paragraphs 1 and 2
of the Annex on Article II Exemptions, a Member may, during a period of
60 days beginning four months after the date of entry into force of the
WTO Agreement, list in that Annex measures relating to financial
services which are inconsistent with paragraph 1 of Article II of the
Agreement.
2. Notwithstanding Article XXI of the
Agreement, a Member may, during
a period of 60 days beginning four months after the date of entry into
force of the WTO Agreement, improve, modify or withdraw all or part of
the specific commitments on financial services inscribed in its
Schedule.
3. The Council for Trade in Services shall establish any procedures
necessary for the application of paragraphs 1 and
2.
B. Interpretation and Application of the Second Annex on Financial
Services
No jurisprudence or decision of a competent WTO body.
XXXIX. Annex on Negotiations on Maritime Transport Services
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A. Text of the Annex on Negotiations on Maritime Transport Services
Annex on Negotiations on Maritime Transport
Services
1. Article II and the
Annex on Article II Exemptions, including the
requirement to list in the Annex any measure inconsistent with
most-favoured-nation treatment that a Member will maintain, shall enter
into force for international shipping, auxiliary services and access to
and use of port facilities only on:
(a) the implementation date to be determined under paragraph 4 of the
Ministerial Decision on Negotiations on Maritime Transport Services; or,
(b) should the negotiations not succeed, the date of the final report
of the Negotiating Group on Maritime Transport Services provided for in
that Decision.
2. Paragraph 1 shall not apply to any specific commitment on maritime
transport services which is inscribed in a Member’s Schedule.
3. From the conclusion of the negotiations referred to in
paragraph 1, and before the implementation date, a Member may improve, modify or
withdraw all or part of its specific commitments in this sector without
offering compensation, notwithstanding the provisions of Article
XXI.
B. Interpretation and Application of the Annex on Negotiations on
Maritime Transport Services
No jurisprudence or decision of a competent WTO body.
XL. Annex on Telecommunications
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A. Text on the Annex on Telecommunications
Annex on Telecommunications
1. Objectives
Recognizing the specificities of the telecommunications services
sector and, in particular, its dual role as a distinct sector of
economic activity and as the underlying transport means for other
economic activities, the Members have agreed to the following Annex with
the objective of elaborating upon the provisions of the Agreement with
respect to measures affecting access to and use of public
telecommunications transport networks and services. Accordingly, this
Annex provides notes and supplementary provisions to the Agreement.
2. Scope
(a) This Annex shall apply to all measures of a Member that affect
access to and use of public telecommunications transport networks and
services.(14)
(footnote original) 14 This paragraph is understood to mean that
each Member shall ensure that the obligations of this Annex are applied
with respect to suppliers of public telecommunications transport
networks and services by whatever measures are necessary.
(b)
This Annex shall not apply to measures affecting the cable or
broadcast distribution of radio or television programming.
(c)
Nothing in this Annex shall be construed:
(i) to require a Member to authorize a service supplier of any other
Member to establish, construct, acquire, lease, operate, or supply
telecommunications transport networks or services, other than as
provided for in its Schedule; or
(ii) to require a Member (or to require a Member to oblige service
suppliers under its jurisdiction) to establish, construct, acquire,
lease, operate or supply telecommunications transport networks or
services not offered to the public generally.
3. Definitions
For the purposes of this Annex:
(a)
‘Telecommunications’ means the transmission and reception of
signals by any electromagnetic means.
(b)
‘Public telecommunications transport service’ means any
telecommunications transport service required, explicitly or in effect,
by a Member to be offered to the public generally. Such services may
include, inter alia, telegraph, telephone, telex, and data transmission
typically involving the real-time transmission of customer-supplied
information between two or more points without any end-to-end change in
the form or content of the customer’s information.
(c)
‘Public telecommunications transport network’ means the
public telecommunications infrastructure which permits
telecommunications between and among defined network termination points.
(d)
‘Intra-corporate communications’ means telecommunications
through which a company communicates within the company or with or among
its subsidiaries, branches and, subject to a Member’s domestic laws
and regulations, affiliates. For these purposes, ‘subsidiaries’, ‘branches’
and, where applicable, ‘affiliates’ shall be as defined by each
Member. ‘Intra-corporate communications’ in this Annex excludes
commercial or non-commercial services that are supplied to companies
that are not related subsidiaries, branches or affiliates, or that are
offered to customers or potential customers.
(e)
Any reference to a paragraph or subparagraph of this Annex
includes all subdivisions thereof.
4. Transparency
In the application of Article III of the
Agreement, each Member shall
ensure that relevant information on conditions affecting access to and
use of public telecommunications transport networks and services is
publicly available, including: tariffs and other terms and conditions of
service; specifications of technical interfaces with such networks and
services; information on bodies responsible for the preparation and
adoption of standards affecting such access and use; conditions applying
to attachment of terminal or other equipment; and notifications,
registration or licensing requirements, if any.
5. Access to and Use of Public Telecommunications Transport Networks
and Services
(a)
Each Member shall ensure that any service supplier of any other
Member is accorded access to and use of public telecommunications
transport networks and services on reasonable and non-discriminatory
terms and conditions, for the supply of a service included in its
Schedule. This obligation shall be applied, inter alia, through
paragraphs (b) through (f).(15)
(footnote original) 15 The term ‘non-discriminatory’ is
understood to refer to most-favoured-nation and national treatment as
defined in the Agreement, as well as to reflect sector-specific usage of
the term to mean ‘terms and conditions no less favourable than those
accorded to any other user of like public telecommunications transport
networks or services under like circumstances’.
(b)
Each Member shall ensure that service suppliers of any other
Member have access to and use of any public telecommunications transport
network or service offered within or across the border of that Member,
including private leased circuits, and to this end shall ensure, subject
to paragraphs (e) and (f), that such suppliers are permitted:
(i) to purchase or lease and attach terminal or other equipment which
interfaces with the network and which is necessary to supply a supplier’s
services;
(ii) to interconnect private leased or owned circuits with public
telecommunications transport networks and services or with circuits
leased or owned by another service supplier; and
(iii) to use operating protocols of the service supplier’s choice
in the supply of any service, other than as necessary to ensure the
availability of telecommunications transport networks and services to
the public generally.
(c)
Each Member shall ensure that service suppliers of any other
Member may use public telecommunications transport networks and services
for the movement of information within and across borders, including for
intra-corporate communications of such service suppliers, and for access
to information contained in data bases or otherwise stored in
machine-readable form in the territory of any Member. Any new or amended
measures of a Member significantly affecting such use shall be notified
and shall be subject to consultation, in accordance with relevant
provisions of the Agreement.
(d)
Notwithstanding the preceding paragraph, a Member may take such
measures as are necessary to ensure the security and confidentiality of
messages, subject to the requirement that such measures are not applied
in a manner which would constitute a means of arbitrary or unjustifiable
discrimination or a disguised restriction on trade in services.
(e)
Each Member shall ensure that no condition is imposed on access
to and use of public telecommunications transport networks and services
other than as necessary:
(i) to safeguard the public service responsibilities of suppliers of
public telecommunications transport networks and services, in particular
their ability to make their networks or services available to the public
generally;
(ii) to protect the technical integrity of public telecommunications
transport networks or services; or
(iii) to ensure that service suppliers of any other Member do not
supply services unless permitted pursuant to commitments in the Member’s
Schedule.
(f)
Provided that they satisfy the criteria set out in paragraph (e), conditions for access to and use of public telecommunications
transport networks and services may include:
(i) restrictions on resale or shared use of such services;
(ii) a requirement to use specified technical interfaces, including
interface protocols, for inter-connection with such networks and
services;
(iii) requirements, where necessary, for the inter-operability of
such services and to encourage the achievement of the goals set out in
paragraph 7(a);
(iv) type approval of terminal or other equipment which interfaces
with the network and technical requirements relating to the attachment
of such equipment to such networks;
(v) restrictions on inter-connection of private leased or owned
circuits with such networks or services or with circuits leased or owned
by another service supplier; or
(vi) notification, registration and licensing.
(g)
Notwithstanding the preceding paragraphs of this section, a
developing country Member may, consistent with its level of development,
place reasonable conditions on access to and use of public
telecommunications transport networks and services necessary to
strengthen its domestic telecommunications infrastructure and service
capacity and to increase its participation in international trade in
telecommunications services. Such conditions shall be specified in the
Member’s Schedule.
6. Technical Cooperation
(a)
Members recognize that an efficient, advanced telecommunications
infrastructure in countries, particularly developing countries, is
essential to the expansion of their trade in services. To this end,
Members endorse and encourage the participation, to the fullest extent
practicable, of developed and developing countries and their suppliers
of public telecommunications transport networks and services and other
entities in the development programmes of international and regional
organizations, including the International Telecommunication Union, the
United Nations Development Programme, and the International Bank for
Reconstruction and Development.
(b)
Members shall encourage and support telecommunications
cooperation among developing countries at the international, regional
and sub-regional levels.
(c)
In cooperation with relevant international organizations, Members
shall make available, where practicable, to developing countries
information with respect to telecommunications services and developments
in telecommunications and information technology to assist in
strengthening their domestic telecommunications services sector.
(d)
Members shall give special consideration to opportunities for the
least-developed countries to encourage foreign suppliers of
telecommunications services to assist in the transfer of technology,
training and other activities that support the development of their
telecommunications infrastructure and expansion of their
telecommunications services trade.
7. Relation to International Organizations and Agreements
(a)
Members recognize the importance of international standards for
global compatibility and inter-operability of telecommunication networks
and services and undertake to promote such standards through the work of
relevant international bodies, including the International
Telecommunication Union and the International Organization for
Standardization.
(b)
Members recognize the role played by intergovernmental and
non-governmental organizations and agreements in ensuring the efficient
operation of domestic and global telecommunications services, in
particular the International Telecommunication Union. Members shall make
appropriate arrangements, where relevant, for consultation with such
organizations on matters arising from the implementation of this Annex.
B. Interpretation and Application of the Annex on Telecommunications
1. Application to access and use by scheduled suppliers of basic
telecommunications services
152.
In examining which suppliers and services are entitled to access
and use public telecommunications transport networks and services, the
Panel on Mexico — Telecoms observed that:
“[T]he wording of Section 2(a) does not specify that the provision
is limited to measures affecting access to and use of public
telecommunications transport networks and services by only certain
services or service sectors. The ordinary meaning of the words in
Section 2(a) suggests therefore that the scope of the Annex includes
all
measures that affect access to or use of public telecommunications
transport networks and services with regard to all services, including
basic telecommunications services.” (194)
153.
Likewise, referring to Section 5(a) of the Annex, the Panel on
Mexico — Telecoms stated that:
“Section 5 (a) of the Annex states that the obligation to ensure
access to and use of public telecommunications transport networks and
services shall apply for the benefit of ‘any service supplier of any
other Member’ for the supply of ‘a service included in its schedule’.
This language does not explicitly exclude suppliers of basic
telecommunications services. On the contrary, Section 5(a) speaks of ‘any’
service supplier. It also speaks of a ‘service included’ in a Member’s
schedule which, in the case of any Member, can, and for many Members
does, include basic telecommunications services. We consider this to be
a further indication that the Annex is not limited in its application to
exclude measures ensuring the access to and use of public
telecommunications transport networks and services for the supply of any
service, including basic telecommunications services.”(195)
154.
The Panel on Mexico — Telecoms observed further that it would
be “unreasonable to suppose that the access and use of public
telecommunications transport networks and services that is essential to
the international supply of basic telecommunications services was not
intended to be covered by the Annex”. The Panel noted:
“If the Annex did not apply to measures affecting access to and use
of public telecommunications transport networks and services for basic
telecommunications services, Members could effectively prohibit any
supply other than that which originated and terminated within the same
suppliers’ network, even where commitments were undertaken, thereby
rendering most basic telecommunications commitments without economic
value.”(196)
2. Section 5(a)
(a) Relationship of paragraph (a) to the other parts of Section 5
155.
The Panel on Mexico — Telecoms, in assessing the relationship
between paragraph (a) and the other paragraphs of
Section 5, stated:
“We note that the obligation in paragraph (a) ‘shall be applied,
inter alia, through paragraphs (b) through (f)’…. An obligation
cannot be applied ‘through’ another provision if that obligation is
read in isolation from that provision. For an obligation in one
provision to be applied ‘through’ another provision, it is evident
that the two provisions must be interrelated and must inform each other.
We read paragraph (a), in other words, as containing an obligation that
informs paragraphs (b) through (f), and must be read taking into
account paragraphs (b) through (f).”(197)
156.
In examining further the relationship between paragraph (a) and
the other paragraphs of Section 5, the Panel on Mexico — Telecoms
determined that the “reasonable and non-discriminatory” standard in
paragraph (a) applies only to measures that are permissible under
paragraph (e):
“We determined earlier that paragraph (a) should be read together
with the other paragraphs of Section 5. We note that paragraph (a)
addresses ‘terms and conditions’ for access to public
telecommunications transport networks and services, which must be ‘reasonable
and non-discriminatory’. Paragraph (e) requires that no condition
other than as necessary to achieve any of three policy objectives
contained in subparagraphs (e)(i) to (iii) shall be imposed by a Member.
We infer that whenever a condition is ‘necessary’ under paragraph
(e), it must, in addition, be ‘reasonable and non-discriminatory’
under paragraph (a). Conversely, if a condition is not ‘necessary’
to fulfil at least one of the three policy objectives set out under
subparagraphs (i) to (iii), paragraph (e)
prohibits the imposition of
such a condition, which suggests that there may be no need to analyse in
that case whether that condition would otherwise be ‘reasonable and
non-discriminatory’.
…
We conclude that the obligation contained in Section 5(a) informs the
other paragraphs of Section 5, and is likewise informed by elements of
these paragraphs. We cannot therefore examine what constitutes ‘reasonable
terms and conditions’ for access to and use of public
telecommunications transport networks and services in isolation from the
question of whether or not a particular condition may be imposed, an
issue that is addressed in paragraph (e).”(198)
(b) Access and use “on reasonable … terms and conditions”
(i) Whether rates for access and use constitute “terms”
157.
The Panel on Mexico — Telecoms stated that “the ordinary
meaning of the word ‘terms’ suggests that it would include pricing
elements, including rates charged for access to and use of public
telecommunications transport networks and services”.(199)
(ii) Whether rates for access and use are subject to examination as
“reasonable” terms
158.
The Panel on Mexico — Telecoms found that rates for access and
use can be examined under Section 5 to establish whether or not they
constitute “reasonable” terms. The Panel also found that “access
to and use of public telecommunications transport networks and services
on ‘reasonable’ terms includes questions of pricing of that access
and use”.(200)
(iii) Rates for access and use that are “reasonable”
159.
The Panel on Mexico — Telecoms, in examining when rates for
access and use are “reasonable”, and applying the criterion to the
facts of the case, stated:
“We have previously noted that Mexico’s Reference Paper contains
obligations additional to those in the Annex. We consider therefore that
rates charged for access to and use of public telecommunications
transport networks and services may still be ‘reasonable’, even if
generally higher than rates for interconnection that are cost-oriented
in terms of Section 2.2(b) of Mexico’s Reference Paper….
We have already determined in part B of these findings that the rates
charged to interconnect United States suppliers of the services at issue
to public telecommunications transport networks and services in Mexico
exceed cost-oriented rates by a substantial margin.(201) We find that
rates which exceed cost-based rates to this extent, and whose uniform
nature excludes price competition in the relevant market of the
telecommunications services bound under Mexico’s Schedule, do not
provide access to and use of public telecommunications transport
networks and services in Mexico ‘on reasonable … terms’.”(202)
3. Section 5(b)
(a) Relationship of paragraph (b) to the other parts of Section 5
160.
Recognizing that the relationship of paragraph (b) with the
other parts of Section 5 was more “straightforward” than that of
paragraph (a),(203) the Panel on
Mexico — Telecoms stated:
“The obligations in paragraph (b) apply ‘subject to
paragraphs
(e) and (f)’. We understand this to mean that the obligations in
paragraph (b) are subordinated to, and are, therefore, qualified
by,
paragraphs (e) and (f). The obligations in paragraph (b) are therefore
subject to any condition that a Member may impose that is necessary to
achieve one of the policy objectives set out in paragraph (e)(i) to
(iii).(204) We recall that
paragraph (b) is informed also by paragraph
(a), and that the obligation in the latter provision to ensure
reasonable and non-discriminatory access also applies to paragraph
(b).
(…)
We conclude that an obligation arises for a Member under paragraph 5(b) subject to any term or condition that a Member may impose in a
manner consistent with the provisions of paragraphs (a) and
(e).”(205)
(b) Obligation to provide access to and use of private leased
circuits
161.
The Panel on Mexico — Telecoms stated that it
“considers Mexico to have undertaken commitments on the supply of
the services at issue by commercial agencies through commercial
presence, for which access to and use of private leased circuits is not
only relevant but, by Mexico’s own definition in its schedule, is
essential. Therefore, we find that Mexico has failed to ensure access to
and use of private leased circuits for the supply of the committed
services in a manner consistent with Section 5(b) of the Annex on
Telecommunications.”(206)
4. Sections 5(e) and (f)
(a) Whether rates for access and use constitute “conditions”
162.
The Panel on Mexico — Telecoms noted that Section 5 (f),
which lists examples of “conditions”, does not refer to specific
pricing measures.(207) It concluded that, since “whether or not to
charge, or the existence of a price, does not appear to fit within the
meaning of the language of 5(f) and its subparagraphs”, pricing
measures such as rates are not “conditions” within the meaning of
Section 5(e).(208)
(b) Meaning of “necessary” in paragraph (e)
163.
The Panel on Mexico — Telecoms, in considering the alternative
case that rates for access and use were “conditions” as well as “terms”,
examined the meaning of the term “necessary”. It noted that the
meaning of “necessary” could range from “indispensable” to
achieving a policy goal, to merely “making a contribution” to that
policy goal.(209) The Panel found:
“The interpretation of the word ‘necessary’ in Section 5(e) as
meaning ‘indispensable’ would however leave no room for an analysis
of whether terms were ‘reasonable’. cost-based rates were ‘indispensable’
to reach the policy objective, then these rates surely could not also be
unreasonable. Such an interpretation would empty the ‘reasonable’
standard in Section 5(a) of much of its meaning.”(210)
164.
The Panel therefore concluded that the meaning of “necessary”
in paragraph (e) was closer to “making a contribution” to a policy
goal, since then “an examination under paragraph (a) of whether that
rate was also ‘reasonable’ would still have meaning”. (211)
(c) Measures to prevent supply of an unscheduled service in paragraph
(e)
165.
The Panel on Mexico — Telecoms found that paragraph (e)(iii),
permitting conditions to be imposed “to ensure that service suppliers
of any other Member do not supply services unless permitted pursuant to
commitments in the Members’ Schedule”, does not apply to a measure
that simply prevents the supply of a service on which a scheduled
commitment has been made.(212)
5. Section 5(g)
166.
In response to the argument that Section 5(g) allowed Mexico as
a developing country to place reasonable conditions on access and use,
the Panel on Mexico — Telecoms observed:
“Section 5(g) recognizes the right of developing countries
to
inscribe limitations in their schedules for the objectives recognized in
Section 5(g). The Panel notes that Mexico’s Schedule of Specific
Commitments does not include any limitations referring to Section 5(g)
or to the development objectives mentioned therein. Without such
limitations in Mexico’s Schedule, Section 5(g)
does not permit
departure from specific commitments which Mexico has voluntarily and
explicitly scheduled.”(213)
6. Relationship between Annex obligations and Reference Paper
commitments
167.
The Panel on Mexico — Telecoms compared Annex obligations and
Reference Paper commitments in the following terms:
“The Panel noted that, although the obligations in the Annex and
the Reference Paper may overlap in certain respects, there are clear
differences between the two instruments. First, the Annex sets out
general obligations for access to and use of public telecommunications
transport networks and services, applicable to all Members and all
sectors in which specific commitments have been undertaken. Reference
Paper obligations, as additional commitments, are applicable only by
Members that have included them in their schedules, and they apply only
to basic telecommunications. Second, while the Annex applies to all
operators of public telecommunications transport networks and services
within a Member, regardless of their competitive situation, the
Reference Paper obligations on interconnection apply only with respect
to ‘major suppliers’. Third, the Annex broadly deals with ‘access
to and use of’ public telecommunications transport networks and
services, while the Reference Paper focuses on specific ‘competitive
safeguards’ and on ‘interconnection’. (214)
In spite of these differences, the Annex recognizes that its
provisions relate to and build upon the obligations and disciplines
contained in the Articles of the GATS — the Annex states expressly
that it ‘provides notes and supplementary provisions to the Agreement’.(215)
Similarly, many of the provisions of the Reference Paper also draw from
and add to existing obligations of the GATS, such as Articles
III, VI,
VIII and IX and the Annex on
Telecommunications. Accordingly, there is a
degree of overlap between the obligations of the Annex and the Reference
Paper, despite their differences in scope, level of obligations, and
specific detail provided. To the extent that the Reference Paper
requires cost-oriented interconnection on reasonable terms and
conditions, it supplements Annex Section 5, requiring additional
obligations as regards ‘major suppliers’. The Reference Paper
commitments do not in this sense subtract from the Annex or render it
redundant.”(216)
XLI. Annex on Negotiations on Basic
Telecommunications back to top
A. Text of the Annex on Negotiations on Basic
Telecommunications
Annex on Negotiations on Basis Telecommunications
1. Article II and the
Annex on Article II Exemptions, including the
requirement to list in the Annex any measure inconsistent with
most-favoured-nation treatment that a Member will maintain, shall enter
into force for basic telecommunications only on:
(a) the implementation date to be determined under paragraph 5 of the
Ministerial Decision on Negotiations on Basic Telecommunications; or,
(b) should the negotiations not succeed, the date of the final report
of the Negotiating Group on Basic Telecommunications provided for in
that Decision.
2. Paragraph 1 shall not apply to any specific commitment on basic
telecommunications which is inscribed in a Member’s Schedule.
B. Interpretation and Application of the Annex on Negotiations on
Basic Telecommunications
No jurisprudence or decision of a competent WTO body.
XLII. Understanding on Commitments in Financial Services
back to top
A. Text of the Understanding on Commitments in Financial services
Understanding on Commitments in Financial Services
Participants in the Uruguay Round have been enabled to take on
specific commitments with respect to financial services under the
General Agreement on Trade in Services (hereinafter referred to as the
‘Agreement’) on the basis of an alternative approach to that covered
by the provisions of Part III of the Agreement. It was agreed that this
approach could be applied subject to the following understanding:
(i) it does not conflict with the provisions of the Agreement;
(ii) it does not prejudice the right of any Member to schedule its
specific commitments in accordance with the approach under Part III of
the Agreement;
(iii) resulting specific commitments shall apply on a
most-favoured-nation basis;
(iv) no presumption has been created as to the degree of
liberalization to which a Member is committing itself under the
Agreement.
Interested Members, on the basis of negotiations, and subject to
conditions and qualifications where specified, have inscribed in their
schedule specific commitments conforming to the approach set out below.
A. Standstill
Any conditions, limitations and qualifications to the commitments
noted below shall be limited to existing non-conforming measures.
B. Market Access
Monopoly Rights
1. In addition to Article VIII of the
Agreement, the following shall
apply:
Each Member shall list in its schedule pertaining to financial
services existing monopoly rights and shall endeavour to eliminate them
or reduce their scope. Notwithstanding subparagraph 1(b) of the Annex on
Financial Services, this paragraph applies to the activities referred to
in subparagraph 1(b)(iii) of the Annex.
Financial Services purchased by Public Entities
2. Notwithstanding Article XIII of the
Agreement, each Member shall
ensure that financial service suppliers of any other Member established
in its territory are accorded most-favoured-nation treatment and
national treatment as regards the purchase or acquisition of financial
services by public entities of the Member in its territory.
Cross-border Trade
3. Each Member shall permit non-resident suppliers of financial
services to supply, as a principal, through an intermediary or as an
intermediary, and under terms and conditions that accord national
treatment, the following services:
(a) insurance of risks relating to:
(i) maritime shipping and commercial aviation and space launching and
freight (including satellites), with such insurance to cover any or all
of the following: the goods being transported, the vehicle transporting
the goods and any liability arising therefrom; and
(ii) goods in international transit;
(b) reinsurance and retrocession and the services auxiliary to
insurance as referred to in subparagraph 5(a)(iv) of the
Annex;
(c) provision and transfer of financial information and financial
data processing as referred to in subparagraph 5(a)(xv) of the Annex and
advisory and other auxiliary services, excluding intermediation,
relating to banking and other financial services as referred to in
subparagraph 5(a)(xvi) of the Annex.
4. Each Member shall permit its residents to purchase in the
territory of any other Member the financial services indicated in:
(a) subparagraph
3(a);
(b) subparagraph
3(b); and
(c) subparagraphs 5(a)(v) to
(xvi) of the Annex.
Commercial Presence
5. Each Member shall grant financial service suppliers of any other
Member the right to establish or expand within its territory, including
through the acquisition of existing enterprises, a commercial presence.
6. A Member may impose terms, conditions and procedures for
authorization of the establishment and expansion of a commercial
presence in so far as they do not circumvent the Member’s obligation
under paragraph 5 and they are consistent with the other obligations of
the Agreement.
New Financial Services
7. A Member shall permit financial service suppliers of any other
Member established in its territory to offer in its territory any new
financial service.
Transfers of Information and Processing of Information
8. No Member shall take measures that prevent transfers of
information or the processing of financial information, including
transfers of data by electronic means, or that, subject to importation
rules consistent with international agreements, prevent transfers of
equipment, where such transfers of information, processing of financial
information or transfers of equipment are necessary for the conduct of
the ordinary business of a financial service supplier. Nothing in this
paragraph restricts the right of a Member to protect personal data,
personal privacy and the confidentiality of individual records and
accounts so long as such right is not used to circumvent the provisions
of the Agreement.
Temporary Entry of Personnel
9. (a)
Each Member shall permit temporary entry into its territory of
the following personnel of a financial service supplier of any other
Member that is establishing or has established a commercial presence in
the territory of the Member:
(i) senior managerial personnel possessing proprietary information
essential to the establishment, control and operation of the services of
the financial service supplier; and
(ii) specialists in the operation of the financial service supplier.
(b) Each Member shall permit, subject to the availability of
qualified personnel in its territory, temporary entry into its territory
of the following personnel associated with a commercial presence of a
financial service supplier of any other Member:
(i) specialists in computer services, telecommunication services and
accounts of the financial service supplier; and
(ii) actuarial and legal specialists.
Non-discriminatory Measures
10. Each Member shall endeavour to remove or to limit any significant
adverse effects on financial service suppliers of any other Member of:
(a) non-discriminatory measures that prevent financial service
suppliers from offering in the Member’s territory, in the form
determined by the Member, all the financial services permitted by the
Member;
(b) non-discriminatory measures that limit the expansion of the
activities of financial service suppliers into the entire territory of
the Member;
(c) measures of a Member, when such a Member applies the same
measures to the supply of both banking and securities services, and a
financial service supplier of any other Member concentrates its
activities in the provision of securities services; and
(d) other measures that, although respecting the provisions of the
Agreement, affect adversely the ability of financial service suppliers
of any other Member to operate, compete or enter the Member’s market;
provided that any action taken under this paragraph would not
unfairly discriminate against financial service suppliers of the Member
taking such action.
11. With respect to the non-discriminatory measures referred to in
subparagraphs 10(a) and (b), a Member shall endeavour not to limit or
restrict the present degree of market opportunities nor the benefits
already enjoyed by financial service suppliers of all other Members as a
class in the territory of the Member, provided that this commitment does
not result in unfair discrimination against financial service suppliers
of the Member applying such measures.
C. National Treatment
1. Under terms and conditions that accord national treatment, each
Member shall grant to financial service suppliers of any other Member
established in its territory access to payment and clearing systems
operated by public entities, and to official funding and refinancing
facilities available in the normal course of ordinary business. This
paragraph is not intended to confer access to the Member’s lender of
last resort facilities.
2. When membership or participation in, or access to, any
self-regulatory body, securities or futures exchange or market, clearing
agency, or any other organization or association, is required by a
Member in order for financial service suppliers of any other Member to
supply financial services on an equal basis with financial service
suppliers of the Member, or when the Member provides directly or
indirectly such entities, privileges or advantages in supplying
financial services, the Member shall ensure that such entities accord
national treatment to financial service suppliers of any other Member
resident in the territory of the Member.
D. Definitions
For the purposes of this approach:
1. A non-resident supplier of financial services is a financial
service supplier of a Member which supplies a financial service into the
territory of another Member from an establishment located in the
territory of another Member, regardless of whether such a financial
service supplier has or has not a commercial presence in the territory
of the Member in which the financial service is supplied.
2. ‘Commercial presence’ means an enterprise within a Member’s
territory for the supply of financial services and includes wholly-or
partly-owned subsidiaries, joint ventures, partnerships, sole
proprietorships, franchising operations, branches, agencies,
representative offices or other organizations.
3. A new financial service is a service of a financial nature,
including services related to existing and new products or the manner in
which a product is delivered, that is not supplied by any financial
service supplier in the territory of a particular Member but which is
supplied in the territory of another Member.
B. Interpretation and Application of the Understanding on Commitments
in Financial Services
No jurisprudence or decision of a competent WTO body.
Footnotes:
79. S/C/M/2,
paras. 23–25. See also the Reports of the Working Party on GATS Rules to the
Council for Trade in Services, S/WPGR/1–14. back to text
80.
S/WPGR/10. back to text
81.
S/WPGR/10. back to text
82.
Checklist on Subsidies, Note from the Chairperson, Job No. 4519 (17 July 2000)
and 4519/Rev.1 (6 October 2000). back to text
83.
Checklist on Subsidies, Note from the Chairperson, JOB(03)/57. back to text
84.
S/L/74, paras. 15–16. back to text
85.
Panel Report on Mexico —
Telecoms, paras. 7.357–7.358. back to text
86.
Panel Report on Mexico —
Telecoms, para. 7.361. back to text
87.
Panel Report on Mexico —
Telecoms, para. 7.85. back to text
88.
Panel Report on Mexico —
Telecoms, para. 7.85. back to text
89.
Panel Report on Mexico —
Telecoms, para. 7.86. back to text
90.
S/L/74, paras. 17–18. back to text
91.
Panel Report on EC— Bananas III, para. 7.322. back to text
92.
Appellate Body Report on EC —
Bananas III, para. 241. back to text
93.
Panel Report on Canada — Autos, para. 10.298. back to text
94.
Panel Report on Canada — Autos, paras. 10.300–10.301. back to text
95.
Panel Report on Mexico —
Telecoms, para. 7.230. back to text
96.
Panel Report on Mexico —
Telecoms, para. 7.232. back to text
97.
Panel Report on Mexico —
Telecoms, para. 7.234. back to text
98.
Panel Report on Mexico —
Telecoms, para. 7.238. back to text
99.
Panel Report on Mexico —
Telecoms, para. 7.242. back to text
100.
Panel Report on Mexico —
Telecoms, para. 7.243. back to text
101.
(footnote original) Section 1.1 of the Reference Paper. back to text
102.
(footnote original) See the Vienna Convention on the Law of Treaties, 1969,
Art. 27. See also Ian Brownlie, Principles of Public International Law
(Clarendon Press, 1998, 5th ed.), page 34. back to text
103.
(footnote original) Section 1.1 of the Reference Paper. back to text
104.
Panel Report on Mexico —
Telecoms, para. 7.244. back to text
105.
Panel Report on Mexico —
Telecoms, para. 7.267. back to text
106.
Panel Report on Mexico —
Telecoms, para. 7.262. back to text
107.
Panel Report on Mexico —
Telecoms, para. 7.94. back to text
108.
Panel Report on Mexico —
Telecoms, para. 7.105. back to text
109.
Panel Report on Mexico —
Telecoms, para. 7.117. back to text
110.
Panel Report on Mexico —
Telecoms, para. 7.121. back to text
111.
Panel Report on Mexico —
Telecoms, para. 7.138. back to text
112.
Panel Report on Mexico —
Telecoms, para. 7.151. back to text
113.
Panel Report on Mexico —
Telecoms, para. 7.155. back to text
114.
Panel Report on Mexico —
Telecoms, para. 7.159. back to text
115.
Panel Report on Mexico —
Telecoms, para. 7.168. back to text
116.
Panel Report on Mexico —
Telecoms, para. 7.174. back to text
117.
(footnote original) ITU, Trends in Telecommunications Reform: Interconnection
Regulation, 3rd edition, sec. 4.2.1.2, p. 40. This paragraph also states that
countries that apply long run incremental cost methodologies include the United
States, Australia, EC, Colombia, and South Africa, and that “numerous
developing countries have adopted or proposed” some form of this model. back to text
118.
(footnote original) ITU, Trends in Telecommunications Reform: Interconnection
Regulation, 3rd edition, sec. 4.2.1.2, p. 40. back to text
119.
Panel Report on Mexico —
Telecoms, para. 7.175. back to text
120.
Panel Report on Mexico —
Telecoms, para. 7.182. back to text
121.
(footnote original) The Appellate Body in US
— Hot-Rolled Steel stated:
“…The word ‘reasonable’ implies a degree of flexibility that involves
consideration of all of the circumstances of a particular case. What is ‘reasonable’
in one set of circumstances may prove to be less than ‘reasonable’ in
different circumstances. This suggests that what constitutes a reasonable period
or a reasonable time, under Article 6.8 and
Annex II of the Anti-Dumping Agreement, should be defined on a case-by-case basis, in the light of the
specific circumstances of each investigation. In sum, a ‘reasonable period’
must be interpreted consistently with the notions of flexibility and balance
that are inherent in the concept of ‘reasonableness’, and in a manner that
allows for account to be taken of the particular circumstances of each case.
This was in the context of the Anti-Dumping Agreement, but we believe it is
equally pertinent in the context of GATS.” See The Appellate Body in US
— Hot-Rolled Steel, paragraphs 84–85. back to text
122.
Panel Report on Mexico —
Telecoms, para. 7.182. back to text
123.
Panel Report on Mexico —
Telecoms, para. 7.184. back to text
124.
Panel Report on Mexico —
Telecoms, para. 7.191. back to text
125.
Panel Report on Mexico —
Telecoms, para. 7.203. back to text
126.
Panel Report on Mexico —
Telecoms, para. 7.207. back to text
127.
Panel Report on Mexico —
Telecoms, para. 7.208. back to text
128.
S/C/3, para. 47. back to text
129.
WT/MIN(96)/DEC, para. 19. See also S/C/M/17, para. 14. back to text
130.
S/C/M/27, para. 3. back to text
131.
WT/GC/M/53, paras. 13 and 39. See also S/CSS/M/1, Section A. For the reports by
the Chairman of the Special Session to the TNC, see the document series TN/S/-. back to text
132.
WT/MIN(01)/DEC/1, paras. 15 and 47. See also TN/C/M/1. back to text
133.
S/L/93. back to text
134.
WT/MIN(01)/DEC/1,
para. 15. back to text
135.
S/CSS/3, Section II. back to text
136.
S/C/M/5, para. 4. back to text
137.
S/C/M/5, paras. 4–5. The Decision can be found in S/L/10, and the text of the
adopted Third Protocol can be found in S/L/12. back to text
138.
S/FIN/M/8, para. 4. The text of the Second Protocol can be found in
S/L/11.
Also, the text of the decision to adopt the Second Protocol can be found in
S/L/13. back to text
139.
The text of the adopted Decision can be found in S/L/8. back to text
140.
The text of the adopted Second Decision can be found in S/L/9. back to text
141.
S/C/M/5, paras. 2–3. back to text
142.
S/FIN/M/18, para. 25. The text of the Fifth Protocol can be found in S/L/45.
Also, the text of the decision to adopt the Fifth Protocol can be found in
S/L/44. back to text
143.
S/C/M/22, para. 2. The text of the decision can be found in S/L/50. back to text
144.
S/L/68. back to text
145.
Costa Rica and Nigeria (S/L/76); Ghana (S/L/87); Kenya and Nigeria (S/L/89) and
Bolivia (S/L/108), Dominican Republic (S/L/111); Uruguay (S/L/112); Poland
(S/L/130). back to text
146.
S/C/M/11, paras. 12–13. The text of the Decision can be found in S/L/24. The
Council for Trade in Services noted in its report to the General Council, (S/C/3)
paras. 32–33, dated 6 November 1996:
“After the suspension of the negotiations, two Members, Iceland and Norway,
consolidated their best offers, i.e. transformed their offers into specific
commitments to be inscribed in their schedules. Two Members, Austria (in the
context of its accession to the European Union) and the Dominican Republic,
withdrew their commitments, while two Members, Canada and Malaysia, modified
their commitments slightly. Currently, 35 Members have commitments on maritime
transport services. This includes: 29 Members who made commitments in the
Uruguay Round, 4 Members
(Papua New Guinea, Saint Christopher and Nevis, Sierra Leone and Slovenia) who
acceded subsequently, and 2 Members (Iceland and Norway) who made commitments
after the extended negotiations.
At the time of suspension of the negotiations, 56 governments (including the
European Communities and their Member States) had elected to participate fully
in the negotiations. Another 16 governments were participating in the process as
observers. By that time 24 conditional offers had been submitted.” back to text
147.
S/L/24. back to text
148.
S/CSS/M/1, paras. 4–35. The decision to hold the negotiations in Special
Sessions of the Council for Trade in Services was tabled by the General Council
on 7 February 2000. The text of the decision can be found in WT/GC/M/53. back to text
149.
S/C/M/9, paras. 2–3. The text of the adopted Fourth Protocol can be found in
S/L/19. Also, the text of the adopted Fourth Protocol can be found in S/L/20. back to text
150.
S/C/M/52, para. 11. The text of the adopted Guidelines can be found in S/L/92. back to text
151.
Panel Report on Mexico —
Telecoms, para. 7.371. back to text
152.
Panel Report on Mexico —
Telecoms, para. 7.371. back to text
153.
Panel Report on Mexico —
Telecoms, para. 7.371. back to text
154.
S/L/5. back to text
155.
S/C/M/38, section D. The text of the adopted Procedures can be found in S/L/80.
The text of the decision to adopt the Procedures can be found in S/L/79. back to text
156.
S/C/M/42, para. 38–41. The text of the adopted Procedures can be found in
S/L/84. The text of the decision to adopt the Procedures can be found in S/L/83.
back to text
157.
Paragraph 4 of Annex on Air Transport Services relates to the dispute settlement
in air transport services. back to text
158.
Paragraph 4 of Annex on Financial Services relates to the dispute settlement in
financial services. back to text
159.
Appellate Body Report on EC —
Bananas III, para. 250. back to text
160.
S/C/M/1. The text of the adopted Decision can be found in
S/L/2. back to text
161.
S/L/2, para. 1. back to text
162.
S/C/M/6, paras. 41–42. back to text
163.
S/C/M/1, paras. 6–7. The text of the adopted Decision can be found in S/L/1. back to text
164.
See Annual Reports S/FIN/1–6, 8–10, 14. back to text
165.
S/L/1, para. 1. back to text
166.
S/L/3. back to text
167.
The reports are numbered S/WPPS/1–4. back to text
168.
S/C/M/35, paras. 18–22. back to text
169.
S/L/70. back to text
170.
S/C/10, para. 25. Report (1999) of the Council for Trade in Services to the
General Council. back to text
171.
S/WPDR/1–7. back to text
172.
S/C/M/2,
paras. 22–25. back to text
173.
S/C/M/6, paras. 22–25. back to text
174.
S/L/16. back to text
175.
S/L/15. back to text
176.
S/C/M/6. back to text
177.
WT/GC/M/1. back to text
178.
S/C/M/1.
back to text
179.
S/C/M/1. back to text
180.
S/C/M/42, paras. 68–69. back to text
181.
The text is contained in document S/C/9/Rev.1. back to text
182.
WT/GC/M/58, pp. 14–15. back to text
183.
S/C/N/1, S/C/N/2, S/C/N/3 and S/C/N/5. back to text
184.
S/C/N/232. back to text
185.
S/C/M/40, para. 53. back to text
186.
See S/C/M/44, S/C/M/45 and S/C/M/47. back to text
187.
S/C/M/53, Section A. back to text
188.
S/C/M/1,
paras. 10–11. The approved Guidelines can be found in S/L/5. back to text
189.
S/L/106. back to text
190.
S/C/M/1,
para. 14. back to text
191.
G/C/1, para. 6. back to text
192.
S/C/M/49, S/C/M/50, S/C/M/57 and S/C/M/62. back to text
193.
S/C/M/68, paras. 115–116. back to text
194.
Panel Report on Mexico —
Telecoms, para. 7.278. back to text
195.
Panel Report on Mexico —
Telecoms, para. 7.281. back to text
196.
Panel Report on Mexico —
Telecoms, para. 7.286. back to text
197.
Panel Report on Mexico —
Telecoms, para. 7.302. back to text
198.
Panel Report on Mexico —
Telecoms, paras. 7.306 and 7.309. back to text
199.
Panel Report on Mexico —
Telecoms, para. 7.325. back to text
200.
Panel Report on Mexico —
Telecoms, para. 7.333; see also paras. 7.331–7.332,
and para. 164 of this Chapter. back to text
201.
(footnote original) See para. 7.216. back to text
202.
Panel Report on Mexico —
Telecoms, paras. 7.334–7.335. back to text
203.
Panel Report on Mexico —
Telecoms, para. 7.307. back to text
204.
(footnote original) For an interpretation of the words “subject to”, see
also Appellate Body Report, Canada – Dairy, paragraph 134. back to text
205.
Panel Report on Mexico —
Telecoms, paras. 7.308–7.309. back to text
206.
Panel Report on Mexico —
Telecoms, para. 7.381. back to text
207.
Panel Report on Mexico —
Telecoms, para. 7.326. back to text
208.
Panel Report on Mexico —
Telecoms, para. 7.327. back to text
209.
Panel Report on Mexico —
Telecoms, para. 7.338. back to text
210.
Panel Report on Mexico —
Telecoms, para. 7.341. back to text
211.
Panel Report on Mexico —
Telecoms, para. 7.342. back to text
212.
Panel Report on Mexico —
Telecoms, para. 7.385. back to text
213.
Panel Report on Mexico —
Telecoms, para. 7.388. back to text
214.
Panel Report on Mexico —
Telecoms, para. 7.331. back to text
215.
(footnote original) For example, footnote 2 of the Annex expressly refers to
most favoured nation treatment (Article II) and national treatment
(Article XVII). Section 4 (Transparency) builds upon
Article III (Transparency). The
Annex further elaborates on concepts contained in Articles VI (Domestic
Regulation), VIII (Monopolies and exclusive service suppliers), and
IX (Business
practices). back to text
216.
Panel Report on Mexico —
Telecoms, paras. 7.331–7.332. back to text
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