Out-Law News 2 min. read

China breached some commitments on treatment of foreign electronic payments companies, says WTO


China has breached some World Trade Organisation (WTO) commitments by offering preferential treatment to a Chinese electronic payments firm, a WTO panel has ruled.

The panel upheld some complaints (4-page / 94KB PDF) from the US that China breached commitments it made around the supply of 'payment and money transmission services' by offering preferential treatment to a single China-based provider of electronic payment services (EPS).

The panel said that China should change its "measures" in order to conform to its "obligations" under the WTO's General Agreement on Trade in Services (GATS) after finding that China had "nullified or impaired benefits accruing to the United States under that agreement."

The US had complained that China's rules gave firm China UnionPay (CUP) an unfair monopoly position for providing electronic payment services in China. It argued that foreign suppliers have to comply with measures that afford them "less favourable treatment".

The EU, which provided its own submissions as evidence in the proceedings, broadly supported the arguments raised by the US. It had disputed claims made by China that its commitments regarding the supply of payment and money transmission services had been limited in scope.

The EU had argued that China should be required to provide "market access" to EPS providers other than in cases where it has "explicitly included" limitations within its commitments.

"Nothing in the text of the reservations ... provides for a limitation on the number of service suppliers scheduled by China; not in general terms, nor specifically in favour of China Union Pay," the EU had argued (133-page / 551KB PDF). "China did not argue otherwise in its First Written Submission."

"Furthermore, the EU notes that China does not seem to dispute the fact that the measures at issue in this dispute result in a privileged position for China Union Pay. It is therefore clear that in the absence of a scheduled limitation, China is subject to the obligations under Article XVI [of GATS]," it said. Article XVI sets out conditions which WTO members must respect for commitments they have made regarding foreign supplier access to selected markets.  

Member countries of the WTO must conform to commitments they make under GATS. Any limitations to those commitments must be negotiated and agreed on by other member countries. China had agreed to "scheduled commitments" for 'all payment and money transmission services', the terms of which covered EPS, the panel ruled.

The panel found that China treats foreign companies in the same way it treats China-based firms in the provision of EPS other than where it places some restrictions on transactions involving local currency the renminbi.

There was insufficient evidence to prove that China had enabled CUP to become a monopoly provider of renminbi card transaction processing services but the panel did rule that China had enabled CUP to become a monopoly provider in respect of renminbi card transaction clearing services for cards issued in Hong Kong, China & Macao and used in China.

China had not committed to allow foreign suppliers of EPS to deliver those services into the country, but had committed to allow foreign suppliers with a commercial presence in China to supply their services, subject to conditions regarding renminbi obligations.

China violated its GATS commitments by requiring all terminal equipment to bear the logo of CUP and by requiring all EPS providers to become members of the CUP network and meet uniform business specification and technical standards, which included that all terminal equipment be interoperable with CUP's systems, the panel said.

China can appeal against the findings.

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