RESTRICTEDWORLD TRADE
ORGANIZATIONS/WPGR/W/33
31 May 2000
(00-2197)
Working Party on GATS Rules
PATTERNS OF LIMITATIONS SCHEDULED UNDER MODE 2
Background Note by the Secretariat
A. INTRODUCTION
1. This Note responds to a request by the Working Party on GATS Rules at its meeting of 4 and
5 May 2000.  It is intended to give an overview of the types of limitations which Members have
entered in their schedules of specific commitments under mode 2.  Given the Working Party's interest
in illustrative examples of such limitations, an attempt has been made to identify broad patterns of
exemplary cases, rather than giving an accurate account of individual entries.  For the same reasons,no distinction has been made between limitations scheduled in the market access and national
treatment columns.
2. The following overview seeks to capture and categorise all limitations scheduled under
mode 2, although there may doubts in individual cases about their relevance for this mode.  Repetitive
entries are particularly frequent;  limitations may have been scheduled as applying to all four modesor, more often, to modes 1 and 2, which may reflect Members' difficulties in some cases to delimit
precisely the respective scope of individual modes.  The only omissions concern entries which have
not been expressed in terms of limitations, but of entitlements (for instance, "soliciting is allowed"),
one or two reciprocity-type clauses, as well as a few provisions of a very specific nature which proved
difficult to interpret.  All other entries have been treated the same way, regardless of whether they
were confined to mode 2 or repeated under some or all other modes.
3. When the same limitation appears under various sectors or sub-sectors in a given schedule, it
has been counted each time.  Thus, the number of limitations indicated in square brackets refers to the
measures and not to the Members actually main taining them.  Moreover, the figures should be
considered only as rough estimates as quite a few entries are simply to vague to be categorised with
certainty.
4. Finally, Members may have different legal interpretations of some of the limitations identified
below (for instance in relation to GATS Articles VI or XI).  However, the purpose of this Note is
simply to reflect actual entries in schedules, regardless of their legal status.
B. 
HORIZONTAL LIMITATIONS
5. More than twenty Members have scheduled horizontal limitations under mode 2.  As already
noted, these limitations are not necessarily specific to mode 2, but often extend to mode 1 or even toall four modes of supply.  Three main types of limitations have been found:
(a) Restrictions on transfers, payments or capital transactions abroad .  The
implementing measures may take the form of a special authorization or a fee to be
paid.  Some countries have reserved the right to apply such measures across the
board, others have limited it to specific types of financial operations. [9]S/WPGR/W/33
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(b) Discriminatory subsidy regimes .  These limitations generally apply to the four
modes of supply or have been entered only with respect to modes 1 and 2. [6]
(c) Discriminatory taxation of services provided from, or consumed abroad . [4]
C. SECTORAL LIMITATIONS
6. More than sixty Members have scheduled sector-specific limitations under mode 2.  The vast
majority of these limitations are to be found in the area of financial services and to a significant
degree in business services.  In communication services, the most common limitation pertains to
call-back restrictions.  It is worth noting that so me entries, including residence requirements, may
amount in fact to a prohibition on the consumption abroad of the services concerned and, thus, be
economically equivalent to scheduling "unbound".
1. Business Services
(a) Commercial presence or residence requirements .  Such limitations have been
found in the sub-sectors of real estate services;  placement and supply services of
personnel;  investigation and security services; and  legal services.  [10]
(b) Authorization and/or licensing requirement .  Relevant criteria include minimum
qualification, local training or citizenship requirements.  These limitations exist
mainly in the areas of auditing services;  scientific and technical consulting services(related to investigation and security services);  R&D services on natural, social
sciences and humanities;  and services related to hunting. [9]
(c) Requirement that legal services be supplied by a natural person .[ 6 ]
(d) Registration or notification requirements .  Relevant entries exist in rental/leasing
services without operators (relating to aircrafts and ships), and in architecturalservices. [4]
(e) Discriminatory taxation .  Two such entries have been found for convention
services.   [2]
(f) Exclusions of services consumed abroad from insurance coverage .  Public
medical insurance programmes do not cover costs of private medical servicesconsumed abroad, including dental services and services provided by midwives and
nurses.  [2]
2. Communication Services
(a) Requirement to supply services only th rough a given network and/or operator,
and under specified conditions .   Relevant limitations concern in general long-
distance and international traffic and prohibitions of call-back services.  [20]
(b) Licensing, authorization and registration requirement .  These limitations pertain
to the installation and use of telecommunications equipment and networks, and the
provision of telecommunication services.  [3]
(c) Local establishment as a prerequisite for obtaining licenses or concessions .  [1]S/WPGR/W/33
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3. Construction and Related Engineering Services
No limitations found.
4. Distribution Services
No limitations found.
5. Educational Services
(a) Exclusion of services supplied or consumed abroad from public support
schemes.   [3]
6. Environmental Services
No limitations found.
7. Financial Services1
(a) Licensing, registration and/or author ization requirements governing purchases
and/or consumption of financial services abroad .  The activities subject to
authorization or approval include, in particular, opening bank accounts, requesting
loans, borrowing in foreign currency, pur chasing "new financial products" such as
derivatives, or purchasing unrefined gold.  [39]
(b) Services consumed abroad may be subject to discriminatory taxation . [20]
(c) Licensing, registration and/or authorizat ion requirements for the foreign-based
financial service provider .  The measures concerned may consist of an obligation on
the foreign service supplier to be licensed or approved, be subject to regulatory
supervision, or to have complied with relevant deposit requirements. [44]
(d) Requirement on the supplier to be locally established  (permanent residence or
commercial presence).  This category includes citizenship requirements orrequirements that the supply of a service be undertaken jointly with established
companies.     [80]
(e) Limitations on compulsory insurance .  A number of entries provide that
compulsory insurance (insurance of risks, motor vehicle third-party liability, for
instance) have to be concluded with companies established in the territory of theMember and/or with authorized, exclusive or licensed suppliers.   [12]
(f) Limitations on the quantity of services which can be supplied and/or consumed
abroad .  Relevant measures may take the form of quantitative restrictions (for
instance, only 25 percent of the risk can be covered by a non-resident insurer) or,
more frequently, provisions that insurance can be contracted abroad only if no home
country company is prepared to handle the risk in question. [27]
                                                     
1 Some entries of a prudential nature have been ignored for the purpose of this Note.  However, the
borderline between prudential measures and market access or national treatment limitations is not always clear
and it could be argued that additional entries should have been disregarded in the present context (see in
particular 7(c)).S/WPGR/W/33
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(g) Restrictions on transfers, payments or capital transactions .  Three Members have
scheduled limitations relating to exchange controls of various types. [3]
8. Health Related and Social Services
(a) Exclusions of medical treatment obta ined abroad from insurance coverage .  This
type of limitation may cover all types of medical services or be limited to privatehealth services.  [6]
9. Tourism and Related Travel Services
(a) Limitation on the amount of currency (local and foreign) that permanent
residents are entitled to take abroad .  This foreign exchange restriction was entered
by one Member with respect to "Hotels and restaurants, including catering".  [1]
(b) Commercial presence requirement .  This type of limitation has been found with
respect to for travel agencies and tour operators. [1]
10. Recreational, Cultural and Sporting Services
(a) Discretionary authorizations .  The relevant entry relates to "access to management
functions in news agencies".  [1]
11. Transport Services
(a) Requirement of commercial presence or (permanent) residence .  Such limitations
have been scheduled with respect to some auxiliary services.  [3]
(b) Authorization or registration requirements.   Such entries have been found with
respect to maintenance and repair of vessels. [2]
(c) Prior notification requirements .  An entry of this type has been found for chartering
of ships for "Internal waterways transport, rental with operators".  [1]
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