Journal of International Economic Law vol:13 issue:1 pages:27-63
This paper examines whether the GATS is a useful instrument to tackle government support that creates distortions of international competition in the banking sector. The GATS has no specific provisions on subsidies. However, general support schemes ‘as such’ or ‘as applied’ may violate Article XVII if they exclude foreign-owned banks with a commercial presence in the territory of the WTO Member that adopts the scheme. This depends on the specific commitments of the WTO Member and the limitations to this commitment. Moreover, it is required that the excluded banks are ‘like’ the domestic banks. A single application of a general scheme may violate Article VI:1 if solid evidence is available that this application is not reasonable, objective or impartial. Despite these possible violations, the great majority of measures will still be justified under the broad ‘prudential carve-out’. Only support measures that are not reasonably able to achieve the prudential goal will not be exempted. Hence, the GATS imposes only in very limited cases restraint on government support. The WTO Members should address the remaining uncertainties with regard to both the obligations and the exception. This would ensure that the GATS is able to prevent that government support distorts competition and would also alleviate concerns that the GATS constitutes a danger to financial stability.