OPINION 1/08

GATS

3By Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994) (OJ 1994 L 336, p. 1), the Council approved the Agreement establishing the WTO as well as the agreements contained in Annexes 1 to 3 to that Agreement, one of which is the GATS.

4Under Article I(2) of the GATS:

‘For the purposes of this Agreement, trade in services is defined as the supply of a service:

(a) from the territory of one Member into the territory of any other Member [(“mode 1”)];

(b) in the territory of one Member to the service consumer of any other Member [(“mode 2”)];

(c)by a service supplier of one Member, through commercial presence in the territory of any other Member [(“mode 3”)];

(d) by a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member [(“mode 4”)].’

5Article V of the GATS, headed ‘Economic Integration’, provides:

‘1. This Agreement shall not prevent any of its Members from being a party to or entering into an agreement liberalising trade in services between or among the parties to such an agreement, provided that such an agreement [meets certain conditions].

…

5.If, in the conclusion, enlargement or any significant modification of any agreement under paragraph 1, a Member intends to withdraw or modify a specific commitment inconsistently with the terms and conditions set out in its Schedule, it shall provide at least 90 days advance notice of such modification or withdrawal and the procedure set forth in paragraphs 2, 3 and 4 of Article XXI shall apply.

…’

6Within Part III of the GATS, ‘Specific Commitments’, Article XVI provides:

‘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. …

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;

(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 shareholding or the total value of individual or aggregate foreign investment.’

7Under Article XVII(1) of the GATS:

‘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. …’

8Article XX of the GATS provides:

‘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;

…

3.Schedules of specific commitments shall be annexed to this Agreement and shall form an integral part thereof.’

9The specific commitments are in some cases of a horizontal nature in that they concern without distinction all services mentioned in the relevant Member’s schedule (‘horizontal commitments’) and in some cases are of a sectoral nature where they concern a particular service sector (‘sectoral commitments’).

10Article XXI of the GATS, headed ‘Modification of Schedules’, provides:

‘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 …, 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.

...

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.’

11The relevant procedural rules for the modification of schedules, adopted by the Council for Trade in Services on 19 July 1999, are included in WTO document S/L/80, of 29 October 1999, entitled ‘Procedures for the implementation of Article XXI of the General Agreement on Trade in Services (GATS) (Modification of Schedules)’ (‘the Procedural Rules’).

12Paragraphs 5 and 6 of the Procedural Rules state:

‘5.Upon completion of each negotiation conducted under paragraph 2(a) of Article XXI, the modifying Member shall send to the Secretariat a joint letter signed by the Members concerned, together with a report concerning the results of the negotiations which shall be initialled by the Members concerned. The Secretariat will distribute the letter and the report to all Members in a secret document.

6. A modifying Member which has reached agreement with all [affected] Members that had identified themselves … shall, no later than 15 days after the conclusion of the negotiations, send to the Secretariat a final report on negotiations under Article XXI, which will be distributed to all Members in a secret document. After completing the certification procedure under paragraphs 20 to 22, such a modifying Member will be free to implement the changes agreed upon in the negotiations and specified in the report, and it shall notify the date of implementation to the Secretariat, for circulation to the Members of the WTO. Such changes shall not exceed the modification or withdrawal initially notified and shall include any compensatory adjustment agreed upon in the negotiations.’

13Paragraph 8 of the Procedural Rules, which applies where no agreement on compensation has been reached, provides:

‘If no [affected] Member that had identified itself … submits a timely arbitration request …, the modifying Member shall be free to implement the proposed modification or withdrawal, after completing the certification procedure under paragraphs 20 to 22. … The modifying Member shall notify the date of implementation to the Secretariat, for circulation to the Members of the WTO’.

14Paragraph 20 of the Procedural Rules provides:

‘Modifications in the authentic texts of Schedules annexed to the GATS which result from action under Article XXI shall take effect by means of Certification. The draft schedule clearly indicating the details of the modifications shall be communicated to the Secretariat for circulation to all Members. The modifications shall enter into force upon the conclusion of a period of 45 days from the date of their circulation or on a later date to be specified by the modifying Member ...’

Purpose and origin of the proposed agreements

15The Commission states that, since the establishment under the GATS of the Schedule of specific commitments of the Community and its Member States, then numbering 12, the enlargements which took place in 1995 and 2004 made it necessary to draw up a new schedule, including the 13 new Member States which until then had their own Schedules of commitments.

16On 28 May 2004, the Commission notified, under Article V(5) of the GATS, the list of the modifications and withdrawals of commitments intended to be made to the Schedules of the 13 new Member States in order to merge those various Schedules with the existing Schedule of the Community and of its Member States (‘Document S/SECRET/8’). That notification was followed by a second on 4 April 2005 concerning the withdrawal of certain commitments contained in the Schedules of the Republic of Malta and the Republic of Cyprus (‘Document S/SECRET/9’).

17Following claims of interest submitted by various WTO members which considered themselves affected by the proposed modifications and withdrawals of commitments, negotiations with a view to agreeing on compensatory adjustments under Article XXI(2) of the GATS were conducted by the Commission acting on behalf of the Community and its 25 Member States.

18Upon completion of those negotiations, the parties agreed on the compensation to be provided in consideration of the modifications and withdrawals of commitments mentioned in Document S/SECRET/8. In contrast, they were unable to agree on compensation in relation to the withdrawals of commitments listed in Document S/SECRET/9. No arbitration was initiated on that matter by the affected WTO members.

19As is apparent from the Council’s conclusions of 26 July 2006, the Commission was authorised to sign the agreements thus negotiated and to transmit the draft consolidated Schedule of commitments of the Community and of its Member States to the WTO Secretariat for certification.

20Those conclusions stated in particular that, ‘in circulating the consolidated schedule of specific commitments of the European Community and its Member States …, the Commission will indicate that the new schedule will enter into force following the completion of the internal decision-making procedures of the European Community and its Member States, where appropriate. In this respect, the Commission will submit a proposal to the Council’.

21Agreements were thus signed with each of the following 17 States or territories: the Republic of Argentina, the Commonwealth of Australia, the Federative Republic of Brazil, Canada, the People’s Republic of China, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei), the Republic of Columbia, the Republic of Cuba, the Republic of Ecuador, Hong Kong (China), the Republic of India, Japan, the Republic of Korea, New Zealand, the Republic of the Philippines, the Swiss Confederation and the United States of America (‘the agreements at issue’).

22The certification procedure was successfully completed on 15 December 2006.

23On 27 March 2007, the Commission submitted to the Council a proposal for a decision to conclude the agreements at issue on the basis of Article 133(1) to (5) EC, in conjunction with Article 300(2) EC.

24In the explanatory memorandum to that proposal, the Commission explained inter alia that it had negotiated the agreements at issue for and on behalf of the Community and its Member States on the premiss that it could not, from the outset, be ruled out that those agreements would require approval by Member States. In view of the compensatory adjustments actually negotiated, the Commission was, however, of the opinion that they did not go beyond the Community’s internal powers and did not lead to harmonisation of the laws of the Member States in an area for which the Treaty rules out such harmonisation, so that the second subparagraph of Article 133(6) EC would not be applicable and conclusion of the agreements at issue would therefore be within the exclusive competence of the Community.

25However, the Council and the Member States meeting within it considered that competence to conclude the agreements at issue was shared between the Community and its Member States.

26Consequently, the Member States initiated their own internal procedures with a view to approval of those agreements.

27On 13 July 2007, the Council, for its part, consulted the Parliament regarding the abovementioned Commission proposal. On that occasion, the Council informed the Parliament that it envisaged basing the decision to conclude the agreements at issue both on Article 133(1) to (5) EC, in conjunction with Article 300(2) EC, and on Articles 71 EC 80(2) EC, and 133(6) EC, in conjunction with Article 300(3) EC.

28In its legislative resolution of 11 October 2007, the Parliament approved the abovementioned proposal. The recitals in the preamble to that resolution refer, however, only to Articles 133(1) and (5) EC and 300(2) and (3) EC.