DS: China — Certain Measures Affecting Electronic Payment Services

This dispute concerns various alleged Chinese requirements that the United States claimed are inconsistent with obligations China allegedly assumed under the GATS.  These are:  

• Alleged requirements that establish China UnionPay (CUP), a Chinese company, as the sole supplier of electronic payment services (EPS) for all domestic Renminbi (RMB) payment card transactions;
   
• Alleged requirements that payment cards issued by banks in China bear the “Yin Lian”/“UnionPay” logo (the logo of CUP's network);
   
• Alleged requirements that all ATMs, merchant card processing equipment and point-of-sale terminals in China be capable of accepting payment cards bearing the “Yin Lian”/“UnionPay” logo;
   
• Alleged requirements that acquiring institutions post the “Yin Lian”/“UnionPay” logo and be capable of accepting all payment cards bearing the “Yin Lian”/“UnionPay” logo;
   
• Alleged prohibitions on the use of non-CUP cards for inter-bank and cross-region payment card transactions; and
   
• Alleged requirements pertaining to RMB transactions involving payment cards issued in China and used in Hong Kong, China or Macao, China, and payment cards issued in Hong Kong, China or Macao, China and used in China.

The United States claimed that China assumed market access and national treatment commitments to permit the supply of EPS both on a cross-border basis (under mode 1) and through commercial presence (under mode 3).  The United States considered that EPS fall under subsector 7.B(d) of China's GATS Schedule, which reads “[a]ll payment and money transmission services, including credit, charge, and debit cards, travellers cheques and bankers drafts (including import and export settlement)”.  The United States further claimed that, in view of these alleged commitments, the identified Chinese requirements are inconsistent with China's market access and national treatment obligations under Articles XVI and XVII of the GATS.

The panel first examined whether the services at issue — EPS for payment card transactions — are covered under subsector 7.B(d) of China's GATS Schedule and decided in the affirmative.  The panel rejected the United States' view that China's Schedule includes a market access commitment concerning subsector 7.B(d) to allow the cross-border (Mode 1) supply of EPS into China by foreign EPS suppliers.  However, the panel found that China's Schedule includes a market access commitment that allows foreign EPS suppliers to supply their services through commercial presence in China, so long as a supplier meets certain qualifications requirements related to local (RMB) currency business.  In addition, the panel concluded that China's Schedule contains a full national treatment commitment for the cross-border (Mode 1) supply of EPS, as well as a national treatment commitment under mode 3 that is also subject to certain qualifications requirements related to local (RMB) currency business. 

The panel next considered whether the various requirements alleged by the United States actually exist.  The panel rejected the United States' claim on the basis of insufficient evidence that China maintains CUP as an across-the-board monopoly supplier for the processing of all domestic RMB payment card transactions.  Accordingly, the panel rejected the United States' market access and national treatment claims in their entirety in respect of this alleged across-the-board requirement.

However, the panel concluded that China maintains CUP as a monopoly supplier for the clearing of certain types of RMB-denominated payment card transactions.  The specific transactions in respect of which the panel determined that CUP is a sole supplier involve RMB payment cards issued in China and used in Hong Kong, China or Macao, China, or RMB payment cards issued in Hong Kong, China or Macao, China and used in China.  Article XVI:2(a) requires Members not to limit the number of service suppliers where market access commitments have been undertaken.  The panel found that China acted inconsistently with its mode 3 market access commitment under Article XVI:2(a) of the GATS by granting CUP a monopoly for the clearing of these types of RMB payment card transactions.  The panel found no inconsistency with China's national treatment commitments. 

Regarding the other Chinese requirements at issue, the panel found that China maintains a requirement that all payment cards issued in China must bear the “Yin Lian”/“UnionPay” logo and be interoperable with that network, a requirement that all terminal equipment in China must be capable of accepting “Yin Lian”/“UnionPay” logo cards, and finally, a requirement that acquiring institutions post the “Yin Lian”/“UnionPay” logo and be capable of accepting all payment cards bearing the “Yin Lian”/“UnionPay” logo.  The panel found each of these requirements to be inconsistent with China's mode 1 and mode 3 national treatment obligations under Article XVII of the GATS.  It found, through these requirements, that China modifies the conditions of competition in favour of CUP and therefore fails to provide national treatment to EPS suppliers of other Members, contrary to China's commitments.