RESTRICTED  WORLD TRADE  
ORGANIZATION  S/C/M/98 
25 May 2010 
 (10-2897) 
Council for Trade in Services  
  
 
REPORT OF THE MEETING HELD ON 28 APRIL 2010 
 
Note by the Secretariat
1 
  
1. On 28 April 2010, the Council for Trade in Serv ices held a meeting under the Chairmanship 
of Ambassador Elin Johansen (Norway).  The agenda was contained in document WTO/AIR/3544. 
2. The Chairperson
 said that, under Other Business, she would make a statement regarding the 
third review of Article II (MFN) exemptions.  The representative of Australia  said that her delegation 
wished to add an item of Other Bu siness to the agenda concerning th e delayed entry into force of the 
certified EC-25 schedule.  
3. The agenda was adopted , as modified. 
A. APPOINTMENT OF THE NEW CHAIRPERSON  
4. A representative of the Secretariat informed Members that, due to unforeseen circumstances, 
Ambassador Agah had been unable to return from Nige ria in time to chair the opening of the meeting.  
On behalf of Ambassador Agah, and based on the consensus reached in the General Council, he was 
pleased to pass on the Chairmanship of the Counc il to Ambassador Elin Johansen of Norway. 
5. The Council elected  Ambassador Johansen by acclamation. 
B. NOTIFICATIONS PURSUANT TO ARTICLES III:3,  V:7 AND VII:4  OF THE GATS 
6. Starting with the notifications made pursuant to Article III:3 of the GATS, the Chairperson  
drew delegations' attention to the notifications  received from Chile (in document S/C/N/536);  
Australia (contained in documents S/C/N/540 and Corr.1, S/C/N/541 and S/C/N/542);  and India (in 
document S/C/N/543).   
7. The Council took note  of the notifications made. 
8. The Chairperson  indicated that five more notificati ons pursuant to Article III:3 had been 
received recently from Peru, and circulated in docume nts S/C/N/546 to S/C/N/550.  At that time, they 
were only in Spanish, but English and French translations would be distributed as soon as they 
became available.  Delegations would be able to re vert to these notifications at the following meeting 
of the Council. 
9. The Chairperson subsequently pointed to the notification made pursuant to GATS Article V:7 
(Economic Integration) and received from:  Peru and China (S/C/N/537);  El Salvador, Honduras and 
The Separate Customs Territory of Taiwan, Penghu,  Kinmen and Matsu (S/C /N/544);  and Australia, 
                                                      
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO. S/C/M/98 
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  Brunei Darussalam, Cambodia, Indonesia, Malays ia, Myanmar, New Zealand, the Philippines, 
Singapore, Thailand and Vietnam (S/C/N/545). 
10. The Council took note
 of the notification, and referred  the agreement notified to the 
Committee on Regional Trade Agreements for consideration. 
11. Finally, with regard to notifications made under Article VII:4 (recognition), the Chairperson  
drew attention to two communications, received fr om Australia (S/C/N/538) and the United States 
(S/C/N/539).   
12. The Council took note  of these notifications.   
C. COMPLIANCE WITH GATS NOT IFICATION REQUIREMENTS  
13. The Chairperson  recalled that the Council had last discussed the issue of compliance with 
GATS notification requirements at its meeting of Febr uary 2010.  At that meeting, the delegation of 
Switzerland had proposed that the Secretariat update  the informal note providing a statistical account 
of the notifications made under the relevant GATS provisions, contained in JOB(09)/10/Rev.1.  No 
consensus could be reached on the proposal, and it w as agreed that the Council would revert to the 
issue at this meeting.   
14. The representative of Switzerland  reiterated his delegation's suggestion that the Secretariat 
update the list of notifications contained in the Note  in JOB(09)/10/Rev.1 with the notifications made 
in 2009, and use the opportunity to include any correc tions to factual mistakes that delegations might 
have identified in the original Note.  He e xpressed the hope that the Council could accept his 
delegation's proposal. 
15. It was so agreed . 
D. SECTORAL AND MODAL DISCUSSIONS  
16. The Chairperson  recalled that, at the meeting held  in February 2010, the Council had 
addressed two new Background Notes produced by the Secretariat on services sectors, namely 
audiovisual services and energy services.  As indica ted in the airgram, delegations would have an 
opportunity to revert to those sectors and modes at the end of the discussion of the agenda item.  For 
that meeting, the subjects up for discussion were fi nancial services, education services and mode 3. 
17. The Chairperson recalled that the Secretariat Notes were intended to provide a basis for 
Members' discussions in the Council on sectors and modes of supply.  The Notes should not be the sole focus of the deliberations.  Accordingly, sh e encouraged delegations to offer their own written 
submissions, contributions and co mments on the sectors concerned.  
18. In line with the practice adopted at previous m eetings, the substantive pa rt of the debate under 
that agenda item would be held in informal m ode.  The presentations by the Secretariat and by 
international organisations, and the statements of any delegations wishing to place their interventions 
on record, would be incorporated in the minutes of th e meeting.  For the substantive part of Members' 
informal debate, instead, the Chairperson would produce, under her own responsibility, a non-
attributable summary.  The summary would be circul ated shortly after the me eting, and subsequently 
recorded in the minutes of the meeting.   
19. She also recalled that the Council had agreed th at, for that meeting, the Secretariat would 
invite, on an ad hoc basis, the OECD and UNESCO, which we re not observers to the Council, to 
share with Members any relevant work that th ey had produced for the sectors under discussion.    S/C/M/98 
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  20. In line with the practice adopted at previous meetings, she would request these international 
organisations to briefly introduce their contributi ons immediately after the Secretariat had presented 
its own papers, and before  opening up the floor for general discussion.   
1. Financial services (Background Note by the Secretariat, S/C/W/312 and 
S/C/W/312/Corr.1) 
21. The Chairperson  recalled that, at the request of several Members, the Secretariat Note on this 
sector had also been placed on the agenda of Committee on Trade in Financial Services (CTFS).  The Committee had discussed the note at its meeting held two days previously. 
22. A representative of the Secretariat
 said that, given that he had introduced the Background 
Note on financial services at the CTFS, he would no t present it at length.  He nevertheless wished to 
emphasise a few points.  First, that given the in terest expressed by several delegations, the Note 
focused on the GATS provisions that specifically co ncerned financial services, such as the Annex on 
Financial Services, the Understanding, etc.  He welcomed any comments delegations might have on 
the sections concerned, given the interest they ha d communicated.  He stressed that the Note was not 
an authoritative interpretation of the GATS by the Secretariat, but illustrated the way in which the 
Secretariat explained the Agreement in the context of its technical assistance activities.  Second, he 
remarked that the reference to "liberalisation" in the Note had a very specific meaning under the 
GATS.  "Liberalisation" under the Agreement di d not mean deregulation, but rather referred 
exclusively to the removal of market access and nati onal treatment restrictions.  Finally, he recalled 
that, like the other Background Notes produced for the Council's sectoral and modal discussion, the financial services Note focused only on GATS-relate d issues in financial services, and was not 
intended to be comprehensive account of the sector. 
23. No interventions
 were made on financial services. 
2. Education services (Background Note by the Secretariat, S/C/W/313) 
24. By way of introduction, a representative of the Secretariat  recalled the education sector's 
importance in terms of personal a nd social development, as well as economic growth.  He indicated 
that the first section of the Background Note discusse d the definition of the sector and highlighted the 
main classification issues.   It also addressed the economic importance of the sector and the changing 
structure of the education market.  The second section analyzed recent trends in international 
education and the main factors driving growth .  One aspect underscored in the Note was the 
increasing mobility of not only studen ts and institutions, but also of education programmes.  The third 
section reviewed existing GATS commitments and MFN exemptions.  Relative to other sectors, 
education services was one of the least committed  sectors under the GATS.  This situation stood 
somewhat in contrast to the situation on the gro und where international education had been growing 
rapidly.  The final section discussed barriers to trad e in education services, with particular emphasis 
on those specific to education services.  In this co ntext, given their importance to both suppliers and 
consumers of education services, issues-related to accreditation, quality assurance and recognition 
were also discussed.  The representative underscored that, like the other Background Notes produced 
for the Council's sectoral and modal discussions, that  Note had note sought to address issues related to 
the DDA negotiations.  
25. The Chairperson  indicated that, following the Secret ariat's invitations to the OECD and 
UNESCO, four contributions, which were relevant to the discussion of education services, had been 
received from the OECD for distribution to delega tions.  These contributions were contained in 
documents JOB/SERV/4, 5, 6 and 7.   S/C/M/98 
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  26. A representative of the OECD
 thanked the Council for the invitation to attend the meeting.  
He wished to make a number of comments to comp lement the excellent Background Note prepared by 
the WTO Secretariat.  First of all, with regard to trends in the education sector, in terms of growth of 
trans-national higher education modes 2 and 4, i.e. the mobility of students as well as teaching staff, 
were the modes exhibiting the highest growth rates, a nd this was expected to continue in the future.  
Worldwide, there was a relative stability in terms of  the number of foreign students as a share of all 
students, but since foreign students tended to concentrate in OECD countries, there had been considerable growth within the OECD area, with  a near doubling of the number of international 
students between 1998 and 2007.  With regard to mode 1, growth was a bit more stable, and had even 
slowed down in recent years.  For instance, followi ng the initial explosion of foreign programmes in 
China, only four new programmes had been re-authori sed recently in the country.  A certain degree of 
stabilization could be observed in this  mode of supply.  As concerned mode 3, slower growth could be 
observed.  There was greater awareness on the part of operators of the business risks involved in setting up institutions abroad.  New tr ends could also be observed, such as regional clusters, like in 
the Middle-East, campuses provided by the foreign host , or the direct invitation by governments to set 
up such teaching institutions.   
27. The second main point concerned the public-private  relationship.  Public or private non-profit 
establishments were the main driving force in intern ational trade in higher education.  This was often 
linked to a prestige strategy as much as a revenue-gener ating strategy.  The United States was quite an 
exception, because it was practically the only count ry where there was a significant proportion of 
private profit-making institutions that were in the education market.  
28. The third point was the diversity of countries'  strategies in internationalization.  Some 
countries, such as Australia, New Zealand, the United Kingdom, had an explicit policy of establishing a higher education service industry.  In 2007, in Au stralia education services were the largest service 
export and third most important export of all goods and services exports.  While in 2008 tourism 
ranked ahead of education, this still pointed to the importance of the sector for the Australian 
economy.  Other countries, such as Germany for exam ple, had an approach to higher education linked 
to qualified migration, i.e. improving the quality of higher education by promoting mobility and 
offering their establishments points of comparison.  Other countries' strategies were focused more on 
imports, with the aim of building capacity through the training of their own human resources, while 
the original strategy of mutual understanding an d cooperation was still broadly applied in many 
countries.    
29. The fourth point was the issue of quality in  the market.  In 2005, the OECD and UNESCO 
drew up Guidelines for a good quality cross-border highe r education.  The lack of quality and the lack 
of a guarantee of quality in this sector did hamper tr ade:  they could lead to the actual closing down of 
a foreign establishment or to the student population refusing to turn to these new suppliers of cross-
border higher education.  So greater cooperation an d strengthening of ties between quality insurance 
agencies allowed for the recognition of diplomas and promote the development of the sector.   
30. The last point concerned the impact of the GATS in the education sector.  This was a hotly 
debated issue, particularly early in 2000s.  Presen tly, the debate had somewhat subsided, particularly 
because trade was happening even in the absence of progress in trade negotiations.  Moreover, aspects 
linked to migration, quality assurance, diploma reco gnition, harmonization of diplomas had gained in 
importance.  Overall, the education and trade comm unities had come closer together, even if there 
were still some concerns, such as GATS Article I:3(b) and other issues relating to quality and 
subsidies.  
31. The Council
 conducted the rest of the discussion in informal mode.  The Chairperson  
produced the following summary of the main points raised during the informal discussions of education services (also contained in JOB/SERV/10).  S/C/M/98 
 Page 5 
 
 
  32. Eight delegations took the floor to welcome the Secretariat Background Note on Education 
Services.  Delegations noted that the Note provide d a comprehensive portrayal of international trade 
in education services and concurred with many of the observations made on the importance of 
education for economic growth and development, the expansion of pr ivate education programmes, the 
growing share of the education sector in total ser vices trade, and the relevance of quality assurance 
issues.  Various delegations underscored the flexib ilities provided by the GATS to take commitments 
which limit the sector scope to private education b ased on self-defined criteria.  Many delegations 
also stressed that the limited number of GAT S commitments on education services stood in sharp 
contrast to current practice, providing significant sc ope for improvements to be made in schedules.    
33. Education was generally noted as a critical fact or for economic growth and development, as 
well as a necessary condition for the attainment of ot her social objectives.  In this connection, a 
delegation described its own positive experiences and underscored that the GATS, in particular 
through the Doha Round, could serve  education policy purposes.  Ope nness to international education 
would help increase the quantity, diversity and quality of  education services.  Several delegations  
highlighted other benefits such as the transfer of id eas and technology.  A delegation noted that for its 
economy, education expenditure at the household a nd governmental level had been increasing. It also 
noted that a large number of its students were alre ady studying abroad, thus contributing significantly 
to trade in education services.  
34. Several delegations underscored the importance of private education services as an export 
sector for both developed and deve loping countries.  A delegation em phasised that education exports 
were its second largest services export sector, with 15 per cent annual growth achieved over the last 
10 years.  Many delegations concurred with the observation in the Note that due to increasing 
demand, which often was not met by domestic capacity, the market for private education was 
growing.  One delegation underscored that in its c ase joint venture programme s had been attractive to 
both domestic and international students. The same dele gation noted that the sector would continue to 
be progressively liberalized, in line with changes in the education system.  Another  delegation 
highlighted that trade commitments could help re duce business risks, which ha d been highlighted as a 
possible factor for lower growth in mode 3 educat ion services.  The same delegation noted that the 
data in paragraph 29 of the Note on tertiary enrolment in OECD countries could be updated.  
35. The importance of ensuring that education services continue to capitalize on technological 
developments and respond to changing needs of the world economy was stressed by several 
delegations. The advantages of education services pr ovided through mode 1, in the form of on-line 
delivery or twinning/franchise arrangements, were emphasised.  These advantages included lower cost 
and a greater diversity of programmes.   It was recognized that cross-border supply could pose some quality assurance challenges, though it was felt by several delegations that these were not 
insurmountable.  A delegation raised various factor s constraining the movement of students across 
borders, as well as the benefits for the receiving ec onomy. The same delegation highlighted that there 
had been some regional developments to facilitate student movement but these had not been reflected 
in the Note.  
36. Several delegations noted that trade in private education services could complement 
government provided education services.  A delegati on highlighted that where there are concerns,  
scheduling flexibilities could be used to limit the sect or scope to only private education.   Another 
delegation noted while the Note di d not provide any interpretation of the GATS, the explanation of 
Article 1.3 (b) provided in Box 1 did not meet wi th its delegation's position on this matter.  The 
explanation given was too optimistic and, in keep ing with the Vienna Convention, regular meaning 
had to be given to the interpretation of the "exerci se of governmental authority".  It was further noted 
that consideration should also be given to the po ssibility of competition between the four modes of 
supply.  This delegation undersco red that it did not see any linkage between services with a "public 
services aspect" and the definition provided by Ar ticle I.3 (b).  Also, while government funding or, S/C/M/98 
Page 6  
 
  assistance in kind, might in some cases be provided to private operators, it did not take the service out 
of the category of private education.  With regard  to paragraph 63, the same delegation highlighted 
that it had adopted a different way of limiting the se ctor scope for education services, and there was 
thus not only "two main ways" of exclusion.  
37. Various delegations underscored the importance of quality assurance to alleviating regulatory 
concerns and welcomed the number of national and international initiatives described in the Note.  In 
addition to market access and national treatment limitations, trade barriers specific to education 
included registration, recognition of qualifications and conventions fo r the naming of testimonies.  In 
dealing with regulatory challenges, particular  reference was made to the "UNESCO/OECD 
Guidelines for Quality Provisions in Cross-Border Higher Education".  A delegation stressed that in 
its  own experience, it was possible to reconcile  good quality education with a liberal regime 
nationally and internationally. There was no contradiction between GATS commitments and 
regulatory control or quality assurance.  Anothe r delegation stressed that  quality assurance issues 
were important not only to the importing but also to exporting economies, as well as for the overall sustainability of the sector.  In this regard, measures should be taken to close down fraudulent 
operators.  A call was made for further work on qua lity assurance in the appropriate WTO body.  This 
was supported by most delegations.   
38. Many delegations noted that while the educa tion sector had among the lowest number of 
GATS commitments, the situation was different with  respect to recently acceded Members.  Twenty-
three of  the 51 Members with education services  commitments ac ceded after 1995, almost all of 
which are developing countries.  Of these Members, 17 had commitments in at least four out of the 
five education sub-sectors.  Various delegati ons encouraged developed Members to take 
commitments in the Round in sub-sectors where de veloped countries have a strong interest.  A 
delegation emphasised that its areas of interest in cluded language training and education of traditional 
knowledge.  Another delega tion underscored the usefulness of the statistics provided in the Note, 
highlighting in particular the breakdown of market access and national treatment limitations contained 
in Annexes 8 and 9.  
39. The Secretariat clarified that the Note had not given much emphasis to barriers that students 
might face when trying to access education services in  other territories because the GATS, unlike the 
GATT, does not address export restrictions.  The GATS focuses exclusively on the extent that services and service suppliers are treated.  Measures relating to consumers are relevant only to the 
extent that such measures affect the services supplier of another Member.  On Box 1, it was noted that 
the explanation given in the Note had tried to re flect the point that "no one size fits all".  The 
reference to sectors with important public servi ces aspects was merely an observation about the 
typical kinds of services that are normally found within the scope of the governmental authority 
carve-out.  With regard to limitations on funding criteria as mentioned in paragraph 63, this was a 
factual account of the types of sectoral limitations found in schedules of Members and was not an 
explanation by the Secretariat of how to interpret the carve-out.  
3. Mode 3 – Commercial Presence (Backgro und Note by the Secretariat, S/C/W/314) 
40. Turning to mode 3, a representative of the Secretariat
 recalled that, since mode 3 had been 
addressed already in the different sectors covered by the Background Notes, the Note on this mode had tried to avoid overlaps and had placed greater emphasis on some horizontal issues.  The Note took 
a closer look at the scope of mode 3, as define d in Articles I and XXVIII of the GATS, and discussed 
statistics and trends in trade flows.  Mode 3 w as, overall, the primary way in which services were 
supplied internationally, as it was estimated to repr esent between 55 and 60 per cent of total trade in 
services.  The Note also discussed economic implications  and trends in the liberalization of mode 3.  
It also provided a picture of the state of horizontal and sector-specific commitments on mode 3, and discussed certain relevant MFN exemptions.  Among other things, it was observed that commitments  S/C/M/98 
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  appeared rather limited overall when compared to the liberalization that had taken place on the 
ground, including since the Uruguay Round.  He underscored that, like the other Background Notes produced by the Secretariat for the Council's sector al and modal discussions, that Note was not 
intended to address the ongoing DDA negotiations. 
41. The representative of China
 said that mode 3 was equivalent to foreign direct investment in 
the service sector and her delegation wished, first, to offer some information concerning the general 
situation of foreign direct investment in the service s ector in China.  Foreign direct investment was an 
important part of China’s opening up policy and ha d made a great contribution to China’s economic 
development during the previous 30 years.  Statis tics showed that the industry output, tax paid, and 
exports of foreign invested enterprises in China acc ounted for, respectively, 28 per cent, 22.7 per cent 
and 55.9 per cent of the total in 2009.  Foreign invest ed enterprises created 45 000 000 jobs directly in 
China in 2009.  According to MOFCOM's statisti cs, in the first quarter of 2010, real foreign 
investment in services amounted to US$8.42 billion , accounting for 38.7 per cent of total foreign 
investment in China, a decline of 31.3 per cent co mpared with the same period in 2009 due to the 
impact of the current financial and economic cris is.  She said that services would be a sector of 
priority for China to absorb FDI in  the future, and that the FDI policy of China would continue to be 
stable and be improved con tinuously, towards a more investor-friendly environment. 
42. Second, at a first glance, the representative wish ed to convey a number of technical concerns 
regarding some of the interpretations of certain le gal provisions of GATS cont ained in the Secretariat 
Background Note.  She was not comfortable with the S ecretariat’s interpretation,  in paragraph 9 of the 
Note, that the definition of commercial presence in the GATS made it clear that mode 3 also covered 
the pre-establishment phase.  She recalled the histor y of previous discussions in other international 
fora on this issue.  The question of whether nationa l treatment of FDI, in services or other sectors, 
should be extended to the pre-establishment phase had been heatedly debated when drafting international rules concerning foreign investment, su ch as with the MAI sponsored by the OECD or 
the MFI by UNCTAD.  Many countries and economies had expressed their serious opposition 
towards so-called “pre-establishm ent” being included in the drafting of any new international 
investment disciplines.  Though none of these documen ts had entered into force, those opinions still 
continued to be valid for many Members.   
43. Her delegation could not agree with the inte rpretation in the Note of “constitution” and 
“creation” in Article XXVIII:(d) either.  It seemed  to China that the interpretation of “constitution” 
had to be considered the context of Article XXVIII:(d), where the two terms “constitution” and 
“acquisition” were in parallel with each other.  Th erefore, in her delegation's view, these two terms 
referred to the different forms of investment, rather than the different phases of it.  In her delegation's 
understanding, “constitution” in Article XXVIII:(d) refe rred to the situation of greenfield investment, 
while “acquisition” referred to merger and acquisitio n activities.  Therefore, “constitution” could not 
be interpreted as referring to the pre-establishment ph ase.  The interpretation of “creation” in Article 
XXVIII:(d) was the same and she did not intend to repeat it. 
44. Her delegation also considered that the interpre tation of the Note was not in line with current 
FDI legislation and management practice in many c ountries.  If national treatment was to be applied 
to trade in services at a pre- establishment phase under mode 3 through the definition of commercial 
presence on a horizontal basis, the FDI legislation for service sectors in many countries would have no legal basis.  And that interpretation could al so nullify or impair Member’s commitments under 
mode 3 of GATS. 
45. The note referred to the Panel Report on Chin a- Publications and Audiovisual Products, 
which found that mode 3 under GATS covered entities th at “seek to establish in the host Member”.  
All depended on how the word “seek” was interpreted in this report.  This issue had not been appealed S/C/M/98 
Page 8  
 
  by China in the Panel Report, given there were more important issues than that one, but this did not 
necessarily mean her delegation agreed with the finding on that particular point.   
46. She also had questions on the interpretation of th e rules of origin in paragraphs 11 and 12 of 
the Secretariat Note, and of “ownership and control”  in paragraphs 12 and 13, and she hoped to have 
further opportunities to seek clarification from the Secretariat.  
47. Her delegation understood that these were difficu lt and complicated issues, the interpretation 
of which needed to be extremely cautious.  Thus China reserved its pos itions on the points raised and 
would remain free to come revert to those issu es after consulting with its capital-based experts. 
48. The Council
 conducted the rest of the discussion in informal mode.  The Chairperson  
produced the following summary of the main points ra ised during the informal discussions of mode 3 
(also contained in JOB/SERV/10). 
49. Twelve delegations took the floor to welcome the Secretariat Background Note on Mode 3.  
Various delegations emphasized points made in the Note in relation to the economic benefits of 
liberalization, the importance of mode 3 as the ma in vehicle for services trade, and the broad trend 
towards liberalization of services FDI during the last decades.  Openness to services supply through 
commercial presence contributed to economic growth  and development.  It had various spillover 
effects, including improved productivity, and contri buted to the improvement of basic service 
infrastructures.  Recognition of these benefits was reflected in many WTO Members’ efforts in improving the investment climate and promoting fo reign investment.  Mode 3 formed part and 
contributed to the national economy, domestic pr oduction and employment, and provided additional 
fiscal revenues.  A delegation underscored its own po sitive experience with liberalization of mode 3, 
and said that 56 per cent of its inward FDI now went to services sectors.  Another delegation 
underscored that the strong growth of sales through this mode of supply had been particularly 
significant in developing economies.  A delegation indicated that foreign investment in services 
within its territory amounted to US$ 8.4 billion,  which represented 39 per cent of total foreign 
investment.   
50. Various delegations deplored that levels of commitments under mode 3 in the GATS 
remained limited despite the liberalization undertaken  by many governments over the recent period.  
The situation should be improved through the Do ha Development Agenda. It was observed that 
commercial presence was the mode where the greatest number of limitations were scheduled.  Despite some progress, the level of restrictiveness still re mained high, including in such key sectors for 
economic development as communication, transport a nd financial services.  In practice, some of the 
limitations inscribed in schedules might no longer be relevant in light of the liberalization that had 
occurred since previous negotiations.  To enhance legal certainty, commitments should be updated to 
reflect existing openness.  Reviewing commitments would also allow to clean up unclear or erroneously scheduled limitations as pointed out in the Background Note.  The multilaterally-agreed 
negotiating objectives on mode 3 in paragraph 1 of Annex C to the Hong Kong Ministerial 
Declaration were recalled, as was the collective requ est on mode 3, which complemented sectoral and 
bilateral requests by seeking the removal of horizont al limitations on the type of commercial presence, 
foreign equity participation, joint venture requireme nts, foreign exchange and profit repatriation, as 
well as economic needs tests. 
51. A delegation said that it was not comfortable with the statement in paragraph 9 of the Note to 
the effect that mode 3 also covered the pre-est ablishment phase and that obligations like national 
treatment applied to it.  Such interpretation was not in line with the current FDI legislation and 
management practice in many countries, and woul d have important consequences.  The issue of 
whether national treatment should be extended to  the pre-establishment phase had been heatedly 
debated in international fora.  The delegation also disagreed with the interpretation given in the Note  S/C/M/98 
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  to the terms "constitution" and "creation" in Artic le XXVIII(d) of the Agreement.  These referred to 
different forms of investment rather than differe nt phases of it.  While the Note observed that the 
Panel Report in China – Publications and Audiovisual Products  indicated that mode 3 covered 
entities that "seek to establish", this part of the re port had not been appealed, and the term "seek" was 
open to interpretation.   
52. Another delegation agreed with the interpreta tion provided in paragraph 9 of the Note.  
Various limitations in Members' schedules made clear that pre-establishment was covered.  Some other delegations hoped that this issue could be discussed further.  In relation to another technical 
issue, a delegation wondered, in view of the de finition of service supplier, about the value of 
commitments limiting foreign ownership to less th an 50 per cent of capital.   Another delegation 
stressed the importance of taking into account de velopment needs and of establishing an appropriate 
regulatory framework to accompany any liberalization.   
53. A delegation proposed that further work be done on the relationship between the GATS and 
obligations and commitments under preferential invest ment agreements.  Members dealt in different 
way with investment issues in such agreem ents, and the issue could be clarified.   
54. With respect to the comments on pre-establis hment, a representative from the Secretariat 
observed that a number of the measures covered by Article XVI of the Agreement related to the pre-
establishment phase, for example limits on the number of licenses to supply services.  He also pointed 
to paragraph 5 (b) of the Annex on Financial Services, which said that a financial service supplier 
covered persons "wishing to supply".  The GATS contained obligations and commitments that were 
applicable prior to the entry of the service supplie r into the market.  Further, Articles XVI and XVII 
overlapped, as noted in Article XX:2 of the GATS.  As regards ownership and control, 
Article XXVIII provides that the juridical person of another Member would have to be either owned 
or controlled by a person of another Member.  Th ese two conditions were not cumulative.  If one did 
not have ownership but had sufficient shares to exercise control, then the entity would qualify as a juridical person of another Member.  Accordingly,  having a foreign equity limit of 49 per cent, for 
example, did not automatically exclude the supply through commercial presence.   
55. Regarding the proposal for further work on the relationship between investment agreements 
and the GATS, the Secretariat was ready to do furt her work as required by Members.  GATS was not 
an investment treaty; it only addressed the aspects of  investment that related to the supply of the 
service.  Accordingly, the GATS dealt with differe nt matters than BITs.  This issue had been 
discussed after the conclusion of the Uruguay Round and prior to the entry into force of the WTO in 
1995.  Some of these documents were mentioned in footnote 54 of the Background Note.  The 
proposal may benefit from further clarification with r espect to the exact scope of the work envisaged.   
4. Sectors discussed at the meeting held on 11 February 2010 (audiovisual services and 
energy services) 
56. No interventions
 were made on the two sectors that had been discussed at the Council 
meeting held on 11 February 2010 (i.e. a udiovisual services and energy services).   
5. Further comments 
57. The Chairperson  thanked Members for their contributions.  She recalled that, as agreed, she 
would be producing a summary, under her own res ponsibility, of the main issues raised.  This 
summary would be circulated rapidly (document JOB/SERV/10) and subsequently recorded in the 
minutes of the meeting.  The minutes would also contain the presentations of the various papers 
circulated and the statements by international or ganisations, as well as interventions that delegations 
had asked to be placed on record.   S/C/M/98 
Page 10  
 
  58. She said that the Council would revert to this ite m at its next meeting, when it would address:  
accountancy services;  maritime transport services;  logistics services and legal services.  For those 
topics, the following organisations, which were not observers to the Council, had produced relevant 
and interesting work that they could helpfully sh are with Members:  the OECD, the International 
Federation of Accountants (IFAC), the Internati onal Accounting Standards Board (IASB), and the 
International Bar Association (IBA).  In line with previously adopted  practice, he would be inviting 
them, on and ad hoc  basis, to the next meeting of the Council to offer their contributions.  Delegations 
would also be able to revert to the sectors discussed at that meeting. 
E. O
THER BUSINESS  
59. As had been indicated at the beginning of the meeting, the Chairperson  made a brief 
statement regarding the third review of Article II  (MFN) exemptions.  She recalled that the Council 
had conducted its second review of MF N exemptions in 2004.  At its meeting of 24 June 2005, it had 
been agreed that the Council would start the third re view of MFN exemptions no  later than June 2010.  
Accordingly, she proposed that the Council start th e third review of MFN exemptions at its next 
meeting.  
60. It was so agreed . 
61. The representative of Australia  expressed her delegation's on-goi ng concern about the lengthy 
delay in the entry into force of the certified EC-25 schedule.  She recalled that it had been more than 
three years since the EU notified the certification of the EC-25 amended schedule of commitments.  Her delegation was one of a number of affected Member with whom compensation arrangements had 
been agreed, but there was still no defined date for entry into force of these a rrangements.  This posed 
both systemic and commercial concerns for Australia .  She urged once again the European Union and 
its Member States to expedite the entry into fo rce of the amended schedule of commitments, and 
sought an update on progress to that end. 
62. The representatives of Switzerland
 and China  supported the statement made by Australia. 
63. The representative of the European Union  took note of the concerns  expressed but stressed 
that the EU commitments had not changed.  He i ndicated that the ratification procedure was still on-
going and that it was difficult to indicate when it w ould be completed.  He had no new elements to 
report since the account he had provided at the previ ous meeting of the Council.  At that point, 16 EU 
Member States out of the 25 concerned had comple ted their national ratification procedures.  These 
were:  Austria, Germany, Denmark, Finland,  Hungary, Greece, Latvia, Lithuania, Malta, the 
Netherlands, Poland, the Slovak Republic, Sloveni a, Spain, Sweden and the United Kingdom. 
64. The Council took note of the statements made. 
__________