Electronic Payments: US v China
DS413
Maria Leon
Tim Kirkconnell
David Levy
1
Circumstances
• September 15, 2010 US requested
consultations with China
• US alleged China had restricted access to
electronic payment systems in-country
• US alleged that China’s control over renminbi
transactions was unfair and violated Articles
XVI and XVII of the GATS
2
US Request for Consultations Letter
• China UnionPay (CUP) is the only company
with guaranteed access to payments in China
using the renminbi (RMB)
• Other companies can only process payments
in foreign currency
3
US Request for Consultations Letter
• China Requires all merchant locations to use
CUP compatible devices
• Forces foreign companies to negotiate with
individual merchants for access
4
POSITION
On 02/11/2011, the US requested a panel pursuant to
Article 6 of the DSU.
“Certain restrictions and requirements maintained by
China affecting electronic payment services for payment
card transactions and the suppliers of those services
(electronic payment services suppliers)“.
US
The US’ panel request fails to provide a brief summary
of the legal basis of the complaint in a clear manner.
CHINA
 China has failed to establish that the US' panel request
is inconsistent with Article 6.2 of the DSU on the
grounds that it does not provide a brief summary of the
legal basis sufficient to present the problem clearly.
PANEL
5
Scope of the expressions “payments services” and “money transmission services”
Electronic payment services for payment card transactions are
one integral service.
EPS is the service through which transactions involving payment
cards are processed and through which transfers of funds between
institutions participating in the transactions are managed and
facilitated. EPS means "payment and money transmission services"
US
as one type of "all" such services.
 A service supplier that is merely "managing" or "facilitating" the
supply of this type of payment service, or "processing" payment
transactions, is not itself a party to the payment transaction. CHINA
 The services at issue are classifiable under China's Schedule,
which reads "[a]ll payment and money transmission services,
including credit, charge and debit cards, travellers cheques and
bankers draft (including import and export settlement)".
PANEL
 The Panel agrees with the US that "payment and money
transmission services" include those services that "manage",
"facilitate" or "enable" the act, of paying, or transmitting money.
6
MEASURES AT ISSUE
The United States has identified a series of six requirements that
impose market access restrictions and national treatment
limitations on service suppliers of other WTO Members seeking to
supply EPS in China. These measures are maintained through a
series of legal instruments. Each of the requirements allegedly
imposed by China is considered by the United States to be in
breach of Articles XVI:1 and XVI:2 and Article XVII of the General
Agreement on Trade in Services (GATS).
US
The requirements identified by the US as measures at issue in this
dispute do not violate Article XVI or XVII of the GATS.
China further claims that the identified measures establish a
national inter-bank network for clearing and settling RMB payment
card transactions and otherwise create uniform technical and
commercial standards that allow this inter-bank payment card
CHINA
network to function.
 See subsequent slides.
7
PANEL
Measures/Requirements identified by the US
The requirements/measures that impose market access
restrictions and national treatment limitations are:
1) Sole Supplier Requirement -Mandates the use of CUP and/or
establish CUP as the sole supplier of EPS for all domestic
transactions denominated and paid in Renminbi;
2) Issuer Requirement – on issuers that payment cards issued in
China bear the CUP logo;
3) Terminal Equipment Requirements - All ATMs, merchant card
processing equipment and POS terminals in China must
accept CUP cards;
4) Acquirer Requirements – Acquiring institutions must post the
CUP logo and be capable of accepting all payment cards
bearing the CUP logo;
5) Cross-Region/Inter-bank Prohibition - Non-CUP cards can’t be
used for cross-region or inter-bank transactions ; and
6) Hong Kong/Macao - Requirement pertaining to card-based
electronic transactions in China, Macao, and Hong Kong. 8
Panel’s conclusion regarding measures
 China imposes requirements on issuers that bank cards issued
in China bear the Yin Lian/UnionPay logo, issuers become
members of the CUP network, and that the bank cards they
issue in China meet certain uniform business specifications and
technical standards;
 China imposes requirements that all terminals (ATMs, merchant
processing devices and POS terminals) in China that are part of
the national bank card inter-bank processing network be
capable of accepting all bank cards bearing the Yin
Lian/UnionPay logo;
 China imposes requirements on acquirers to post the Yin
Lian/UnionPay logo, acquirers must join the CUP network and
comply with uniform business standards and technical
specifications of inter-bank interoperability, and that terminal
equipment operated or provided by acquirers be capable of
accepting bank cards bearing the Yin Lian/UnionPay logo; 9
Panel’s conclusion regarding measures
(cont…)
 China imposes requirements that CUP and no other EPS
supplier handle the clearing of certain RMB bank card
transactions that involve either an RMB bank card issued in
China and used in Hong Kong or Macao, or an RMB bank card
issued in Hong Kong or Macao that is used in China in an
RMB-denominated transaction;
 The United States failed to establish that China imposes
requirements that mandate the use of CUP and/or establish
CUP as the sole supplier of EPS for all domestic RMB payment
card transactions; and
 The United States failed to establish that China imposes broad
prohibitions on the use of "non-CUP" cards for cross-region or
inter-bank transactions.
10
GATS art. XVI – Market Access Restrictions
These measures are inconsistent with China’s obligation to accord
services and service suppliers of any other Member treatment no
less favourable than that provided for in China’s Schedule and
that China is maintaining or adopting measures set out in Article
XVI:2 of the GATS.
US
None of these requirements "have anything to do with the
maintenance or adoption of a limitation on market access 'in the
form of' of a monopoly or exclusive service supplier arrangement"
CHINA
The US failed to established that these measures when
considered either individually or jointly, are not inconsistent with
Article XVI:1 and Article XVI:2(a) of the GATS;
PANEL
11
GATS art. XVII – Less favorable treatment
The US considers that these measures appear inconsistent with
China’s obligations to accord services and service suppliers of any
other Member treatment no less favourable than that it accords
to its own like services and service suppliers.
US
China considers that it is unnecessary to resolve these questions.
China does not specifically address whether these issues result in
different treatment.
CHINA
The issuer, terminal equipment, and acquirer requirements are
inconsistent with Article XVII:1 of the GATS these requirements fail
to accord to services and service suppliers of any other Member
treatment no less favourable than China accords to its own like
services and service suppliers;
The Hong Kong/Macao requirements are not inconsistent with
Article XVII:1 of the GATS, as China has no national treatment
obligation in respect of these requirements;
PANEL
12
Panel’s recommendation
 Under Article 3.8 of the DSU, in cases where there is an
infringement of the obligations assumed under a covered
agreement, the action is considered prima facie to
constitute a case of nullification or impairment. The Panel
concluded that, to the extent that the measures at issue
were inconsistent with the GATS, they had nullified or
impaired benefits accruing to the United States under that
agreement.
 Pursuant to Article 19.1 of the DSU, the Panel
recommended that the Dispute Settlement Body request
China to bring its measure into conformity with its
obligations under the GATS.
13
Outcome of the Panel Decision
• The DSB Accepted the report on August 31st,
2012
• China indicated it would comply with the DSB
recommendations and requested an
acceptable period of time to begin
implementation
14
Proposals for Compliance
• China complies with international interbank
practices regarding transfer/handling of
monetary transactions
• Eliminate the monopoly of CUP
• Allow market access for other financial
institutions to offer bank card transactions
involving RMB
15