GATS Articles II:1 and XVII (‘likeness’ and ‘treatment no less favourable’)

The panel found that measures 1–8 violated Article II:1 of the GATS (Most-Favoured-Nation Treatment) because they accord less favourable treatment to services and service providers of non-cooperative countries relative to like services and service providers of cooperating countries.Footnote ² The panel further found that measures 2, 3, and 4 were not inconsistent with Article XVII of the GATS (National Treatment), as Panama argued, because they do not accord less favourable treatment to services and service providers of non-cooperative countries relative to like Argentine services and service providers in respect of the relevant services and modes on which Argentina undertook specific commitments.Footnote ³ The Appellate Body reversed the panel's findings. In particular, the Appellate Body considered that the panel erred in its conclusion that services and service suppliers of non-cooperative countries are ‘like’ those of cooperating countries.Footnote ⁴ This also ‘[r]emove[d] the basis of the Panel's finding that Argentine services and service suppliers are like the services and service suppliers of non-cooperative countries for purposes of Article XVII, because that finding was dependent on the Panel's earlier finding of “likeness” under Article II:1’.Footnote ⁵

The Appellate Body indicated that its findings regarding ‘likeness’ ‘means that the Panel's findings on “treatment no less favourable” [under Articles II:1 and XVII of the GATS] are moot because they were based on the Panel's findings that the relevant services and service suppliers are “like”’.Footnote ⁶ Nevertheless, the Appellate Body decided to review the panel's analysis of the ‘treatment no less favourable’ issue because it ‘concern[ed] “issues of law covered in the panel report and legal interpretations developed by the panel”, and hence [fell] within the scope of appellate review under Article 17.6 of the DSU. Moreover … issues raised in Panama's appeal have implications for the interpretation of provisions of the GATS.’Footnote ⁷ In this context, the Appellate Body agreed with the panel that ‘[u]nder Article II:1 and Article XVII of the GATS, a measure fails to confer “treatment no less favourable” if it modifies the conditions of competition to the detriment of services or service suppliers of any other Member in comparison to like services or service suppliers of, respectively, any other country or the Member imposing the contested measure’.Footnote ⁸ However, the Appellate Body found that ‘the Panel erred in finding … that an assessment of “treatment no less favourable” under Article II:1 of the GATS in this dispute “has to take into account regulatory aspects relating to services and service suppliers that may affect the conditions of competition”’ and, similarly, that ‘the Panel erred in finding … that an assessment of “treatment no less favourable” under Article XVII of the GATS in this dispute “has to take into account regulatory aspects concerning the services and service suppliers that might affect the conditions of competition”’.Footnote ⁹

GATS Article XIV(c) (measures ‘necessary to secure compliance’)

The panel found ‘on a preliminary basis’ that six of the challenged measures were, as argued by Argentina, ‘“necessary to secure compliance with [Argentine] laws or regulations which are not [GATS] inconsistent” with the GATS within the meaning of [GATS Article XIV(c)]’,Footnote ¹⁰ but that ‘the application of [the] measures … constitutes arbitrary and unjustifiable discrimination within the meaning of the chapeau of Article XIV of the GATS’.Footnote ¹¹ The Appellate Body indicated that ‘as a consequence of our reversal of the Panel's “likeness” findings, there remains no finding of inconsistency with the GATS. This, in turn, renders moot the Panel's analysis of whether [the relevant] measures … may be justified pursuant to Article XIV(c) of the GATS.’Footnote ¹² Nevertheless, the Appellate Body decided to review the panel's analysis of Article XVI(c) of the GATS because it ‘concern[ed] “issues of law covered in the panel report and legal interpretations developed by the panel”, and hence fall within the scope of appellate review under Article 17.6 of the DSU. Moreover … issues raised in Panama's appeal have implications for the interpretation of provisions of the GATS.’Footnote ¹³ ‘Neither participant … appealed the Panel's analysis of the conformity of Argentina's measures with the chapeau of Article XIV of the GATS, nor the Panel's ultimate finding that Argentina had not made out its defence. Panama, however, allege[d] that the Panel erred in finding that [the] measures … are provisionally justified under Article XIV(c).’Footnote ¹⁴ The Appellate Body rejected all of Panama's claims of error in this context.Footnote ¹⁵

GATS Annex on Financial Services, paragraph 2(a) (prudential exception)

The panel rejected Argentina's argument that measures 5 and 6 were justified under paragraph 2(a) to the GATS Annex on Financial Services (the ‘prudential exception’) because neither measure had ‘a rational relationship of cause and effect with the prudential reasons identified by Argentina’.Footnote ¹⁶ The Appellate Body indicated that ‘as a consequence of our reversal of the Panel's “likeness” findings, there remains no finding of inconsistency with the GATS. This, in turn, renders moot the Panel's analysis of whether … measures 5 and 6 may be justified pursuant to paragraph 2(a) of the GATS Annex on Financial Services.’Footnote ¹⁷ Nevertheless, the Appellate Body decided to review the panel's analysis of the prudential exception because it ‘concern[ed] “issues of law covered in the panel report and legal interpretations developed by the panel”, and hence fall within the scope of appellate review under Article 17.6 of the DSU. Moreover … issues raised in Panama's appeal have implications for the interpretation of provisions of the GATS.’Footnote ¹⁸ In this context, the Appellate Body rejected Panama's argument, i.e. that the panel incorrectly found that ‘paragraph 2(a) of the GATS Annex on Financial Services “covers all types of measures affecting the supply of financial services within the meaning of paragraph 1(a)” of this Annex’.Footnote ¹⁹