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WTO ANALYTICAL INDEX: GENERAL AGREEMENT ON TRADE IN SERVICES

General Agreement on Trade in Services

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The texts reproduced here do not have the legal standing of the original documents which are entrusted and kept at the WTO Secretariat in Geneva.

> Preamble
> Article I
> Article II
> Article III
> Article III bis
> Article IV
> Article V
> Article V bis
> Article VI
> Article VII
> Article VIII
> Article IX
> Article X
> Article XI
> Article XII
> Article XIII
> Article XIV
> Article XIV bis
> Article XV
> Article XVI
> Article XVII
> Article XVIII
> Article XIX
> Article XX
> Article XXI
> Article XXII
> Article XXIII
> Article XXIV
> Article XXV
> Article XXVI
> Article XXVII
> Article XXVIII
> Article XXIX
> Annex on Article II Exemptions
> Annex on Movement of Natural Persons Supplying Services Under the Agreement
> Annex on Air Transport Services
> Annex on Financial Services
> Second Annex on Financial Services
> Annex on Negotiations on Maritime Transport Services
> Annex on Telecommunications
> Annex on Negotiations on Basic Telecommunications
> Understanding on Commitments in Financial Services

 

> Analytical Index main page


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. General

94.     The Panel in US — Large Civil Aircraft (2nd Complaint) referred to Articles XIII:2 and XV of the GATS in the context of interpreting the definition of a subsidy found in Article 1 of the SCM Agreement. The Panel concluded that transactions properly characterized as purchases of services are excluded from the scope of Article 1 of the SCM Agreement, which expressly refers to purchases of goods but omits any reference to purchases of services. In the course of its analysis, the Panel observed that “[w]hile the SCM Agreement was being negotiated, parallel negotiations on trade in services were also taking place. Article XIII:2 and XV of the GATS reflect the fact that the negotiators of the GATS were unable to reach agreement on disciplines regarding governmental purchases of services, or on disciplines governing the provision of subsidies to service suppliers.”(145) The Panel concluded that when the omission of “purchases” of “services” from the text of Article 1 of the SCM Agreement is read against this historical background, it offers further confirmation that the drafters of that provision could not have removed the express reference to “purchases” of “services” from Article 1 of the SCM Agreement on the understanding that the reference was superfluous.(146)

2. Working Party on GATS Rules

95.     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.(147)

 

Part III: Specific Commitments

 

XX. Article XVI     back to top

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

96.     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.(148)

2. Article XVI:1

97.     The Panel in US — Gambling found that paragraph 1 of Article XVI did not contain restrictions on market access beyond those listed in paragraph 2 of Article XVI:

“The ordinary meaning of the words, the context of Article XVI, as well as the object and purpose of the GATS confirm that the restrictions on market access that are covered by Article XVI are only those listed in paragraph 2 of this Article.“(149)

98.     The Appellate Body in US — Gambling, noting that Antigua had only made a conditional appeal regarding this issue, left the issue of the relationship between the first and second paragraphs of Article XVI “to another day.”(150)

99.     In China–Publications and Audiovisual Products, the Panel stated that:

Paragraph 1 of Article XVI sets out the general principle that a Member must accord to services and service suppliers of other Members treatment no less favourable than that specified under the “terms, limitations and conditions” contained in its schedule. Paragraph 2 is more specific. It defines, in six sub-paragraphs, the measures that a Member, having inscribed a specific sectoral commitment, must not adopt or maintain “unless otherwise specified in its Schedule”. The six types of measures form a closed or exhaustive list, as indicated by the wording of the chapeau to paragraph 2 (“the measures … are defined as”). Under Article XVI, a Member undertakes a minimum standard of treatment, and is thus free to maintain a market access regime less restrictive than set out in its schedule, as confirmed in paragraph 1 which refers to a standard of “no less favourable” treatment.”(151)

3. Article XVI:2

(a) Restrictions on part of a sector

100.     The Panel in US — Gambling stated, in a finding which was not appealed,(152) that if a full market access commitment is given in a particular sector or sub-sector, that commitment applies to the whole of that sector, including all of its sub-sectors:

“In our view, if a Member makes a market access commitment in a sector or sub-sector, that commitment covers all services that fall within the scope of that sector or sub-sector. A Member does not fulfil its GATS obligations if it allows market access for only some of the services covered by a committed sector or sub-sector while prohibiting all others. If a Member wishes to restrict market access with respect to certain services falling within the scope of a sector or sub-sector, it should set out the restrictions or limitations on access in the appropriate place in the Member’s schedule. Indeed, a specific commitment in a given sector or sub-sector is a guarantee that the whole of that sector, i.e. all services included in that sector or sub-sector are covered by the commitment. Any other interpretation would make market access commitments under the GATS largely meaningless.”(153)

(b) Restrictions on part of a mode of supply

101.     The Panel in US — Gambling stated, in a finding that was not appealed,(154) that if a full market access commitment is given for the supply of a service through mode 1, that commitment applies to any mode of delivery included in mode 1:

“The Panel concludes that mode 1 under the GATS encompasses all possible means of supplying services from the territory of one WTO Member into the territory of another WTO Member. Therefore, a market access commitment for mode 1 implies the right for other Members’ suppliers to supply a service through all means of delivery, whether by mail, telephone, Internet etc., unless otherwise specified in a Member’s Schedule. We note that this is in line with the principle of “technological neutrality”, which seems to be largely shared among WTO Members.”(155)

(c) Restrictions directed at consumers

102.     The Panel in US — Gambling, found that certain laws making it a criminal offence for a person to engage in gambling were directed at consumers, not suppliers, of the service and therefore that these measures were not inconsistent with Article XVI:2(a) and (c).(156) On appeal, the Appellate Body found that, because the claimant had failed to make a prima facie case of violation with respect to these laws, the Panel was not entitled to make findings on them, and therefore that there was no need, in resolving the appeal, to consider the merits of the Panel’s findings.(157)

(d) Temporal qualifications

103.     The Panel in 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.”(158)

104.     The Panel in Mexico — Telecoms said further 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.(159) In this regard, see Section XXIV.B.3 below.

(e) “Routing requirements” in telecommunications

105.     The Panel in 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.”(160) With respect to the cross border supply of telecommunications services:

“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.”(161)

106.     Likewise, with respect to non-facilities based services supplied cross border, the Panel in 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).”(162)

4. Article XVI:2 (Introductory Heading or “chapeau”)

107.     The Appellate Body in US — Gambling, observed that the phrase “where market access commitments are made”, did not imply that a zero quota or a prohibition was outside the scope of the quantitative measures described in sub-paragraph (a).(163) See also paragraph 113 below.

5. Article XVI:2(a) (limitations on the Number of Suppliers)

108.     The Appellate Body in US — Gambling observed that the use of the words “number” of suppliers and “numerical” quotas in this provision suggests a focus on “quantitative limitations”.(164)

109.     Since the dictionary meaning of the word “form” was broad, the Appellate Body in US — Gambling reasoned that the meaning of the phrase “in the form of” had to be deduced by reading it together with the four types of limitation which it described.(165) The phrase “in the form of ”, read together with the words “numerical quota”, suggested that Article XVI:2(a) could encompass a zero quota:

“The fact that the word “numerical” encompasses things which “have the characteristics of a number” suggests that limitations “in the form of a numerical quota” would encompass limitations which, even if not in themselves a number, have the characteristics of a number. Because zero is quantitative in nature, it can, in our view, be deemed to have the “characteristics of” a number — that is, to be “numerical”.”(166)

110.     The phase “in the form of ”, read together with the terms “monopolies” and “exclusive service suppliers”, and bearing in mind the GATS definitions of these terms, suggested that Article XVI:2(a) could include limitations that are “in effect” monopolies or exclusive service suppliers:

“These two definitions suggest that the reference, in Article XVI:2(a), to limitations on the number of service suppliers “in the form of monopolies and exclusive service suppliers” should be read to include limitations that are in form or in effect, monopolies or exclusive service suppliers.”(167)

111.     The phrase “in the form of ”, read together with the phrase “the requirements of an economic needs test” did not suggest clearly that such a test needed to take any particular form:

“We further observe that it is not clear that “limitations on the number of service suppliers … in the form of … the requirements of an economic needs test” must take a particular “form.”(168) Thus, this fourth type of limitation, too, suggests that the words “in the form of” must not be interpreted as prescribing a rigid mechanical formula.”(169)

112.     The Appellate Body in US — Gambling, in concluding that the words “in the form of” must not be interpreted as “prescribing a rigid mechanical formula”, cautioned:

“This is not to say they should not be “ignored or replaced by the words “that have the effect of”. Yet, at the same time, they cannot be read in isolation.”(170)

113.     Interpreted in this way, the Appellate Body in US — Gambling found that “it is clear that the thrust of sub-paragraph (a) [of Article XVI:2] is not on the form of limitations, but on their numerical, or quantitative, nature.”(171)

114.     The Appellate Body in US — Gambling examined the context provided by the phrase “where market access commitments are made”, contained in the chapeau to Article XVI:2. It concluded that this phrase did not imply that a zero quota or a prohibition was outside the scope of the quantitative measures described in subparagraph (a), referring to an analogous provision in the GATT 1994, Article II:1(b).(172) The Appellate Body quoted approvingly the Panel’s conclusion on this issue:

“The fact that the terminology [of Article XVI:2(a)] embraces lesser limitations, in the form of quotas greater than zero, cannot warrant the conclusion that it does not embrace a greater limitation amounting to zero. Paragraph (a) does not foresee a “zero quota” because paragraph (a) was not drafted to cover situations where a Member wants to maintain full limitations. If a Member wants to maintain a full prohibition, it is assumed that such a Member would not have scheduled such a sector or subsector and, therefore, would not need to schedule any limitation or measures pursuant to Article XVI:2.”(173)

115.     The Appellate Body in US — Gambling, finding that “certain ambiguities” remained in the interpretation of Article XVI:2(a), referred to the 1993 Scheduling Guidelines as relevant preparatory work, concluding that a measure equivalent to a zero quota is within the scope of sub-paragraph (a):

“[T]hose Guidelines set out an example of the type of limitation that falls within the scope of sub-paragraph (a) of Article XVI:2, that is, of the type of measures that will be inconsistent with Article XVI if a relevant commitment has been made and unless the Member in question has listed it as a condition or limitation in its Schedule. That example is: “nationality requirements for suppliers of services (equivalent to zero quota)”.(174) This example confirms the view that measures equivalent to a zero quota fall within the scope of Article XVI:2(a).”

116.     The Appellate Body in US — Gambling was thus able to conclude that “limitations amounting to a zero quota are quantitative limitations and fall within the scope of Article XVI:2(a)(175). Since the Panel’s findings on limitations affecting part of a sector, or part of a mode of supply, were not appealed, the Appellate Body was able to quote and uphold the Panel’s combined finding that:

“[a prohibition on one, several or all means of delivery cross-border] is a “limitation on the number of service suppliers in the form of numerical quotas” within the meaning of Article XVI:2(a) because it totally prevents the use by service suppliers of one, several or all means of delivery that are included in mode 1.”(176)

117.     The Panel in 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.”(177) With respect to the cross border supply of telecommunications services:

“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.”(178)

118.     Likewise, with respect to non-facilities based services supplied cross border, the Panel in 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).”(179)

6. Article XVI:2(b)

119.     The Panel in Mexico — Telecoms examined Mexico’s GATS Schedule which required that international telecommunications traffic “must be routed through the facilities” of a Mexican concessionaire. See discussion in paragraphs 116117 above.

7. Article XVI:2(c)

120.     The Appellate Body in US — Gambling, noting that the construction of Article XVI:2(c) was “grammatically ambiguous”(180), focused instead on the language of the provision, finding that it did not necessarily exclude a measure equivalent to a zero quota:

“In our view, by combining, in sub-paragraph (c), the elements of the first clause of Article XVI:2(c) and the elements in the second part of the provision, the parties to the negotiations sought to ensure that their provision covered certain types of limitations, but did not feel the need to clearly demarcate the scope of each such element. On the contrary, there is scope for overlap between such elements: between limitations on the number of service operations and limitations on the quantity of service output, for example, or between limitations in the form of quotas and limitations in the form of an economic needs test. That sub-paragraph (c) applies in respect of all four modes of supply under the GATS also suggests the limitations covered thereunder cannot take a single form, nor be constrained in a formulaic manner. Nonetheless, all types of limitations in sub-paragraph (c) are quantitative in nature, and all restrict market access. For these reasons, we are of the view that, even if sub-paragraph (c) is read as referring to only two types of limitations, as contended by the United States, it does not follow that sub-paragraph (c) would not catch a measure equivalent to a zero quota.”(181)

121.     In order to resolve any ambiguity that Article XVI:2(c) covers measures equivalent to a zero quota, the Appellate Body in US — Gambling resorted to supplementary sources. It noted references, made in 1991 in the group negotiating the GATS, to the “quantitative” nature of measures covered by Article XVI. It also noted a relevant example in the 1993 Scheduling Guidelines of a type of measure covered by Article XVI:2(c): “[r]estrictions on broadcasting time available for foreign films”, a measure that does not mention numbers or units.(182) If this were not the case, the Appellate Body stated, Article XVI:2(c) “could not cover, for example, a limitation expressed as a percentage or described using words such as “a majority”.”(183)

122.     The Appellate Body in US — Gambling was thus able to conclude that “limitations amounting to a zero quota are quantitative limitations and fall within the scope of Article XVI:2(a)”.(184) Since the Panel’s findings on limitations affecting part of a sector, or part of a mode of supply, were not appealed, the Appellate Body was able to quote and uphold the Panel’s combined finding that a measure prohibiting the supply of certain services where specific commitments have been undertaken is a limitation within the meaning of Article XVI:2(c) “because it totally prevents the services operations and/or service output through one or more or all means of delivery that are included in mode 1. In other words, such a ban results in a “zero quota” on one or more or all means of delivery include in mode 1.”(185)

123.     The Appellate Body in US — Gambling declined to go beyond a ruling on the measure at issue, and stated that “[i]t is neither necessary nor appropriate for us to draw, in the abstract, the line between quantitative and qualitative measures, and we do not do so here.”(186)

124.     The Panel in Mexico — Telecoms examined Mexico’s GATS Schedule which required that international telecommunications traffic “must be routed through the facilities” of a Mexican concessionaire. See discussion in paragraphs 116117 above.

 

XXI. Article XVII     back to top

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) Elements of a claim under Article XVII

125.     In China–Publications and Audiovisual Products, the Panel provided an overview of the elements of a claim under Article XVII:

“The wording of Article XVII indicates that we need to determine: whether the services at issue, i.e. the wholesale services supplied through commercial presence, are inscribed in China’s Schedule; the extent of China’s national treatment commitments, including any conditions or qualifications, with respect to these services entered in its Schedule; whether the measures at issue affect the supply of these services; and whether these measures accord less favourable treatment to service suppliers of other Members, in comparison with like domestic suppliers.”(187)

(b) Electronic commerce

126.     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.(188)

2. “subject to any conditions and qualifications set out therein”

127.     In China–Publications and Audiovisual Products, the Panel stated:

“As noted above, a Member may limit the extent to which it grants market access or national treatment for the services listed in its Schedule, by inscribing the “conditions and qualifications” (which we refer to more simply as “limitations”) mentioned in Article XVII either under “limitations on market access” or under “limitations on national treatment”. A Member’s obligations on market access and/or national treatment are determined with reference to any such limitations inscribed in its schedule. Therefore, to determine the extent of China’s national treatment commitments with respect to the services at issue, we need to examine China’s Schedule to see whether, with respect to supply through commercial presence, there are any limitations inscribed (a) beside “Wholesale Trade Services”, in the national treatment column or (b) in the national treatment column of the horizontal section of China’s Schedule, as those limitations inscribed in the horizontal section apply to all the sectors in the Schedule unless otherwise specified.”(189)

3. “like services and service suppliers”

128.     The Panel in 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.”(190)

129.     In China–Publications and Audiovisual Products, the Panel concluded that when origin is the only factor on which a measure basis a difference in treatment between domestic service suppliers and foreign suppliers, the “like service suppliers” requirement is met, provided there will, or can, be domestic and foreign suppliers that under the measure are the same in all material respects except for origin:

“When origin is the only factor on which a measure bases a difference of treatment between domestic service suppliers and foreign suppliers, the “like service suppliers” requirement is met, provided there will, or can, be domestic and foreign suppliers that under the measure are the same in all material respects except for origin. We note that similar conclusions have been reached by previous panels.(191) We observe that in cases where a difference of treatment is not exclusively linked to the origin of service suppliers, but to other factors, a more detailed analysis would probably be required to determine whether service suppliers on either side of the dividing line are, or are not, “like”.

 

Therefore, to the extent that, under the measure at issue, a difference of treatment between foreign-invested enterprises that would, if not prohibited, engage in the wholesale of imported reading materials and wholly Chinese-owned enterprises that are permitted to supply this service is based exclusively on the origin of service suppliers, the “like” service suppliers requirement in Article XVII is met, as long as there will, or can, be domestic and foreign suppliers that under the measure are the same in all material respects except for origin. In our view, there is no doubt that under the measure at issue, there will, or can, be foreign-invested enterprises prohibited from engaging in the wholesale of imported reading materials that are the same in all material respects as wholly Chinese-owned enterprises permitted to supply this service, except for their origin. We also note that the parties do not dispute the likeness of the service suppliers under the measures at issue. We thus consider that, for the measure at issue, the “like” service suppliers requirement in Article XVII is met.”(192)

4. “treatment no less favourable”

130.     As regards the “no less favourable” treatment element of Article XVII, the Panel in China — Publications and Audiovisual Products stated that:

“We must now examine whether the formal prohibition on the supply of certain services by a foreign service supplier that a like domestic supplier may undertake, constitutes “no less favourable” treatment in terms of Article XVII.

 

This treatment is to be assessed in terms of the “conditions of competition” between like services and services suppliers, as specified in Article XVII:3 of the GATS:

 

“Formally identical or formally different treatment shall be considered to be less favourable if it modified 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.”

 

In our view, a measure that prohibits foreign service suppliers from supplying a range of services that may, subject to satisfying certain conditions, be supplied by the like domestic supplier cannot constitute treatment “no less favourable”, since it deprives the foreign service supplier of any opportunity to compete with like domestic suppliers. In terms of paragraph 3 of Article XVII, such treatment modifies conditions of competition in the most radical way, by eliminating all competition by the foreign service supplier with respect to the service at issue.”(193)

131.     The Panel in China — Publications and Audiovisual Products also discussed the burden of proof on the issue of “less favourable” treatment, drawing upon jurisprudence developed under the GATT 1994:

“We recall the requirement under Article XVII that a Member accord “no less favourable treatment” to foreign services or service suppliers than it does to like domestic ones. Under paragraph 2 of Article XVII, the treatment need not be identical. Formally different treatment may be accorded to foreign services or service suppliers, as long as that treatment does not modify conditions of competition in favour of like domestic services or service suppliers. Therefore, China’s formally different treatment of foreign-invested wholesalers with respect to operating term does not necessarily indicate an inconsistency with Article XVII. It is for the United States, as the complaining party, to demonstrate that the formal difference in treatment by China has modified the conditions of competition in favour of wholly Chinese-owned wholesalers.

 

The demonstration of “less favourable treatment” of foreign services or service suppliers under Article XVII must proceed through careful analysis of the measure and the market. In examining the national treatment obligation applying to trade in goods, the Appellate Body in US — FSC (Article 21.5 — EC) stated:

 

“The examination of whether a measure involves ‘less favourable treatment’ of imported products within the meaning of Article III:4 of the GATT 1994 must be grounded in close scrutiny of the ‘fundamental thrust and effect of the measure itself’.(194) This examination cannot be rest on simple assertion, but must be founded on a careful analysis of the contested measure and of its implications in the marketplace. At the same time, however, the examination need not be based on the actual effects of the contested measure in the marketplace.”(195)’(196)

 

We consider that this statement by the Appellate Body is relevant also to an analysis under Article XVII of the GATS, since an examination of “less favourable treatment” involves, in goods as well as services cases, an analysis of the effects of a measure on conditions of competition.”(197)

5. “aims-and-effects” test

132.     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.”(198)

6. Footnote 10

133.     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.”(199) 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.”(200)

 

XXII. Article XVIII     back to top

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

(a) General

134.     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.

(b) 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 anti-competitive 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.

(c) Section 1.1 — Anti-competitive Practices

(i) Concept of “anti-dumping practices”

135.     In examining the meaning of “anti-competitive practices”, the Panel in Mexico — Telecoms stated that, on its own, the term is “broad in scope, suggesting actions that lessen rivalry or competition in the market.”(201) 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.”(202)

136.     The Panel in Mexico — Telecoms also supported its reasoning in paragraph 135 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’.”(203)

137.     The Panel in 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.”(204)

(ii) Practices required under a Member’s law

138.     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 in Mexico — Telecoms found that Section 1.2 contains an explicit example of an anti-competitive 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 anti-competitive 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.”(205)

139.     The Panel in 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.”(206)

140.     The Panel in 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’(207) 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,(208) 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’.(209) 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.”(210)

141.     The Panel in 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.”(211)

(iii) Types of measures constituting “anti-competitive practices”

Setting of uniform price by the major supplier

142.     The Panel in 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.”(212)

Proportionate return system

143.     The Panel in 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”

144.     The Panel in 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 anti-competitive 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.”

(d) Section 2.1 — Interconnection

(i) “on the basis of the specific commitments undertaken”

145.     The Panel in Mexico — Telcoms, 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.”(213)

(ii) Applicability to cross-border supply

146.     The Panel in 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:

“[N]o 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.”(214)

147.     The Panel in 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.”(215)

148.     Further, the Panel in 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.”(216)

149.     The Panel in 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.”(217)

(iii) “major supplier”

150.     In examining whether Telmex was a “major supplier”, the Panel in 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.”(218)

(iv) “the ability to materially affect the terms of participation (having regard to price and supply)”

151.     In examining further whether Telmex could affect the market to the extent required to be a major supplier, the Panel in 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’.”(219)

(v) “control over essential facilities” or “use of its position in the market”

152.     The Panel in Mexico — Telecoms found that “[t]he 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.”(220)

(e) Section 2.2(b) — Interconnection rates

(i) “cost oriented”

153.     In examining the ordinary meaning of the term “cost-oriented”, the Panel in 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.”(221)

154.     The Panel in 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.”(222)

155.     The Panel in 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”.(223) 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.(224) The increasing use of incremental cost methodologies indicates the special meaning that the term “cost-oriented” is acquiring among WTO Members.”(225)

(ii) “reasonable”

156.     In examining the further requirement that cost-oriented rates be “reasonable”, the Panel in Mexico — Telecoms found that this term suggested something “judged to be appropriate or suitable to the circumstances or purpose.”(226) 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’.”(227)”(228)

(iii) “having regard to economic feasibility”

157.     The Panel in 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.”(229)

(iv) Evaluating whether rates are “costs oriented”

158.     In evaluating whether in fact the rates were “cost-oriented,” the Panel in 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.”(230)

159.     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 in 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.”(231)

160.     In examining other methodologies for determining whether interconnection rates were “cost-oriented”, the Panel in Mexico — Telecoms was not convinced that a comparison of international grey-market 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.(232) 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.(233)

 

Part IV: Progressive Liberalization

 

XXIII. Article XIX     back to top

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

161.     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,(234) 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.(235) 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.(236)

(b) GATS 2000 negotiations

162.     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.(237)

(c) Doha Development Agenda

163.     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.(238)

2. Article XIX:3

(a) GATS 2000 negotiations

164.     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,(239) which were subsequently reaffirmed by Ministers meeting in Doha on 9–14 November 2001.(240)

(b) Assessment of trade in services

165.     At its meeting on 25 February 2000, the Council decided that the assessment of trade in services 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.(241)

3. Negotiations in specific services sectors

(a) Movement of natural persons

166.     At its meeting of 21 July 1995,(242) the Council for Trade in Services decided to adopt the Third Protocol to the General Agreement on Trade in Services,(243) which had been proposed by the Negotiating Group on Movement of Natural Persons.

(b) Financial services

167.     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.(244) 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(245) and the Second Decision on Financial Services,(246) both of which had been proposed by the Committee on Trade in Financial Services.(247)

168.     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.(248) 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,(249) 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.(250) 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.(251)

(c) Maritime transport services

169.     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 the GATS, and to conclude them no later than at the end of this first round of progressive liberalization.(252) The Group was to resume “with the commencement of comprehensive negotiations on Services”.(253) A Special Session of the Council for Trade in Services formally launched the new negotiations on services on 25 February 2000.(254)

(d) Basic telecommunications

170.     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,(255) both of which had been proposed by the Negotiating Group on Basic Telecommunications.

(e) Professional services

171.     With respect to the establishment of the Working Party on Professional Services, and its successor, the Working Party on Domestic Regulation, see paragraphs 208210 below.

(i) Disciplines on domestic regulation

172.     With respect to disciplines on domestic regulation, see paragraph 60 above.

 

XXIV. Article XX     back to top

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

173.     With regard to the establishment and terms of reference of the Committee on Specific Commitments under the GATS, see paragraph 215 below.

174.     At the Committee meeting of 10 April 2006,(256) the Chairman reported that during informal discussions, Members’ attention had been drawn to an error in the French version of the Services Sectoral Classification List where parts of the headings of the sub-sectors corresponding to CPC 9401 and CPC 9403 had been inverted. The correct correspondence was set out in the report of the meeting, as well as in a corrigendum to the French version of the Guidelines for the Scheduling of Commitments under the General Agreement on Trade in Services (GATS). (257)

175.     At the meeting of 5 October 2006,(258) delegations arrived at a common understanding to the effect that dredging services, which are not explicitly mentioned in the CPC, are covered by CPC 5133 — “Construction work for civil engineering for waterways, harbours, dams, and other water works.”

176.     This information is also contained in the Annual Report of the Committee on Specific Commitments to the Council for Trade in Services 2006, S/CSC/12, 21 November 2006.

2. Interpretation of schedules

(a) General

177.     The Appellate Body in US — Gambling observed that the interpretative approach for a GATS Schedule is very similar to that used for a tariff schedule under GATT 1994, relying on Articles 31 and 32 of the Vienna Convention:

“In the context of the GATS, Article XX:3 explicitly provides that Members’ Schedules are an “integral part” of that agreement. Here, too, the task of identifying the meaning of a concession in a GATS Schedule, like the task of interpreting any other treaty text, involves identifying the common intention of Members. Like the Panel — and, indeed, both the participants — we consider that the meaning of the United States’ GATS Schedule must be determined according to the rules codified in Article 31 and, to the extent appropriate, Article 32 of the Vienna Convention.(259)

178.     The Panel and the Appellate Body in US Gambling considered the need for precision and clarity in scheduling. See above, paragraphs 12.

179.     In China–Publications and Audiovisual Products, the Panel summarized the guidance provided by the Appellate Body (elaborated in detail below) on the various instruments that have potential value in the interpretation of GATS schedules:

“Apart from the WTO Agreement and its constituent parts, various instruments have been recognized in previous dispute settlement cases as having potential value in assisting the interpretation of GATS schedules. These instruments include the 1991 United Nations Provisional Central Product Classification (hereafter “CPC”) and the GATT Secretariat document “Services Sectoral Classification List” (MTN.GNS/W/120, hereafter “W/120”), both of which deal with the classification of services. The Appellate Body has identified document W/120 and the 1993 Guidelines for the Scheduling of Specific Commitments under the GATS (hereafter the “1993 Scheduling Guidelines”), which are not binding on WTO Members, as supplementary means of interpretation within the meaning of Article 32 of the Vienna Convention.“(260),(261)

(b) 1993 Scheduling Guidelines(262)

180.     The Appellate Body in US — Gambling found that the 1993 Scheduling Guidelines were a “supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion”, in terms of Article 32 of the Vienna Convention.(263) The Appellate Body noted, nonetheless, the importance of the Guidelines (and document W/120) which were:

“[P]repared and circulated at the request of parties to the Uruguay Round negotiations for the express purpose of assisting those parties in the preparation of their offers. These documents undoubtedly served, too, to assist parties in reviewing and evaluating the offers made by others. They provided a common language and structure which, although not obligatory, was widely used and relied upon.”(264)

181.     The Appellate Body in US — Gambling therefore set aside the Panel’s finding that the 1993 Guidelines are “context” under Article 31(2) of the Vienna Convention. Explaining its disagreement with the Panel’s justification that these documents “were agreed upon by Members with a view to using such documents, not only in the negotiation of their specific commitments, but as interpretative tools in the interpretation and application of Members’ scheduled commitments”,(265) the Appellate Body stated:

“In our opinion, the Panel’s description of how these documents were created and used may suggest that the parties agreed to use such documents in the negotiations of their specific commitments. The Panel cited no evidence, however, directly supporting its further conclusion, in the quotation above, that the agreement of the parties encompassed an agreement to use the documents “as interpretative tools in the interpretation and application of Members’ scheduled commitments.”(266)

182.     The Appellate Body in US — Gambling stated that the 1993 Scheduling Guidelines also do not constitute “subsequent practice” under Article 31(3)(b) of the Vienna Convention:

“Although they may be relevant in identifying the United States’ practice, they do not establish a common, consistent, discernible pattern of acts or pronouncements by Members as a whole. Nor do they demonstrate a common understanding among Members that specific commitments are to be interpreted by reference to (…) the 1993 Scheduling Guidelines.”(267)

(c) 2001 Scheduling Guidelines(268)

183.     The Appellate Body in US — Gambling stated that the 1993 Scheduling Guidelines do not constitute “subsequent practice” under Article 31(3)(b) of the Vienna Convention, with respect to pre-existing commitments:

“Although the 2001 Guidelines were explicitly adopted by the Council for Trade in Services, this was in the context of the negotiation of future commitments and in order to assist in the preparation of offers and requests in respect of such commitments. As such, they do not constitute evidence of Members’ understanding regarding the interpretation of existing commitments.”(269)

184.     The Appellate Body in US — Gambling stated that the Guidelines for the Scheduling of Specific Commitments do constitute “supplemental means of interpretation” of GATS, in accordance with Article 32 of the Vienna Convention.(270) The Appellate Body found that the Panel had erred in characterising the Guidelines as “context” under Article 31 of the Vienna Convention.(271)

(d) Document W/120(272)

185.     The Appellate Body in US — Gambling found that document W/120 was a “supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion”, in terms of Article 32 of the Vienna Convention.(273) The Appellate Body noted, nonetheless, the importance W/120 (and the 1993 Scheduling Guidelines) which were:

“[P]repared and circulated at the request of parties to the Uruguay Round negotiations for the express purpose of assisting those parties in the preparation of their offers. These documents undoubtedly served, too, to assist parties in reviewing and evaluating the offers made by others. They provided a common language and structure which, although not obligatory, was widely used and relied upon.”(274)

186.     The Appellate Body in US — Gambling therefore set aside the Panel’s finding that document W/120 (and the 1993 Scheduling Guidelines) are “context” under Article 31(2) of the Vienna Convention. Explaining its disagreement with the Panel’s justification that the documents “were agreed upon by Members with a view to using such documents, not only in the negotiation of their specific commitments, but as interpretative tools in the interpretation and application of Members’ scheduled commitments”,(275) the Appellate Body stated:

“In our opinion, the Panel’s description of how these documents were created and used may suggest that the parties agreed to use such documents in the negotiations of their specific commitments. The Panel cited no evidence, however, directly supporting its further conclusion, in the quotation above, that the agreement of the parties encompassed an agreement to use the documents “as interpretative tools in the interpretation and application of Members’ scheduled commitments.”(276)

187.     The Appellate Body in US — Gambling noted a direct reference to W/120 in the DSU, providing direct support for the relevance of W/120 in identifying services sectors in GATS Schedules:

Article 22.(f) of the DSU provides that, for purposes of suspending concessions, “‘sector’ means …. (ii) with respect to services, a principal sector as identified in the current ‘Services Sectoral Classification List’ which identifies such sectors”. A footnote adds that “[t]he list in document MTN.GNS/W/120 identifies eleven sectors.” This reference confirms the relevance of W/120 to the task of identifying service sectors in GATS Schedules, but does not appear to assist in the task of ascertaining within which subsector of a Member’s Schedule a specific service falls.”(277)

(e) UN Provisional Central Product Classification (“CPC”)(278)

188.     The Appellate Body in US — Gambling clarified the relationship between the different levels of disaggregation within the CPC:

“As the CPC is a decimal system, a reference to an aggregate category must be understood as a reference to all of the constituent parts of that category. Put differently, a reference to a three-digit CPC Group should, in the absence of any indication to the contrary, be understood as a reference to all the four-digit Classes and five-digit Sub-classes that make up the group; and a reference to a four-digit Class should be understood as a reference to all of the five-digit Sub-classes that make up that Class.”(279)

(f) Other Members’ Schedules

189.     The Appellate Body in US — Gambling stated that other Members’ Schedules could be relevant context for the interpretation of a particular Schedule:

“Both participants, as well as the Panel, accepted that other Members’ Schedules constitute relevant context for the interpretation of subsector 10.D of the United States’ Schedule. As the Panel pointed out, this is the logical consequence of Article XX:3 of the GATS, which provides that Members’ Schedules are “an integral part” of the GATS. We agree. At the same time, as the Panel rightly acknowledged, use of other Members’ Schedules as context must be tempered by the recognition that “[e]ach Schedule has its own intrinsic logic, which is different from the US Schedule.”“(280)

(g) Document published by a government agency

190.     The Appellate Body in US — Gambling observed that, given the findings it had already made in the case, it did not need to determine whether the Panel erred in using a document of the USITC to confirm its interpretation of the US Schedule.(281) The Panel had found that the USITC document, which related the service sectors in the US Schedule to corresponding CPC classifications, had “probative value as to how the US government views the structure and the scope of the US Schedule, and, hence, its GATS obligations”.(282)

3. Article XX:1

191.     The Appellate Body in US — Gambling deduced that the structure of the GATS led to two consequences for the scheduling of a specific commitment covering a particular service:

“First, because the GATS covers all services except those supplied in the exercise of governmental authority, it follows that a Member may schedule a specific commitment in respect of any service. Secondly, because a Member’s obligations regarding a particular service depend on the specific commitments that it has made with respect to the sector or subsector within which that service falls, a specific service cannot fall within two different sectors or subsectors. In other words, the sectors and subsectors in a Member’s Schedule must be mutually exclusive.”(283)

4. Article XX:1(d)

192.     The Panel in 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.”(284)

193.     Referring to the circumstances of the case, the Panel in 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.”(285)

194.     With respect to the length of time in which implementation by Mexico could reasonably have been concluded, the Panel in 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.”(286)

195.     The Panel in 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.

5. Article XX:2

196.     The Panel in China — Publications and Audiovisual Products explained that:

“This schedule structure gives each WTO Member flexibility in defining the precise scope of its commitments. Having chosen on which service sectors it wishes to commit, a Member may specify the exact extent to which these commitments are to apply by indicating full market access and national treatment, or partial or no commitment with respect to the four modes of supply. As stated, this case involves only the supply of distribution services through “commercial presence”, also known as “mode 3”. In the case of making partial commitment, a Member may inscribe limitations in one of the two columns: either under “limitations on market access” or under “limitations on national treatment”. If a limitation affects both market access and national treatment then, by a convention set out in Article XX:2 of the GATS (avoiding the need to repeat an inscription), it is to be inscribed only in the market access column.”(287)

6. Article XX:3

197.     The Panel in US — Gambling stated that all Members’ Schedules annexed to the GATS, according to Article XX:3, are an integral part of the Agreement.(288)

198.     The Appellate Body in US — Gambling found that, as in the context of the GATT 1994, the interpretation of schedules of specific commitments under the GATS must be based on the customary rules of interpretation, codified in Articles 31 and 32 of the Vienna Convention.

“In the context of the GATT 1994, the Appellate Body has observed that, although each Member’s Schedule represents the tariff commitments that bind one Member, Schedules also represent a common agreement among all Members.(289) Accordingly, the task of ascertaining the meaning of a concession in a Schedule, like the task of interpreting any other treaty text, involves identifying the common intention of Members, and is to be achieved by following the customary rules of interpretation of public international law, codified in Articles 31 and 32 of the Vienna Convention.(290)

 

In the context of the GATS, Article XX:3 explicitly provides that Members’ Schedules are an “integral part” of that agreement. Here, too, the task of identifying the meaning of a concession in a GATS Schedule, like the task of interpreting any other treaty text, involves identifying the common intention of Members. Like the Panel(291) — and, indeed, both the participants(292) — we consider that the meaning of the United States’ GATS Schedule must be determined according to the rules codified in Article 31 and, to the extent appropriate, Article 32 of the Vienna Convention.”

199.     The Panel in China — Publications and Audiovisual Products, referring to Article XX:3 and prior Appellate Body pronouncements, stated that “[w]e recognize that GATS schedules are an integral part of the GATS,(293) and are thus legally part of the WTO Agreement. Consistent with Article 3.2 of the DSU, we interpret commitments in schedules according to the “customary rules of interpretation of public international law” which include Articles 31 and 32 of the Vienna Convention.”(294)

 

XXV. Article XXI     back to top

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

200.     With respect to the format for notifications under paragraph 1(b), see the Guidelines for Notifications under the General Agreement on Trade in Services.(295)

2. Article XXI:5

(a) Procedures for the rectification or modification of schedules

201.     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.(296) The Procedures are to be used whenever a Member intends to modify or withdraw a scheduled commitment.

202.     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.(297) 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 on the substance of the existing commitments.

 

Part V: Institutional Arrangements

 

XXVI. Article XXII     back to top

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     back to top

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.(298),(299).

 
B. Interpretation and Application of Article XXIII

1. Article XXIII:1

(a) Relationship with Article 3.8 of the DSU

203.     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.”(300)

204.     The Panel in Mexico — Telecoms understood these statements by the Appellate Body to mean that the GATS does not require that, in the case of a violation complaint (Article XXIII:1 of the GATS), “nullification or impairment” of treaty benefits has to be claimed by the complaining WTO Member and examined by a Panel:

“ Unlike some other covered agreements (e.g. GATT Article XXIII:1 in connection with Article 3.8 of the DSU), the GATS does not require that, in the case of a violation complaint (GATS Article XXIII:1), ‘nullification or impairment’ of treaty benefits has to be claimed by the complaining WTO Member and examined by a Panel. Whereas Article XXIII:1 of the GATT specifically conditions access to WTO dispute settlement procedures on an allegation that a ‘benefit’ or the ‘attainment of an objective’ under that agreement are being ‘nullified or impaired’, the corresponding provision in the GATS (Article XXIII:1) permits access to dispute settlement procedures if a Member “fails to carry out its obligations or specific commitments” under the GATS. In this respect, we note that the Appellate Body in EC — Bananas III stated that the panel in that case “erred in extending the scope of the presumption in Article 3.8 of the DSU to claims made under the GATS”.(301) Having found that Mexico has violated certain provisions of the GATS, we are therefore bound by Article 19 of the DSU to proceed directly to the recommendation set out in that provision.”(302)

2. Articles of the GATS invoked in panel and Appellate Body proceedings

205.     For a table of disputes under the GATS, see the table of “Articles of the Covered Agreements Invoked in Panel and Appellate Body Proceedings” in the Chapter on the DSU.

3. Decision on Certain Dispute Settlement Procedures for the General Agreement on Trade in Services

206.     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,(303) which called for the establishment of a roster of panellists.(304) 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.”

207.     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.(305)

 

XXVIII. Article XXIV     back to top

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

208.     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,(306) thereby establishing the Committee on Trade in Financial Services.(307) 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.(308)

(ii) Working Party on Professional Services and Working Party on Domestic Regulation

209.     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.(309) With respect to disciplines on domestic regulation and mutual recognition guidelines, see paragraph 60 above.

210.     The Working Party reported to the Council for Trade in Services on an annual basis.(310)

211.     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.(311) For this purpose, at the same meeting, the Council for Trade in Services adopted a decision establishing the Working Party on Domestic Regulation (WPDR).(312) 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.(313)

212.     In 2005, the WTO Hong Kong Ministerial Declaration instructed negotiators to develop disciplines on domestic regulations and to adopt text for adoption before the end of the Round. Annex C of the Ministerial Declaration provides that:

5. Members shall develop disciplines on domestic regulation pursuant to the mandate under Article VI:4 of the GATS before the end of the current round of negotiations. We call upon Members to develop text for adoption. In so doing, Members shall consider proposals and the illustrative list of possible elements for Article VI:4 disciplines(2).

 

Footnote 2 As attached to the Report of the Chairman of the Working Party on Domestic Regulation to the Special Session of the Council for Trade in Services on 15 November 2005, contained in document JOB(05)/280.”

213.     The WPDR reports to the Council for Trade in Services on an annual basis.(314)

(iii) Working Party on GATS Rules

214.     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).(315)

(iv) Committee on Specific Commitments

215.     On 4 October 1995, the Council for Trade in Services established the Committee on Specific Commitments.(316) 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.(317)

(v) Negotiating Groups on Natural Persons, Maritime Transport Services and Basic Telecommunications

216.     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

217.     On 4 October 1995, the Council for Trade in Services adopted(318) the Rules of Procedure of the General Council, along with appropriate modifications.(319) See also the Chapter on the WTO Agreement, Section V.B.5(b).

(b) Observer status

218.     At is meeting of 1 March 1995, the Council for Trade in Services took note of the decision by the General Council of 31 January 1995(320) 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.(321) 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.(322)

219.     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.(323) At its meeting on 11 April 2006, the Council for Trade in Services, following previous practice, decided to grant ad hoc observer status to the Universal Postal Union [s/c/26].

 
C. Decision on Institutional Arrangements for the General Agreement on Trade in Services

220.     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     back to top

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     back to top

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

221.     On 26 May 2000, the Council for Trade in Services adopted the Cooperation Agreement between the International Telecommunication Union and the World Trade Organization.(324) 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.(325)

222.     With respect to the relationship of the WTO with other international organizations in general, see Article V of the Chapter on the WTO Agreement.

 

Part VI: Final Provisions

 

XXXI. Article XXVII     back to top

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     back to top

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(a) (“measure”)

223.     The Appellate Body in US — Gambling, rejecting Antigua’s claim that a “total prohibition” resulting from various US federal and state laws was in itself a measure, stated that:

“We are therefore of the view that the DSU and the GATS focus on “measures” as the subject of challenge in WTO dispute settlement. To the extent that a Member’s complaint centres on the effects of an action taken by another Member, that complaint must nevertheless be brought as a challenge to the measure that is the source of the alleged effects.(326)

2. Article XXVIII(b) (“supply of a service”)

225.     In China — Publications and Audiovisual Products, the Panel found that the scope of China’s commitment in its GATS Schedule on “Sound recording distribution services” extends to sound recordings distributed in non-physical form, through technologies such as the Internet. The Panel found support for its interpretation in the definition of “supply of a service” in Article XXVIII(b):

“The Panel recalls that a Member’s Schedule, according to Article XX:2, is an integral part of the GATS, and the provisions of the GATS thus apply to the inscriptions in China’s Schedule. In examining the definitions in Article XXVIII(b) of the GATS, we note that “the supply of a service” is defined as including the “production, distribution, marketing, sale and delivery of a service” (emphasis added). This definition makes clear that the activity of “distribution” is included within the notion of the supply of a service. Since a “service” is intangible and not itself a good (although the supply of a service may well involve goods), this definition suggests that the supply of a service listed in a Member’s Schedule, unless otherwise specified, can cover the distribution of nonphysical products, such as sound recordings delivered over the Internet. In our view, therefore Article XXVIII:(b) of the GATS is further support for the view that the supply of “sound recording distribution services” that China has committed to in its Schedule applies, unless otherwise specified in its Schedule, to the distribution of the intangible content of sound recordings, and is not limited, as China argues, to the distribution of sound recordings as physical products.”(327)

226.     The Appellate Body agreed with the Panel’s analysis, and stated that:

“The definition of “supply of a service” in Article XXVIII(b) of the GATS would not in itself exclude the possibility of drafting a Schedule entry in a way that covers only the distribution of physical goods. However, the interpretative question in this dispute is whether China’s entry has been formulated in such a way. It is clear that the term “distribution” as used in Article XXVIII(b) of the GATS refers to the distribution of something intangible services. We agree with the Panel that this is relevant context in interpreting the meaning of the term “distribution” in China’s entry “Sound recording distribution services” in its GATS Schedule, and that Article XXVIII(b) of the GATS lends support to an interpretation of the term “distribution” in the relevant entry in China’s Schedule as covering the distribution of both tangible and intangible products.”(328)

3. Article XXVIII(d) (“commercial presence”)

227.     The Panel in China — Publications and Audiovisual Products referred to the definition of “commercial presence” in Article XXVIII(d) in the context of interpreting and applying Article XVII:

Article XXVIII (d) of the GATS defines “commercial presence” as “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.” (emphasis added) Therefore for the purpose of Article XVII, and depending on the measures at issue, the term “service suppliers of another Member” supplying a service through commercial presence includes entities that have established a commercial presence in the host Member and/or entities that seek to establish in the host Member.”(329)

4. Article XXVIII(e) (“sector”)

228.     The Panel in US — Gambling stated that:

“In our view, if a Member makes a market access commitment in a sector or sub-sector, that commitment covers all services that fall within the scope of that sector or sub-sector. A Member does not fulfil its GATS obligations if it allows market access for only some of the services covered by a committed sector or sub-sector while prohibiting all others. If a Member wishes to restrict market access with respect to certain services falling within the scope of a sector or sub-sector, it should set out the restrictions or limitations on access in the appropriate place in the Member’s schedule. Indeed, a specific commitment in a given sector or sub-sector is a guarantee that the whole of that sector, i.e. all services included in that sector or sub-sector are covered by the commitment. Any other interpretation would make market access commitments under the GATS largely meaningless.”(330)

229.     Along the same lines, the Panel in China — Publications and Audiovisual Products stated that:

“A description of a service sector in a GATS schedule does not need to enumerate every activity that is included within the scope of that service, and is not meant to do so. Article XXVIII(e) of the GATS defines “sector” generally as “the whole of that service sector, including all of its subsectors”. A service sector or subsector in a GATS schedule thus includes not only every service activity specifically named within it, but also any service activity that falls within the scope of the definition of that sector or subsector referred to in the schedule.”(331)

5. Article XXVIII(k)(ii)2 (“natural person of another Member”)

230.     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.(332) At its meeting of 2, 9 and 24 October 2003 the Council took note of a similar notification.(333)

 

XXXIII. Article XXIX     back to top

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     back to top

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

231.     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.(334)

2. Paragraph 4

232.     The Council conducted a review of MFN exemptions at meetings held on 29 May 2000, 5 July 2000 and 5 October 2000.(335) The Council decided that a further review of MFN exemptions should take place no later than June 2004.(336)

233.     At its dedicated meetings held on 30 November 2004 and 23 February 2005, the Council undertook the second review of MFN exemptions. At its regular meeting on 24 June 2005, the Council addressed outstanding questions on MFN exemptions and concluded the second review by deciding that the next review should begin in 2010 and no later than June 2010.(337)

234.     The third review of MFN exemption formally began at the meeting of the Council held on 30 June 2010. At its dedicated meetings held on 17 November 2010 and 9 March 2011, the Council undertook the substantive part of the review. At its regular meeting on 2 May 2011, the Council addressed outstanding questions on MFN exemptions and concluded the third review by deciding to hold its next review no later than 2016.(338)

3. Paragraph 7

235.     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 GATS.(339)

4. Terminations, reductions and rectifications of MFN exemptions

236.     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.(340)

 

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

237.     At its meeting of 1 March 1995, the Council for Trade in Services adopted a conclusion of the SubCommittee on Services concerning measures relating to the entry and stay of natural persons.(341) The SubCommittee had dealt with the question on what basis a distinction between “temporary” and “permanent” residency and employment should be made. The SubCommittee, 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.(342)

 

XXXVI. Annex on Air Transport Services     back to top

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 nonscheduled, 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

238.     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.(343) 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.”(344)

239.     In accordance with the decision taken at the conclusion of the first Review, the Council formally commenced the second Review at its last 2005 meeting, i.e. on 23 September 2005.(345) Three dedicated meetings have taken place in the context of the Second Review (12 September 2006, 1 March and 2 October 2007).

 

XXXVII. Annex on Financial Services     back to top

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 transaction;

 

(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

240.     The Panel in Mexico — Telecoms was reluctant to place too much weight on the wording of the Annex on Financial Services in order to interpret the scope of another Annex to the GATS which “differs significantly in structure and objective”:

“Mexico contrasts the scope provision of the Annex with the provisions on “Scope and Definition” contained in Section 1 of the Annex on Financial Services, and argues that the former only applies to access to and use of public telecommunications transport networks and services, whereas the latter applies to “supply”. Mexico is of the view that, where the negotiators of the GATS intended that an Annex was to apply to the “supply” of a service, they stated this explicitly. According to Mexico, the Annex distinguishes between access to and use of public telecommunications transport networks and services, which is relevant to telecommunications services as an underlying transport means for other economic activities, and the supply of such services, which is relevant to trade in telecommunications services as a distinct sector of economic activity.

 

We agree that the Annex addresses measures affecting “access to and use of” public telecommunications transport networks and services, and not the supply of services. However, “access to and use of” public telecommunications transport networks and services are to be granted in order to enable the supply of services. Section 5 explicitly seeks to ensure that access to and use of public telecommunications transport networks and services is granted “for the supply of a service included in [a Member’s] Schedule”. While the Annex is neutral as to the services that can be supplied through access to and use of public telecommunications transport networks and services, the Annex on Financial Services only “applies to measures affecting the supply of financial services”. The fact that Members devoted an annex to measures affecting the supply of services in one specific services sector — financial services — does not provide a basis for interpreting the scope of another annex — on telecommunications networks and services — which differs significantly in structure and objective.”(346)

241.     Along the same lines, the Panel in Korea — Commercial Vessels questioned the relevance of the wording of the GATS Annex on Financial Services to the interpretation of a provision of the SCM Agreement.(347)

 

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     back to top

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     back to top

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

242.     In examining which suppliers and services are entitled to access and use public telecommunications transport networks and services, the Panel in 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.”(348)

243.     Likewise, referring to Section 5(a) of the Annex, the Panel in 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.”(349)

244.     The Panel in 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.”(350)

2. Section 5(a)

(a) Relationship of paragraph (a) to the other parts of Section 5

245.     The Panel in 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).”(351)

246.     In examining further the relationship between paragraph (a) and the other paragraphs of Section 5, the Panel in 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 nondiscriminatory”. 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 nondiscriminatory.

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).”(352)

(b) Access and use “on reasonable … terms and conditions”

(i) Whether rates for access and use constitute “terms”

247.     The Panel in 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.”(353)

(ii) Whether rates for access and use are subject to examination as “reasonable” terms

248.     The Panel in 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”.(354)

(iii) Rates for access and use that are “reasonable”

249.     The Panel in 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.(355) 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’.”(356)

3. Section 5(b)

(a) Relationship of paragraph (b) to the other parts of Section 5

250.     Recognizing that the relationship of paragraph (b) with the other parts of Section 5 was more “straightforward” than that of paragraph (a)(357), the Panel in 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).(358) We recall that paragraph (b) is informed also by paragraph (a), and that the obligation in the latter provision to ensure reasonable and nondiscriminatory 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).”(359)

(b) Obligation to provide access to and use of private leased circuits

251.     The Panel in Mexico — Telecoms stated that it:

“[C]onsiders 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 the Section 5(b) of the Annex on Telecommunications.”(360)

4. Sections 5(e) and (f)

(a) Whether rates for access and use constitute “conditions”

252.     The Panel in Mexico — Telecoms noted Section 5(f), which lists examples of “conditions,” does not refer to specific pricing measures.(361) 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).”(362)

(b) Meaning of “necessary” in paragraph (e)

253.     The Panel in 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.(363) 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’. If 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.”(364)

254.     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.”(365)

(c) Measures to prevent supply of an unscheduled service in paragraph (e)

255.     The Panel in 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.(366)

5. Section 5(g)

256.     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 in 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 a departure from specific commitments which Mexico has voluntarily and explicitly scheduled.”(367)

6. Relationship between Annex obligations and Reference Paper commitments

257.     The Panel in 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’.(368)

 

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’.(369) 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.”(370)

 

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 te 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:

145. Panel Report, US — Large Civil Aircraft (2nd Complaint), para. 7.968. back to text
146. Panel Report, US — Large Civil Aircraft (2nd Complaint), para. 7.969. back to text
147. 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/121. See also S/WPGR/M/71. back to text
148. S/L/74, paras. 15–16. back to text
149.Panel Report, US — Gambling, para. 6.318. See also paras. 6.298–6.299. back to text
150. Appellate Body Report, US — Gambling, para. 256. back to text
151. Panel Report, China — Publications and Audiovisual Products, para. 7.1353. back to text
152. Appellate Body Report, US — Gambling, para. 6.219–220. back to text
153. Panel Report, US — Gambling, para. 6.290. back to text
154. Appellate Body Report, US — Gambling, para. 6.219–6.220. back to text
155. Panel Report, US — Gambling, para. 6.285. back to text
156. Panel Report, US — Gambling, paras. 6.381–6.383, 6.396–6.398, 6.399–6.402, 6.403–6.406. back to text
157. Appellate Body Report, US — Gambling, para. 6.254. back to text
158. Panel Report, Mexico — Telecoms, paras. 7.357–7.358. back to text
159. Panel Report, Mexico — Telecoms, para. 7.361. back to text
160. Panel Report, Mexico — Telecoms, para. 7.85. back to text
161. Panel Report, Mexico — Telecoms, para. 7.85. back to text
162. Panel Report, Mexico — Telecoms, para. 7.86. back to text
163. Appellate Body Report, US — Gambling, para. 233. back to text
164. Appellate Body Report, US — Gambling, para. 225. back to text
165. Appellate Body Report, US — Gambling, para. 226. back to text
166. Appellate Body Report, US — Gambling, para. 227. back to text
167. Appellate Body Report, US — Gambling, para. 230. The definition of “monopoly supplier of a service” is found in GATS Article XXVIII(h); the definition of “exclusive service suppliers” is found in GATS Article VIII:5. back to text
168. (footnote original) See the WTO Secretariat Note on “Economic Needs Tests”, S/CSS/W/118, 30 November 2001, para. 4. back to text
169. Appellate Body Report, US — Gambling, para. 231. back to text
170. Appellate Body Report, US — Gambling, para. 232. back to text
171. Appellate Body Report, US — Gambling, para. 232. back to text
172. Appellate Body Report, US — Gambling, para. 233. back to text
173. Panel Report, US — Gambling, para. 6.331; quoted in Appellate Body Report, para. 233. back to text
174. (footnote original) 1993 Scheduling Guidelines, para. 6. (Scheduling of Initial Commitments in Trade in Services: Explanatory Note, MTN.GNS/W/64, 3 September 1993). back to text
175. Appellate Body Report, US — Gambling, para. 238. back to text
176. Panel Report, US — Gambling, para. 6.335. back to text
177. Panel Report, Mexico — Telecoms, para. 7.85. back to text
178. Panel Report, Mexico — Telecoms, para. 7.85. back to text
179. Panel Report, Mexico — Telecoms, para. 7.86. back to text
180. Appellate Body Report, US — Gambling, para. 245. back to text
181. Appellate Body Report, US — Gambling, para. 247. back to text
182. Appellate Body Report, US — Gambling, para. 249. back to text
183. Appellate Body Report, US — Gambling, para. 250. back to text
184. Appellate Body Report, US — Gambling, para. 238. back to text
185. Panel Report, US — Gambling, para. 6.355, cited by the Appellate Body at para. 252. back to text
186. Appellate Body Report, US — Gambling, para. 250. back to text
187. Panel Report, China — Publications and Audiovisual Products, para. 7.944. back to text
188. S/L/74, paras. 17–18. back to text
189. Panel Report, China — Publications and Audiovisual Products, para. 7.950. back to text
190. Panel Report, EC — Bananas III, para. 7.322. back to text
191. (footnote original) E.g, Panel Report on Canada — Wheat Exports and Grain Imports, paras 6.164–6.167, and Panel Report on Argentina — Hides and Leather, paras. 11.168–11.169. Although these cases concern trade in goods, we consider that the same reasoning applies here. back to text
192. Panel Report, China — Publications and Audiovisual Products, paras. 7.975–7.976. back to text
193. Panel Report, China — Publications and Audiovisual Products, paras. 7.978–7.979. back to text
194. (footnote original) Appellate Body Report on Korea — Various Measures on Beef, supra, footnote 44, para. 142. back to text
195. (footnote original) Appellate Body Report on Japan — Alcoholic Beverages II, supra, footnote 116, at 110. back to text
196. (footnote original) Appellate Body Report on US — FSC (Article 21.5 — EC), paras. 215 and 221. back to text
197. Panel Report, China — Publications and Audiovisual Products, paras. 7.1130–7.1131. back to text
198. Appellate Body Report, EC — Bananas III, para. 241. back to text
199. Panel Report, Canada — Autos, para. 10.298. back to text
200. Panel Report, Canada — Autos, paras. 10.300–10.301. back to text
201. Panel Report, Mexico — Telecoms, para. 7.230. back to text
202. Panel Report, Mexico — Telecoms, para. 7.232. back to text
203. Panel Report, Mexico — Telecoms, para. 7.234. back to text
204. Panel Report, Mexico — Telecoms, para. 7.238. back to text
205. Panel Report, Mexico — Telecoms, para. 7.242. back to text
206. Panel Report, Mexico — Telecoms, para. 7.243. back to text
207. (footnote original) Section 1.1 of the Reference Paper. back to text
208. (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
209. (footnote original) Section 1.1 of the Reference Paper. back to text
210. Panel Report, Mexico — Telecoms, para. 7.244. back to text
211. Panel Report, Mexico — Telecoms, para. 7.267. back to text
212. Panel Report, Mexico — Telecoms, para. 7.262. back to text
213. Panel Report, Mexico — Telecoms, para. 7.94. back to text
214. Panel Report, Mexico — Telecoms, para. 7.105. back to text
215. Panel Report, Mexico — Telecoms, para. 7.117. back to text
216. Panel Report, Mexico — Telecoms, para. 7.121. back to text
217. Panel Report, Mexico — Telecoms, para. 7.138. back to text
218. Panel Report, Mexico — Telecoms, para. 7.151. back to text
219. Panel Report, Mexico — Telecoms, para. 7.155. back to text
220. Panel Report, Mexico — Telecoms, para. 7.159. back to text
221. Panel Report, Mexico — Telecoms, para. 7.168. back to text
222. Panel Report, Mexico — Telecoms, para. 7.174. back to text
223. (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 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
224. (footnote original) ITU, Trends in Telecommunications Reform: Interconnection Regulation, 3rd edition, sec. 4.2.1.2, p. 40. back to text
225. Panel Report, Mexico — Telecoms, para. 7.175. back to text
226. Panel Report, Mexico — Telecoms, para. 7.182. back to text
227. (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 Appellate Body Report, US — Hot-Rolled Steel, paragraphs 84–85. back to text
228. Panel Report, Mexico — Telecoms, para. 7.182. back to text
229. Panel Report, Mexico — Telecoms, para. 7.184. back to text
230. Panel Report, Mexico — Telecoms, para. 7.191. back to text
231. Panel Report, Mexico — Telecoms, para. 7.203. back to text
232. Panel Report, Mexico — Telecoms, para. 7.207. back to text
233. Panel Report, Mexico — Telecoms, para. 7.208. back to text
234. S/C/3, para. 47. back to text
235. WT/MIN(96)/DEC, para. 19. See also S/C/M/17, para. 14. back to text
236. S/C/M/27, para. 3. back to text
237. 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
238. WT/MIN(01)/DEC/1, paras. 15 and 47. See also TN/C/M/1. back to text
239. S/L/93. back to text
240. WT/MIN(01)/DEC/1, para. 15. back to text
241. S/CSS/3, Section II. back to text
242. S/C/M/5, para. 4. back to text
243. 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
244. 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
245. The text of the adopted Decision can be found in S/L/8. back to text
246. The text of the adopted Second Decision can be found in S/L/9. back to text
247. S/C/M/5, paras. 2–3. back to text
248. 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
249. S/C/M/22, para. 2. The text of the decision can be found in S/L/50. back to text
250. S/L/68. back to text
251. See e.g. Costa Rica and Nigeria (S/L/76); Ghana (S/L/87); Kenya and Nigeria (S/L/89); Bolivia (S/L/108); Dominican Republic (S/L/111); Uruguay (S/L/112); Poland (S/L/130); and Philippines (S/L/382). back to text
252. 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
253. S/L/24. back to text
254. 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
255. 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. Appellate Body Report in US — Gambling, para. 194. back to text
256. Report of the Meeting held on 10 April 2006, S/CSC/M/40, 10 May 2006. back to text
257. Document S/L/92/Corr.1, 12 June 2006, French version only. back to text
258. Report of the Meeting held on 5 October 2006, S/CSC/M/42, 19 October 2006. back to text
259. Appellate Body Report, US — Gambling, para. 159. back to text
260. (footnote original) Appellate Body Report on US — Gambling, para. 196. back to text
261. Panel Report, China — Publications and Audiovisual Products, para. 7.923. back to text
262. Scheduling of Initial Commitments in Trade in Services: Explanatory Note (MTN.GNS/W/64, 3 September 1993). back to text
263. Appellate Body Report, US — Gambling, paras. 188–189. back to text
264. Appellate Body Report, US — Gambling, para. 204. back to text
265. Panel Report, US — Gambling, para. 6.82. back to text
266. Appellate Body Report, US — Gambling, para. 177. back to text
267. Appellate Body Report, US — Gambling, para. 194. back to text
268. Guidelines for the Scheduling of Specific Commitments under the General Agreement on Trade in Services (S/L/92, 28 March 2001), adopted by the Council for Trade in Services 23 March 2001 (S/C/M/52, para. 11). back to text
269. Appellate Body Report, US — Gambling, para. back to text
270. Appellate Body Report, US — Gambling, para. 197. back to text
271. Appellate Body Report, US — Gambling, para. 197. back to text
272. Services Sectoral Classification List, MTN.GNS/W/120, 10 July 1991. back to text
273. Appellate Body Report, US — Gambling, paras. 188–189. back to text
274. Appellate Body Report, US — Gambling, para. 204. back to text
275. Panel Report, US — Gambling, para. 6.82. back to text
276. Appellate Body Report, US — Gambling, para. 177. back to text
277. Appellate Body Report, US — Gambling, para. 181. back to text
278. United Nations, Statistical Papers, Series M, No. 77, 1991. back to text
279. Appellate Body Report, US — Gambling, para. 200. back to text
280. Appellate Body Report, US — Gambling, para. 182. back to text
281. Appellate Body Report, US — Gambling, para. 212. back to text
282. Panel Report, US — Gambling, para. 6.133. back to text
283. Appellate Body Report, US — Gambling, para. 180. back to text
284. Panel Report, Mexico — Telecoms, para. 7.371. back to text
285. Panel Report, Mexico — Telecoms, para. 7.371. back to text
286. Panel Report, Mexico — Telecoms, para. 7.371. back to text
287. Panel Report, China — Publications and Audiovisual Products, para. 7.921. back to text
288. Panel Report, US — Gambling, para. 6.97 back to text
289. (footnote original) Appellate Body Report, EC — Computer Equipment, para. 109. back to text
290. (footnote original) Ibid., para. 84. back to text
291. (footnote original) Panel Report, para. 6.45. back to text
292. (footnote original) Antigua’s and the United States’ responses to questioning at the oral hearing. back to text
293. (footnote original) Article XX:3 of the GATS provides: “Schedules of specific commitments shall be annexed to this Agreement and shall form an integral part thereof.” back to text
294. Panel Report, China — Publications and Audiovisual Products, para. 7.922. back to text
295. S/L/5. back to text
296. S/C/M/38, section D. The text of the adopted procedure can be found in S/L/80. The text of the decision to adopt Procedures can be found in S/L/79. back to text
297. 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
298. Paragraph 4 of Annex on Air Transport Services relates to the dispute settlement in air transport services. back to text
299. Paragraph 4 of Annex on Financial Services relates to the dispute settlement in financial services. back to text
300. Appellate Body Report, EC — Bananas III, para. 250. back to text
301. (footnote original) See Appellate Body Report, European Communities — Regime for the Importation, Sale and Distribution of Bananas (“EC — Bananas III”), WT/DS27/AB/R, adopted 25 September 1997, DSR 1997:II, 591, at paragraph 250. back to text
302. Panel Report, Mexico — Telecoms, para. 8.4. back to text
303. S/C/M/1. The text of the adopted Decision can be found in S/L/2. back to text
304. S/L/2, para. 1. back to text
305. S/C/M/6, paras. 41–42. back to text
306. S/C/M/1, paras. 6–7. The text of the adopted Decision can be found in S/L/1. back to text
307. See Annual Reports S/FIN 16, 810, 14. back to text
308. S/L/1, para. 1. back to text
309. S/L/3. back to text
310. The reports are numbered S/WPPS/14. back to text
311. S/C/M/35, paras. 18–22. back to text
312. S/L/70. back to text
313. S/C/10, para. 25. Report (1999) of the Council for Trade in Services to the General Council. back to text
314. S/WPDR 17. back to text
315. S/C/M/2, paras. 22–25. back to text
316. S/C/M/6, paras. 22–25. back to text
317. S/L/16. back to text
318. S/L/15. back to text
319. S/C/M/6. back to text
320. WT/GC/M/1. back to text
321. S/C/M/1. back to text
322. S/C/M/1. back to text
323. S/C/M/42, paras. 68–69. back to text
324. The text is contained in document S/C/9/Rev.1. back to text
325. WT/GC/M/58, pp. 14–15. back to text
326. Appellate Body Report, US — Gambling, paragraph 123. back to text
327. Panel Report, China — Publications and Audiovisual Products, para. 7.1209. back to text
328. Appellate Body Report, China — Publications and Audiovisual Products, para. 379. back to text
329. Panel Report, China — Publications and Audiovisual Products, para. 7.974. back to text
330. Panel Report, US — Gambling, paragraph 6.289. back to text
331. Panel Report, China — Publications and Audiovisual Products, para. 7.1014. back to text
332. S/C/N/1, S/C/N/2, S/C/N/3 and S/C/N/5. back to text
333. S/C/N/232. back to text
334. S/C/M/40, para. 53. back to text
335. See S/C/M/44, S/C/M/45 and S/C/M/47. back to text
336. S/C/M/53, Section A. back to text
337. S/C/24. back to text
338. S/C/M/105, para. 35. back to text
339. S/C/M/1, paras. 10–11. The approved Guidelines can be found in S/L/5. back to text
340. S/L/106. back to text
341. S/C/M/1, para. 14. back to text
342. G/C/1, para. 6. back to text
343. S/C/M/49, S/C/M/50, S/C/M/57 and S/C/M/62. back to text
344. S/C/M/68, paras. 115–116. back to text
345. S/C/26. back to text
346. Panel Report, Mexico — Telecoms, paras. 7.282–7.283. back to text
347. Panel Report, Korea — Commercial Vessels, para. 7.47. back to text
348. Panel Report, Mexico — Telecoms, para. 7.278. back to text
349. Panel Report, Mexico — Telecoms, para. 7.281. back to text
350. Panel Report, Mexico — Telecoms, para. 7.286. back to text
351. Panel Report, Mexico — Telecoms, para. 7.302. back to text
352. Panel Report, Mexico — Telecoms, paras. 7.306 and 7.309. back to text
353. Panel Report, Mexico — Telecoms, para. 7.325. back to text
354. Panel Report, Mexico — Telecoms, para. 7.333, see also paras. 7.331–7.332, and para. 229 of this Chapter. back to text
355. (footnote original) see para. 7.216. back to text
356. Panel Report, Mexico — Telecoms, paras. 7.334–7.335. back to text
357. Panel Report, Mexico — Telecoms, para. 7.307. back to text
358. (footnote original) For an interpretation of the words subject to, see also: Appellate Body Report, Canada — Dairy, para. 134. back to text
359. Panel Report, Mexico — Telecoms, paras. 7.308–7.309. back to text
360. Panel Report, Mexico — Telecoms, para. 7.381. back to text
361. Panel Report, Mexico — Telecoms, para. 7.326. back to text
362. Panel Report, Mexico — Telecoms, para. 7.327. back to text
363. Panel Report, Mexico — Telecoms, para. 7.338. back to text
364. Panel Report, Mexico — Telecoms, para. 7.341. back to text
365. Panel Report, Mexico — Telecoms, para. 7.342. back to text
366. Panel Report, Mexico — Telecoms, para. 7.385. back to text
367. Panel Report, Mexico — Telecoms, para. 7.388. back to text
368. Panel Report, Mexico — Telecoms, para. 7.331. back to text
369. (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
370. Panel Report, Mexico — Telecoms, paras. 7.331–7.332. back to text

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