WTO Panel Rules on Electronic Payment Services in China: What to Expect

by Davis Wright Tremaine LLP
Contact

[author: Vincent Wang]

On July 16, 2012, the World Trade Organization (the “WTO”) issued its panel report regarding certain measures affecting China electronic payment services (“EPS”). The report concludes that certain restrictions on the provision of such services violate WTO trade rules, but the report is not a wholesale victory for the United States and its effects may not prove as far-reaching as the U.S. government would appear to believe.

Factual Findings

The WTO panel found that China imposes the following requirements on EPS:

(1)   Issuers of bank cards in China must become members of the China Union Pay (the “CUP”) network[1], bank cards must meet certain uniform business specifications and technical standards[2], and the bank cards must bear the Yin Lian or UnionPay logo[3];

(2)   All terminals (ATMs, merchant processing devices and POS terminals) in China that are part of the national bank card inter-bank processing network must be capable of accepting all bank cards bearing the Yin Lian/Union Pay logo[4];

(3)   Acquirers must post the Yin Lian/Union Pay logo, join the CUP network[5] and comply with uniform business standards and technical specifications for inter-bank interoperability; and terminal equipment operated or provided by acquirers must be capable of accepting bank cards bearing the Yin Lian/Union Pay logo[6]; and

(4)   Only CUP may clear certain RMB bank card transactions that involve either a bank card issued in China Mainland but used in Hong Kong or Macao or a bank card issued in Hong Kong or Macao but used in China Mainland in an RMB-denominated transaction[7].

Notably, the WTO panel did not determine that such measures (1) mandate the use of CUP and/or establish CUP as the sole supplier of EPS for all domestic RMB payment card transactions, or (2) prohibit the use of non-CUP cards for cross-region or inter-bank transactions.

Legal Findings

Based upon the above findings, the WTO panel found that the following measures violate GATS trade rules:

(1)   The Hong Kong/Macao clearing requirements limit number of service suppliers and thus establish a form of unlawful monopoly; and

(2)   The issuer, terminal equipment and acquirer requirements are inconsistent with Article XVII of China’s national treatment commitments under the GATS because they do not afford service providers of other Members treatment no less favorable than Chinese service providers.

However, the clearing requirements for Hong Kong/Macao related transactions were otherwise deemed to comply with China’s commitments under Articles XVI and XVII of the GATS.

The WTO panel concluded that the Chinese measures that were inconsistent with the GATS have nullified or impaired benefits accruing to the United States. Accordingly, the panel recommends that the Dispute Settlement Body of the WTO direct China to bring those measures into compliance with China’s obligations under the GATS.

Government Reaction and Outlook

The U.S. government expressed satisfaction with the panel report. The U.S. Trade Representative, Tim Reif, claimed that the implementation of the remedies in the report would likely support the creation of 6,000 jobs in a trillion-dollar market. However, because the WTO panel did not find that China established a monopoly in the EPS domestic market or excludes non-CUP bank cards from cross-region or inter-bank transactions, and that China’s actions are consistent with its commitment on market access, the benefits to the United States remain an open question.

On the Chinese side, the panel report may not be completely unacceptable. The Chinese government expressed relief that no market access noncompliance or domestic and cross-region monopoly were found. The government considers that it can address the national treatment inconsistency in a reasonable period of time, for example, over several years. 

Under the WTO rules, either the United States or China can appeal the panel report within 60 days. So far, neither the United States nor China has made any official indication as to whether it will appeal. If either party appeals, the WTO has six months to respond to the appeal. Even if neither the United States nor China appeals, as mentioned above, it will take years for the panel’s report to be implemented.

China recently accelerated its regulatory efforts in the electronic payment industry, probably by coincidence. For example, China granted 96 non-financial institution payment business licenses in its latest release, and also issued several EPS industry regulation drafts for public comment since late last year. At the current rate, by the time the panel report’s findings are cured, U.S. EPS suppliers may suddenly face a fiercely competitive market in China with the well-entrenched, Chinese-based EPS suppliers holding a dominant share of the market.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Davis Wright Tremaine LLP | Attorney Advertising

Written by:

Davis Wright Tremaine LLP
Contact
more
less

Davis Wright Tremaine LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!