Appellate Body Overrules Panel, says Argentina does not Discriminate against Panama in Financial Services on Account of “Non Co-operation”

The WTO’s highest court reversed an earlier panel ruling last Thursday in a dispute filed by Panama (DS453) concerning various Argentine tax measures, along with policies involving access to the reinsurance sectors, the Argentine capital market, the foreign exchange market, and the registration of foreign company branches.

The previous panel ruling, circulated late last year, had found that many of these financial services-related measures were in violation of WTO rules.

A key element of the eight measures challenged by Panama is that they impose different requirements based on the distinction between “cooperative” and “non-cooperative” countries for tax transparency purposes, which was established under an Argentine Decree.

According to this Decree, for a country to be considered “cooperative,” it must have a deal with Argentina for effective exchange of tax information, or fulfil necessary requirements for initiating talks on the subject.

The Appellate Body said that the “treatment no less favourable” concept under the GATS is about “a measure’s modification of the conditions of competition,” and that this legal standard does not include further investigation into a measure’s regulatory objective or underlying regulatory concerns.

Where a measure violates non-discrimination provisions, the WTO judges said that regulatory concerns that could potentially justify it should be reviewed in line with the relevant exceptions.

Furthermore, it found that the panel’s review of “regulatory aspects” was not for evaluating how these measures affect competitive opportunities, but actually used an incorrect legal standard under which the regulatory aspects could justify the harm caused by Argentina’s increased burden on non-cooperative countries’ services and service suppliers.

Overall, the Appellate Body reversed the panel’s conclusion that the Argentine measures violate the GATS’ non-discrimination obligations.