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2017 | OriginalPaper | Buchkapitel

13. TPP Promoting Financial Services as an Investment Playground: Crystalizing a Change in Approach from GATS?

verfasst von : Antoine P. Martin, Bryan Mercurio

Erschienen in: Paradigm Shift in International Economic Law Rule-Making

Verlag: Springer Singapore

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Abstract

Considered as a secondary subject matter and largely ignored by international trade negotiators and the multilateral trade regime for some time, the importance of financial services in the wider sphere of international economic law has been steadily rising since the 2008 global financial crisis. First regulated internationally in the WTO’s GATS and the accompanying Annex on Financial Services, there remains much work to be done to further open and craft standards and rules for the sector. The text of the TPP had the capacity to play an important role in terms of liberalizing market access to financial services and in establishing a new set of standards and rules for their development at the global level. Financial services are both a trade and investment issue, yet negotiations have traditionally placed the issue within the trade ‘silo’ without recognising its important place as an investment issue. Negotiators of the TPP, in contrast, have followed the modern trend and added coherence to the issue by dealing with it both as a trade and investment issue, and rightfully placing financial services markets as a major investment playground. The TPP appeared to be a significant new player in the field of international economic law and this chapter therefore considers the TPP’s potential contribution to the liberalization of financial services by focusing on the idea that financial services may be promoted as a form of investment.

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Vorheriges Kapitel Anti-corruption Provisions in the TPP: Innovation, Effectiveness and Prospects

Nächstes Kapitel WTO to the TPP: Evolution of Environmental Provisions in Trade Agreements

General Agreement on Trade in Services (GATS), available at https://goo.gl/bI6SJY.

GATS Annex on Financial Services, available at https://goo.gl/INpTyI.

In TPP Chapter 11 Financial Services.

GATS Articles III and XVI.

As described by the World Trade Organization itself, referring to Document TN/S/23 and TN/S/20. See World Trade Organization, ‘Services: Sector by Sector, Financial Services’ available at https://goo.gl/Jclkw5.

‘However, improvements are not significant, and in many cases, fall behind the current—more open—regulatory framework’, See World Trade Organization, ‘Services: Sector by Sector, Financial Services’ available at https://goo.gl/Jclkw5.

GATS Annex on Financial Services, Article 1(a).

GATS Annex on Financial Services. Articles 1 and 5.

GATS Annex on Financial Services. Articles 2 and 3.

GATS Annex on Financial Services. Article 4.

The GATS Annex on Financial Services was followed by a ‘Decision on Financial Services’ available at https://goo.gl/2NAu3q as well as by five successive Protocols as negotiators long remained reluctant to commit recirpocally on MFN standards, see for instance Wendy Dobson, Further Financial Services Liberalization in the Doha Round? International Economics Policy Briefs, Number PB02-8 (The Peterson Institute for International Economics, 2002) p. 329. On the reduced contribution of GATS to financial services, see also Apostolos Gkoutzinis, International Trade in Banking Services and the Role of the WTO: Discussing the Legal Framework and Policy Objectives of the General Agreement on Trade in Services and the Current State of Play in the Doha Round of Trade Negotiations, ‎39 Int. Lawyer, No. 4, p. 908; Piritta Sorsa, The GATS Agreement on Financial Services—A Modest Start to Multilateral Liberalization, International Monetary Fund Working Paper, 7, (May 1997) p7.

See Antoine Martin and Bryan Mercurio, ‘Doha Dead and buried in Nairobi: Lessons for the WTO’, Journal of International Trade Law and Policy (2017, forthcoming).

GATS Article XVI(2).

TPP Article 11.5: Market Access for Financial Institutions.

See footnote 14.

GATS, Article III.

TPP Article 11.13: Transparency and Administration of Certain Measures.

TPP Article 11.6.1.

TPP Article 11.6.2.

TPP Article 11.7: New Financial Services.

To the exclusion of the host’s lender of last resort facilities. See TPP Article 11.15.

TPP Article 11.13.

TPP Article 11.19.

See Sect. 2.3.

To avoid doctrinal debates on whether these standards indeed make part of customary law, it should be added that Annex 9-A of TPP Chapter 9 emphasises that ‘The Parties confirm their shared understanding that “customary international law” generally and as specifically referenced in Article 9.6 (Minimum Standard of Treatment) results from a general and consistent practice of States that they follow from a sense of legal obligation. The customary international law minimum standard of treatment of aliens refers to all customary international law principles that protect the investments of aliens’. A reminder of the state of the law on compensation is furthermore provided in Annex 9-B. On the main standards, see for instance M Sornarajah, The International Law on Foreign Investment (3rd edn, Cambridge 2011) 201. See also Bilateral Investment treaties 1995–2006: Trends in Investment Rulemaking (UNCTAD 2007) Sections E and F.

TPP Article 9.4: National Treatment.

TPP Article 9.5: Most-Favoured-Nation Treatment.

TPP Article 9.6: Minimum Standard of Treatment.

Ibid. Article 9.8: Expropriation and Compensation.

See for instance M. Sornarajah, The International Law on Foreign Investment (Cambridge, 3rd Ed 2010) 506.

TPP Article 9.8. In Annexes 9-E and 9-F, Chile filed reservations as to a right to regulate in order to ensure currency stability and the normal operation of domestic and foreign payments.

TPP Articles 11.3–11.5.

TPP Article 11.2(1).

There are of course some variation to US BIT practice. For instance, the US—Bahrain FTA was never given an investment dimension as its Article 11.21 (Definitions) makes it clear that ‘cross-border trade in financial services or cross-border supply of financial services means the supply of a financial service … but does not include the supply of a financial service in the territory of a Party by an investor of the other Party, or a BIT investment, in a financial institution of the other Party’ (emphasis added). Of note, expropriation and compensation provisions are not made available in the NAFTA and US FTAs with Bahrain, Jordan and Chile FTAs. Further, the US FTAs with Bahrain and Jordan are the only instruments which do not include an investment chapter.

Respectively TPP Articles 9.4 and 11.3; Articles 9.5 and 11.4; Article 9.8.

Understanding on Commitments in Financial Services, available at https://goo.gl/2ZeCQQ.

GATS Article I 2 (c).

GATS Article II.

GATS Article XVII.

Most of the trade arrangements entered into by the U.S., including NAFTA, contain an investment Chapter to the exclusion of the ‘Trade & Investment Framework Agreements’ entered into with numerous countries but which, in the authors opinion, rather resemble to early generation BITs or ‘Treaties of Friendship, Commerce and Navigation’ and thus cannot be compared with current FTAs.

GATS Annex on Financial Services, Section 4.

GATS Annex on Financial Services, Section 4. The Annex adds that the ‘panels for dispute on prudential issues and other financial matters shall have the necessary expertise relevant to the specific financial services under dispute’ but this does little beyond guaranteeing the competence of the panel.

For more on the dispute settlement process in the WTO, see Simon Lester, Bryan Mercurio and Arwel Davies, World Trade Law (2d edn, Hart Publishing 2012) Chapter 3.

As formulated in ‘Deputy Director General Jara Reports on Consultations to Enhance Efficiency of Panels’ WTO: 2012 News Items (2012) available at https://goo.gl/7kPgt9. On the contribution of the WTO dispute settlement system, see for instance Asif H Qureshi and Andreas R Ziegler, International Economic Law (Sweet and Maxwell 2011) 431.

Exceptions of US FTAs include the U.S.–Australia, U.S.–Bahrain and U.S.–Jordan FTAs where only a WTO-type Panel composed of financial experts would be available. See for instance the U.S.–Korea FTA at Article 13.19, the U.S.–Chile FTA at Article 12.18, the U.S.–Colombia FTA at Article 12.19, the U.S.–Morocco FTA at Article 12.18, the U.S.–Oman FTA at Article 12.19, the U.S.–Panama FTA at Article 12.19, the U.S.–Singapore FTA at Article 10.19, as well as the NAFTA Agreement at Article 1415.

The UNCTAD accounted for 3271 investment agreements by the end of 2014. See UNCTAD, World Investment Report 2015 (United Nations) 106.

On precedents under investment arbitration, see for instance Kyla Tienhaara, The Expropriation of Environmental Governance, Protecting Foreign Investors at the Expense of Public Policy (Cambridge 2009) 130.

TPP 11.22: Investment Disputes in Financial Services.

As provided in TPP Article 11.21: Dispute Settlement.

On Argentina’s crisis-related disputes, see for instance Antoine Martin, ‘Investment Disputes after Argentina’s Economic Crisis: Interpreting BIT Non-Precluded Measures and the Doctrine of Necessity under Customary International Law’ (2012) 29 Journal of International Arbitration 49.

TPP Article 11.22(2)(a)–(b). It should be noted, also, that as set forth under Annex 11-E, Brunei Darussalam, Chile, Mexico and Peru do not consent to arbitration or damage compensation under Investment Chapter 9 for a breach of Minimum Standard of Treatment as incorporated into Chapter 11, in relation to any situation that took place or ceased to exist before the fifth or even seventh (Mexico) anniversary of the date of entry into force of TPP.

See Article 27(3) of the Agreement establishing the Asean-Australia New-Zealand Free Trade Area (AANZFTA).

The panel established under TPP Article 28.7 (Establishment of a Panel) shall be constituted in accordance with Article 11.21 (Dispute Settlement).

See for instance the U.S.—Korea FTA at Article 13.19, the U.S.—Chile FTA at Article 12.18, the U.S.—Colombia FTA at Article 12.19, the U.S.—Morocco FTA at Article 12.18, the U.S.—Oman FTA at Article 12.19, the U.S.—Panama FTA at Article 12.19, the U.S.—Singapore FTA at Article 10.19, as well as the NAFTA Agreement at Article 1415.

GATS Article XXVII.

See for instance Article 12.1 of the US—Dominican Republic FTA or Article 12, 1(2) of the US—Colombia FTA which formulation is similar to the other US FTAs.

TPP Article 11.11.

TPP Article 11–11.3.

The Jordan—U.S. FTA is the only agreement that provides no regulatory carve-out clause.

GATS Article XII: Restrictions to Safeguard the Balance of Payments.

GATS Annex on Financial Services, para 2.

EU-Singapore Free Trade Agreement. Authentic text as of May 2015. Chapter 9.

EU-Singapore Free Trade Agreement. Authentic text as of May 2015. Chapter 8.

EU-Singapore Free Trade Agreement. Authentic text as of May 2015. Chapter 8, Subsection 6.

Canada-European Union: Comprehensive Economic and Trade Agreement (CETA). Chapter 10.

Canada-European Union: Comprehensive Economic and Trade Agreement (CETA). Chapter 15, Articles 19 and 20.

Canada-European Union: Comprehensive Economic and Trade Agreement (CETA). Article 20.

ASEAN Comprehensive Investment Agreement. The ACIA reinforced and replaced the Framework Agreement on the ASEAN Investment Area.

ASEAN Comprehensive Investment Agreement.

Agreement on Investment of the Framework Agreement on Comprehensive Economic Co-operation between the Association of Southeast Asian Nations and the People’s Republic of China, Bangkok, 15 August 2009; and Agreement on Trade in Services of the Framework Agreement on Comprehensive Economic Co-operation between China and ASEAN, available at http://fta.mofcom.gov.cn/topic/chinaasean.shtml.

Article 27(3) of the Agreement establishing the Asean-Australia New-Zealand Free Trade Area (AANZFTA).

As far as dispute settlement is concerned, Article 8 of the Annex only provides that disputes shall be solved under Chapter 17 through an expert arbitral tribunal.

Australia’s FTAs are available at http://dfat.gov.au/trade/agreements/pages/trade-agreements.aspx.

Australia-Chile FTA, Chapter 12; Australia-Korea FTA Chapter 8.

Australia-Chile FTA, Articles 12.3–5 and 12.17–18; Australia-Korea FTA, Articles 8.2–4 and 8.18–19.

ChAFTA, Chapter 9.

ChAFTA, Annex 8-B.

See also the Japan-Australia Economic Partnership Agreement or the Malaysia-Australia Free Trade Agreement.

Titel: TPP Promoting Financial Services as an Investment Playground: Crystalizing a Change in Approach from GATS?
verfasst von: Antoine P. Martin
Bryan Mercurio
Verlag: Springer Singapore
Buch: Paradigm Shift in International Economic Law Rule-Making
Print ISBN: 978-981-10-6730-3

Electronic ISBN: 978-981-10-6731-0

Copyright-Jahr: 2017
DOI: https://doi.org/10.1007/978-981-10-6731-0_13

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