ARGENTINA – MEASURES RELATING TO TRADE IN GOODS AND SERVICES REPORT OF THE PANEL
Document: Addendum
Date: 30 September 2015
Document codes: WT/DS453/R/Add.1; WT/DS453/R.
Complainant: Panama
Respondent: Argentina
Third parties: Australia, China, Ecuador, EU, Guatemala, Honduras, India, U.S., Brazil, Singapore, Oman, Saudi Arabia
Dispute stage: Appellate Body
Agreements cited: Art. II:1, XVI, XVII, I:1  Services (GATS)Art. I:1, III:4, XI:1  GATT 1994Art. XVII, XVI:1, XVI:2(a), XVI:2(e)  Services (GATS)

ARGENTINA – MEASURES RELATING TO TRADE IN GOODS
AND SERVICES
REPORT OF THE PANEL
Addendum
This addendum contains Annexes A to C to the Report of the Panel to be found in document

LIST OF ANNEXES

ANNEX A
WORKING PROCEDURES OF THE PANEL
Contents Page
Annex A Working Procedures of the Panel A-1
ANNEX B
ARGUMENTS OF THE PARTIES
PANAMA
Contents Page
Annex B-1 First part of the executive su mmary of the arguments of Panama B-2
Annex B-2 Second part of the executive summary of the arguments of Panama B-16

ARGENTINA
Contents Page
Annex B-3 First part of the executive su mmary of the arguments of Argentina B-31
Annex B-4 Second part of the executive summary of the arguments of Argentina B-44

ANNEX C
ARGUMENTS OF THE THIRD PARTIES
Contents Page
Annex C-1 Integrated executive summary of the arguments of the Kingdom of Saudi Arabia C-2
Annex C-2 Integrated executive summary of the arguments of Brazil C-4
Annex C-3 Integrated executive summary of the arguments of the United States C-6
Annex C-4 Integrated executive summary of the arguments of the European Union C-11

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ANNEX A
WORKING PROCEDURES OF THE PANEL
Adopted on 12 December 2013
1. In its proceedings, the Panel shall follow the relevant provisions of the Understanding on
Rules and Procedures Governing the Settlement of Disputes (DSU). In addition, the following
Working Procedures shall apply.
General
2. The deliberations of the Panel and the document s submitted to it shall be kept confidential.
Nothing in the DSU or in these Working Procedures shall preclude a party to the dispute
(hereafter "party") from disclosing statements of its own positions to the public. Members shall
treat as confidential information submitted to the Panel by another Member which the submitting
Member has designated as confidential. Where a party submits a confidential version of its written
submissions to the Panel, it shall also, upon request of a Member, provide a non-confidential
summary of the information contained in its submissions that could be disclosed to the public.
3. Upon indication from any of the parties, at th e latest during the first substantive meeting, of
its intention to submit information that requires protection beyond that provided for under these
Working Procedures, the Panel, after consultation with the parties, shall decide whether to adopt
appropriate additional procedures.
4. The Panel shall meet in closed session. The parties, and Members having notified their
interest in the dispute to the Dispute Settlement Body in accordance with Article 10 of the DSU
(hereafter "third parties"), shall be present at the meetings only when invited by the Panel to
appear before it.
5. Each party and third party has the right to determine the composition of its own delegation
when meeting with the Panel. Each party and third party shall have the responsibility for all
members of its own delegation and shall ensure th a t e a c h m e m b e r o f s u c h d e l e g a t i o n a c t s i n
accordance with the DSU and these Working Procedures, particularly with regard to the
confidentiality of the proceedings.
Submissions
6. Before the first substantive meeting of the Panel with the parties, each party shall submit
a written submission in which its presents the fact s of the case and its arguments, in accordance
with the timetable adopted by the Panel. Each party shall also submit to the Panel, prior to the
second substantive meeting of the Panel, a written rebuttal, in accordance with the timetable
adopted by the Panel.
7. Should a party wish to request a preliminary ruli ng of the Panel, it shall do so at the earliest
possible opportunity and in any event no later than in its first written submission to the Panel.
If Panama requests such a ruling from the Panel, Argentina shall respond to the request in its first
written submission. If Argentina requests such a ruling, Panama shall submit its response to the
request prior to the first substantive meeting of the Panel, at a time to be determined by the Panel
in the light of the request. The Panel may grant ex ceptions to this rule upon a showing of good
cause.
8. Each party shall submit all factual evidence to the Panel no later than during the first
substantive meeting, except with respect to evidence necessary for purposes of rebuttals, answers
to questions or comments on answers provided by the other party. The Panel may grant
exceptions to this rule where good cause is shown. Where such exception has been granted,

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the Panel shall accord the other party a period of time for comment, as appropriate, on any new
factual evidence submitted after the first substantive meeting.
9. Where the original language of exhibits submitted to the Panel is not a WTO working
language, the submitting party or third party shall submit a translation into the WTO working
language of the submission to which the exhibits are annexed at the same time. The Panel may
grant reasonable extensions of time for the transl ation of such exhibits upon a showing of good
cause. Any objection as to the accuracy of a translation shall be raised promptly in writing, no later
than the next filing or meeting (whichever occurs earlier) following the submission which contains
the translation in question. Any objection shall be accompanied by a detailed explanation of the
grounds of objection and an alternative translation.
10. In order to facilitate the work of the Panel, each party and third party is invited to make its
submissions in accordance with the WTO Editorial Guide for Panel Submissions, attached in annex,
to the extent that it is practical to do so.
11. To facilitate the maintenance of the record of the dispute and maximize the clarity
of submissions, each party and third party shall sequentially number its exhibits throughout the
course of the dispute. For example, exhibits submitted by Panama could be numbered PAN 1,
PAN 2, etc. If the last exhibit in connection with the first submission was numbered PAN 5, the first
exhibit of the next submission would be numbered PAN 6.
Questions
12. The Panel may at any time pose questions to the parties and third parties, orally or
in writing, including prior to each substantive meeting.
Substantive meetings
13. Each party shall provide to the Panel the list of members of its delegation in advance of each
meeting with the Panel and no later than 5 p.m. on the previous working day.
14. The first substantive meeting of the Panel wi th the parties shall be conducted as follows:
a. The Panel shall first invite Panama to ma ke an opening statement to present its case.
Subsequently, the Panel shall invite Argentina to present its point of view. Before each
party takes the floor, it shall provide the Panel and other participants at the meeting
with a provisional written version of its statement. In the event that interpretation
is needed, each party shall provide additional copies to the interpreters through the
Panel secretariat. Each party shall supply the Panel and the other party with a final
version of its statement, preferably at the en d of the meeting, and in any event no later
than 5 p.m. on the first working day following the meeting.
b. After the conclusion of the statements, the Panel shall give each party the opportunity to
ask the other party questions or to make comments through the Panel. Each party shall
then have an opportunity to answer those questions orally. Each party shall send in
writing, within a time-frame to be determined by the Panel, any questions to the other
party to which it wishes to receive a response in writing. Each party shall be invited
to respond in writing to the questions of the other party within a deadline to be
determined by the Panel.
c. The Panel may subsequently pose questions to the parties. Each party shall then have
an opportunity to answer these questions orally. The Panel shall send in writing, within
a time-frame to be determined by it, any questions to the parties to which it wishes
to receive a response in writing. Each party shall be invited to respond in writing to such
questions within a deadline to be determined by the Panel.
d. Once the questioning has concluded, the Pa nel shall afford each party an opportunity
to present a brief closing statement, with Panama presenting its statement first.

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15. The second substantive meeting of the Panel wi th the parties shall be conducted as follows:
a. The Panel shall ask Argentina if it wishes to avail itself of the right to present its case
first. If so, the Panel shall invite Argentina to present its opening statement, followed by
Panama. If Argentina chooses not to avail itself of that right, the Panel shall invite
Panama to present its opening statement first. Before each party takes the floor, it shall
provide the Panel and other participants at the meeting with a provisional written version
of its statement. In the event that interpre tation is needed, each party shall provide
additional copies to the interpreters through the Panel secretariat. Each party shall
supply the Panel and the other party with a final version of its statement, preferably at
the end of the meeting, and in any event no later than 5 p.m. on the first working day
following the meeting.
b. After the conclusion of the statements, the Panel shall give each party the opportunity to
ask the other party questions or to make comments through the Panel. Each party shall
then have an opportunity to answer those questions orally. Each party shall send in
writing, within a time-frame to be determined by the Panel, any questions to the other
party to which it wishes to receive a response in writing. Each party shall be invited to
respond in writing to the questions of the other party within a deadline to be determined
by the Panel.
c. The Panel may subsequently pose questions to the parties. Each party shall then have an
opportunity to answer these questions orally. The Panel shall send in writing, within
a time-frame to be determined by it, any questions to the parties to which it wishes to
receive a response in writing. Each party shall respond in writing to such questions
within a deadline to be determined by the Panel.
d. Once the questioning has concluded, the Pane l shall afford each party an opportunity to
present a brief closing statement, with the party that presented its opening statement
first presenting its closing statement first.
Third parties
16. The Panel shall invite each third party to tran smit to the Panel a written submission prior to
the first substantive meeting of the Panel with the parties, in accordance with the timetable
adopted by the Panel.
17. Each third party shall also be invited to presen t its views orally during a session of this first
substantive meeting, set aside for that purpose. Ea ch third party shall provide to the Panel the list
of members of its delegation in advance of this session and no later than 5 p.m. the previous
working day.
18. The third-party session shall be conducted as follows:
a. All third parties may be present during the entirety of this session.
b. The Panel shall first hear the arguments of the third parties in alphabetical order.
Third parties present at the third-party session and intending to present their views
orally at that session, shall provide the Panel, the parties and other third parties with
provisional written versions of their statements before they take the floor.
The third party shall make available to the Pa nel, the parties and other third parties the
final versions of their statements, preferably at the end of the session, and in any event
no later than 5 p.m. on the first working day following the session.
c. After the third parties have made their statements, the parties may be given the
opportunity, through the Panel, to ask the third parties questions for clarification on any
matter raised in the third parties' submissions or statements. Each party shall send
in writing, within a time-frame to be determined by the Panel, any questions to
a third party to which it wishes to receive a response in writing.

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d. The Panel may subsequently pose questions to the third parties. Each third party shall
then have the opportunity to answer these questions orally. The Panel shall send in
writing, within a time-frame to be determined by it, any questions to the third parties to
which it wishes to receive a response in writing. Each third party shall be invited to
respond in writing to such questions within a deadline to be determined by the Panel.
Descriptive part
19. The description of the arguments of the part ies and third parties in the descriptive part
of the Panel report shall consist of executiv e summaries provided by the parties and the
third parties, which shall be attached as annexes to the report. These executive summaries shall
not serve in any way as a substitute for the submis sions of the parties and the third parties in the
Panel's examination of the case.
20. Each party shall provide executive summaries of the facts and arguments as presented to
the Panel, in accordance with the timetable ad opted by the Panel. These summaries may also
include a summary of the replies to questions. These summaries shall not exceed 15 pages each.
The Panel shall not summarize the parties' replies to the questions in the descriptive part, nor shall
it annex them to its report.
21. Each third party shall submit an executive summary of its arguments as presented to the
Panel in its written submission and its declaration of conformity with the timetable adopted by the
Panel for its work. This summary may also include a summary of the replies to questions, where
applicable. The executive summary to be provided by each one of the third parties shall not
exceed six pages.
Interim review
22. Following issuance of the interim report, each party may submit a written request to review
precise aspects of the interim report and request a further meeting with the Panel, in accordance
with the timetable adopted by the Panel. The righ t to request such a meeting shall be exercised
no later than at the time the written request for review is submitted.
23. In the event that no further meeting with the Panel is requested, each party may submit
written comments on the other party's written request for review, in accordance with the timetable
adopted by the Panel. Such comments shall be limited to commenting on the other party's written
request for review.
24. The interim report, like the final report prior to its official circulation, shall be kept strictly
confidential and shall not be disclosed.
Service of documents
25. The following procedures regarding service of documents shall apply:
a. Each party and third party shall submit all documents to the Panel by filing them with
the DS Registry (office No. 2047).
b. Each party and third party shall file four pa per copies of all documents it submits to the
P a n e l . H o w e v e r , w h e n e x h i b i t s a r e p r o v i d e d o n C D R O M s / D V D s , f o u r C D R O M s / D V D s
and three paper copies of those exhibits shal l be filed. The DS Registrar shall stamp the
documents with the date and time of the filing. The paper version shall constitute the
official version for the purposes of the record of the dispute.
c. Each party and third party shall also provide an electronic copy of all documents it
submits to the Panel at the same time as the paper versions, preferably in Microsoft
Word format, either on a CD ROM, a DVD or as an email attachment. If the electronic
copy is provided by email, it should be addressed to *****@wto.org, and cc'd to
*****.*****@wto.org, *****.*****@wto.org, *****.*****@wto.org, and
*****.*****@wto.org. If a CD ROM or DVD is provided, it shall be filed with the
DS Registry.

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d. Each party shall serve any document submitted to the Panel directly on the other party.
Each party shall, in addition, serve on all third parties its written submissions in advance
of the first substantive meeting with the Panel. Each third party shall serve any
document submitted to the Panel directly on the parties and all other third parties.
Each party and third party shall confirm, in writing, that copies have been served as
required at the time it provides each document to the Panel.
e. Each party and third party shall file its do cuments with the DS Registry and serve copies
on the other party (and third parties where appropriate) by 5 p.m. (Geneva time) on the
dates established by the Panel. A party or third party may transmit its documents to the
other party or third party in electronic form only, subject to prior written consent of the
notified party or third party and provided the Panel secretariat is informed.
f. The Panel shall provide the parties with an electronic version of the descriptive part, the
interim report and the final report, as well as of other documents as appropriate.
When the Panel transmits to the parties or third parties both paper and electronic
versions of a document, the paper version shall constitute the official version for the
purposes of the record of the dispute.

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ANNEX B
ARGUMENTS OF THE PARTIES
PANAMA
Contents Page
Annex B-1 First part of the executive su mmary of the arguments of Panama B-2
Annex B-2 Second part of the executive summary of the arguments of Panama B-16

ARGENTINA
Contents Page
Annex B-3 First part of the executive su mmary of the arguments of Argentina B-31
Annex B-4 Second part of the executive summary of the arguments of Argentina B-44

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ANNEX B-1
FIRST PART OF THE EXECUTIVE SUMMARY OF THE ARGUMENTS OF PANAMA
1. INTRODUCTION

1.1. Argentina maintains a set of measures that accord to services and service suppliers (and in
some cases also goods) from the excluded countries less favourable treatment than that accorded
to like services and service suppliers from the beneficiary countries. Certain Argentine measures
also accord products, services and service suppliers from the excluded countries treatment less
favourable than that accorded to like products, services and service suppliers of Argentine origin.

1.2. The measures create discriminatory barrier s that limit, or even nullify, competitive
opportunities in the Argentine market for services and service suppliers from the excluded
countries, while affecting the goods and services of 71 WTO Members (45% of the Membership),
including 32 of the 34 least developed country Members.
1

1.3. Argentina uses a list system to implement the measures. Initially, selection was on the basis
of a positive list of "countries considered to have low or no taxes", incorporated in the Regulations
Ganancias (RIG)).
2 Currently, selection is made on the basis of a negative list arising from Decree
No. 589/2013, General Resolution No. 3576 of the Federal Administration of Public Revenue (AFIP)
and the list published on 8 January 2014.3

1.4. A country is included and kept on the list subject to compliance with certain requirements
imposed unilaterally by Argentina, including the signing or negotiation of an agreement
on exchange of information with Argentina and the easing of certain rules concerning the
disclosure of private information of individuals. Indeed, under existing Argentine legislation,
"non-cooperating countries for tax transparency purposes" are (i) countries that have not signed,
with Argentina, agreements on exchange of tax information or conventions to avoid international
double taxation with a clause on extensive information exchange; or (ii) countries that, at AFIP's
discretion, have not entered into, with Argentina, the negotiations necessary for signing the
aforementioned agreements or conventions.

1.5. Although Panama is currently included on the list of beneficiary countries, it was, for many
years, an excluded country, and remained so until the establishment of the Panel and timetable for
this dispute. Panama's inclusion on the list does not reflect a solution agreed by both parties.

1.6. In specific terms, the claims raised by Panama in this dispute address the following issues:

 the withholding tax on the payment of interest or remuneration for certain financial
services provided by suppliers from the excluded countries;

 the presumption that any entry of funds from the excluded countries constitutes an
unjustified increase in wealth;

 the transfer pricing regime for the determination of profits tax, applicable to transactions
with persons from the excluded countries;

 the establishment of a special rule for the al location of expenditure for the profits tax,
applicable only to service payments made to persons from the excluded countries;

1 List of WTO Members affected by the measures in question, contained in the introduction to Panama's
first written submission (p. 13).
2 Seventh unnumbered article following Article 21 of Decree No. 1344 of 19 November 1998 establishing
the Implementing Regulations for the Income/Profits Tax Law (RIG). This provision was incorporated pursuant
to Decree No. 1037/2000 (Exhibit PAN-1).
3 Pursuant to Decree No. 589 of 27 May 2013 (Decree No. 589/2013), Argentina modified the positive
list system by replacing the sixth unnumbered article following Article 21 of Decree No. 1344/1998
(Exhibit PAN-3).

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 the restrictions on access to the Argentine reinsurance and retrocession market;

 the restriction on access to the Argentine capital market for financial service suppliers
from the excluded countries;

 the imposition of more stringent requiremen ts for the registration of branches of
companies from the excluded countries; and

 the imposition of the foreign exchange authorization requirement.

1.7. The claims concerning each measure and its inconsistency with the provisions of the GATS
and the GATT are detailed below.

2. LEGAL CLAIMS

2.1. The withholding tax on payments for ce rtain services provided by suppliers from
the excluded countries is inconsistent with Article II:1 of the GATS

2.1. Argentina taxes foreign loan, credit and fund placement services for non-financial
consumers, provided by foreign suppliers, differently depending on the supplier's geographical
location. When suppliers of these services are based in the excluded countries, Argentina has
different presumptions of net profit, which involve the imposition of a heavier tax burden.

2.2. This means that if the foreign suppliers are banks or financial entities residing
in a beneficiary country
4, Argentina will presume that the payments for the services in question
generate a net profit of 43% of the amount paid. On this basis, Argentina will apply the rate
of 35%.5 As a result, Argentina will effectively impose on suppliers from the beneficiary countries
a withholding tax of 15.05% of the total amount of the payment for interest or remuneration
(i.e. 35% on 43% of the payments). However, if th e suppliers are banks or financial entities from
the excluded countries, Argentina will presume, ag ainst any evidence to the contrary, that the
payments generate a net profit of 100%.
6 On this basis, Argentina will apply the rate of 35%. 7
As a result, Argentina will effectively impose on suppliers from the excluded countries
a withholding tax of 35% of the total amount of the payment for interest or remuneration
(i.e. 35% on 100% of the payments).

2.3. Panama believes that Argentina's measur e meets the criteria necessary to be deemed
inconsistent with Article II:1 of the GATS.
8

2.4. First, the measure in question is a measure covered by the GATS, as: (i) it has an impact on
the cross-border supply (mode 1) of loan and cred it services and services involving the placement
of funds in Argentina, which are classified in sector 7.B. of the Sectoral Classification List prepared
by the GATT Secretariat for the negotiation of Members' schedules of commitments
9; and
(ii) it affects trade in the above-mentioned services by having a direct impact on the "payment"
(i.e. interest or remuneration as consideration) for the services provided, within the meaning of
Article XXVIII(c) of the GATS.

4 According to Article 92(c)(1), second paragraph, of the Income/Profits Tax Law (LIG), preferential
treatment is also granted to suppliers from jurisdictions that have signed an information exchange agreement
with Argentina and where banking, stock market or other forms of secrecy may not be invoked in response to
a request for information from the Argentine tax authorities (Exhibit PAN-4).
5 Articles 92 and 93 of the LIG (Exhibit PAN-4).
6 Article 92(c)(2) of the LIG (Exhibit PAN-4).
7 Articles 92 and 93 of the LIG (Exhibit PAN-4).
8 In Canada - Autos, the Appellate Body indicated that a finding of violation of Article II:1 of the GATS
must be based on the following three components: (i) the measure in question must be covered by the GATS;
(ii) there must be "likeness" between the foreign services and/or service suppliers affected by the measure and
other foreign services and/or service suppliers; and (iii) the measure must accord, immediately and
unconditionally, treatment no less favourable to the services and/or service suppliers of a Member than that
accorded to the like services and/or service suppliers of other countries.
9 Note by the Secretariat, "Services Sectoral Classification List", of 10 July 1991,
document MTN.GNS/W/120 (Document W/120) (Exhibit PAN-6).

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2.5. Secondly, the foreign services and service suppliers affected by the measure are like other
foreign services and/or service suppliers. In fact, through the withholding regime for payments
made to suppliers from the excluded countries, Argentina affords different tax treatment
depending on the location of the service supplier
10, which is less favourable for suppliers from the
excluded countries. Given that the only reason for providing differential treatment is the origin
of the service supplier, it follows that the measur e affects services and service suppliers that are
"like" those not covered by the measure.11

2.6. Lastly, the measure in question accords to services and service suppliers from the excluded
countries treatment less favourable than that accorded to like services and service suppliers from
other countries. Imposing a tax burden on services from suppliers in the excluded countries that is
higher than that imposed on like services from suppliers in the beneficiary countries effectively
reduces the profit margins of suppliers of credit and loan services from the excluded countries,
in relation to the higher profit margins enjoyed by competitors from the beneficiary countries,
thereby nullifying equality of competitive conditio ns in the Argentine market between the services
and service suppliers of the excluded countries an d the like services and service suppliers of the
beneficiary countries. By establishing different presumptions of net profit, the measure necessarily
imposes a heavier tax burden, and therefore less fa vourable treatment, on services and service
suppliers from the excluded countries than on like services provided by suppliers from the
beneficiary countries.

2.2. The presumption of unjustified increase in wealth is inconsistent with Articles II:1
and XVII of the GATS and Article I:1 of the GATT

2.7. Argentine tax legislation
12 contains the presumption that any entry of funds from the
excluded countries constitutes, unless proven otherwise, an "unjustified increase in wealth" for the
recipient of the funds in Argentina; such inflows are accordingly presumed to be net profits liable
to the payment of profits tax and, as such, qua lify as omitted sales. To rebut the presumption,
taxpayers must undergo an administrative procedur e in which they must certify a series of acts
provided for in Argentine legislation in order to prove the legitimate origin of the funds.13

2.8. If the recipient is unable to prove the legiti mate origin of the funds, the presumption would
be confirmed, which entails consequences for the taxpayer, as it obliges him to pay profits tax,
value added tax (VAT) and other internal taxes on the amount received from the excluded country,
regardless of the type of operation that led to the money being sent and of whether the taxable
event giving rise to the imposition of the above taxes actually occurred. The recipient of the funds
is not subject to this presumption when the funds enter from a beneficiary country.

2.9. Panama believes that Argentina's measur e meets the criteria necessary to be deemed
inconsistent with Articles II:1 and XVII of the GATS and Article I:1 of the GATT.

Inconsistency of the measure with Article II:1 of the GATS

2.10. The legal presumption of unjustified increa se in wealth accords to services and service
suppliers from the beneficiary countries less favourable treatment than that accorded to like
services and service suppliers from the excl uded countries, in violation of Article II:1
of the GATS.
14

2.11. First, the measure in question is a measure covered by the GATS, as (i) given that the
presumption applies to any funds entering Argentina from the excluded countries "whatever their

10 In Panama's understanding, there is no difference of treatment in the case of Argentine banks or
financial entities. Article 93(c)(1), first sentence, of the LIG (Exhibit PAN-4).
11 Panel Report, China - Publications and Audiovisual Products, para. 7.975. In this report, the Panel
specifically noted that "[w]hen origin is the only factor on which a measure bases a difference of treatment
between domestic service suppliers and foreign suppliers, the 'like service suppliers' requirement is met".
Although the Panel in this dispute had to analyse the consistency of the measure in question with the national
treatment obligation, Panama considers the same reasoning to be relevant to an examination of the MFN
treatment obligation. This reasoning was reiterated in China - Electronic Payment Services.
12 Article added to Article 18 of the Law on Tax Procedure (Exhibit PAN-9).
13 The taxpayer must prove that the funds originate from: (i) activities actually carried out by the
taxpayer in the excluded countries; (ii) activities actually carried out by third parties in those jurisdictions; or
(iii) duly declared fund placements.
14 See footnote 8.

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nature or category or the type of operation involved" 15, the measure covers all trade transactions
deriving from the supply of any service that requires a transfer of money from the foreign country
to Argentina, in particular, loan or insurance services, inter alia , in cross-border mode; and
(ii) the measure has an effect on the very object or "supply" of the service, within the meaning
of Article XVIII(b) of the GATS, and on the "use" of the services, within the meaning
of Article XVIII(c)(i) of the GATS, by having an impact on an essential part of any service the
supply of which involves sending funds to Argentina.

2.12. Secondly, the foreign services and service suppliers affected by the measure are like other
foreign services and/or service suppliers. In fact, if the funds come from the excluded countries,
the presumption provided for in the article added to Article 18 of the Law on Tax Procedure
is triggered, whereas if they enter Argentina from a beneficiary country, there is no presumption
of unjustified increased wealth. The likeness requirement is therefore met, as Argentine legislation
establishes differential treatment based solely on the origin of the service or service supplier.
16

2.13. Lastly, the measure in question accords to services and service suppliers from the excluded
countries less favourable treatment than that accorded to like services and service suppliers from
other countries, as it creates a disincentive to contracting services that imply a transfer of funds
from the listed countries (e.g. loan services, money transfers, insurance), thus distorting the
conditions of competition with like services and service suppliers from other countries.

Inconsistency of the measure with Article XVII of the GATS

2.14. Under the measure, Argentina accords to se rvices and service suppliers from the excluded
countries treatment less favourable than that accorded to its own like services and service
suppliers, in violation of Article XVII of the GATS, in particular as regards the following services:
(i) maritime and air transport insurance, and (ii) reinsurance and retrocession.
17

2.15. First, having included the word "None" in its schedule of specific commitments in the
national treatment column in respect of mode 1 for maritime and air transport insurance,
and reinsurance and retrocession, Argentina has not established any limitation on the national
treatment obligation in that mode. Due to this full commitment in respect of national treatment
18,
any limitation imposed by Argentina on mode 1 supply would be inconsistent with Article XVII
of the GATS.

2.16. Secondly, the presumption of unjustified increase in wealth is a measure that affects the
supply of services, as it has an impact on an essential part of the service, namely on the monetary
amounts that the service supplier (i.e. the insurer or reinsurer) has undertaken to pay to the
consumer of the service (i.e. the insured) in the event of the occurrence of the circumstances
or contingency stipulated in the respective contract. This therefore affects the "supply" of these
services, within the meaning of Article XVIII(b) of the GATS, and the "use" of the services,
within the meaning of Article XVIII(c)(i) of the GATS.

2.17. Lastly, the measure in question accords to services and service suppliers from the excluded
countries treatment less favourable than that accorded by Argentina to its own like services and
service suppliers. Indeed, the likeness requirement is shown to have been met by the fact that the
country of origin of the funds is the only el ement that determines the triggering of the
presumption that these funds constitute an unjustified increase in wealth for the local recipient.
19
Moreover, the less favourable treatment accorded to suppliers of air and maritime transport
insurance services and reinsurance and retrocession services based in excluded countries, lies in

15 Article added to Article 18 of the Law on Tax Procedure (Exhibit PAN-9).
16 Panel Report, China - Publications and Audiovisual Products, para. 7.975.
17 As established by the Panel in China - Electronic Payment Services, a finding of violation of
Article XVII of the GATS must be based on the following three components: (i) the Member in question has
made commitments on national treatment in the relevant sector and mode of supply, regard being had to any
conditions and qualifications, or limitations, set out in its Schedule; (ii) the measure in question is one affecting
the supply of services in the relevant mode of supply; and (iii) the measure in question accords to services and
service suppliers of any other Member treatment less favourable than that accorded to like services and service
suppliers of national origin.
18 Appellate Body Report, US - Gambling, para. 215; and Panel Report, China - Electronic Payment
Services, para. 7.651.
19 Panel Report, China - Publications and Audiovisual Products, para. 7.975.

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that, should the agreed circumstances or risk occur, there would be a transfer of funds to
Argentina that would trigger the presumption of increased wealth, with the above-mentioned
procedural and tax implications. This situation has a direct impact on the service supplier's
opportunities to compete, as the Argentine consumer would choose not to contract the services
offered by suppliers from the excluded countries because this would imply undergoing
a verification procedure and possible fiscal charges. The measure thus clearly discourages the
contracting of such services by modifying the conditions of competition to the detriment of services
and service suppliers from the excluded countries.

Inconsistency of the measure with Article I:1 of the GATT

2.18. The measure in question is in breach of the MFN treatment obligation for trade in goods laid
down in Article I:1 of the GATT. This is because the measure does not accord to exports of like
products destined for the excluded countries (giving rise to payments from the listed countries)
the advantage, favour, immunity or privilege that is accorded to exports destined for the
beneficiary countries.
20

2.19. First, the presumption of unjustified increase in wealth in relation to the entry of funds
as payment for exports qualifies as a "rule and formality in connection with exportation" 21 and as
a "charge imposed on the international transfer of payments" for exports.

2.20. Secondly, under the measure, the Argentine exporter sending his goods to beneficiary
countries receives an advantage, privilege or immunity in the form of an exemption from the
procedural and fiscal charges mentioned in respect of exports destined for the excluded countries.
The measure in question thus gives rise to an advantage, privilege or immunity within the
meaning of Article I:1 of the GATT.

2.21. Thirdly, the measure in question affects products "like" those that receive the advantage,
immunity and/or privilege, since the only indica tor for the differential treatment is the country
of destination of the exports. Indeed, the likeness requirement is met because Argentine
legislation provides for a regulatory distinction based only on the destination of the exports.
22

2.22. Lastly, Argentina does not extend the said a d v a n t a g e , p r i v i l e g e o r i m m u n i t y t o e x p o r t s
destined for the excluded countries. Consequently, Argentina is clearly in breach of Article I:1
of the GATT.

2.3. Valuation based on transfer prices is in consistent with Articles II:1 and XVII of the
GATS and Articles I:1, III:4 and XI:1 of the GATT

2.23. Argentine legislation considers that tran sactions between an Argentine taxpayer and
a person domiciled in one of the excluded countries are not consistent with normal arms-length
market practices or prices, and requires the Ar gentine taxpayer to apply the transfer pricing
regime as if the transaction were between related parties
23, even though the parties are
independent.24 Argentine legislation establishes the same presumption for importation and for
exportation of goods.25

2.24. Hence, a taxpayer contracting from a person domiciled in any of the excluded countries
is necessarily subject to the transfer pricing regime in order to establish the value of transactions
that generate revenue and those that involve deductible outlays, for the purposes of determining
the net profit liable to profits tax.
26

20 In accordance with applicable case law, a determination of inconsistency with this provision is
comprised of four elements: (i) the measure in question must be covered by Article I:1; (ii) the measure in
question must be related to an "advantage, favour, privilege or immunity […] to any product originating in or
destined for any other country"; (iii) there is a likeness between the products in question; and (iv) the
"advantage, favour, privilege or immunity" is not accorded immediately and unconditionally to like products
originating in or destined for all WTO Members. Panel Report, EU - Footwear (China), para. 7.99 (in reference
to the Panel Report in Indonesia - Autos, para. 14.138).
21 Panel Report, US - Poultry (China), para. 7.410.
22 Panel Report, China - Publications and Audiovisual Products, para. 7.975.
23 Article 15, second paragraph, of the LIG (Exhibit PAN-4).
24 Article 21 of the RIG (Exhibit PAN-1).
25 Article 8, fifth paragraph, of the LIG (Exhibit PAN-4).
26 Article 17 of the LIG (Exhibit PAN-4).

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2.25. Under this regime, an Argentine taxpayer deciding to contract services from a service
supplier based in an excluded country must follow a complex process that requires not only
knowledge of the conceptual methodology framew ork but also the gathering of a considerable
amount of information on the transaction in question and on other "comparable" transactions,
or on the use of man-hours, to understand what is wanted, process the relevant information and
make the appropriate calculations and comparisons. The measure also requires that an
independent chartered accountant, certified by the relevant professional association, be hired to
make or approve the calculations.

2.26. Panama believes that the measure in question meets the criteria necessary to be considered
inconsistent with Articles II:1 and XVII of the GATS and Articles I:1, III:4 and XI:1 of the GATT.

Inconsistency of the measure with Article II:1 of the GATS

2.27. The transfer pricing regime for the valuation of services provided by suppliers from the
excluded countries leads to disincentives that accord to services and service suppliers domiciled,
incorporated or based in the excluded countries treatment less favourable than that accorded to
like services and service suppliers from other countries, in violation of Article II:1 of the GATS.
27

2.28. First, the measure in question is a measure covered by the GATS, as it affects transactions
concluded between Argentine residents and persons domiciled in the excluded countries, under the
cross-border mode and, possibly, the mode of consumption abroad.

2.29. Secondly, the foreign services and service suppliers affected by the measure are like other
foreign services and/or service suppliers. The measure is premised on a regulatory distinction
based only on the place where a contractual party is located. It follows that there is likeness
between the services and/or service suppliers from the excluded countries and other services or
service suppliers from the beneficiary countries not subject to the measure in question.
28

2.30. Lastly, the measure in question accords to services and service suppliers from the excluded
countries less favourable treatment than that accorded to like services and service suppliers from
other countries. For Argentine taxpayers, purchasing services from persons in the excluded
countries involves administrative requirements, financial burdens and tax contingencies, which do
not apply if they choose to contract the same services from a supplier located in any of the
beneficiary countries - meaning that they are discouraged from contracting under such
circumstances. Consequently, by making the contracting of services from suppliers in the excluded
countries more burdensome, the measure in question impairs the conditions of competition among
foreign like services and service suppliers.

Inconsistency of the measure with Article XVII of the GATS

2.31. The transfer pricing regime for the valuation of services provided by suppliers from the
excluded countries discourages Argentine consumers from purchasing services from suppliers
domiciled, incorporated or located in the excl uded countries, thereby placing such suppliers
in a situation less favourable than that applicable to like domestic services and suppliers,
in a manner that is inconsistent with Article XVII of the GATS.
29

2.32. First, Argentina undertook full commitments in respect of national treatment in cross-border
trade in all the sectors in its Schedule, except for certain specific services in the financial
services sector.
30

2.33. Secondly, the measure in question is a measure covered by the GATS. This is because
it involves and affects services, particularly under the mode of cross-border trade in professional
services, such as the legal or accounting advisory services provided by service suppliers based in
the excluded countries.

27 See footnote 8.
28 Panel Report, China - Publications and Audiovisual Products, para. 7.975.
29 See footnote 17.
30 Argentina's Schedule of Specific Commitments (Exhibit PAN-19).

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2.34. Lastly, the measure in question accords to services and service suppliers from the excluded
countries less favourable treatment than that accorded to like services and service suppliers
of national origin. The likeness requirement is shown to have been met by the fact that the
measure in question is premised on a regulatory distinction based only on the place of provenance
or origin of the services.
31 Furthermore, the less favourable treatment is demonstrated by the fact
that, for the Argentine taxpayer, the purchasing of services from persons in the excluded countries
implies administrative requirements, financial burdens and significant tax contingencies,
while purchasing the same services from a supplier based in Argentina would not entail the same
requirements, financial burdens or tax contingencies. Consequently, the measure in question
impairs the conditions of competition between like services and service suppliers from the
excluded countries and those of national origin.

Inconsistency of the measure with Article I:1 of the GATT

2.35. The measure in question accords to imports from the beneficiary countries, as well as to
exports of products to any beneficiary country, the possibility of being valued as transactions in
line with normal market practices or prices, wi thout making them subject to the determination
of transfer prices, whereas the same advantage, immunity, favour or privilege is not extended
immediately and unconditionally to imports of like products from the excluded countries.
Consequently, the measure is inconsistent with Article I:1 of the GATT.
32

2.36. First, the measure is a rule or formality li nked to the importation or exportation of goods
within the meaning of Article I:1 of the GATT, as all international trade transactions are subject
to this mandatory requirement under Argentine legislation.

2.37. Secondly, the measure in question affects products "like" those that receive the advantage,
immunity and/or privilege, since the only indi cator for differential treatment is the country
of destination of the exports. Indeed, the likeness requirement is met because Argentine
legislation provides for a regulatory distinction based only on the destination of the exports.
33

2.38. Thirdly, goods traded with persons from any of the beneficiary countries are not subject
to the same type of requirements and charges. Th e transfer pricing regime is not usually applied
to such transactions, as it is assumed that their value is that agreed between the parties.
The measure thus implicitly accords to like good s imported from, or exported to, the beneficiary
countries, an advantage, immunity or privilege in the Argentine market.

2.39. Lastly, Argentina does not provide the more favourable treatment that is accorded to the
products imported from any of the beneficiary countries. Likewise, nor has it provided the more
favourable treatment that is accorded to the export products destined for any of the beneficiary
countries.

Inconsistency of the measure with Article III:4 of the GATT

2.40. Subjecting Argentine taxpayers to the transf er pricing regime for the valuation of imported
goods when they are sold by persons from the excluded countries accords to these goods less
favourable treatment than that accorded to dome stic goods sold by persons based in Argentina,
in violation of Article III:4 of the GATT.
34

2.41. First, the measure in question is contained in laws, regulations and requirements established
by Argentina, since it derives from Articles 8, 14 and 15 of the LIG, in conjunction with Article 21
of the RIG, and the subsequent articles foll owing Article 21 of the RIG, and AFIP General
Resolution No. 1122.
35

31 Panel Report, China - Publications and Audiovisual Products, para. 7.975.
32 See footnote 20.
33 See Panel Report, China - Publications and Audiovisual Products, para. 7.975.
34 In Korea - Various Measures on Beef (para. 133), the Appellate Body found that an assessment of
conformity with Article III:4 of the GATT requires the determination of whether: (i) the measure in question is
a law, regulation or requirement affecting the sale, offering for sale, purchase, transportation, distribution or
use of these products in a Member's internal market; (ii) the imported products affected by the measure at
issue are "like" the domestic products; and (iii) the treatment accorded to the imported products is less
favourable than that accorded to like domestic products.
35 AFIP General Resolution No. 1122 (Exhibit PAN-26).

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2.42. Secondly, the measure affects products from the excluded countries that are like those
traded by other persons, including domestic products traded by persons based in Argentina, as the
regulatory distinction for applying the measure is based on the location of the traders of the goods
(whether they are in the excluded countries or not).
36

2.43. Thirdly, the measure accords to products originating in or coming from the excluded
countries less favourable treatment than that granted to like products of national origin. Indeed,
subjecting imports from persons from the exclud ed countries to the transfer pricing regime
imposes on Argentine taxpayers additional admini strative requirements, financial burdens and tax
contingencies that are not imposed on transactions concluded for goods of Argentine origin. These
additional requirements and charges constitute regu latory conditions that influence the taxpayer's
decision to contract with persons from the excl uded countries. They therefore affect the sale,
offering for sale, and purchase or use of products from the excluded countries by actual or
potential importers in Argentina. Since they are onerous for a buyer in Argentina, these
requirements and charges deny imported products effective opportunities to compete in the
Argentine market. Conversely, domestic products sold by persons based in Argentina are not
subject to the transfer pricing regime.

Inconsistency of the measure with Article XI of the GATT

2.44. The measure alternatively qualifies as a restriction on the importation and exportation
of goods within the meaning of Article XI:1 of the GATT, as it establishes restrictive conditions
consisting of certain requirements and charge s that condition and discourage the importation
of goods from the excluded countries, and the exportation of goods to these countries.
37

2.45. Importing products from the excluded countries entails automatic consequences:
for determination of the profits tax, Argentine taxpayers are subject to the transfer pricing regime,
which generates extra costs and significant risks. There is no legally valid way to avoid these
consequences, and failure to comply with the information obligations and related requirements
gives rise to penalties of various kinds. These conditions end up discouraging the importation
of goods from the excluded countries.

2.46. The exportation of goods to the excluded count ries is also affected by the transfer pricing
regime. The application of these rules and procedures discourages the exportation of goods
to certain destinations. This is due to the administrative and financial charges and tax
contingencies imposed through application of the transfer pricing regime. The measure in question
thus limits the ability of buyers from the exclud ed countries to effectively procure goods produced
in Argentina.

2.4. The rule on allocation of expenditur e for transactions with persons from the
excluded countries is inconsistent with Articles II:1 and XVII of the GATS

2.47. Under Argentine legislation, the allocation of expenditure in relation to transactions with any
person from abroad for the purposes of determining the tax base is governed in general terms by
the "accrual" rule
38, according to which profits and expenditure shall be allocated to the period in
which they originated, regardless of the time when the expenses become due or payment was
actually made. However, under Argentine legislation, the deduction may not be made under the
accrual rule if the allocation of expenditure stems from a transaction with a person from an
excluded country.
39 In these circumstances, Argentine legislation provides that the allocation shall
be made at the time of verification that payment of the obligation has actually been made.40

36 See Panel Report, China - Publications and Audiovisual Products, para. 7.975.
37 Panel Report, India - Autos, paras. 266-268; Panel Report, Colombia - Ports of Entry, para. 7.252;
Panel Report, China - Raw Materials, paras. 7.914-7.915.
38 Article 18, paragraph 6, of the LIG, and Article 18, paragraph 11, of the LIG (Exhibit PAN-4).
39 Article 18, final paragraph, of the LIG.
40 Alternatively, Article 18, final paragraph, of the LIG, provides that this allocation shall be made in the
event of any of the cases set forth in paragraph 6 of Article 18 or, failing this, if any of the circumstances
mentioned in that paragraph occur within the period provided for submission of the sworn declaration in which
the respective expense was accrued (Exhibit PAN-4).

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2.48. Because of the way in which the measure is co nfigured, the rule on allocation of expenditure
at the time of payment applies to any transactions with service suppliers in the excluded countries
that generate profits considered to be of Argentine origin, including credit, loan and fund
placement services.
41

2.49. In Panama's opinion, the measure in question meets the criteria necessary to be considered
inconsistent with Articles II:1 and XVII of the GATS.

Inconsistency of the measure with Article II:1 of the GATS

2.50. The rule on allocation of expenditure for se rvice transactions with persons from the excluded
countries limits the possibility of being able to deduct payment for services provided by these
suppliers, and accords them less favourable treatment than that accorded to like services
and service suppliers from the beneficiary countries, in violation of Article II:1 of the GATS.
42

2.51. First, the measure in question is a measure covered by the GATS. This is because it involves
and affects services, such as the credit, financial loan or fund placement services from the
excluded countries that are referred to in Title V of the Income/Profits Tax Law (LIG).
43
The measure affects these services under the cross-border mode.

2.52. Secondly, the foreign services and service suppliers affected by the measure are like other
foreign services and/or service suppliers. Given its configuration, the measure is premised on
a distinction based on the place of provenance or origin of the services generating the expenses
in question. There is therefore a presumption of likeness in this case, as it is not necessary
to demonstrate the concurrence of additional similar factors.
44

2.53. Lastly, the measure in question accords to services and service suppliers from the excluded
countries less favourable treatment than that accorded to like services and service suppliers from
other countries. The less favourable treatment stems from the fact that the measure in question
increases the tax liability of the service consum er, i.e. the Argentine taxpayer, which places
the services provided by persons from the exclud ed countries under tax and accounting conditions
that make them less attractive in the Argentine market and, as a result, reduce their opportunities
to compete on an equal footing with like services and service suppliers from other countries.

Inconsistency of the measure with Article XVII of the GATS

2.54. The rule on allocation of expenditure for service transactions with persons from the excluded
countries accords to suppliers from the excluded countries and to their services less favourable
treatment than that accorded to domestic like services and service suppliers, in violation
of Article XVII of the GATS.
45

2.55. First, the measure in question affects specific services in respect of which Argentina
undertook full commitments on national treatment in cross-border trade.46

2.56. Secondly, the foreign services and service suppliers affected by the measure are like other
foreign services and/or service suppliers. Indeed, the measure establishes a regulatory distinction
based only on the location and place of domicile and/or incorporation of the service supplier,
which is why there should be a presumption of likeness in this case.
47

2.57. Lastly, the measure accords less favourable treatment to excluded services and service
suppliers than to like services and service suppliers of national origin, because applying the
criterion of payments received ( criterio de lo percibido) in order to be allowed to deduct expenses
means that purchasing foreign services is less attractive for Argentine taxpayers. The measure

41 According to Article 1, third paragraph, of the LIG, "[n]on-residents shall pay tax only on their
earnings of Argentine origin, in accordance with the provisions of Title V." (Exhibit PAN-4). The services
referred to in Title V of the LIG, particularly in Articles 91 and 93, are credit, loan and fund placement services.
42 See footnote 8.
43 Article 93(c) of the LIG (Exhibit PAN-4).
44 Panel Report, China - Publications and Audiovisual Products, para. 7.975.
45 See footnote 17.
46 Argentina's Schedule of Specific Commitments (Exhibit PAN-19).
47 Panel Report, China - Publications and Audiovisual Products, para. 7.975.

- B-11 -

thus denies foreign services and service suppliers opportunities to compete under equal conditions
with domestic services and service suppliers, for which payments may continue to be allocated
on an accrual basis.

2.5. The restrictions on access to the Arge ntine reinsurance and retrocession market
are inconsistent with Articles II:1, XVI:1 and XVI:2(a) of the GATS
48

2.58. Argentine legislation contains various provisions that prohibit, in absolute terms,
the provision of reinsurance services 49 in Argentine territory when provided by suppliers from the
excluded countries in the modes of cross-border trade (mode 1) and commercial presence
(mode 3).

2.59. In normal circumstances, reinsurance servic es may be provided in Argentina by suppliers
from the beneficiary countries that have branches, i.e. a commercial presence, in Argentina.
50
However, this possibility is expressly denied to suppliers of the same service when they are
incorporated in the excluded countries. 51 Furthermore, in exceptional circumstances, reinsurance
service suppliers from the beneficiary countries may be authorized to provide reinsurance services
in Argentina in cross-border mode. 52 However, this possibility is also expressly denied to suppliers
of the same services when they are incorporated in the excluded countries.53

2.60. Panama believes that the measure in question meets the criteria necessary to be considered
inconsistent with Articles II:1, XVI:1 and XVI:2(a) of the GATS.

Inconsistency of the measure with Article II:1 of the GATS

2.61. Argentina accords to reinsurance services an d service suppliers from the excluded countries
less favourable treatment than that accorded to like reinsurance services and service suppliers
from other countries, in violation of Article II:1 of the GATS.
54

2.62. First, the measure in question is covere d by the GATS. This is because the prohibition
on suppliers from the excluded countries providin g reinsurance services in cross-border mode and
through commercial presence is a measure that affects trade in reinsurance services conducted
through two of the four modes of supply provided for in Article I:1 of the GATS, since it regulates
the manner and cases in which reinsurance services may be provided in Argentina by foreign
suppliers.

2.63. Secondly, the foreign services and service suppliers affected by the measure are like other
foreign services and/or service suppliers. In effect, the prohibition is imposed only on reinsurance
service suppliers from the excluded countries. Given that the only reason for providing differential
treatment in respect of the provision of reinsurance services is the origin of the service supplier,
it follows that the measure affects services and service suppliers "like" those not covered by the
measure.
55

2.64. Lastly, the measure in question accords to services and service suppliers from the excluded
countries less favourable treatment than that accorded to like services and service suppliers from
other countries. Indeed, by directly denying supplie rs from the excluded countries the opportunity
to access the Argentine reinsurance market, the measure places them at a "serious competitive
disadvantage"
56 in relation to like suppliers from other countries, which can always supply their
services through commercial presence and, in exceptional circumstances, in cross-border mode.

48 It should be noted that Argentina modified its reinsurance-related measures on the same day that
Panama presented its first written submission to the Panel, i.e. 25 March 2014.
49 Any reference made solely to the term "reinsurance" also includes retrocession services,
in accordance with the Note in Chapter III of National Insurance Supervisory Authority Resolution No. 35.615
of 11 February 2011 (Exhibit PAN-36).
50 Point 1 of Annex I to Resolution No. 35.615 (Exhibit PAN-36).
51 Point 18 of Annex I to Resolution No. 35.615 (Exhibit PAN-36).
52 Point 19 of Annex I to Resolution No. 35.615 and Article 4 of Resolution No. 35.794.
53 Point 20(f) of Annex I to Resolution No. 35.615 (Exhibit PAN-36).
54 See footnote 8.
55 Panel Report, China - Publications and Audiovisual Products, para. 7.975.
56 Panel Report, US - Poultry (China), para. 7.416.

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Inconsistency of the measure with Articles XVI:1 and XVI:2(a) of the GATS

2.65. Through the measure in question, Argentina establishes restrictions that accord less
favourable treatment than that provided for in Argentina's Schedule of Specific Commitments, in a
manner that is inconsistent with Article XVI:1 of the GATS; in particular, these restrictions
constitute limitations on access to the Argentine market that are impermissible under
Article XVI:2(a) of the GATS.
57

2.66. In mode 1, Argentina has undertaken a full market access commitment in respect of the
reinsurance services sector and yet completely prohibits the provision of these services by
suppliers from the excluded countries. This proh ibition accords to suppliers from the excluded
countries less favourable treatment than that provided for in Argentina's Schedule
of Commitments, in a manner that is inconsistent with Article XVI:1 of the GATS, since
it constitutes a limitation inconsistent with Article XVI:2(a) of the Agreement. Furthermore, even if
Argentina were to allow suppliers from the excluded countries to access its reinsurance market
in cross-border mode, such access would be limited and subject to economic needs tests, which
are not inscribed in Argentina's Schedule of Commitments.

2.67. Hence, Argentina also accords to foreign service suppliers less favourable treatment than
that provided for in its Schedule, in a manner that is inconsistent with Article XVI:1 of the GATS,
as the limitation arising from the requirement for an economic needs test is inconsistent with
Article XVI:2(a) of the Agreement.

2.68. Consequently, by not allowing foreign supp liers to provide reinsurance services through
cross-border trade, Argentina accords to these suppliers treatment less favourable than that
established in its Schedule of Commitments, in a manner that is inconsistent with Articles XVI:1
and XVI:2(a) of the GATS.

2.69. In mode 3, Argentina has undertaken a market access commitment in respect of the
reinsurance services sector. This commitment is not, at present, subject to any limitation.
However, Argentina prohibits suppliers from the excluded countries from providing reinsurance
services under mode 3. This prohibition accords to these suppliers less favourable treatment than
that accorded by Argentina in its Schedule of Commitments in respect of market access under
mode 3, in a manner that is inconsistent with Article XVI:1 of the GATS, and constitutes
a limitation inconsistent with Article XVI:2(a) of the Agreement.

2.6. The restriction on access to the Argentin e capital market for service suppliers from
the excluded countries is inconsistent with Article II:1 of the GATS

2.70. Under Argentine legislation
58, agents registered to operate in the Argentine capital market
are, as a general rule, prohibited from carrying out transactions involving the public offering of
negotiable securities when such transactions are conducted or ordered by persons incorporated,
domiciled or residing in the excluded countries. Service suppliers from the excluded countries that
require access to the capital market to effectively provide their services, such as portfolio
managers, cannot directly obtain such access because of the prohibition imposed by the regulatory
provisions of the National Securities Commission (CNV). Transactions in the Argentine capital
market ordered by persons from the excluded countries are allowed only if the foreign manager is
registered with a body equivalent to the CNV and if there is a memorandum of understanding
between that body and the CNV.

2.71. Panama believes that the measure in question meets the criteria necessary to be considered
inconsistent with Article II:1 of the GATS.
59

2.72. First, the measure in question is a measure covered by the GATS. The prohibition on access
to the Argentine capital market for persons from the excluded countries is a measure that affects

57 Panel Report, China - Electronic Payment Services, para. 7.629 (citing the Panel Report in
China - Publications and Audiovisual Products, para. 7.1353). Appellate Body Report, US - Gambling,
para. 143; Panel Reports, China - Publications and Audiovisual Products, para. 7.1354, and China - Electronic
Payment Services, para. 7.511.
58 Article 5 in Section III of Title XI of the regulatory provisions of the National Securities
Commission (CNV) (Exhibit PAN-58).
59 See footnote 8.

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trade in services within the meaning of Article I:1 of the GATS, as: (i) the measure has an impact
on the supply of portfolio management services und er one of the modes provided for in Article I:2
of the GATS: the cross-border mode (mode 1); an d (ii) the measure "affects" the cross-border
supply in Argentina of portfolio management services from foreign suppliers, since it has a direct
impact on the effective supply of these services. 60 For the managers concerned, the prohibition
established by Argentina amounts to a restriction on access to the Argentine capital market,
thereby affecting the supply of portfolio management services.

2.73. Secondly, the foreign services and service suppliers affected by the measure are like other
foreign services and/or service suppliers. The measure addressed in this claim is the restriction on
Argentine registered agents carrying out transactions in the capital market "when they are
conducted or ordered by persons incorporated, do miciled or residing in [excluded countries]".
61
Therefore, the regulations themselves expressly st ipulate that the difference in treatment shall be
determined by the origin of the service supplier. Given that the only reason for providing
differential treatment is the origin of the supplier of the portfolio management service, it follows
that the requirement that the measure apply to "like" service suppliers has been met.62

2.74. Lastly, the measure in question accords to services and service suppliers from the excluded
countries less favourable treatment than that accorded to like services and service suppliers from
other countries. Indeed, the Argentine measure limits the investment options of portfolio
managers from the excluded countries by restricting their access to the essential auxiliary service
of stock brokerage and, consequently, to the Argentine capital market. The practical impossibility
of directly and freely accessing the Argentine capital market thus puts portfolio managers from the
excluded countries at a clear competitive disadvantage vis-à-vis managers from other countries.
The measure also discourages Argentine consumers from seeking the services of suppliers from
the excluded countries, in favour of suppliers from other countries that can ensure access to
a greater number of markets, develop broader and more diverse investment strategies and offer
more competitive prices. This, by definition, accords portfolio management service suppliers from
the beneficiary countries a competitive advantage
63, which is not extended immediately and
unconditionally to like suppliers from the excluded countries.

2.7. The imposition of more stringent requirements governing the registration
of branches of companies from the excluded countries is inconsistent with Article II:1
of the GATS

2.75. Under Argentine legislation, when a fore ign company from a beneficiary country wishes
to enter its branch in the Public Trade Regi ster of Buenos Aires, the Argentine Office
of Corporations (IGJ) will only seek compliance with the requirements listed in Article 188
of Resolution No. 7/2005.64 If a foreign company from an excluded country wishes to do the same,
the IGJ will request not only compliance with those requirements but also certification that the
company is effectively engaged in economically significant business activity in the place where it
was set up, registered or incorporated. In other wo rds, it must be demonstrated that the foreign
company is engaged in business activity in its place of origin, that it engages in this activity in an
effective manner, and that the activity is economically significant. To this end, the IGJ may require
that the company also provide the documentation listed in Article 192.1(a), (b), (c) and (d).
65

2.76. If the requirements provided for in Resolu tion No. 7/2005 are not met, the IGJ may, in the
exercise of its supervisory functions, request any information and document that it considers

60 Although Article 5 in Section III of Title XI of the regulatory provisions of the CNV does not refer
explicitly to portfolio management services, this provision imposes certain obligations on authorized
intermediaries (whose services are essential for portfolio managers).
61 Article 5 in Section III of Title XI of the regulatory provisions of the CNV (Exhibit PAN-58).
62 Panel Report, China - Publications and Audiovisual Products, para. 7.975.
63 Panel Report, EC - Bananas III (Ecuador), para. 7.239.
64 Article 188 of Resolution No. 7/2005 (Exhibit PAN-62).
65 In addition, Article 192.2 of Resolution No. 7/2005 establishes that, with regard to companies from
the excluded countries, the Argentine Office of Corporations (IGJ) may request, for the purposes of identifying
partners and certifying their credentials, the presentation of elements other than those provided for in
paragraph 3 of Article 188, including those relating to the assets and tax status of partners.
It should be noted that while the companies of beneficiary countries have only to identify their partners
and their respective shares in the company, companies from the excluded countries may be obliged to provide
information relating to the personal assets and tax status of their partners (Exhibit PAN-62).

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necessary.66 In the event of failure to comply, the IGJ will refuse to register the branch of the
foreign company.67

2.77. Panama believes that the measure in question meets the criteria necessary to be considered
inconsistent with Article II:1 of the GATS.
68

2.78. First, the measure in question is a measure covered by the GATS. It affects trade in services
within the meaning of Article I:1 of the GATS
69, as: (i) it has an impact on all the services likely
to be provided in Argentine territory through commercial presence (mode 3); and (ii) it "affects"
trade in services supplied through commercial presence, since it regulates the requirements to be
met for establishing branches in Argentine territory, and specifies the consequences of
non-compliance with those requirements. The measure therefore has "an effect on" such services.

2.79. Secondly, the foreign services and service pr oviders affected by the measure are like other
foreign services and/or service providers. In effect, the determining factor for applying the
additional requirement provided for in Article 192.1 is the origin of the foreign company. Foreign
companies, in general, must thus comply with th e requirements listed in Article 188 of Resolution
No. 7/2005. Companies from the excluded countries must, however, also comply with the
additional effective business activity requiremen t provided for in Article 192.1 of that same
Resolution. Given that the only reason for provid ing differential treatment in respect of the supply
of reinsurance services is the origin of the service supplier, it follows that the measure affects
services and service suppliers "like" those not covered by the measure.
70

2.80. Lastly, the measure in question accords to services and service suppliers from the excluded
countries less favourable treatment than that accorded to like services and service suppliers from
other countries. The measure thus undermines equal opportunities for competition between
foreign suppliers of different origins and, in particular, hinders opportunities for the development
and achievement of certain business models that involve the parallel presence of a central office in
a listed country and a branch in Argentina, without there having been any economically significant
business activity prior to the moment of requesting branch registration. Furthermore, the very
structure and design of the measure discourages companies from the excluded countries from
establishing a commercial presence in Argentina. Imposition of the registration requirement
in question also constitutes an additional administrative burden that, in itself, has a negative
impact on the competitive position of companies from the excluded countries in Argentina.

2.8. The imposition of the foreign exchange authorization requirem ent is inconsistent
with Article II:1 of the GATS

2.81. A foreign resident supplying services (of any sort other than financial) through commercial
presence in Argentina, for a period of 365 days or more, may repatriate investments made without
prior authorization to access the foreign exchange market from the Central Bank of the Argentine
Republic (BCRA). This exception to the BCRA general prior authorization requirement does not,
however, apply when the investor is from an excluded country.
71 In this case, the repatriation of
direct investments by natural or legal persons residing, incorporated or domiciled in the excluded
countries remains subject to prior authorization from the BCRA. This authorization is needed in
order to be able to gain access to the Unified Free Foreign Exchange Market (MULC) and buy the
foreign currency, which must be remitted, for such repatriation. Given that there is no specific
regulatory procedure for obtaining this authorization, the process is governed by the general rules
of Argentine administrative law, which means that the administration has an ample amount of time
(90 administrative working days, i.e. around four months) to issue a response. Failure to comply
with the foreign exchange regulations gives rise to criminal penalties.
72

66 Article 6(a) of the Basic Law (LO) of the IGJ (Exhibit PAN-63).
67 Article 6(f) of the Basic Law (LO) of the IGJ (Exhibit PAN-63).
68 See footnote 8.
69 Appellate Body Report, EC - Bananas III, para. 220.
70 Panel Report, China - Publications and Audiovisual Products, para. 7.975.
71 Point I of Communication "A" 4940 of the BCRA of 12 May 2009, which refers to the "list of
Decree No. 1344/1998", which was incorporated in the RIG by Decree No. 1037/2000 and contains the names
of "countries with low or no taxes" (Exhibit PAN-71).
72 Communication "A" 3471 of the BCRA of 8 February 2002 (Exhibit PAN-66).

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2.82. Panama believes that the measure in question meets the criteria necessary to be considered
inconsistent with Article II:1 of the GATS.73

2.83. First, the measure in question is a measure covered by the GATS, as it affects trade in
services within the meaning of Article I:1 of the GATS, i.e.: (i) it has an impact on all the services
likely to be supplied in Argentine territory through commercial presence (mode 3);
(ii) the measure "affects" trade in services supplied through commercial presence, since it
regulates a key aspect of the development of any business model that involves commercial
presence in Argentine territory, namely, the repa triation of investment in the event of sale,
liquidation, reduction of capital or return of irrevocable capital contributions by the company.
The measure thus has "an effect on" such services.

2.84. Secondly, the foreign services and service suppliers affected by the measure are like other
foreign services and/or service suppliers. The fo reign exchange authorization requirement for the
repatriation of direct investments by persons from the excluded countries, in accordance with
point I of Communication "A" 4940, is imposed only when the foreign beneficiary is a natural or
legal person residing, incorporated or domiciled in one of the excluded countries. Given that the
only reason for providing differential treatment in respect of the repatriation of direct investments
is the origin of the service supplier, under case law the requirement that the measure apply to
"like" service suppliers is met.
74

2.85. Lastly, the measure in question accords to services and service suppliers from the excluded
countries treatment less favourable than that accorded to like services and service suppliers from
other countries. By limiting the outflow of capital once the investment has been made, the
measure has the effect of discouraging ab initio the establishment of commercial presence in
Argentina by the listed service suppliers. These suppliers bear not only an additional administrative
burden (i.e. having to request the consent of the BCRA), but also the risk of seeing their request
denied or granted too late. Consequently, the measure puts suppliers from the excluded countries
at a clear competitive disadvantage in relation to suppliers from beneficiary countries, when
accessing and setting up in the Argentine market.

73 See footnote 8.
74 Panel Report, China - Publications and Audiovisual Products, para. 7.975.

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ANNEX B-2
SECOND PART OF THE EXECUTIVE SUMMARY OF THE ARGUMENTS OF PANAMA
1 INTRODUCTION

1.1. Panama has presented a solid case of violation of the MFN principle in relation to services and,
in some regards, to goods, as well as of the national treatment and market access obligations. In
its attempts at rebuttal, Argentina resorts to laboured and clearly untenable arguments that entail
absurd consequences.

1.2. Argentina also attempts to justify the violations by invoking Articles XIV(c)(i) and XIV(d) of
the GATS, as well as Article XX(d) of the GATT, an d in regard to two of the challenged measures,
the prudential exception under paragraph 2(a) of the GATS Annex on Financial Services. However,
the defence raised by Argentina is in all respects inadequate. Consequently, Panama considers that
the Panel should find that the Argentine measures are inconsistent with the GATS and GATT
obligations identified by Panama.

2 LEGAL ARGUMENT

2.1 Discrimination in regard to the withholding tax on payment for certain services

2.1. The withholding tax on payments made by Argentine residents to persons in excluded
countries in return for loan, credit and other services entailing the placement of funds in Argentina
is a compulsory tax and is imposed by virtue of Article 93(c) of the Income/Profits Tax Law (LIG).
Argentina taxes certain transactions between Argentine residents and persons in other countries
by means of a withholding tax on net profits from such transactions. Loan, credit and other
services that entail the placement of funds in Argentina are subject to this withholding tax on
profits. When Argentine consumers – that are not banks or financial entities – obtain loans, credits
or funds in general from abroad, Argentina impose s different tax burdens on payments of interest
or remuneration, depending on the location of the supplier. If the payments are intended for
suppliers in beneficiary countries, Argentina imposes an effective withholding tax of 15.05% of the
amount of the payments. However, if they are intended for excluded countries, Argentina imposes
an effective withholding tax of 35% on the amount of such payments.

2.1.1 Argentina has not succeeded in rebutting the prima facie inconsistency of the
withholding tax on payments for certain se rvices with the MFN treatment obligation
under Article II:1 of the GATS

2.2 Panama has established in this proceeding that: (i) the discriminatory withholding tax is a
measure affecting trade in services and is therefore covered by the GATS; (ii) the measure affects
like services and service suppliers from excluded and beneficiary countries; and (iii) the treatment
accorded to the said services and service suppliers from excluded countries is less favourable than
that applicable to like services and service suppliers from the beneficiary countries. Thus, Panama
has demonstrated that the measure is inconsistent with Article II:1 of the GATS.

2.3. Applying the correct legal standard, in the order established by the case law
1, Panama notes
that, with regard to the coverage of the measur e by the GATS, the withholding tax is a measure
"in respect of" the payment of a service within the meaning of Article XXVIII(c)(i), and as such is a
measure "affecting trade in services" within the meaning of that Article and Article I:1 of the
GATS. Argentina maintains that there is no trade in services because Panama has failed to identify
clearly and concretely the relevant services and modes of supply
2 and because Panama has not

1 Argentina has put forward a legal standard inconsistent with that established by the case law for the
assessment of claims under GATS Article II:1. Panama considers that the Panel should reject that legal
standard and apply the correct standard, which has three elements and a specific order, namely: (i) the
coverage and applicability of the GATS; (ii) the likeness of services and service suppliers; and (iii) less
favourable treatment.
2 Argentina's first written submission, para. 142.

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demonstrated the existence of a genuine supply to consumers in Argentina. 3 In Panama's opinion,
Argentina's arguments are out of place and, in any case, have no basis either in the text of
Articles I and XXVIII of the GATS or in the case la w. To make application of the GATS subject to
the existence of actual trade would run counter to the object and purpose of the GATS and would,
if anything, limit its scope. Nevertheless, Panama places on record that it has duly identified the
services affected
4 and has demonstrated the existence of trade in services. 5 Argentina also
appears to insinuate that trade in services is not affected because Panama posits a "theoretical
effect" on potential service suppliers. 6 However, the effect is clear from the very wording of
Article 93(c) of the Income/Profits Tax Law (LIG) and this has been recognized by Argentina.7

2.4. Regarding likeness, the distinction made by the measure centres not on the supplier or the
service as such, but simply on "the place where the supplier is located". The case law ( China -
Publications and Audiovisual Products and China - Electronic Payment Services ) has established
that, when the only distinction between service suppliers is based on origin, the requirement of
likeness between the suppliers in question is met. Argentina's arguments do not detract from the
legal validity of that approach. However, even if it were relevant to resort to other criteria in order
to verify that the measure affects like services and service suppliers, Panama considers that,
applying mutatis mutandis the criteria used for those purposes in goods trade (namely the nature
of the service, its purpose, consumer preference s and classification), an assessment of the facts
would continue to show the existence of likeness in the services and suppliers affected by the
withholding tax.
8 Lastly, in pointing out that origin and regulatory environment (understood in this
dispute as the existence or non-existence of an agreement on exchange of tax information
between governments) is a relevant criterion for distinguishing service suppliers, Argentina
suggests that an analysis of aims and effects should be introduced for the determination of
likeness. However, this criterion has been reject ed by the Appellate Body, with respect to both
trade in goods and trade in services.

2 . 5 . F i n a l l y , c o n t r a r y t o w h a t i t i s s t a t e d by Argentina, the demonstration of less favourable
treatment does not require the demonstration of actual effects. When the claim is based on
legislation, what has to be examined is the existence of less favourable treatment in Argentina's
regulatory framework, such as to alter equality of competitive opportunities in the relevant
market.9 This clearly occurs in the case of the withho lding tax, since a much higher tax burden is
imposed on the services of suppliers from exclud ed countries than that which is imposed on the
like services of the suppliers from beneficiary countries.

2.1.2 Argentina has failed to demonstrate that the withholding tax on payments for
certain services is justified by Article XIV(c)(i) of the GATS

2.6. Argentina has failed to demonstrate that the measure in question is designed to secure
compliance with laws and regulations which in themselves are not inconsistent with the GATS.
Argentina maintains that the discriminatory withholding tax seeks to enforce the LIG but does not
show how it is that a law establishing a tax on profits is a law relating to the prevention of
deceptive and fraudulent practices within the meaning of Article XIV(c)(i) of the GATS. The
reference to the LIG in general - with its 182 articles - is insufficient to meet the standard of
Article XIV(c)(i) of the GATS, and Argentina has also failed to make any attempt to demonstrate
that the LIG is consistent with the GATS. At the same time, Argentina fails to explain how it is that
its measures, and the discriminatory withholding tax in particular, secure compliance with the LIG.
On the contrary, the analysis of the design, structure and architecture of the discriminatory
withholding tax shows that it is not a compliance measure.
10

2.7. In any event, Argentina has not succeeded in demonstrating that the measure is "necessary"
to secure compliance with the LIG. Argentina ha s failed to demonstrate that the discriminatory
withholding tax contributes to the purpose intended by Argentina, and that the measure has no

3 Argentina's first written submission, paras. 143-144.
4 Panama's first written submission, paras. 4.3, 4.4, 4.30 and 4.31.
5 Panama's second written submission, para. 2.99.
6 Argentina's first written submission, para. 145.
7 Ibid., para. 109.
8 Panama's second written submission, para. 2.132.
9 Panama's first written submission, paras. 4.22-4.24.
10 The fact that the tax is withheld at the time of remittance of the payment ensures payment of the tax
charged to the person responsible, that is, the supplier from abroad.

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adverse impact on international trade in the services in question. Although the interest in
collecting taxes may be important in the highest degree to Argentina, that interest must be
interpreted in conjunction with the interests of the Argentine citizen, resident or economic operator
who trusts that tax authority measures are in keeping with the parameters of the principles of
legality and tax equality. Finally, with the regard to the chapeau of GATS Article XIV(c)(i), the
measure in question constitutes a means of arbi trary or unjustifiable discrimination between
countries where like conditions prevail, and a disguised restriction on trade in services. The
measure is applied arbitrarily, distinguishing between countries on the basis of cooperation with
Argentina, although the initiation of negotiations is subject to the discretion of Argentina (the
example of Bahrain may be recalled). In additi on, there is no reason for the discriminatory
withholding tax to have a broader scope than that relating to the concern that allegedly gave rise
to the measure: the situation of insider loans.

2.2 Presumption of unjustified increase in wealth

2.8. Argentine tax legislation contains the legal presumption that any entry of funds from the
excluded countries constitutes, unless proven otherwise, an "unjustified increase in wealth" for the
recipient of the funds in Argentina. This has consequences for the taxpayer as it obliges him to pay
profits tax, value added tax (VAT) and other internal taxes on the amount received from the
excluded country, regardless of the type of oper ation that led to the money being sent and of
whether the taxable event giving rise to the imposition of the above taxes actually occurred. When
the funds enter Argentina from beneficiary countries, the presumption of unjustified increase in
wealth does not arise and, therefore, the local re cipient of those funds incurs no risk of fiscal
consequences.

2.2.1 Argentina has failed to rebut the prima facie inconsistency of the presumption of
unjustified increase in wealth with the MFN treatment obligation under Article II:1 of
the GATS

2.9. Panama has established in this proceeding: (i) that the presumption of unjustified increase in
wealth, as provided for in the article added to Article 18 of the Law on Tax Procedure (LPT), is a
measure affecting trade in services, the delivery of which implies the entry of funds from abroad
and is covered by the GATS; (ii) that the services and service suppliers in question are like; and
(iii) that the treatment accorded to the servic es and service suppliers in question from the
excluded countries is less favourable than that applicable to like services and service suppliers
from the beneficiary countries. Consequently, the measure is inconsistent with Article II:1 of the
GATS.
11

2.10. Argentina has not succeeded in disproving that its measure is in breach of the
MFN treatment obligation provided for in the GATS. With regard to coverage, Argentina has not
succeeded in disproving that the presumption of unjustified increase in wealth qualifies as a
measure affecting trade in services within the meaning of Article I:1 of the GATS, and therefore as
a measure covered by the GATS. The measure affects all those services the delivery or supply of
which requires the entry of funds into Argentina, as has been indicated by Panama.
12 Argentina's
argument that it is necessary to show that trad e actually exists between the complainant and the
respondent in order for the GATS to be applicable, lacks any foundation in the GATS and in the
case law and would render the purpose of the GATS meaningless.

2.11. Regarding likeness, Argentina asserts that the services and service suppliers of the excluded
countries are not like those of the beneficiary countries because of the different regulatory
environment of each, particularly as regards the regulations on exchange of tax information with
the Argentine Government.13 As was mentioned earlier, a distinction between service suppliers on
the basis of this "regulatory environment" is unf ounded. The regulatory environment is a factor
external to the service supplier and could only be relevant in a de facto case insofar as it is
perceived by the market - and not by the regulator - as a key factor affecting competition. The
only distinction established by the measure is on account of the location of the supplier, but not
the nature of the services or the supplier of the se rvices. Therefore, it is clear that it flows from

11 As in the case of the first measure, Argentina posits a legal standard inconsistent with that
established by the case law for the assessment of claims regarding less favourable treatment in trade in
services, which should be rejected by this Panel.
12 Panama's first written submission, paras. 4.3, 4.4, 4.30 and 4.31.
13 See, for example, Argentina's first written submission, paras. 193 and 220.

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the same Argentine legislation, and that objectively it does not allow for the assumption of a
difference in the character of the suppliers from excluded countries and those from beneficiary
countries in the context of services the delivery of which implies entry of funds from abroad (such
as insurance, reinsurance, retrocession and loans), as Argentina seeks to have us believe on the
basis of mere argument. Even if it were relevant to have recourse to other criteria in order to
verify that the measure affects services and service suppliers from excluded countries like those
from beneficiary countries, Panama considers that, taking into account the criteria used in goods
trade to determine likeness between products, there would also be no reason to maintain that the
services and service suppliers of excluded countries and beneficiary countries are not like.
14

2.12. With regard to less favourable treatm ent, the measure constitutes an "additional
requirement" which in the circumstances of this case - lack of a similar requirement for the entry
of funds from beneficiary countries – proves a change in the conditions of competition and,
therefore, the existence of less favourable treatment.
15 The mere existence of a presumption of
unjustified increase in wealth which applies solely to suppliers from excluded countries is sufficient
to impair equality in the conditions of competition between suppliers from excluded countries and
from beneficiary countries, and therefore gives rise to less favourable treatment for the former.
The statistics submitted by Argentina to refute the existence of less favourable treatment are not
relevant and, in any case, confirm that, due to the difficulty of rebutting the presumption, in most
cases the taxpayer will fail in his attempt to demonstrate the legitimacy of the funds and
therefore will remain subject to the tax consequences entailed by the confirmation of an unjustified
increase in wealth.
16

2.2.2 Nor has Argentina succeeded in rebutting Panama's prima facie c a s e t h a t t h e
measure in question is inconsistent with Article XVII of the GATS

2.13. Argentina does not deny having made full commitments in respect of national treatment
under mode 1 for maritime transport and air transport insurance services, as well as reinsurance
and retrocession services. Nevertheless, despit e having assumed that commitment, Argentina
applies the presumption of unjustified increase in wealth solely to funds originating from
companies located in excluded countries. Consequently, Argentina accords to maritime and air
transport insurers and suppliers of reinsurance and retrocession services from excluded countries
treatment less favourable than that accorded to like domestic insurers and reinsurers, in a manner
clearly inconsistent with Article XVII of the GATS.

2.14. Panama has shown that the presumption of unjustified increase in wealth is a measure
affecting the supply of maritime and air transport insurance services, as well as the supply of
reinsurance and retrocession services (delivery of which implies the entry of funds from abroad).
In the context of this measure, origin is the only criterion for differentiating between the services
and service suppliers in question. Consequently, and in accordance with the case law, likeness is
verified between suppliers of excluded countries and national suppliers. Finally, Argentina has not
disproved that the treatment accorded to services and service suppliers from excluded countries is
not only different, but is also less favourable tr eatment than that accorded to like services and
service suppliers of Argentine origin.

2.2.3 Argentina has not demonstrated that the presumption of unjustified increase in
wealth is justified under Article XIV(c)(i) of the GATS

2.15. Argentina has not demonstrated that the presumption of unjustified increase in wealth is
aimed at securing compliance with laws and regulations which in themselves are not inconsistent
with the GATS. The objective proposed by Argentina of "preventing undeclared funds or income
which should have been subject to taxation in Argentina, but which was diverted to
non-cooperative tax jurisdictions, from being repatriated to Argentina by means of simulated
transactions between the same beneficiary owners or related parties"
17, would not qualify as an
objective of "compliance" with the LIG.

2.16. Argentina has failed to show how it is that the practices mentioned allegedly prevent the
achievement of compliance with the LIG, or how it is that the presumption of unjustified increase

14 Panama's second written submission, para. 2.278.
15 Appellate Body Report, Thailand - Cigarettes, para. 130.
16 Panama's second written submission, para. 2.285.
17 Argentina's first written submission, paras. 280–281.

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in wealth serves to require its enforcement. Nor has it demonstrated that the presumption of
unjustified increase in wealth is "necessary" to secure compliance with the LIG. However, even if
the presumption of unjustified increase in wealth were to constitute a means of compliance
provisionally justified under subparagraph (c)(i) of Article XIV of the GATS, the measure would
nevertheless be a means of arbitrary and unjustifiable discrimination between countries where like
conditions prevail for the purposes of tax transparency and exchange of information, since
Argentina's distinctions based on the list of beneficiary or "cooperative" countries for purposes of
tax transparency and exchange of information do not reflect impartial and neutral treatment with
regard to countries that face similar situations in this context.

2.2.4 Argentina has not demonstrated that the measure in question is justified under
Article XIV(d) of the GATS.

2.17. Argentina has failed to meet the standard for demonstrating justification of a measure
under Article XIV(d) of the GATS.
18 In the first place, the presumption of unjustified increase in
wealth refers to certain taxes that are not direct taxes of (VAT and internal taxes). Secondly, the
presumption of unjustified increase in wealth is not aimed at ensuring collection of the profits tax
on parties abroad, but gives rise to tax effects on the recipient of the funds. 19 Nor is it a measure
on the imposition or collection of the profits tax on the services in question. Finally, the
presumption of increased wealth constitutes a means of arbitrary and unjustifiable discrimination
between countries where like conditions prevail fo r purposes of tax transparency and exchange of
information, since Argentina's distinctions based on the list of beneficiary or "cooperative"
countries for purposes of tax transparency and exchange of information do not reflect impartial
treatment between countries in a similar situation.

2.2.5 Argentina has failed to rebut the prima facie inconsistency of the presumption of
unjustified increase in wealth with Article I: 1 of the GATT, nor has it demonstrated that
the measure is justified under Article XX(d) of the GATT

2.18. Panama has demonstrated that the presumption of unjustified increase in wealth is a
measure affecting payments for exports and falls within the scope of Article I:1 of the GATT.
Regarding coverage, although it is a rule in the sphere of taxation, through its legal effects it
governs payments for exports (which are considered unjustified increases in wealth, depending on
their origin). For this reason, from the standpo int of Article I:1 of the GATT, the measure in
question constitutes a "rule in connection with exportation" carried out by Argentine persons. With
regard to likeness, Argentina does not deny that exports destined for beneficiary countries are like
those destined for excluded countries. Nor would there be any scope for such an argument, since
in the case of discrimination regarding exports, the same products, exported by the same parties
in Argentina, are involved. With regard to less favourable treatment, the measure in question
grants an advantage, favour, privilege or immunity to products destined for beneficiary countries,
since, despite emphasizing that the presumption is rebuttable, Argentina recognizes that the
presumption is automatic. As was pointed out by Panama, a Member's compliance with its
obligations cannot be made conditional on the act of a private individual.

2.19. Furthermore, Argentina has failed to demonstrate that the measure addressed in this claim
is justified. Although Argentina invoked Article XX(d) of the GATT, it failed to identify specific laws
or regulations with which it is sought to secure compliance through presumption of unjustified
increase in wealth. Without this basis, it is impossible to determine whether the measure is
intended, and whether it is "necessary", to achieve the purpose of compliance which is the subject
of protection under Article XX(d) of the GATT. In any event, the application of the presumption of
unjustified increase in wealth on the basis of a list of beneficiary countries which does not meet
objective criteria constitutes a means of arbitrary and unjustifiable discrimination between
countries where like conditions prevail, in a manner inconsistent with the chapeau of Article XX(d).

18 In order to justify a measure under the above-mentioned article, the respondent must: (i)identify the
direct taxes; (ii) establish what it considers to be fair or effective imposition or collection [of these taxes] with
respect to services and service suppliers of other Members; and (iii) demonstrate that the measure has the
purpose of guaranteeing such imposition or collection. In addition, the measure must be applied in accordance
with the chapeau of Article XIV of the GATS.
19 Article added to Article 18 of the LPT.

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2.3 Requirement of valuation based on transf er prices for transactions with excluded
countries

2.20. In the case of arm's-length transactions where there is no link between the Argentine
taxpayer and his counterpart, the value of a transaction may be considered as a market value and
will be determined in accordance with the agreement reached between the parties. This general
rule applies to transactions with persons from beneficiary countries and transactions with
Argentine persons. On the other hand, in accordance with Articles 8 and 15 of the LIG, if the
transaction takes place between an Argentine ta xpayer and a person domiciled in any of the
excluded countries, that transaction is not considered to be consistent with normal arm's-length
market practices or prices, and the Argentine taxp ayer is required to apply the transfer pricing
regime as if the transaction were between related parties.

2.3.1 Argentina has failed to rebut the prima facie inconsistency of valuation based on
transfer prices with the MFN treatment obligation under Article II:1 of the GATS

2.21. Panama has established in this proceeding that: (i) the requirement of valuing services from
excluded countries on the basis of transfer prices is a measure affecting trade in services and is
covered by the GATS; (ii) the measure affects lik e services and service suppliers from excluded
countries and beneficiary countries; and (iii) the treatment accorded to services and service
suppliers from the excluded countries is less favourable than that applied to like services and
service suppliers from the beneficiary countries. Therefore, the measure is inconsistent with
Article II:1 of the GATS.
20

2.22. With regard to coverage, valuation based on transfer prices is a measure affecting trade in
services and is therefore covered by the GATS. 21 Contrary to what is stated by Argentina, Panama
has duly identified the services affected by th e measure. Given the broad scope of the measure,
Panama's claim covers all services contracted between the relevant Argentine taxpayers and
foreign suppliers. Argentina's attempt to introduce a "procedural legitimacy" requirement
(namely, that trade must effectively exist betw een the complainant and the respondent) in order
for the GATS to be applicable, is inappropriate. Although Argentina alleges that trade in services is
not affected because Panama raises a case involving a "theoretical effect"
22, the mere existence of
the legislation that gives shape to the measure is proof that there is a real effect in the Argentine
market.

2.23 With regard to likeness, the premise established in the LIG is that persons from abroad that
conduct transactions with Argentine residents ha ve equal status for tax purposes. The measure
establishes no qualifications or limitations on the way in which the service is to be supplied. What
the measure establishes in Article 15 of the LIG is differential treatment based on the place of
domicile, establishment or location of the persons from abroad that enter into contracts with
Argentine residents, and that "supply the service"; in other words, based on the location of the
"service suppliers". Consequently, service suppliers from the excluded countries are like those
from the beneficiary countries which also conclude service transactions with relevant Argentine
taxpayers, in accordance with the case law.

2.24 With regard to less favourable treatment, Panama has demonstrated that the measure
imposes not one, but various additional requirements which give evidence in this case of the
existence of less favourable treatment. This is so because the costs of purchasing a service will
have to be supplemented by a substantial administ rative burden, costs, additional work and the
existence of a definite tax risk owing to the mandatory nature of the system. Argentina argues
that in this case less favourable treatment has not been effectively demonstrated, since it
considers that Panama has not demonstrated th e existence of actual trade. However, this
argument should be rejected as having no basis in the GATS or in the case law.

20 As in the case of the previously mentioned measures, the Panel should reject the legal standard
presented by Argentina and apply the correct legal standard developed by the case law, which has
three elements and a specific order.
21 From the consumer's standpoint, Article XXVIII(c)(i) of the GATS characterizes measures "in respect
of" the purchase or use of a service as "measures by Members affecting trade in services", and these are
therefore covered by the GATS by virtue of Article I:1. Moreover, from the supplier's standpoint, the measure
affects the supply of services, in particular the sale thereof, within the meaning of Article XXVIII(d) of the
GATS.
22 Argentina's first written submission, para.145.

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2.3.1.2 Nor has Argentina rebutted Panama's case that the measure in question is
inconsistent with Article XVII of the GATS

2.25. Argentina does not deny that it undertook full commitments in respect of national treatment
under modes 1 and 2 for virtually all the services provided for in its Schedule. However, Argentina
applies valuation on the basis of transfer prices to funds from companies located in excluded
countries and not to those from national companies. Consequently, Argentina accords less
favourable treatment to services and service suppliers from excluded countries than that which it
accords to like services and service suppliers of national origin, in a manner clearly inconsistent
with Article XVII of the GATS.

2.26. In the first place, Argentina does not dispute the fact that, except in relation to certain
services, Argentina has undertaken full commitments in respect of national treatment for all
sectors of its Schedule under modes 1 and 2. 23 This means that, in respect of these services and
modes of supply, Argentina can maintain no limitation - "None". 24 Secondly, the measure affects
the supply of these services since it "has an effect on" the transaction between the service supplier
and the local consumer. In the light of Article XXVIII(b) of the GATS, the measure affects the
"sale" of services by suppliers from excluded co untries and, in the light of Article XXVIII(c), the
measure affects the "purchase" or "use" of such services by Argentine consumers, both in
Argentina (mode 1) and in the territory of the country concerned (mode 2). Thirdly, given that the
origin of the service supplier is the only element determining the imposition of the transfer pricing
regime for the valuation of transactions, there is a verified likeness between suppliers from
excluded countries and national suppliers. Finally, Argentina has not refuted the fact that the
treatment accorded to services from excluded countries is not only different but also less
favourable than that accorded to like services and service suppliers of Argentine origin. Given the
mandatory requirement and absolute presumption of knowledge of the law, Argentine taxpayers
will know that transactions with suppliers from excluded countries generate complexities, costs
and possible problems with the Federal Administra tion of Public Revenue (AFIP), and given this
regulatory disincentive, the conditions of competition between them are affected.

2.3.1.3 Argentina has failed to demonstrate that the transfer pricing regime is justified
under Article XXIV(c)(i) of the GATS

2.27. Argentina has failed to prove that the transfer pricing regime is intended to secure
compliance with laws and regulations which in themselves are not inconsistent with the GATS. The
explanation furnished by Argentina, to the effect that its tax measures (including the valuation of
transfer prices) seek to secure compliance with tax legislation, "including the prevention of
'deceptive and fraudulent practices'"
25 and that the laws and regulations with which it is sought to
secure compliance are in themselves consistent with the GATS, and that therefore Argentina is
entitled to establish measures that "secure compliance" with those laws and regulations"
26 is
inadequate and deficient in Panama's view. According to Argentina, the law or regulation with
which it is sought to secure compliance through valuation based on transfer pricing is the LIG. 27
However, in Panama's view, in order to meet the standard of Article XIV(c)(i) of the GATS,
Argentina should have demonstrated that the LIG is a law with the status under Article XIV(c)(i) of
a law "relating to the prevention of deceptive and fraudulent practices". Argentina made no
attempt whatsoever to demonstrate that the LIG is consistent with the GATS. 28 Although
Argentina asserts that its measures, including the requirement of valuation on the basis of transfer
prices, secures compliance with the LIG 29, it does not clearly explain how this occurs, particularly
with regard to transactions between persons that are clearly not related and to whom the measure
in question is nevertheless applied. Nor has Argentina demonstrated that the presumption of
unjustified increase in wealth is "necessary" to secure compliance with the LIG. Without prejudice
to the foregoing, the measure constitutes a mean s of arbitrary and unjustifiable discrimination
between countries where like conditions prevail for the purposes of tax transparency and exchange

23 There are some services for which commitments were not established under Modes 1 and 2. See
footnote to page 420 of Panama's second written submission.
24 Panama's second written submission, para. 2.433.
25 Argentina's first written submission, para. 262.
26 Ibid., para. 267.
27 Ibid., para. 264.
28 Appellate Body Report, Thailand - Cigarettes (Philippines), para. 179.
29 Argentina's first written submission, para. 264.

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of information, as it is based on distinctions between countries that do not reflect impartial and
neutral treatment with respect to countries facing similar situations.

2.3.1.4 Argentina has not demonstrated that the transfer pricing regime is justified
under Article XIV(d) of the GATS

2.28. Argentina has failed to demonstrate that the requirement of transaction valuation based on
transfer prices is duly justified in the light of Article XIV(d) of the GATS.
30 Valuation based on
transfer prices is linked to the imposition or coll ection of the profits tax, which Panama recognizes
as a direct tax. However, this measure bears no relation to the collection or imposition of taxes on
services or service suppliers of other Members. Th e imposition or collection of the profits tax in
regard to services that are affected under mode 1 is carried out by means of Articles 9 to 13 and
Title V of the LIG. With respect to services that could be affected under mode 2 – insofar as they
concern activities conducted outside Argentina - they are not taxed under the LIG by virtue of
Article 5 of that law.
31 Moreover, the transfer pricing regime constitutes a means of arbitrary and
unjustifiable discrimination between countries where like conditions prevail for the purposes of tax
transparency and exchange of information, in a manner inconsistent with the chapeau of
Article XIV(d) of the GATS.

2.3.2 Argentina has failed to rebut the prima facie inconsistency of the transfer pricing
regime with the obligations under Articles II:1, III:4 and XI:1 of the GATT, nor has it
demonstrated that the measure in questions is justified under Article XX(d) of the GATT.

2.29. Regarding the obligation of MFN treatment under Article I:1 of the GATT, the requirement of
valuation based on transfer prices is a measure covered by Article I:1 of the GATT which affects
products from the excluded countries that are like the products from beneficiary countries, as well
as products destined for the excluded countries that are like those destined for the beneficiary
countries. As far as imports are concerned, the measure grants an advantage, favour, immunity or
privilege to products from beneficiary countries, which is not extended immediately and
unconditionally to the like products from excluded countries. As far as exports are concerned, the
measure grants an advantage, favour, immunity or privilege to products destined for beneficiary
countries, which is not extended immediately and unconditionally to like products destined for the
beneficiary countries.

2.30. With regard to the national treatment ob ligation under Article III:4 of the GATT, although
Argentina and Panama appear to have no differences regarding the legal standard of applicability
of Article III:4 of the GATT in respect of the likeness of products, Argentina appears to suggest
that rules which do not identify or distinguish specific products cannot be challenged under
Article III:4 of the GATT because it is not possible to assess likeness. 32 Panama considers that a
measure does not have to mention specific products as long as it affects imports in the context of
Article III:4 of the GATT. If the measure makes dist inctions between import "transactions" on the
basis of origin, the case law has established that the measure in question adversely affects like
products, as has been pointed out by Panama throughout this dispute. Although Argentina asserts
that imported products from the excluded countries and those of national origin have "intrinsic"
differences", it has not provided support for that assertion.

2.31. As regards the obligation to eliminate quantitative restrictions under Article XI:1 of the
GATT, Argentina has indicated that the requirement of valuation based on transfer prices has the
nature of a tax and is therefore not covered by the GATS. 33 However, this argument is untenable.
The measure is based on methodological requirements, administrative formalities and costs, but
does not impose a tax as such. Argentina establishes a limiting condition on purchases (imports)
and on sales (exports), which constitutes a restriction on the importation and exportation of
goods, since the compulsory nature and certai n knowledge of the requirement condition the
purchase of products from the excluded countries, or sales destined for those countries, on the
part of an Argentine taxpayer, by means of charges and costs attached to the goods purchased
from or destined for those countries.

30 See the legal standard in footnote 19 of this executive summary.
31 Exhibit PAN-4.
32 Argentina's first written submission, paras. 717-720.
33 Ibid., para. 728.

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2.32. Argentina has failed to demonstrate that the requirement of valuation on the basis of
transfer prices is justified under Article XX(d) of the GATT. Argentina does not even identify
specific laws and regulations with which it is sought to secure compliance through implementation
of the transfer pricing regime. Without this basis, it is not possible to determine whether the
measure is intended, or much less necessary, to achieve the aim of compliance which is the
subject of protection under Article XX(d) of the GATT. In any event, this regime does not meet
objective criteria with regard to countries facing like conditions in respect of tax transparency and
exchange of information, and it therefore cons titutes a means of arbitrary and unjustifiable
discrimination between countries where like conditions prevail, in a manner inconsistent with the
chapeau of Article XX(d) of the GATT.

2.4 Allocation of expenditure for transactions with persons from the excluded countries

2.33. For the purpose of determining the tax base for the profits tax, an Argentine taxpayer may
deduct expenses of various kinds with a view to obtaining the net profit. In general, the basic
criterion used for the allocation of earnings and expenditure is the "accrual" rule. However, in the
case of payments made to persons from the excluded countries which generate a profit of
Argentine origin, the Argentine tax legislation provides that the Argentine taxpayer should allocate
those payments to the period of time at which they are made.

2.4.1 Argentina has failed to rebut the prima facie inconsistency of the allocation of
expenditure to the time of payment with the MFN treatment obligation under Article II:1
of the GATS

2.34 Panama has established in this proceeding th at: (i) the rule on allocation of expenditure to
the time of payment for specific services from excluded countries, as derived from Article 18,
last paragraph, of the LIG, is a measure affecting trade in services and is covered by the GATS; (ii)
the measure affects like services and service suppliers from excluded countries and beneficiary
countries; and (iii) the treatment accorded to se rvices and service suppliers from the excluded
countries is less favourable than that which is applicable to like services and service suppliers from
the beneficiary countries. Therefore, the measure is inconsistent with Article II:1 of the GATS.

2.35 With regard to coverage, the measure qualifies as a measure affecting trade in services
under Articles XXVIII(b), XXVIII(c)(i) and I:1 of the GATS. 34 Argentina considers that "there is no
trade in services" because Panama has failed to identify the services and service modes that are
relevant to this dispute. Panama has already explained that the very wording of the measure
makes it a measure that applies only to some services.
35 Without prejudice to the identification of
the general category of services, and of some spec ific services affected by the measure, Panama
observes that the LIG envisages other services, wh ether under Title V or in other sections, which
are also affected by the measure when they generate profits of Argentine origin. 36 Moreover,
Panama considers that it is necessary to dismiss Argentina's argument that there is no trade in
services because Panama failed to demonstrate the existence of actual trade between Panama and
Argentina, or alternatively between another Member discriminated against and Argentina.

2.36. With regard to likeness, the distinction in treatment made by Argentina is based on the
doubt concerning the existence of genuine transactions (case of insider loans) and not on the lack
of likeness between services or service suppliers from the excluded countries compared with those
from the beneficiary countries. Even if it were relevant to have recourse to other criteria in order
to verify that the rule on allocation of expenditure affects services and service suppliers from the
excluded countries like those from the beneficiary countries, Panama has provided numerous
examples of how specific services and service suppliers that generate profits of Argentine origin
should be considered like for the purposes of Ar ticle II:1 of the GATS, in accordance with the
criteria used in the goods trade to determine likeness between products.

34 From the standpoint of the consumer, this is a measure which, under Article XXVIII(c)(i) of the GATS,
qualifies as a measure in respect of the purchase or use of a service, and as such must be considered a
"measure[] by Members affecting trade in services". From the standpoint of the supplier, it is a measure
affecting the supply of services, and in particular, in the light of Article XXXIII(b) of the GATS, the sale of
services. The fiscal prejudice caused to the services covered by Title V of the LIG affects the conditions of sale
of the relevant services for the service supplier abroad.
35 Panama's second written submission, para. 2.507.
36 Ibid., para. 2.508.

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2.37. With regard to less favourable treatment, th e rule on allocation of expenditure is a measure
that affects conditions of competition between service suppliers from the excluded countries and
those from the beneficiary countries, inasmuch as it alters the competitive opportunities for
services and service suppliers from the excluded countries and objectively places them at a
disadvantage compared with their competitors from beneficiary countries. Argentina has submitted
only legal arguments
37 and Panama has already explained the reasons why it is inappropriate to
make an assessment of less favourable treatment in terms of trade volumes actually affected, in
relation to Panama or any excluded country.

2.4.2 Argentina has failed to rebut the prima facie inconsistency of the allocation of
expenditure with the national treatment obligation under Article XVII of the GATS

2.38. Argentina does not deny that it undertook full commitments in respect of national treatment
under mode 1 for certain types of services
38, the supply of and payment for which generate profits
of Argentine origin. However, Argentina imposes the rule on allocation of expenditure to the time
of payment solely with respect to services supplied from excluded countries and not those supplied
by Argentine suppliers. Consequently, Argentina accords service suppliers from the excluded
countries less favourable treatment than that accorded to like service suppliers of Argentine origin,
in a manner inconsistent with Article XVII of the GATS.

2.39 The measure affects the "delivery" of these services, within the meaning of Article XXVIII(b)
of the GATS, as well as the "use" of the services within the meaning of Article XXVIII(c)(i) of the
GATS. Regarding likeness, the measure in question is premised on a regulatory distinction based
solely on the location, place of domicile and/or incorporation of the recipient of the payments, that
is the service supplier in question. Again, the or igin of the service supplier is the only element
which, for the Argentine taxpayer, determines the al location of expenditure to the time of actual
payment for the service or the time of accrual of the obligation to make the payment. With regard
to less favourable treatment, since the measure in question can alter the net taxable income of
Argentine taxpayers, this generates a disincentive for Argentine enterprises in their relations with
service suppliers located in the excluded countries, which in turn affects the conditions of
competition between service suppliers vis-à-vis like suppliers located in Argentina.

2.4.3 Argentina has not demonstrated that th e allocation of expenditure to the time of
payment is justified under Article XIV(c)(i) of the GATS

2.40. Panama considers that Argentina's explanation that the measure in question is intended to
secure compliance with laws and regulations which in themselves are not inconsistent with the
GATS is inadequate and deficient. According to Argentina, the law or regulation with which it is
sought to secure compliance under the rule of allocation of expenditure at the time of payment is
the LIG.
39 However, Argentina should have demonstrated that the LIG is a law that qualifies under
Article XIV(c)(i) as a law "relating to the prevention of deceptive and fraudulent practices". The
LIG imposes a tax on Argentine taxpayers, but is not a law relating to the prevention of certain
problematical forms of conduct in the marketplac e, between market players. Moreover, Argentina
has not established that the rule on allocation of expenses at the time of payment is necessary to
achieve any compliance objective under the LIG. Even if the measure in question constituted a
means of compliance provisionally justified under Article XIV(c)(i), it would nevertheless be a
means of arbitrary and unjustifiable discrimination between countries where like conditions prevail
for the purposes of tax transparency and exchange of information, in a manner inconsistent with
the chapeau of this provision, owing to the arbitrary way in which Argentina establishes
distinctions between countries.

2.4.4 Argentina has not demonstrated that the allocation of expenditure to the time of
payment is justified under Article XIV(d) of the GATS

2.41. The rule on allocation of expenditure is li nked to the collection of the profits tax, which
Panama recognizes as a direct tax. However, this measure bears no relation to the collection or
imposition of taxes on services or service suppliers of other Members. As a general matter, it is not
aimed at ensuring the collection of the profits tax on persons from abroad. The imposition or

37 Argentina's first written submission paras. 222-236.
38 Panama's second written submission para. 2.538.
39 Argentina's first written submission, para. 264.

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collection of the profits tax in relation to services that generate profits of Argentine origin is carried
out through Articles 9 to 13 and Title V of the LIG. In addition, the rule on allocation of
expenditure to the time of payment constitu tes a means of arbitrary and unjustifiable
discrimination between countries where like condit ions prevail for purposes of tax transparency
and exchange of information, since the distinctions made by Argentina do not reflect impartial and
neutral treatment with respect to countries facing similar situations in this context.

2.5 Restrictions and discrimination in respect of access to the Argentine reinsurance and
retrocession market

2.42. The fact that Argentina, by means of Resolution No. 38.284 of 25 March 2014, eliminated
the prohibition on the provision of reinsurance servic es by entities of excluded countries is a step
forward, since that prohibition was clearly inconsistent with Argentina's obligations under the
GATS. Panama observes, however, that the Argent ine measures on reinsurance continue to be
discriminatory under Article II:1 of the GATS, an d continue limiting access to the Argentine
reinsurance market under mode 1, in breach of Article XVI of the GATS.

2.5.1 Argentina has failed to rebut the prima facie inconsistency of discrimination in
respect of access to the Argentine market with the MFN treatment obligation under
Article II:1 of the GATS

2.43. With regard to coverage, Argentina maintains that Panama "has not made a prima facie case
that trade in services in the insurance sector exists in the non-cooperative countries and
Argentina" and that "it has not demonstrated in what form [services and service suppliers] are
affected by the measure it invokes."40 However, nothing in the text, context, object and purpose of
the GATS supports the existence of an alleged requirement to demonstrate the existence of
specific service supply transactions in order to submit a claim under Article II:1 of the GATS. On
the contrary, Argentina's argument would lead to the absurd result that any measure totally
prohibiting trade in services would be immune from challenge under the GATS. The measure in
question is a measure that regulates trade in reinsurance services and, as such, directly affects
such trade, within the meaning of Article I:1, and the definitions contained in Articles I:2,
XXVIII(b) and XVIII(c) of the GATS.

2.44. With regard to likeness, the Argentine measure provides for differential treatment for
reinsurance service suppliers based solely and exclusively on their origin ( de jure distinction). No
other element - size, capital, number of workers, et c. - determines the practical application of one
form of treatment or another to a reinsurer. For th is reason, in accordance with the case law, the
services and service suppliers must be found to be like. In any event, in situations where the
different treatment provided for by a measure is neutral as to the origin of the services and service
suppliers (de facto distinction), the determination of likeness must be based on factors relating to
the competitive relationship 41 between them. 42 In a de facto case, contrary to what is argued by
Argentina, no account should be taken of regulatory differences (i.e. the existence or
non-existence of an agreement on information exchange with the Argentine Government) per se in
the examination of "likeness". The case law has established clearly that, in de facto situations,
services and service suppliers are like when they "are in a competitive relationship with each other
(or would be if they were allowed to be supplied in a particular market)".
43 The introduction of
regulatory differences as a criterion for distinguishing between service suppliers would be
equivalent to reintroducing the analysis of aims and effects in the determination of likeness, an
approach which, as has been said before, the Appellate Body rejected categorically.44

2.45. With regard to less favourable treatment, Argentina explicitly acknowledges that its
measures "establish different treatment" for reinsurance service providers from excluded
countries.45 The amendments introduced by Argentina by means of Resolution No. 38.284
maintain the differential treatment of reinsurance service suppliers on the basis of their origin.

40 Argentina's first written submission, paras. 402 and 406.
41 To begin with, consideration could be given to the likeness criteria traditionally used in the context of
trade in goods (i.e. characteristics and nature; classification; use or purpose; and consumer preferences with
regard to the services in question).
42 Panel Report, China - Electronic Payment Services, para. 7.702.
43 Ibid., para. 7.700
44 Appellate Body Reports, Japan - Alcoholic Beverages II, p. 27 and EC - Bananas III, para. 241.
45 Argentina's first written submission, para. 412. (emphasis added)

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Non-compliance with these conditions entails denial of access to the Argentine reinsurance market
both in cross-border mode and through commercial presence. This conditionality is contrary to
Article II:1 of the GATS and its mere existence is sufficient to conclude that Argentina's measure is
inconsistent with its MFN treatment obligation under the GATS.
2.5.2 Argentina has failed to rebut the prima facie inconsistency of the restrictions on
market access with the obligations under Articles XVI:1 and XVI:2(a) of the GATS
2.46. Despite having assumed a commitment without limitations in respect of market access for
the supply of cross-border reinsurance services, Argentina does not permit full access to its
reinsurance market under mode 1. Argentina itself recognizes that its legislation provides for the
participation of foreign enterprises in the supply of reinsurance services under mode 1 only "in a
partial manner and for amounts in excess of what is considered a threshold for certain types of
insurance risk".
46 Likewise, Argentina recognizes that "approved reinsurers" can only be authorized
by the National Insurance Supervisory Authority (SSN) to operate in the Argentine market for risks
below US$50 million "when the magnitude and characteristics of the risks ceded make it
impossible for such reinsurance operations to be covered in the national reinsurance market".
Therefore, it is confirmed that Argentina establishes a limitation on the number of service suppliers
by requiring an economic needs test, within the meaning of Article XVI:2(a) of the GATS.
47
2.5.3 Argentina has not demonstrated that th e measure is justified under the prudential
exception of paragraph 2(a) of the Annex on Financial Services to the GATS
2.47. Argentina has not justified its restriction on access to the Argentine reinsurance market by
foreign suppliers through mode 1 under paragraph 2(a) of the GATS Annex on Financial Services.
Consequently, it must be considered that Argentina admits that its measure, being inconsistent
with Article XVI of the GATS, is not justified und er the prudential exception. Argentina has also
failed to demonstrate that the discrimination between reinsurers of different origins, which is
inconsistent with Article II:1 of the GATS, is just ified under the prudential exception. In the first
place, Argentina has not proved that its measure constitutes a "domestic regulation" that falls
within the scope of the prudential exception, as re quired by the title of paragraph 2 of the Annex.
In addition, the Argentine measure in any event seeks to oblige Members to disclose information,
contrary to the provisions of paragraph 2(b). Secondly, Argentina has provided no evidence that
its measure was really adopted "for prudential reasons". Thirdly, since Argentina establishes its list
of "cooperative countries" in a manner that would appear to be random, as it does not correspond
to the effective exchange of information, Argentin a has failed to demonstrate that its measure is
not used as a means of evading its commitments and obligations.

2.6 Discrimination in access to the Argentine capital market

2.48. This measure is directed at securities deal ers authorized to operate on the Argentine capital
market and obliges them not to carry out tran sactions ordered by persons from excluded
countries, unless they meet two conditions: (i) they must have the status in their home jurisdiction
of intermediaries registered with an entity unde r the control and supervision of a body fulfilling
similar functions to those of the National Securities Commission (CNV); and (ii) they must certify
that the body in their home jurisdiction has signed a memorandum of understanding on
cooperation and exchange of information with the CNV.

2.6.1 Argentina has failed to rebut the prima facie inconsistency of discrimination in
market access with the MFN treatment obligation under Article II:1 of the GATS

2.49. Regarding coverage, by requiring Argentine securities dealers not to "sell" their
intermediation services in the Argentine capital market to excluded countries, and by permitting
them at the same time to carry out transactions directly when so ordered by administrators of
beneficiary countries, the measure clearly "affects" those services that require access to the
Argentine financial market. Argentina had no problem in identifying the trade in services relevant
to this claim: portfolio management services provided to Argentine consumers by foreign suppliers
in cross-border mode (mode 1).
48 In any event, and although it is not necessary to demonstrate

46 Argentina's first written submission, para. 458. (emphasis added)
47 This conclusion is confirmed in the light of the Note by the WTO Secretariat on economic needs tests
(document S/CSS/W/118 of 30 November 2001).
48 Argentina's first written submission, para. 142.

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the existence of suppliers impacted or potentially impacted by the measure, Panama has furnished
numerous examples of entities that may supply portfolio management or investment portfolio
services in cross-border mode to Argentine clients.
49

2.50. With regard to likeness, the likeness requirement for service suppliers is met because the
measure provides for differential treatment of portfolio management services suppliers based
exclusively on their origin ( de jure distinction). 50 Argentina maintains that its measures do not
differentiate exclusively in terms of origin, since th ey have an objective basis, i.e. whether or not
the jurisdictions concerned are considered cooperative for tax transparency purposes. However,
the reason why a Member distinguishes between origins is irrelevant when it comes to determining
whether or not a measure is based on origin.

2.51. With regard to less favourable treatment, Argentina imposes express conditions on portfolio
managers from the excluded countries wishing to gain access to the Argentine securities market.
The fulfilment of those conditions - which are not imposed on administrators of other origins – will
presumably be monitored by Argentine securities dealers, who will only conduct transactions when
compliance with the above-mentioned conditions is certified. The case law is very clear in this
respect: no Member can make the granting of advantages (in this instance, direct access to the
capital market) dependent on the fulfilment of conditions.
51

2.6.2 Argentina has not demonstrated that the measure in question is justified under the
prudential exception of paragraph 2(a) of the GATS Annex on Financial Services

2.52. Argentina has failed to demonstrate that discrimination between portfolio managers of
different origins, which is inconsistent with Article II:1 of the GATS, is justified under the
prudential exception. In the first place, Argentina has not proved that its measure constitutes a
"domestic regulation" falling within the scope of the prudential exception, as required by the title
of paragraph 2 of the Annex. The measure seek s in any event to require Members to disclose
information, contrary to the provisions of paragraph 2(b). Secondly, Argentina has provided no
evidence that its measure was really adopted for "prudential reasons". Thirdly, in the light of the
capricious system used by Argentina to list countries as "cooperative", Argentina has failed to
demonstrate that its measure is not used as a means of evading its commitments and obligations
under the GATS.

2.7 Discrimination in the imposition of requirements for the registration of branches

2.53. When a company from an excluded country re quests branch registration in the Public Trade
Register of Buenos Aires, the Argentine Companies Control Authority (IGJ) will not only demand
compliance with the requirements listed in Article 188, but will also require "certification that the
company effectively carries out an economically significant business activity" in its place of origin.
For this purpose, the IGJ may require that the company attach the documents listed in
subparagraphs (a), (b), (c) and (d) of Article 192.1 of Resolution No. 7/2005.

2.7.1 Argentina has failed to rebut the prima facie inconsistency of the requirements for
branch registration with the MFN treatment obligation under Article II:1of the GATS

2.54 With regard to coverage, it is obvious that the registration requirements for a foreign branch
to be able to operate in Buenos Aires constitu te a "measure in respect of commercial presence"
and, therefore, a "measure affecting trade in services" in accordance with the definitions
established in Article XXVIII(c) of the GATS. Re garding likeness, the requirement that service
suppliers should be like is met since the measure itself provides for differential treatment for
companies supplying services solely and exclusively on the basis of their origin ( de jure
distinction). Resolution No. 7/2005 of the IGJ, by its very wording, applies general treatment to all
foreign companies wishing to register a branch in the Buenos Aires registry (Article 188), but
provides specific additional treatment for "companies from countries, dominions, jurisdictions,
territories, associate States and special tax regimes considered not cooperative for tax
transparency purposes (Article 192). If it were determined that the measure makes distinctions
based not solely on origin but on other factors ( de facto distinction), the determination of likeness

49 Panama's first written submission, footnotes 446, 447, 448, 467 and 468.
50 Title XI, Section III, Article 5 of the CNV Regulations.
51 See, in the context of trade in goods, Panel Reports, Indonesia – Autos, para. 14.143 and Canada –
Autos, paras. 6.13-6.15.

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would have to be based on the analysis on the competitive relationship. 52 But even in a de facto
case, no account should be taken of regulatory differences per se in the "likeness" analysis, since
these are only relevant insofar as they affect the competitive relationship.
53 Given the scale of the
measure, Argentina would have to prove that consumers of any service (legal, architectural,
accounting, etc.) perceive their suppliers differen tly (firms of lawyers, architects, accountants,
etc.) according to whether or not their respective governments have negotiated an agreement on
exchange of tax information with Argentina. Regarding less favourable treatment, the different and
more burdensome treatment applied to companies from excluded countries emerges from the very
text of Resolution No. 7/2005. The demonstration of actual effects is not necessary, as was
pointed out earlier. Finally, the concept of "less favourable treatment" under Article II:1 of the
GATS, does not include an analysis of whether the harmful effect of the measure derives
exclusively from a legitimate regulatory distinction, as is maintained by Argentina.

2.7.2 Argentina has not demonstrated that th e measure in question is justified under
Article XIV(c)(i) of the GATS

2.55. Argentina has failed to demonstrate that its measure on branch registration is "necessary to
secure compliance with laws and regulations which are not inconsistent with the provisions of [the
GATS] including those relating to: (i) the prevention of deceptive and fraudulent practices or to
deal with the effects of a default on services contracts". Consequently, Argentina has failed to
demonstrate that the measure is provisionally justified under Article XIV(c)(i) of the GATS.
Argentina has failed to demonstrate that discrimination in regard to the registration of branches is
applied in accordance with the chapeau o f t h a t p r o v i s i o n . P a n a m a c o n t e n d s t h a t t h e A r g e n t i n e
measure on branch registration is applied in a manner that "constitute[s] a means of arbitrary or
unjustifiable discrimination between countries where like conditions prevail", in a manner
inconsistent with the chapeau of Article XIV(c)(i) of the GATS.

2.8 Discrimination in the imposition of the foreign exchange authorization requirement

2.56. The Argentine measure affords different treatment in respect of the repatriation of foreign
investment, on the basis of whether the beneficiary supplier from abroad is from a country
considered by Argentina as cooperative or non-cooperative for tax transparency purposes. This
difference in treatment occurs in all services sectors, with the exception of financial services.

2.8.1 Argentina has failed to rebut the prima facie inconsistency of discrimination in the
foreign exchange authorization requirement with the obligation under Article II:1 of the
GATS

2.57. With regard to coverage, inasmuch as Argentina's measure regulates the dismantling of
commercial presence in Argentine territory, it is a measure " in respect of commercial presence",
within the meaning of Article XXVIII(c)(iii) of the GATS. Consequently, it is a measure affecting
trade in services, which therefore falls within the sco pe of the GATS by virtue of Article I:1 of that
Agreement. As regards likeness, the measure establishes a de jure distinction, in which the only
element that links the imposition of the additional requirement with the supplier or beneficiary is
their country of origin. However, origin alone does not alter the likeness between services and
service suppliers. Even if it were determined that the Argentine measure makes no distinctions
based solely on origin, but on other factors (de facto distinction), the determination of likeness
would have to be based on the analysis of the competitive relationship
54, without the regulatory
differences being relevant per se in the "likeness" analysis. 55 With regard less favourable
treatment, by limiting the outflow of capital on ce the investment has been made, the Argentine
measure has the effect of discouraging ex ante the establishment of commercial presence in
Argentina by service suppliers from excluded countries. Unlike the suppliers of beneficiary
countries, their initial decision to establish commercial presence in Argentina will be negatively
affected by a measure which, from the very outs et, provides in general and prospective terms for
discriminatory treatment in respect of the recove ry of the capital invested and exit from the
Argentine market.

52 Panel Report, China – Electronic Payment Services, para. 7.702.
53 Appellate Body Report, US - Clove Cigarettes, para. 119.
54 Panel Report, China – Electronic Payment Services, para. 7.702.
55 Appellate Body Report, US – Clove Cigarettes, para. 119.

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2.8.2 Argentina has not demonstrated that th e measure in question is justified under
Article XIV(c)(i) of the GATS

2.58. Argentina has failed to demonstrate that its measure on the repatriation of investments is
"necessary to secure compliance with laws or regulations which are not inconsistent with the
provisions of [the GATS] including those relating to: (i) the prevention of deceptive and fraudulent
practices or to deal with the effects of a default on services contracts". Consequently, Argentina
has failed to demonstrate that the measure is prov isionally justified under Article XIV(c)(i) of the
GATS. Nor has Argentina succeeded in demonstrating that the measure is applied in accordance
with the chapeau of that article. It is worth underscoring that Argentina has put forward no
argument relating to the chapeau of Article XIV in its terse defence of the measure on repatriation
of investments. In Panama's opinion, the Argentine measure on the repatriation of investments is
applied in a manner which "constitute[s] a means of arbitrary or unjustifiable discrimination
between countries where like conditions prevail", in a manner inconsistent with the chapeau of
Article XIV(c)(i) of the GATS.

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ANNEX B-3
FIRST PART OF THE EXECUTIVE SUMMARY OF THE ARGUMENTS OF ARGENTINA
I. Introduction
1. This is a case that should not have been brought before the DSB. Panama's claims in this
dispute seek to compare the obligations assumed by Members under the GATS and the GATT 1994
with multilateral commitments in the fight against harmful tax practices, which currently involves
more than 120 countries and tax jurisdictions in the Global Forum on Transparency and Exchange
of Information for Tax Purposes (the "Global Forum") – most of which are also WTO Members – as
well as the mandates of the G-20 aimed at applying international standards in respect
of anti-abuse rules.
2. Panama challenges Argentina's implementation of anti-abuse measures which are essential
tools for enforcing national tax laws, guaranteeing taxation and tax collection, preventing
fraudulent practices, tax evasion and tax avoidance, as well as the erosion of national tax bases.
At the same time, they guarantee the integrity and stability of the global financial system.
The challenged measures are directed to equalizing the conditions of competition on the
international market for financial and other services between service suppliers from cooperative
countries for tax transparency purposes, and service suppliers from non-cooperative countries for
tax transparency purposes, which are not subject to supervision and control by the Argentine
authorities in the non-cooperative countries, because of the absence of agreements on information
exchange, while service suppliers in Argentina and service suppliers of cooperative countries are
subject to permanent supervision and control. The difference in status accounts for the difference
in legal treatment.
3. In its first written submission, Panama decided to bring up a new dispute, different from the
one that was the subject of the request for consultations, which referred to "certain measures
imposed by Argentina that affect trade in goods and services. These measures apply only to trade
conducted with specific countries listed in Decree 1344/98 as amended by Decree 1037/00, which
include Panama (hereinafter "listed countries")".
1
4. Panama alleges "discriminatory treatment" in its first written submission, with respect to an
alleged interest of third Members. In fact, the anti-abuse measures challenged are not currently
applied to Panama, following its inclusion in the category of jurisdictions cooperating for tax
transparency purposes under Decree 589/2013, as it is covered by the "initiation of negotiations"
on exchange of tax information with Argentina
2 for which provision was made by the
Foreign Ministers of Panama at the time of the entry into force of the said Decree,
on 1 January 2014. Panama made an international commitment that defensive measures such as
those at issue in this dispute must be applied against uncooperative jurisdictions, and furthermore
that their application must be coordinated. In April 2012, Panama accepted the principles of the
Global Forum and underscored the multilateral initiative for enforcement of the standards
guaranteeing "equity and non-discrimination between all countries and jurisdictions, whether or
not OECD members, with which the Republic of Panama competes substantially on international
markets in the provision of international services, particularly financial and commercial services".
3
Decree 589/2013 produced a paradigm shift in Argentine legislation by according the status
of cooperative country for tax transparency purposes, based on the result of joint action by
Argentina and its relevant partners, inasmuch as that status derives from an agreement on

1 Request for consultations by Panama, document WT/DS453/1.
2 Argentina-Panama joint communiqué of 28 November 2013, Exhibit ARG-3, and communiqué of the
Panamanian Ministry of Foreign Affairs of 28 November 2013, Exhibit ARG-4.
3 In April 2012, Panama accepted the principles of the Global Forum and underscored the multilateral
initiative for enforcement of the standards guaranteeing "equity and non-discrimination between all countries
and jurisdictions, whether or not OECD members, with which the Republic of Panama competes substantially
on international markets in the provision of international services, particularly financial and commercial
services ". (Letter of 15 April 2002 from the Minister of the Economy and Finance of Panama to the
Secretary-General of the OECD, page 1 in fine and page 2, Exhibit ARG-8).

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exchange of information, from the time of its negotiation, signing and effective implementation.
This legislation reflects Argentina's adjustment to trends in international law on the matter.
5. The global international crisis that started in 2007 highlighted the importance attached by
the G-20 to the Global Forum initiative and the fact that failure to comply with international
standards calls for the application of anti-abuse measures at the national level and on
a coordinated basis, to address the risks affecting the international financial system.4
II. Measures at issue
6. Panama challenges various tax measures as well as measures relating to reinsurance;
registration of foreign companies; repatriation of investments; and capital market instruments.
The measures at issue in this dispute were developed by the Argentine Republic to address the
effects of harmful tax competition and they meet prudential concerns in respect of financial
regulation. These measures are closely related to a range of international anti-abuse rules and
mechanisms dating back nearly 20 years.
5 The defensive measures challenged by Panama are a
necessary, adequate and proportionate response to the risks created by the impossibility of
accessing information on the ultimate beneficiaries in operations involving non-cooperative
jurisdictions for tax transparency purposes.6
7. Argentina contends that Panama has not succeeded in establishing a prima facie case that
the GATS is applicable to the measures at issue, mainly because in order for a measure to affect
"trade in services," as provided in Article 1.2 of the GATS, the complaining Member must
demonstrate that trade in relevant services takes places by one or more of the four modes of
supply. In its first written submission, Panama does not clearly identify what it considers to be the
services and modes of supply in question in the present dispute. Nor does it surpass the minimum
threshold of evidence concerning the existence of trade in any of these services in the specified
modes of supply. Consistent with the way in which the Appellate Body addressed this issue in
Canada – Autos , Argentina considers that Panama has an obligation to show that the relevant
services are provided from the territory of Pana ma into the territory of the Argentine Republic
(in the case of mode 1) or by a service supplier of Panamanian origin, through commercial
presence in Argentina (in the case of mode 3).
7 However, even if the threshold for application
of the GATS could be established on the basis of the services and service suppliers of an origin
different from the origin of the complainant, Panama has failed to demonstrate that trade takes
place in any of the relevant services in the specified modes of supply. In the absence of such
demonstration, Panama has failed to demonstrate the existence of trade in the relevant services
and modes of supply that may be "affected" by the measures challenged in this dispute.
Consequently, it has failed to make a prima facie case for the applicability of the GATS to the
measures at issue.
8. Argentina also wishes to emphasize that it is not aware of any previous dispute in the GATS
framework where a national regulatory regime has been attacked on the basis of its theoretical
effect on hypothetical service suppliers, let alone on service suppliers other than the complainant.
9. Panama has not succeeded in demonstrating that like services and service suppliers of
Panamanian origin receive less favourable treatment under the measures in question. Articles II
and XVII of the GATS require that it be demonstrated that the measures in question accord less
favourable treatment to services and service suppliers of the complaining Member.
The interpretation given by the Panel and the Appellate Body in US – Clove Cigarettes applies with
all the more force to any claim of national treatment or MFN treatment under the GATS, especially
in view of the fact that the GATS (unlike the mult ilateral agreements on trade in goods) sets out
detailed provisions on the nationality and origin of services and service suppliers. As was argued
earlier, and as the Panel in EC – Bananas III recognized, these provisions are vital to the effective
operation of the GATS and define the potential scope of any claim alleging failure to grant MFN or
national treatment. It is the treatment accord ed to services and service suppliers of the

4 G-20, Leaders' Statement, London 2009, Exhibit ARG-1.
5 The OECD's 2001 report notes that "a framework of coordinated defensive measures is a means by
which countries with similar concerns can support each other's efforts to counter the effects of harmful tax
practices", Exhibit ARG-7, para. 47. See Argentina's first written submission, paras. 48-51.
6 Argentina's first written submission, paras. 102-127.
7 See Appellate Body Report, Canada – Autos, para. 157.

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complaining Member which must be compared with the treatment accorded to like services and
service suppliers "of any other country" (in the case of Article II) or to like services and service
suppliers of national origin (in the case of Article XVII).
10. This interpretation affects the analysis of both "like services" and "less favourable
treatment" under Articles II and XVII. As a prerequisite, the complaining Member must identify the
services and service suppliers within its jurisdiction that are the subject of its claim under Article II
or Article XVII, and go on to demonstrate that those services and service suppliers are "like" the
proposed reference group of services and service suppliers "of any other country" (in the case
of Article II) or the respondent Member's own "like services and service suppliers" (in the case
of Article XVII). After establishing the "likene ss" of these two groups, the complaining Member
must go on to demonstrate that the services and service suppliers within its jurisdiction receive
treatment that is "less favourable" than that accorded to services and service suppliers of the
specified "other country", or that accorded to services and service suppliers of national origin.
8
11. Even if Panama could invoke Articles II and XVII in relation to non-Panamanian services and
service suppliers, it did not even attempt to demo nstrate this point and has therefore failed to
establish a prima facie case of inconsistency with those articles. Panama's entire argument
concerning Articles II and XVII rests on the premise that it is under no obligation to demonstrate
that the services and service suppliers of any WTO Member are "like" those of any other country or
those of national origin, since the measures in question allegedly accord differential treatment to
the services and service suppliers of certain Me mbers "solely … by reason of their origin".
Panama's assertion that the measures in question accord differential treatment exclusively on the
basis of origin is no more than that – a mere assertion. Panama does not engage in any analysis of
the actual basis on which Argentina determines that specific jurisdictions must be considered
cooperative or non-cooperative for the purpose of establishing which services and service suppliers
are subject to the application of the measures in question. Decree 589/2013 applies objective and
internationally recognized criteria for determining which services and service suppliers originate in
jurisdictions not participating in transparency and the effective exchange of tax information.
These criteria relate to characteristics of competition and regulation of affected services and
service suppliers and are not the result of differential treatment based exclusively on origin.
9
12. Argentina considers that the regulatory diffe rences between services and service suppliers
are relevant to the examination of "likeness", alth ough those differences are not fully reflected in
the market. Regulators may have to differentiate between service suppliers, precisely because the
market actors are not duly taking account of the regulatory differences affecting the nature of the
service supplied. For example, consumers are not ab le to distinguish properly between banks that
are subject to continuous prudential supervision and those that are not, or between doctors who
maintain sufficient malpractice insurance and those who do not. The object and purpose of the
GATS suggests that such regulatory differences mu st enter into the examination of "likeness" to
the extent that they are relevant in a particular case, and regardless of whether such differences
affect competitive relations in the marketplace. This is a case where regulatory differences
significantly affect competitive relations betwee n the services and service suppliers concerned.
The services and service suppliers in jurisdictions that uphold international standards of
transparency and effective exchange of tax information are in a fundamentally different
competitive position from the services and service suppliers in jurisdictions which do not uphold
those standards. Accordingly, although there is an important question of interpretation as to
whether regulatory differences have a significance independent of the examination of "likeness"
under the GATS, this is a case where the statement of the Appellate Body in US – Clove Cigarettes
is clearly and directly applicable.
10
13. The origin of services and service suppliers is potentially relevant to consideration of
whether services and service suppliers are "like" within the meaning of Articles II and XVII. Hence,
Panama errs when it asserts that no demonstration of "likeness" is required because the measures
at issue in this dispute are allegedly "based on or igin". Panama's citation of the statement by the
Panel in China – Publications and Audiovisual Products represents an attempt by Panama to evade
its responsibility for establishing a prima facie case of "likeness". The Panel in this dispute must
reject this attempt at evasion. It can do so by considering that the "based on origin" principle

8 Argentina's first written submission, paras. 162-163.
9 Argentina's first written submission, paras. 172-174.
10 Argentina's first written submission, paras. 187-188.

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enunciated by the Panel in China – Publications and Audiovisual Products, irrespective of its merits
in other contexts, is not applicable when the origin of services and service suppliers is potentially
relevant in relation to the characteristics of the services and service suppliers concerned, and
relevant for the purpose of establishing that they may be considered "like".
11
14. In the light of Panama's failure to establish a prima facie case of "likeness" in its first written
submission, Argentina will not, in this submission, discuss in depth whether the services and
service suppliers of jurisdictions that uphold the international standards of transparency and
effective exchange of tax information are "like" the services and services suppliers of jurisdictions
that do not uphold those standards. This is because Argentina cannot respond to a case which
Panama has not even attempted to make.
12 Without prejudice to the foregoing, Argentina
endorses the general proposition that, if a jurisdiction upholds the international standards of
transparency and effective exchange of tax information, this is relevant in terms of the
characteristics of the services or service suppliers originating in its jurisdiction.
15. In order to assess the "likeness" of the serv ices and service suppliers referred to in this
dispute, it is worth recalling the relevant characteristics of the measures challenged by Panama
under Articles II and XVII. Each of these measures distinguishes between cooperating and
non-cooperating jurisdictions in order to apply a measure relating to either prevention of tax
evasion or pass-through of benefits, on the one hand, or for a legitimate prudential purpose,
on the other, or both.
13
16. Regarding the analysis of the "likeness" of the services provided by each type of jurisdiction,
previous panels have considered that "like services" should be examined on a case-by-case basis,
focusing primarily on the nature of the competitive relationship between the services being
compared.14 In accordance with the case law developed by panels and the Appellate Body in
respect of product "likeness", a previous panel considered that services are "like" between
themselves "if it is determined that the services in question in a particular case are essentially or
generally the same in competitive terms". 15 As noted earlier, the Appellate Body has found that
regulatory differences are relevant for the analysis of "likeness" to the extent that such differences
"have an impact on the competitive relationsh ip between and among the products concerned",
a proposition that applies with equal or greater force in the context of services "likeness".16
17. The fact that transparency and the effectiv e exchange of information are what define the
"level playing field" tells us everything we need to know about the "likeness" of these services.
If the services provided from non-cooperative jurisdictions were "like" those provided by
non-cooperative jurisdictions, the adherence to international standards of transparency and
effective exchange of tax information would have no significant effect on the competitive
relationship between these two types of jurisdic tion. However, as Panama and other members of
the Global Forum have recognized, precisely the opposite is the case – the adherence to
internationally accepted standards of transpar ency and effective exchange of information
fundamentally alters the nature of the services which service suppliers within these jurisdictions
are capable of providing. Panama and others are concerned about a "level playing field" because
they know that the services provided by non-c ooperative jurisdictions are not at all "like" the
services provided by jurisdictions which adhere to and enforce the international standards of
transparency and effective exchange of information.
17
18. Service suppliers in non-cooperative jurisdictions are not "like" service suppliers in
non-cooperative jurisdictions, for reasons that are independently relevant to Argentina as
a regulator, and also for reasons that affect the competitive relationship between service suppliers
in the market. From the standpoint of Argentina' s tax authorities, the difference between these
two categories of service suppliers should be clear: in the case of service suppliers in cooperative
jurisdictions, the Argentine fiscal authorities have the capacity to obtain the necessary information

11 Argentina's first written submission, para. 198.
12 Argentina's first written submission, para. 200.
13 Argentina's first written submission, para. 202.
14 See for example Panel Report, China – Electronic Payment Services, para. 7.702 ("we consider that
a likeness determination should be based on arguments and evidence that pertain to the competitive
relationship of the services being compared.").
15 Ibid.
16 Appellate Body Report, US – Clove Cigarettes, para. 119.
17 Argentina's first written submission, para. 216.

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for the implementation of Argentina's tax laws, while the Argentine fiscal authorities cannot obtain
this information in the case of service suppliers in non-cooperative jurisdictions. This regulatory
difference directly affects Argentina's capacity to enforce its tax laws and guarantee the integrity
of its tax base. This means that the service suppliers in these two types of jurisdiction are
"not like" from the regulatory point of view.
19. This same regulatory difference directly affects the competitive relations between service
suppliers in the market. For the reasons set forth by Argentina in Part II of its first written
submission, service suppliers in non-cooperat ive jurisdictions are capable of providing
opportunities for corporate clients and individuals to transfer their earnings to jurisdictions with
little or no income tax, and to participate in tax evasion and other illegal activities such as money
laundering. This places service suppliers in these jurisdictions in a fundamentally different
competitive position compared to service suppliers in non-cooperative jurisdictions which provide
otherwise comparable services. As Argentina has demonstrated, the consumers of services are
clearly aware of these differences and take them into account when making decisions as to where
and with whom to do business.
18
20. The measures in question do not accord less favourable treatment to services and service
suppliers of any other Member, less still to services and service suppliers of Panamanian origin.
Panama is not in a position to deny that the measures in question establish a legitimate regulatory
distinction between non-cooperative and cooperative jurisdictions. As a member of the
Global Forum and as a country which has committed itself to complying with its standards,
Panama is aware that the capacity of the national tax authorities to obtain tax information from
other jurisdictions is a regulatory distinction which the 121 members of the Global Forum consider
to be important and legitimate. When Panama join ed the Global Forum, it requested its fellow
members in the forum to apply defensive tax measures in a coordinated manner to all jurisdictions
which do not uphold the standards of the Global Forum relating to transparency and effective
exchange of tax information. This is exactly what Argentina is doing through the measures in
question in this dispute. Argentina's application of defensive tax measures to jurisdictions that do
not uphold the Global Forum's standards of transp arency and effective exchange of information is
fully consistent with Panama's insistence that it is "essential that the practical implementation of
the initiative proposed by the OECD should ensure equity and non-discrimination between all
countries and jurisdictions, whether or not OECD members, with which the Republic of Panama
substantially competes in international services markets, especially financial and trade markets".
19
Panama recognizes - and should continue recognizing - that the application of defensive tax
measures in relation to non-cooperative jurisdictions does not constitute "less favourable
treatment" but is necessary to re-establish a competitive balance – a "level playing field" –
between services and service suppliers in cooperat ive and non-cooperative jurisdictions. There is
no "less favourable treatment" under these measures, either with respect to Panamanian services
and service suppliers, or with respect to the services and service suppliers of any other Member.
20
III. Tax measures
1. Withholding tax on loan interest payments. Article 93(c) of the Earnings Tax Law (Ley de

21. The tax base for determining the presumed net profit shall be forty-three percent (43%)
when the borrower or loan or fund recipient is an entity governed by Law No. 21.526 or any of the
other legal persons covered by Article 49 of the Earnings Tax Law (LIG), a natural person or
an undivided estate, provided that the creditor is a banking or financial institution based in
cooperating jurisdictions for tax transparency purposes, whereas it shall be one hundred percent
(100%) when the borrower or loan or fund recipien t is a legal person covered by Article 49 of the
tax law, excluding entities governed by Law No. 21.526 and amendments thereto, a natural person
or undivided estate, and the creditor does not m eet the condition and requirement specified in the
second paragraph of the preceding section.

18 Argentina's first written submission, paras. 220-221.
19 Exhibit ARG-8.
20 Argentina's first written submission, paras. 235-236.

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22. The purpose of the measure is to neutraliz e the erosion of the tax base that would be
caused by insider loans, given the impossibility of accessing information on the share ownership
of a corporate vehicle based in a non-cooperating jurisdiction for tax transparency purposes.
21
2. Presumption of unjustified increase in weal th. Article added after Article 18 of the Law on
Tax Procedure

23. The Law on Tax Procedure, Law No. 11.683 (LPT), provides that taxation is effected on the
basis of sworn declarations submitted by taxpayers and that, when such sworn declarations have
not been submitted or are challengeable, the fi scal authority shall determine the taxable amount,
on the basis of certain knowledge or by estimation based on presumption.
24. The presumption of unjustified increase in wealth allows for the entry of funds to be
condoned which the interested party can conclusively show to have originated from activities
actually carried out by the taxpayer or by thir d parties in the countries concerned, or from
placements of duly declared funds.
25. This measure addresses the observed inst ances of fraudulent activity by Argentine
companies which use corporate vehicles under their control to divert undeclared income to
non-cooperating jurisdictions for tax transparency purposes.
22
3. Transfer pricing. Articles 8 and 15 of the Earnings Tax Law (LIG)

26. Transfer prices are defined as those values th at are to be assigned to transactions between
related enterprises which, when there is no opposition of interests (but rather a shared interest)
between the parties concerned, do not meet th e criteria used for setting prices between
independent enterprises.
27. The Earnings Tax Law provides that transactions carried out by stable institutions domiciled
in Argentina with natural or legal persons domiciled, established or located in non-cooperating
countries for tax transparency purposes shall not be considered to be in line with normal arm's
length market practices or prices.
28. When the corporate links or ultimate beneficiaries cannot be ascertained in the case of
non-cooperating countries for tax transparency purposes, recourse is had to the test for transfer
pricing between related enterprises.
23
4. Allocation of deductions for payments. Article 18, last paragraph of the Earnings Tax Law
(LIG)

29. The last paragraph of the article in question establishes an exception to the accrual rule:
in the case of persons based in non-cooperating jurisdictions for tax transparency purposes,
expenditures by local bodies that constitute earnin gs of Argentine origin may only be deducted in
the tax year in which they accrued insofar as the payment was made during the period concerned
or, failing this, if the payment takes place before expiry of the period for submission of the sworn
declaration.
30. The rule does not prevent the deduction of expenses, but lays down certain conditions for
such deduction to be made and to prevent situat ions of tax fraud that could arise if accounting
entries reflect outlays in favour of foreign beneficiaries that are not actually made and it cannot be
ascertained whether such transactions are genuine owing to the impossibility for the authorities to
access the information in question because the country concerned is a non-cooperating country for
tax transparency purposes.
24

21 Argentina's first written submission, paras. 108-109, 278-279 and Explanatory Annex No. 1.1.
22 Argentina's first written submission, paras. 110, 280-281 and Explanatory Annex No. 1.2.
23 Argentina's first written submission, paras. 111, 282, and Explanatory Annex No. 1.3.
24 Argentina's first written submission, paras. 112, 283-285 and Explanatory Annex No. 1.4.

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IV. Measures affecting the reinsuranc e sector, the capital market, company
registration and repatriation of investments
5. Reinsurance

31. The regulatory framework for reinsu rance in Argentina is governed by
Resolution No. 35.615/2011, as amended by Resolu tion No. 38.284/2014. The former states that
"local reinsurers" is understood to mean those branches of foreign reinsurance companies that
operate on Argentine territory, i.e. under "Mode 3" defined as "commercial presence"
in Article I:2(c) of the GATS, and "approved reinsurers" is understood to mean foreign reinsurance
companies that offer reinsurance services from their central office, i.e. in accordance with
"Mode 1" defined as "from the territory of one Member into the territory of any other Member"
in Article I:2(a) of the GATS.
25
32. The second paragraph of Article 18(a) requires for verification purposes that, in order to
provide the service referred to, suppliers must certif y that the enterprise is subject to control and
supervision by a body carrying out similar functions to those of the National Insurance Supervisory
Authority (SSN) and with which an understanding on information exchange has been signed.
In the case of countries or jurisdictions not established in associate States cooperating in the
global struggle against the crimes of money laundering and financing of terrorism according to the
Financial Action Task Force (FATF), "the assessment of the request for authorization shall be
subject to enhanced due diligence, proportionate to the risks …"
26
33. The measure challenged by Panama is not in breach of GATS Article II:1, since it is clear
from a reading of points 18 and 20 of Resoluti on No. 35615/2011 of the SSN that Argentina does
not prohibit suppliers from countries considered not cooperative for tax transparency purposes
from providing reinsurance services through a branch established in Argentina (local reinsurer) or
under the "approved reinsurer" modality. Foreign reinsurers maintain a very high level
of participation in Argentina's reinsurance and retrocession sector.
27
34. The measure challenged by Panama is not in breach of GATS Articles XVI:1 and XVI:2.
Not only are retrocession services not limited by any regulatory provision, but in practice most
such services are provided by foreign ente rprises (Mode 1). The regulations provide for
participation by foreign enterprises in the supply of reinsurance services under Mode 1 on a partial
basis and in excess of what is considered a threshold for certain types of insured risk,
normally defined as "major risks".
35. Argentina considers that the Panel should interpret the provisions of the corresponding
section of Argentina's schedule as part of the GATS in relation to this Member, following the rules
of interpretation set forth in the Vienna Convention on the Law of Treaties, as well as the guidance
of the Appellate Body, which upheld the Panel's interpretation that each schedule has its own
intrinsic logic and must be interpreted according to its own conditions or merits.
28
Accordingly, the necessary interpretation must be that Argentina's commitment ("Authorization of
new entities is suspended") concerning the authorization of new branches has not changed,
inasmuch as its schedule remains without amendment and Argentina has expressed no intention to
modify its schedule.
6. Capital market

36. Resolution No. 622/2013
29 of the National Securities Commission (hereinafter "CNV")
modified the challenged regulation that was the subject of consultations and of one of the
complaints included in the request for the establishment of a panel. 30 On the basis of
Law No. 26.83131 on the capital market and the prov isions of Resolution No. 662/2013,

25 Argentina's first written submission, paras. 113-117, 407 et seq.
26 Exhibit ARG-25. Recommendation No. 19 (Higher-risk countries) and Interpretive Note to
Recommendation No. 19 of the International Standards on Combating Money Laundering and the Financing
of Terrorism and Proliferation. February 2012.
27 Argentina's first written submission, para. 438 et seq.
28 Appellate Body Report, US – Gambling, para. 182.
29 Exhibit ARG-28.
30 Request for the Establishment of a Panel by Panama, point 8, p. 9.
31 Exhibit ARG-49.

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the measure challenged here comes under Title XI, Section III 32, of the specific regulations
of 2013 of the National Securities Commission.
37. The persons specified in the Law on the Capita l Market may only engage in transactions in
the area of public supply when they are carried out or ordered by persons established, domiciled
or residing in cooperating countries under Decree No. 589/2013. However, it is provided that
transactions ordered by persons not included in the list of cooperating countries shall go forward
provided that (i) they have the status in their ho me jurisdiction of intermediaries registered with
an entity under the control and supervision of a body fulfilling similar functions to those of the
CNV, and (ii) they certify that the body in their home jurisdiction has signed a memorandum of
understanding on cooperation and exchange of info rmation with the CNV. The measure at issue is
not a prohibition, contrary to Panama's contention, since it provides an alternative for countries
not included in the list under Decree No. 589/2013.
33
7. Repatriation of investments

38. Argentina considers that the measure of the Central Bank of the Argentine Republic (BCRA)
that is challenged is not covered by the GATS, gi ven that the repatriation of investments governed
by the rule is not a subject covered by the GATS, since it is not directly related to trade in services
(under Articles I:1 and XXVIII of the GATS it does not affect trade in services).
39. Moreover, if the measure were considered to be covered by the GATS,
Communication "A" 4940 of the BCRA and amendmen ts does not breach the GATS. This measure
establishes a requirement: prior authorization from the Central Bank of the Argentine Republic for
repatriation of investments when the foreign beneficiary is a natural or legal person residing or
incorporated or domiciled in countries or jurisdictions not considered "cooperative for tax
transparency purposes" in the light of the prov isions of Article I of Decree No. 589/2013 and
supplementary rules. Nevertheless, as previously pointed out by Argentina, the verification
measure of the BCRA does not "solely" target countries that are non-cooperative for tax
transparency purposes.
34
40. Thus, the banking entity places on record that it has verified the documentation submitted
by the customer in order to approve the type of investment declared and that the funds used for
the purchase of the foreign currency transfer come from the sale within the country of the assets
realized, as well as the reasonableness and genuineness of the transaction.
41. Panama specifies no concrete cases and fails to demonstrate how the requirement of
authorization for the repatriation of investments affects "direct investments in companies and/or in
immovable property".
42. Furthermore, the BCRA communication challenged by Panama is fully consistent with
international standards in respect of tax transparency, and yields greater efficiency in the
detection and dismantling of suspected money laundering operations in accordance with the
international standards of the Financial Action Task Force (FATF).
35
8. Requirements for company registration

43. Article 118 of Argentina's Companies Law (No. 19.550) establishes the general principle that
foreign companies are governed, in terms of their existence and form, by the law of the place of
establishment, and that in order for a company to exercise its usual activities in accordance with
its social purpose, through the establishment of a branch, base or any other type of permanent
representation, it must be registered with the pu blic trade registry in the jurisdiction where it
seeks to operate. However, the challenged rule is Resolution No. 7/2005 of the Companies Control
Authority (IGJ), which has been amended by Resolution No. 1/2014 in order to bring the
regulations into line with Decree No. 589/2013. The purpose of that resolution is to register and

32 Title XI, section III, Transactions carried out by clients from or operating from tax havens, or through
offshore companies or shell companies. Exhibit ARG-50.
33 Argentina's first written submission, paras. 118-123, 486 et seq.
34 Argentina's first written submission, Explanatory Annex No. 2, para. 15 et seq.
35 Argentina's first written submission, paras. 124-125 and Explanatory Annex 2.

- B-39 -

supervise only commercial companies, foreign companies, civil associations and foundations
incorporated in the area of the autonomous city of Buenos Aires and not in the rest of Argentina.
44. Panama claims that companies from cooperative countries for tax transparency purposes
receive less favourable treatment in the registration process, and that the measures are therefore
in violation of Article II:1 of the GATS. This treatment is alleged to manifest itself in the additional
requirements that are not requested of companies supplying like services from countries that
cooperate for tax transparency purposes. As Argentina has indicated and demonstrated in its first
written submission
36, Argentina does not accord less favourable treatment to companies from
countries that do not cooperate for tax transparency purposes. The IGJ makes no distinction
between foreign companies when collecting information, since the importance of ascertaining the
economically significant activity of the company is common to all commercial companies that seek
lawful registration with the IGJ.
V. Alternatively, the challenged measures are justified by virtue of the relevant
exceptions of the GATS
45. Argentina maintains that: (1) the services and service suppliers of cooperative and
non-cooperative tax jurisdictions are not "like", nor are they alike to the services and service
suppliers of Argentina; (2) the measures in question do not modify the conditions of competition to
the detriment of like services and service supp liers of any other Member; and (3) Argentina's
treatment of services and service suppliers from cooperative and non-cooperative tax jurisdictions
is based on a legitimate regulatory distinction, which has been developed over a period of nearly
20 years of international cooperation in the framew ork of the Global Forum initiative under OECD
auspices, in order to address harmful tax competition, and the same legitimate distinction applies
to services and service suppliers from non-cooperative countries for tax transparency purposes,
with respect to services and service suppliers from Argentina.
37
46. As a subsidiary argument, and in the unlikely event that the Panel were to find that the
measures in question are inconsistent with the GATS, the measures in any case are justified under
Article XIV(c) and (d) of the GATS and Article 2(a) of the Annex on Financial Services to the GATS.
47. Argentina emphasizes, however, that it is not necessary for the Panel to address itself to
these topics unless and until Panama has conclusively established that: (1) the measures in
question are measures "affecting trade in servic es" under Article I.1 and are therefore covered by
the GATS; (2) the measures in question extend le ss favourable treatment to services and service
suppliers from Panama; and (3) under any comparison, the services and service suppliers that
allegedly receive less favourable treatment by vi rtue of the measures at issue are "like" the
services and service suppliers of Argentine or other origin which allegedly receive more favourable
treatment.
48. Argentina has established defensive fiscal measures "necessary to achieve enforcement"
of Argentine tax laws and regulations, including the "prevention of deceptive and fraudulent
practices"; therefore, in the unlikely event that the Panel were to find that Panama has
demonstrated a violation of Articles II:1 and XVII of the GATS and of Articles I:1, III:4 and XI:1
of the GATT 1994, the Argentine measures are justified by Article XIV(c) and (d) of the GATS.
49. Each measure promotes the application of tax laws and regulations by reducing the scope
for deceptive and fraudulent transactions involving Argentine taxpayers and related enterprises
located in non-cooperative tax jurisdictions, whose only purpose is to evade taxes and/or
circumvent the enforcement of Argentina's tax laws and regulations. The defensive tax measures
adopted by Argentina for the necessary purpose of enforcing its tax laws and regulations include
the following: (1) the imposition of withholding taxes at source on payments to residents of
non-cooperative tax jurisdictions; (2) the reversal of the burden of proof for determining the tax
base for transactions which potentially take advantage of harmful tax practices: (3) the application
of transfer pricing standards in order to counter harmful tax competition; (4) restrictions on
deductions for payments to entities in non-cooperative tax jurisdictions; and (5) increased auditing

36 Argentina's first written submission, para. 572.
37 Argentina's first written submission, para. 238.

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and licensing requirements for subsidiaries of en tities based in tax havens. These measures are
justified under Article XIV(c) of the GATS.38
50. In the process of "weighing and balancing" as a means of determining whether a measure is
necessary39, the Appellate Body has stated that this analysis must weigh up: (1) the contribution
of each of the defensive tax measures to the enforcement objectives of fiscal legislation;
(2) the degree of importance of the interests at stake; and (3) the possible restriction on trade
entailed by the tax defence measures in question.
51. Given that (1) transactions between Argentine taxpayers and entities based in
non-cooperative tax jurisdictions pose a greater risk of tax evasion, tax avoidance and fraud; and
that (2) it is not possible for the Argentine authorities to determine whether (a) the transaction
has a legitimate commercial purpose, or whether (b) the transaction is aimed exclusively at
avoiding the payment of taxes in Argentina, it can be concluded that: Argentina's defensive tax
measures considerably reduce these risks by eliminating the possible tax benefits that Argentine
taxpayers would derive exclusively for the purpose of avoiding the payment of taxes in Argentina
through simulating transactions with related entities based in non-cooperative tax jurisdictions.
52. The measures are not excessively restrictive on trade in financial services from service
suppliers located in non-cooperative tax jurisdictions, nor do they impede the provision of services
in Argentina by such suppliers.
40 The defensive measures are applied in conformity with the
chapeau of Article XIV which stipulates that the measures justified by that provision shall not be
applied "in a manner which would constitute a means of arbitrary or unjustifiable discrimination
between countries where like conditions prevail", or a "disguised restriction on trade in services".
41
In this dispute, the distinction made between service suppliers in cooperative and non-cooperative
jurisdictions can hardly be seen as "arbitrary" or "unjustifiable" since it is entirely based on
internationally accepted and recognized principl es of the Global Forum and the OECD, to which
Panama has duly subscribed. Indeed, when Panama joined the Global Forum, it expressly indicated
that it accepted the rules of that forum and re quested its fellow members of the forum to apply
a coordinated set of defensive measures to all ju risdictions that did not adhere to the standards
of the Global Forum. From the standpoint of Ar gentina's tax authorities, the two categories
of suppliers entail different degrees of risk for the enforcement of tax laws: with respect to
cooperative jurisdictions, the Argentine tax authorities have the capacity to obtain the necessary
information to implement Argentine tax laws, while in the case of suppliers in non-cooperative
jurisdictions, they are not capable of obtaining that information, and this situation entails
potentially serious consequences for the Argentine tax base.
53. The measure relating to the request for prio r authorization from the Central Bank of the
Argentine Republic (BCRA) for the sale of foreign exchange to non-residents for the repatriation of
direct investments is a measure – in case the Panel considers that it is covered by the rules of the
GATS – "necessary to secure compliance with laws or regulations" of Argentina within the meaning
of Article XIV(c) of the GATS concerning the "p revention of deceptive and fraudulent practices",
commonly associated with the concealment and laundering of assets of criminal origin.
54. The measure contributes to the objective of ensuring compliance with Argentina's laws and
regulations on prevention of the laundering of assets of criminal origin, as it is in line with the
international criteria of the FATF under Law No. 25246 of the Argentine Republic.
55. Moreover, Argentina invokes in the alternative Article XIV(d) applicable to direct taxes in
circumstances of non-compliance with Article XVII, in the hypothetical event that the Panel were to
consider that the Argentine defensive measures (measures 2, 3 and 4) of Panama's request should
be justified in Panama's claims under Article XVII instead of as measures "necessary to secure
compliance" with the tax laws and regulations of Argentina within the meaning of Article XIV(c)
of the GATS, including the "prevention of deceptive and fraudulent practices" commonly associated
with transactions with non-cooperative tax jurisdictions.

38 Argentina's first written submission, para. 258.
39 Appellate Body Report, Korea – Various Measures on Beef.
40 Argentina's first written submission, paras. 298-302.
41 See Appellate Body Report, United States – Measures Affecting the Cross-Border Supply of Gambling
and Betting Services, para. 339.

- B-41 -

56. Argentina maintains that the defensive measures challenged are justified under
subparagraph (d) of the GATS as measures which establish the difference in treatment [which]
is aimed at ensuring the equitable or effective imposition or collection of direct taxes in respect
of services or service suppliers of other Members , within the meaning of that provision, whether
envisaged individually or in the context of a co mprehensive policy to address the risks posed by
harmful tax practices.
57. These measures, in turn, make an important contribution to ensuring the effective
imposition or collection of direct taxes in respect of services or service suppliers of other Members,
inasmuch as they limit the possible tax benefits of simulated transactions between Argentine
taxpayers and related entities located in non-cooperative tax jurisdictions exclusively for the
purpose of evading taxes in Argentina and eroding the Argentine tax base.
Argentina's financial service measures are justified under the prudential exception
58. Furthermore, in the event that this Panel we re to find that Panama has demonstrated that
the measures at issue are inconsistent with Articles II:1, XVI:1 and XVII of the GATS, Argentina
argues, in the alternative, that the additional requirements imposed on entities domiciled
in non-cooperative jurisdictions for the provision of reinsurance and retrocession services
in Argentina (measure 5)
42 and the conditions for proceeding with securities transactions
undertaken or ordered by persons domiciled in non-cooperative jurisdictions (measure 6) 43 are
justified by virtue of Article 2(a) of the Annex on Financial Services to the GATS (the "prudential
exception").
59. Pursuant to the foregoing, Article 2(a) prov ides for an exception in respect of different
GATS-inconsistent measures taken for "prudentia l reasons". The ordinary meaning of the term
"prudential" indicates that these are measures taken by WTO Members for prudential or
precautionary purposes. Article 2(a) establishes a non-exhaustive list (which contains no limitation
in principle on the types of measure to which a WTO Member may have recourse for prudential
reasons) of measures that can be used for prudential purposes, including measures "for the
protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by
a financial service supplier, or to ensure the integrity and stability of the financial system".
These provisions indicate that the measures adopted "for prudential reasons" include measures
aimed at safeguarding the interests of consumers of financial services, and/or protecting the
financial system against systemic risks. "The most important aspect of this exception is that it
does not restrict in principle the freedom of regu latory authorities with respect to the types of
measures that can be adopted for prudential reasons".
44
60. The second sentence of Article 2(a) also stipulates that GATS-inconsistent measures adopted
for prudential reasons " shall not be used as a means of avoiding the Member's commitments or
obligations under the Agreement ". This anti-abuse provision is functionally analogous to the
chapeau of Article XIV of the GATS. It is required that any WTO-inconsistent measures adopted for
prudential reasons shall not in effect be me asures adopted for the purpose of evading the
GATS disciplines.
61. On the basis of all of the foregoing, a Member seeking to justify a measure otherwise
inconsistent with the GATS under the prudential exception needs to establish two elements.
First, the Member must demonstrate that the measure was adopted "for prudential reasons", as it
contributes to the achievement of a prudential or precautionary objective. Secondly, the Member
State must demonstrate a logical relationship between the measure and its prudential objective;
and thirdly, whether the measure is being used as a means of evading the Member's obligations
under the Agreement.
62. As Argentina has demonstrated, the restrictions on reinsurance and retrocession services
from non-cooperative jurisdictions (measure 5) and the conditions for processing securities
transactions from non-cooperative jurisdictions (measure 6) are suitably consistent with the
requirements of the prudential exception.

42 In the light of Panama's first written submission.
43 Idem.
44 Report to the TPRB from the WTO Director-General on the Financial and Economic Crisis and
Trade-Related Developments, WT/TPR/OV/W/2, 15 July 2009, para. 80.

- B-42 -

VI. Claims under the GATT
63. Argentina does not discriminate with respect to the presumption of an unjustified increase in
wealth. The presumed inconsistency with Article I:1 of the GATT 1994 is incorrect. The measure
challenged stands outside the scope of applic ation of that Agreement and is not covered
by Article I:1, inasmuch as the tax burdens to which economic operators are regularly made
subject in Argentina cannot be treated as equivalent to restrictions on trade in goods.
64. The measure does not affect international trade transactions because the tax is declared at
a later time, once the foreign trade transaction is completed; it is unrelated to other aspects of the
importation of the product, nor does it affect actual imports. A specific tax imposed by law on the
assets of a domestic taxpayer cannot in any sense be considered "another aspect of importation".
65. Argentina does not discriminate with respect to measure 3 on transfer pricing. It is not
correct to assert that Argentina " requires that" transactions with persons domiciled, incorporated
or residing in non-cooperative countries should be valued in accordance with pricing methods for
transfers. The measure challenged by Panama does not apply to goods valuation for the purpose
of applying the customs tariff, but to the determination of value for the purpose of calculating the
basis of assessment of a tax.
66. The requirements for goods export and import transactions, depending on whether they are
conducted with persons in cooperative or non-cooperative countries, are not intended for customs
valuation purposes and do not imply the granting of any advantage, favour, privilege or immunity
with respect to customs duties or charges of any kind.
67. Nor does the challenged measure affect the sale, offer for sale, purchase, transport,
distribution or use of these products in the domestic market,. The measure does not directly
govern the conditions of purchase or sale of products, nor does it adversely modify the conditions
of competition between domestic and imported products.
68. Rather than any product in particular, the measure targets transactions with natural or legal
persons from non-cooperative countries. No distinction is made between "products" and there is no
criterion for distinguishing between "products", but rather for precisely determining the earnings
derived from an economic activity. It is therefore not possible to have a reference product with
which to compare likeness. Panama's claim concerning the likeness of the products at issue has no
normative basis whatsoever.
69. The measure in question does not have the effect of according imports or exports to the
listed countries treatment less favourable than that accorded to like products of domestic origin in
the same condition.
70. Panama has failed to demonstrate that the challenged measures establish
"restrictive conditions". Article XI:1 of the GATT 1994 explicitly excludes " duties, taxes or other
charges" from its scope of application, so that the challenged measure, being a tool for
determining the basis of assessment of the earnings tax, would not be covered by the provisions
of that article.
71. Even in the unlikely event that the fiscal meas ure is not considered a tax, it is also not
included in the scope of application of Article XI:1 as it is not a restriction or prohibition on the
import or export of goods.
72. The measure is not a "condition" for the import or export of products that is applied prior to
import or export. It is not applied as an exclusive condition for the entry of products from the
listed countries, rather it is applied ex post, i.e. once the products have entered the market and
exclusively for purposes of control and revenue collection in respect of taxpayers'
economic activity.
73. In order for a "restriction" to be subject to Article XI, it must be one that "is expressed in
terms of quantity" or one that is "quantifiable". There is no claim or any evidence from Panama to
show that the regulation challenged imposes a restriction on imports or exports that is expressed
in terms of quantity.

- B-43 -

Justification of the challenged measures under Article XX(d) of the GATT
74. In the unlikely event that the Panel were to reach the conclusion that the Argentine measure
linked to the presumption of an unjustified increase in wealth in transactions related to trade in
goods with persons from non-cooperative countries for tax transparency purposes is inconsistent
with Article I:1 of the GATT 1994 and that the Ar gentine measure linked to transfer pricing is
inconsistent with Articles III:4 and XI:1 of the GATT, the measures in question are justified under
the general exceptions set forth in Article XX(d) of the GATT 1994.
75. The challenged measures are necessary to ensure compliance with Argentina's tax laws and
regulations, as well as to prevent deceptive tax practices. The underlying reason for the measures
relates to the need to guarantee equitable tax treatment, prevent tax fraud and access information
which the tax authority could not otherwise obtain.
76. The challenged measures meet the double test of the Article XX chapeau. They are not
applied arbitrarily or unjustifiably, since they are applied when specific circumstances make it
impossible to access tax information from another country, as in the case of non-cooperative
countries, or when the fact of transactions taking place between related enterprises makes it
impossible to verify the economic reality of the transaction. Such circumstances are explicitly
provided for in the Argentine regulations and in no sense constitute a disguised restriction on
international trade.
77. In conclusion, Argentina respectfully requests the Panel to find that Panama has failed to
establish a prima facie case under the GATS by not having submitted evidence or arguments
specifically related to the treatment accorded by Argentina to trade in services and goods from
Panama. In the hypothetical event that it were acceptable for Panama to challenge the treatment
accorded to services and service suppliers of non-Panamanian origin, Argentina would welcome
a finding that Panama has also failed to make a prima facie case regarding such services and
service suppliers. In the unlikely event that the Panel were to consider that Panama has succeeded
in making such a prima facie case, Argentina requests that the Panel finds that (i) the services in
question are not like services and (ii) there is no less favourable treatment since any difference in
treatment is based on legitimate regulatory distinctions. By the same token, in its claims under the
General Agreement on Tariffs and Trade (GATT), Panama has also failed to establish a prima facie
case, and Argentina similarly requests that, if the Panel considers that, in the matter of trade in
goods, Panama has succeeded in making such a case, the Panel should find that there is no less
favourable treatment since any difference in treatment is based on legitimate regulatory
distinctions. Failing this, if the Panel were to find violations of the relevant rules of the GATS or the
GATT, Argentina respectfully requests the Panel to find that: (a) measures 1, 2, 3, 4, 7 and 8 are
justified by Article XIV(c) of the GATS; (b) if the Panel were to find a violation of Article XVII,
measures 2, 3 and 4 are justified under Article XIV(c) of the GATS and alternatively under
Article XIV(d) of the GATS; and (c) measures 5 and 6 are justified by Article 2(a) of the Annex on
Financial Services.
78. On the basis of the foregoing, Argentina re quests the Panel to reject in their entirety
Panama's claims relating to the Argentine measures challenged on grounds of alleged violations
of Articles II.1, XVI.1, XVI.2(a) and XVII of the GATS, and Articles I:1, III:4 and XI:1 of the GATT.

- B-44 -

ANNEX B-4
SECOND PART OF THE EXECUTIVE SUMMARY OF THE ARGUMENTS OF ARGENTINA
I. Introduction
1. In its second written submission, Argentina remarks on Panama's line of conduct during the
negotiations with Colombia which culminated in the signing of a Memorandum of Understanding in
which both countries "undertake to conclude the negotiation of the agreement [on double
taxation] and proceed to the signing thereof by 30 September 2015".
1 The Agreement includes
a clause on exchange of information.
2. As it had done with regard to its negotiations with Argentina, Panama subsequently played
down the agreement reached with Colombia by asserting in a communiqué from its Ministry of
Foreign Affairs, issued at the time of the si gning of the above-mentioned Memorandum, that
"it was agreed to explore the viability of an agreement to prevent double taxation, in which
guarantees for the users of the Panamanian services platform are preserved".
2
3. Argentina lays stress on Panama's public recognition of its conviction that the conclusion
of an information exchange agreement with Colombia "would disadvantage" corporate and
financial service suppliers operating in Panama. 3 In fact, the Panamanian authorities have
indicated that one of Panama's priority objectives is to preserve the existing conditions of
competition for the Panamanian services platform and that exchange of information and fiscal
transparency are perceived by its authorities as a threat which would undermine the competitive
position of Panamanian services and service suppliers.
4. However, Panama continues to deny, for the purposes of this case, that the existence or
nonexistence of effective exchange of information with a particular jurisdiction affects the
assessment as to whether the services and service suppliers may be considered "like".
5. Panama acknowledges that the regulatory issues underlying a measure are relevant for
an assessment of likeness, as a minimum, to the extent that those issues are reflected in the
conditions of market competition. This must be assessed in particular in the context of Panama's
own statements, which reveal that the existenc e of effective exchange of information is
a regulatory factor affecting the conditions of competition for service suppliers in the marketplace.
4
6 . P a n a m a a d m i t s t h a t i t h a s s i g n e d i n f ormation exchange agreements with numerous
jurisdictions located almost exclusively outside Latin America. 5 This makes it clear that Panama's
strategy is to attempt to preserve its "competitive position" with respect to service suppliers in the
countries of the region.
II. Panama has failed to establish a prima facie case of inconsistency with respect to
its claims under Articles II and XVII of the GATS
7. Panama's claims under Articles II and XVII of the GATS, which underpin its entire case
against the measures at issue 6, are based entirely on the proposition that the Panel should simply
ignore the fact that the regulatory issues underlying a measure are relevant for an assessment of
likeness. To that end, it relies on a single statem ent by a single panel in a case where "likeness"
was not even in dispute. Panama has taken the position that it has no obligation to establish

1 Memorandum of Understanding between the Government of the Republic of Colombia and the
Government of the Republic of Panama on cooperation between administrative authorities in the matter
of money laundering and other topics, and on an agreement to avoid double taxation. (Exhibit ARG-122)
2 Argentina's second written submission, para. 5.
3 Communiqué from the Government of the Republic of Panama, Ministry of Foreign Affairs, dated
8 October 2014. (Exhibit ARG-119)
4 Argentina's second written submission, para. 11.
Panama's response to question No. 44. Of the 30 countries listed by Panama, only Mexico is a
Latin American country.
6 Argentina's second written submission, para. 10.

- B-45 -

a prima facie case that the services and service suppliers at issue in this dispute are "like", on the
sole basis that the principle enunciated by the Appellate Body US – Clove Cigarettes is not
applicable when the measure at issue discriminates "de jure" on the basis of origin.7
A. Panama has failed to establish the applicability threshold of the GATS
8. For the reasons explained in its first written submission, Argentina considers that Panama
has failed to make a prima facie case for the applicability of the GATS to the measures at issue.
Moreover, the positions of the parties on this issu e have been presented clearly in their respective
responses to the Panel's questions following the first substantive meeting. Consequently,
Argentina has made no additional comments on these issues in its second written submission.
B. Panama has failed to establish a prima facie case that the allegedly affected
services and service suppliers are "like"
9. Panama's claims under Articles II and XVII of the GATS are based on the proposition that
the measures at issue discriminate " de jure" against services and service suppliers on the basis
of their origin, relying on a certain line of authority developed in the framework of multilateral
agreements on trade in goods, in a simplistic attempt to transpose that line of authority to the
totally different context of trade in services.
10. The idea of a measure that discriminates " de jure " with respect to goods on the basis
of their origin derives from the fact that the GATT 1994 focuses exclusively on the characteristics
of goods and not on the characteristics of the producers of goods . The GATS is fundamentally
different from the multilateral agreements on trade in goods in that respect. For this reason, the
idea of a measure that discriminates " de jure" against services and service suppliers on the basis
of their origin has little relevance in the context of the GATS and must be transposed to the GATS
with extreme caution.
11. Argentina gave a detailed account of the jurisprudential origins of the argument that
likeness may be presumed when a measure accords differential treatment to goods, exclusively,
on the basis of origin. 8 This argument - which is at best no more than a presumption - derives
from the fact that the origin of a good does not usually affect its characteristics as a good.
This fact is reflected in the text of the GATT 199 4 and the other multilateral agreements on trade
in goods, which refer solely to "like goods" and not, for instance, to "producers of like goods".
In this context, it is presumed that a measure that offers differential treatment exclusively on the
basis of origin discriminates with respect to goods that are "like" except in this respect.
12. Argentina has emphasized that this presumption cannot be transposed to the context of
trade in services. To begin with, Articles II and XVII of the GATS, unlike the corresponding articles
in the multilateral agreements on trade in goods, do not refer to goods but refer to "like services
and service suppliers". This is a fundamental difference between the GATS and the multilateral
agreements on trade in goods which Panama constantly overlooks. This difference is of central
importance for an understanding of why the principle of "distinction based on origin" cannot be
transposed directly to the context of trade in services, as suggested by Panama.
13. The reference to "services and service suppliers " in the GATS demonstrates that the origin
of a service or service supplier is not presumed to be irrelevant for the purpose of a "likeness"
assessment. Unlike the GATT 1994, the characteristics of the service supplier must be examined in
any assessment of "likeness". The relevant characteristics of a service supplier are frequently seen
to be affected, or even determined, by the jurisdiction in which the service supplier is located,
i.e. by the origin of the service supplier.
14. Moreover, Panama has also made no effort to take account of the evidence presented by
Argentina, which demonstrates that the distinction between cooperative and non-cooperative
jurisdictions in fact has a significant impact on conditions of competition in the marketplace.

7 Argentina's second written submission, para. 11.
8 Argentina's opening statement at the second substantive meeting, para. 5, and its second written
submission, paras. 25-34.

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15. Finally, Panama's assertion that it has no obligation whatsoever to demonstrate likeness in
the present dispute is even more untenable in th e light of the history of the GATS negotiations.
The issue placed before the Panel, namely how defensive measures against non-cooperative
jurisdictions under Articles II and XVII of the GATS are to be assessed, was specifically considered
in the course of the negotiations. The Chairperson's statement in document MTN.GNS/49 clearly
indicates that the drafters of the Agreem ent considered how fiscal measures against
non-cooperative jurisdictions were to be assessed under the provisions of the GATS, and concluded
that such measures would normally not be inconsistent with the above-mentioned provisions, since
services and service suppliers in cooperative and non-cooperative jurisdictions cannot be
considered "like".
9 Pursuant to Article 32 of the Vienna Convention on the Law of Treaties, this
element of the GATS negotiation "confirms the mean ing" of Articles II and XVII of the GATS that
derives from the application of Article 31 of the same Convention.10
16. Furthermore, Argentina has referred to the importance to be attached to the "time of
conclusion" of an agreement (in this case the GATS ), bearing in mind that it is central to the
analysis serving to confirm the final intent of the negotiators as set out in the text of the
Agreement for the purposes of its subsequent interpretation.11
17. Argentina has pointed out that it is obvious that Panama has no explanation for the history
of the negotiation and expects the Panel simply to ignore it. The negotiating history provides
confirmation of what is already clear from a prop er implementation of the principles of treaty
interpretation set out in Article 31 of the Vienna Convention. The legal affirmation – an unfounded
one – on which Panama has based its entire case is utterly refuted by an interpretation of the rules
that is fully in accordance with the negotiating history.
12
18. In Argentina's opinion, the Panel's analysis of Panama's claims under Articles II and XVII can
and must end on this point. Panama was obliged to establish a prima facie of likeness under
Articles II and XVII, and has failed to do so. This is the correct and necessary basis on which
Panama's claims under Articles II and XVII are to be rejected.
1. Decree No. 589/13 and the other measures in question refer to the
relevant commercial and regulatory characteristics of services and
service suppliers
19. Panama has emphasized that the proposition that the measures at issue in this dispute
"discriminate de jure" against services and service suppliers on the grounds of origin is based on
the interpretation of Decree No. 589/13, as if the latter established a "list of countries" with no
type of connection with the relevant commercial and regulatory characteristics of services and
service suppliers from those countries.
13
20. However, Panama explicitly recognizes that Argentina "distinguishes between countries on
the basis of whether or not they cooperate with Argentina in the area of fiscal transparency" 14,
a distinction characterized as being "based on objective criteria and including legitimate
reasons".15 Thus, Panama itself appears to acknowledge that Decree No. 589/2013 does not
distinguish between categories of services and service suppliers solely on the basis of origin, either
de jure or in any other way.

9 Statement by the Chairman of the Group of Negotiations on Services (GNS), document MTN.GNS/49,
11 December 1993.
10 Argentina's comments on Panama's responses to the Panel's set of questions to the parties, comment
on the response to question No. 70, para. 1.
11 Argentina's comments on Panama's responses to the Panel's set of questions to the parties, comment
on the response to question No. 70, para. 4 and footnote on page 8 of the Panel Report, EC – Chicken Cuts
(Complaint by Brazil).
12 Argentina's opening statement at the second substantive meeting of the Panel, para. 11 and
Argentina's comments on Panama's responses to the Panel's set of questions to the parties, comment on the
13 Argentina's second written submission, para. 21.
14 Panama's response to question No. 36.
15 Panama's response to question No. 37(a).

- B-47 -

21. In addition, and without prejudice to the burd en of proof which Panama has failed to meet,
Argentina takes the liberty of pointing out that, as it has argued and documented at length,
Decree No. 589/13 distinguishes between jurisdiction s that participate in the effective exchange
of information with Argentina and those that do not so participate. The distinction made by
Decree No. 589/13 between cooperative and non-cooperative jurisdictions is directly relevant to
the commercial and regulatory characteristics of services and service suppliers from those
jurisdictions. Panama has failed to refute the fact that a characteristic of a jurisdiction - in this
case, whether or not it is involved in the effective exchange of information with Argentina -
may at the same time be a characteristic of services and service suppliers from that jurisdiction.
16
22. If a jurisdiction participates in the effective exchange of information with the authorities
of other countries, it directly affects the commercial and regulatory characteristics of services and
service suppliers originating in that jurisdiction. In the present case, the existence or
non-existence of effective exchange of information is clearly relevant in terms of the commercial
and regulatory characteristics of the services and service suppliers originating in the jurisdictions
concerned. In any event, the distinction between cooperative and non-cooperative jurisdictions
affects the conditions of competition in the marketplace and is therefore relevant for the
examination of "likeness".
17
23. Lack of fiscal transparency an d non-exchange of information provide an additional attraction
for service suppliers from non-cooperative countries in relation to competing suppliers from
cooperative jurisdictions, which consists in the absence of any obligation to disclose the identity
of the owner or final beneficiary, or the characteristics of the operations in which they engage,
regardless of the service concerned. This is a factor of attraction for capital and investors, which
benefits the financial and corporate services platform of non-cooperative jurisdictions and sets
them apart from cooperative jurisdictions.
24. Argentina notes that, after the first substantive meeting, Panama openly recognized that
regulatory differences may be relevant for an asse ssment of the "likeness" of services and service
suppliers, to the extent that such differences affect the conditions of competition in the
marketplace.
18 In this connection, Panama appears to have accepted the fact that the
Appellate Body precedent in US – Clove Cigarettes applies with equal force to the context of trade
in services.19
25. It is not surprising, however, that Panama has sought to evade any discussion of whether
the regulatory differences between cooperative an d non-cooperative jurisdictions are reflected in
the conditions of competition for services and service suppliers in the market.
26. Panama has not even attempted to rebut the evidence 20 referred to in the conclusions
reached by Johannesen and Zucman on how the effect of this type of information exchange
agreement would place Panamanian services and service suppliers at a disadvantage.
These conclusions are, moreover, fully consistent with the statements made by Panama when it
joined the Global Forum
21 and in regard to the negotiation with Colombia.22
27. As Argentina documented in its first written submission, the Global Forum's initiative to level
the playing field is largely based on the fact that non-cooperative countries give up a competitive
advantage for their services and service suppliers when they agree to enter into information
exchange agreements with other jurisdictions.

16 Argentina's second written submission, para. 40.
17 Ibid. para. 41.
18 Panama's response to question Nos. 31 and 33(a).
19 Argentina's second written submission, para. 45.
20 Argentina would point out that, given that the study by Johannesen and Zucman was based on
all bilateral bank deposits held in 13 different non-cooperative jurisdictions, it covers the effect produced by
information exchange agreements on deposits held by Argentine nationals in those jurisdictions. Therefore,
the Johannesen-Zucman study provides evidence of the effect produced by information exchange on both
conditions in the Argentine market and, more broadly, conditions on the global financial services market.
21 Letter of 15 April 2002 from the Minister of the Economy and Finance of Panama to the
Secretary-General of the OECD (Exhibit ARG-8).
22 Argentina's second written submission, paras. 1-9.

- B-48 -

28. Undoubtedly, the distinction between cooperative and non-cooperative jurisdictions has an
impact on the competitive relationships between services and service suppliers in the marketplace.
Consequently, that distinction is directly relevant for the purposes of an assessment as to whether
these services and service suppliers may be considered "like".
29. Argentina has demonstrated that the services and service suppliers in question are not
"like"
23 owing to the effect produced by regulatory differences in cooperative and non-cooperative
jurisdictions with regard to their competitive position in the marketplace.
III. Panama has failed to demonstrate that Argentina acted inconsistently with
Articles XVI:1 and XVI:2(a) of the GATS
30. Panama has not proved its argument that the Argentine regulations are inconsistent with
Articles XVI:1 and XVI:2(a).24 The fact is that Article XVI:2(a) is not applicable in the present case.
This is another of the instances in which the Panel should not go beyond making this finding.
31. In fact, the measure challenged by Panama is not inconsistent with Articles XVI:1 and
XVI:2(a) of the GATS for the simple reason that the measure is not covered by those obligations.
The obligations in question prohibit limitations on the number of service suppliers, whether in the
form of numerical quotas, monopolies, exclusiv e service providers or the requirements of
an economic needs test, in sectors where a Me mber has undertaken market access commitments.
Article XVI:2(a) refers explicitly to limitations on the number of "service suppliers". If a challenged
measure does not limit the number of service suppliers per se , the measure is not one of the
measures covered by Article XVI:2(a) of the GATS. This circumstance obtains in the present case.
32. In US – Gambling, the Panel, in a finding not reversed by the Appellate Body, indicated that,
in the context of paragraph 2(a) of Article XVI, a panel must first and foremost determine whether
the challenged measures contain limitations on "service suppliers".25
33. The Panel referred to the definition of service supplier in Article XXVIII and went on to refer
to subparagraph (j) of Article XXVIII which provides that the term person "means either a natural
person or a juridical person". From this it concluded that, in order for a measure to be covered by
Article XVI:2(a) of the GATS, it must impose a limitation on the number of natural or juridical
persons that supply services, and this type of measure must not be confused with others of
a quantitative nature which impose limitations not specifically directed at the number of natural or
juridical persons supplying services.
34. The measure challenged by Panama is not directed at specifically limiting the number of
"natural or juridical persons that supply reinsurance services". In fact, the measure is not directed
at natural or juridical persons at all. On the contrary, the regulation governs reinsurance
operations relating to the coverage of individual risks.
35. Such operations are not the "service suppliers" referred to in Article XVI:2(a), but are
reinsurance service operations, and the measure therefore stands outside the scope of that
provision.
36. Panama bases its claim concerning Articles XVI:1 and XVI:2(a) on point 19 of Annex I to
Resolution No. 35.615/2011 and Article 4 of Resolution No. 35.794/2011.
26 With regard to point 19
of Resolution No. 35.615/2011 (contained in point 4.1 of the Regulatory Framework for
Reinsurance), this provision entitles the SSN to issue resolutions on "reinsurance operations" and

23 Argentina's responses to the Panel's set of questions to the parties (13 February 2015), response to
question No. 71, paras. 8-58.
24 Argentina's first written submission, paras.401 to 466. Argentina's second written submission,
paras. 52-54.
26 Under the regulatory reform carried out by the National Insurance Supervisory Authority (SSN)
pursuant to SSN Resolution No. 38708, in force since 1 December 2014, the regulatory provisions on
reinsurance (previously contained in SSN Resolution Nos. 35.615/2011, 35.794/2011 and 38.284/2014, among
others), are now contained in the Annex to the General Regulations of the Insurance Business, point 2.1.1,
Regulatory Framework for Reinsurance. SSN Resolution No. 38708/2014 does not represent a substantive
change in the regulations on insurance activity, but rather a rearrangement and systematization of all the rules
previously issued by the body concerned.

- B-49 -

authorizes insurers that so request to enter into "reinsurance contracts" with foreign reinsurance
entities operating from their central offices. Reinsurance operations and reinsurance contracts are
not "natural person[s] or … juridical person[s]" and do not therefore constitute reinsurance
"suppliers". Regarding Article 4 of Resolution No. 35.794/2011 (contained in point 4.2 of the
Regulatory Framework for Reinsurance), this ar ticle explicitly refers to the "reinsurance"
of "individual risks". Again, the reinsurance of individual risks is not "a natural person or a juridical
person" that provides reinsurance services and is not therefore a reinsurance service supplier.
There is no doubt that this measure refers to service operations and not at all to the service
suppliers mentioned in Article XVI:2(a).
37. It should be emphasized that Panama, in its second written submission, recognizes the
existence of a limitation on the "supply of services" but not on service suppliers, although this does
not prevent it from reaching the forced and totally illogical conclusion that there is a limitation on
the number of "service suppliers".
27
38. Regarding the reference made by Panama in various passages to the existence of an
economic needs test in the Argentine regulations, the existence or non-existence of an economic
needs test is irrelevant to the present claim since, as has been pointed out, the measure
challenged by Panama stands outside the scope of Article XVI:2(a). This is because it is not
a measure limiting the number of "service suppliers".
28
39. The Argentine measure does not impose a num erical limitation on reinsurance providers
above or below the threshold of 50 million. In any event, it is not necessary to enter into that
analysis, since "[f]irst, the Panel must determine whether the challenged measures contain
limitations on "service suppliers" 29 and Argentina has demonstrated that the challenged measure
contains no limitations on "service suppliers".30
40. Argentina emphasized, in addition, that th e measure challenged by Panama is clearly
a qualitative measure outside the scope of Article XVI:2(a). The relevance of Article 4 of Resolution
No. 35.794 (point of the Regulatory Framework for Reinsurance) does not lie in the figure
(US$50 million) in particular, but in the fact that this figure represents a qualitative parameter
which meets the specific characteristics of reinsurance and the risks that it is sought to insure.
41. The eligibility for direct sourcing of reinsuranc e policies with entities having no presence in
the country, as stipulated in Article 19 of Reso lution No. 35615/2011 (point 4.1 of the Regulatory
Framework for Reinsurance) does not correspond to a quantitative criterion, as alleged by Panama.
The rule establishes that the criteria are: (a) magnitude and (b) the characteristics of the risk to
be insured. The characteristics of a risk have little or nothing to do with the term "quantitative
restriction" in the GATS context. The most aptly applicable sense of the term "magnitude" is that
of the "importance of something". Nor is this a term of a quantitative nature.
42. Contrary to Panama's assertion
31, even if it were accepted that the Argentine measure
in some way restricts access to its reinsurance market, such restriction does not operate on the
basis of a quantitative criterion, a criterion which under the prevailing WTO interpretation has
a precise scope and significance, of a numerical nature. A proper analysis, in line with the rules
of interpretation of the Vienna Convention on the Law of Treaties, must consider not only the text
of the specific provision (Article 4 of SSN Resolution No. 35.797/2011), which is purely
instrumental and operational in nature, but also the legal source of the obligation that is applied
for the purpose of properly assessing its nature, which in this case is qualitative.

27 Panama's second written submission, para. 2.628.
28 WTO Secretariat Note on "Economic Needs Tests", S/CSS/W/118, 30 November 2001, para. 5
(cited by Panama), which assists in identifying which economic needs tests are covered by Article XVI:2(a).
According to the note, the economic needs tests that are prohibited, except where a member includes the test
in its schedule, are those specifying an "exact number" of suppliers. In this connection, see Argentina's
responses to the Panel's set of questions, response to question No. 76, para. 28.
30 Argentina's responses to the Panel's set of questions to the parties, 13 February 2015, response to
question No. 76, para. 31.
31 Panama's second written submission, paras. 2.628 to 2.630.

- B-50 -

IV. In the alternative, the measures at issu e are justified by virtue of the relevant
exceptions of the GATS
43. In the unlikely event that it were necessary to consider Argentina's affirmative defences,
Argentina offers a brief commentary on issues rais ed by Panama with respect to those defences,
in particular with regard to the general exception under Articles XIV(c) and the prudential
exception (prudential carve-out) in paragraph 2(a) of the GATS Annex on Financial Services.32
A. The measures in question are justified by virtue of Article XIV(c) of the GATS
44. Argentina has opted to present its arguments collectively 33 and considers that nothing in the
text of Article XIV(c) requires a respondent Member to invoke that defence separately for each
violation claimed by the complainant Member; nor did the Panel in China – Auto Parts suggest the
contrary.
45. In accordance with the case law on Articl e XX(d) of the GATT in relation to the GATS,
a Member that seeks to justify a measure otherwise inconsistent with WTO rules under
Article XIV(c) of the GATS must establish that the measure in question is designed to "secure
compliance" with laws or regulations which are not per se inconsistent with the GATS.
46. In this connection, Panama criticizes Argentina mainly for being insufficiently specific in
identifying the provisions of domestic law with which it is sought to secure compliance. From the
time of its first written submission, Argentina has explained that all its defensive tax measures are
designed to secure compliance with its national tax laws, in particular the Earnings Tax Law (LIG).
47. Accordingly, it is not legally feasible to ar gue for the separate treatment of tax regulations
which are meant to be enforced jointly and systematically. The Earnings Tax Law and its
implementing regulations, particularly Articles 1, 2, 5, 17, 80, 91, 92, 127, 129 and 130, establish
the tax in accordance with the requirements of the National Constitution (Articles 4, 16, 17
and 75(2)), while the procedural provisions regarding the Earnings Tax Law, in the same way as
for other taxes, are laid down in Tax Procedure Law No. 11.683, a text harmonized in 1998, and
the amendments thereto (Articles 33, 38, 39, 45 an d 46). The specific provisions on tax offences
in relation to non-compliance with the Earnings Tax Law, as in the case of other taxes, are
established in Criminal Tax Law No. 24.759 (Articles 1, 2 and 6).
34
48. Similarly, Argentina has clearly indicated that most of the information requirements for the
establishment of branches in Buenos Aires ar e designed to implement Article 118.3 of the
Commercial Companies Law and Article 188 of Resolution of No. 7/2005, and that the requirement
of authorization for the repatriation of investments is designed to enforce Law No. 25.246 on the
concealment and laundering of assets in Argentina.
49. Regarding Communication "A" 4940, which is challenged by Panama, Argentina reiterates
the statement from its first written submission that the repatriation of investments governed by
this rule is an investment matter and is not covered by the GATS since it does not affect trade in
services.
35 In this connection, the requirement of prior consent of the Central Bank of the
Argentine Republic (BCRA) for the repatriation of direct investment to non-cooperative countries -
which, as previously stated, implies a more detailed review of the operation by that body - makes
it possible to analyse its economic rationale and to exercise tighter control so that access to the
exchange market can be granted for operations that genuinely involve repatriation of a foreign
investment in a local enterprise that really exists and that produces goods or provides services,
involving funds transmitted to a foreign enterprise that also really exists.
36 Hence, such
repatriation is consistent with the rules whereby access to the local exchange market is allowed for

32 Argentina's second written submission, para. 78.
33 Panama's opening statement at the first substantive meeting of the Panel, para. 48.
34 Argentina's opening statement at the second substantive meeting of the Panel, para. 26. Argentina's
responses to the Panel's set of questions (13 February 2015), response to question No. 82, para. 11.
35 Argentina's first written submission, para. 124; and Explanatory Annex No. 2 of Argentina's first
written submission, paras. 27-29.
36 Argentina's responses to the Panel's set of questions to the parties (13 February 2015), response to
question No. 71, measure 8, paras. 48 and 57.

- B-51 -

the repatriation of funds, while operations that do not meet these economic conditions are
discouraged by having to undergo a more detailed review by the Central Bank.37
50. Moreover, neither of the two challenged measures has the effect attributed to them by
Panama. Panama has cited no specific case - because none exists - where a foreign company has
been denied the right to be registered in the city of Buenos Aires or to repatriate its investments.38
51. Panama also claims that Argentina has failed to explain how less favourable treatment in
fiscal and administrative matters can contribute to securing compliance with Argentina's laws and
regulations.39 This argument, too, is unconvincing. Argentina submitted evidence showing how
transactions with non-cooperative jurisdictions expose Argentina to a greater risk of tax evasion
and erosion of its tax base.
40 Argentina's defensive tax measures are geared to making
an important contribution to the mitigation of those risks, as they reduce the opportunities for
evading the payment of taxes in Argentina through transactions with entities located in
non-cooperative jurisdictions. At the same time, Argentina's defensive tax measures can eliminate
the tax benefits that Argentine taxpayers would derive from transactions with entities located in
non-cooperative jurisdictions, or else require the taxpayer to submit evidence demonstrating that
the transactions reflect a legitimate commercial purpose, rather than being for tax evasion
purposes.
41 In both cases, evasion of the payment of taxes in Argentina is made more difficult,
and this in turn contributes to ensuring compliance with the country's tax laws and regulations.
52. With regard to Panama's argument concerning the existence of less trade-restrictive
alternatives for securing compliance with Argentina's laws and regulations, Argentina would
emphasize that it lies with Panama to specify what alternatives are reasonably available.
Moreover, Panama has totally misinterpreted Argentina's argument. It is precisely because
cooperative jurisdictions provide the Argentine tax authorities with access to information about
taxes that it is possible to enforce Argentina's tax laws in transactions between Argentine
taxpayers and entities located in those jurisdiction s, whereas if this is not possible, preventive
measures - the rules that are challenged - have to be taken ex ante in order to reduce the
opportunities for tax evasion in Argentina.
53. Lastly, with regard to Panama's argument as to whether the Argentine measures are applied
in such a manner as to constitute arbitrary or unjustifiable discrimination between countries where
like conditions prevail, as referred to in the chapeau of GATS Article XIV, and that there is
no reason for Argentina to discriminate between, on the one hand, countries that have no
information exchange agreement with Argentina and, on the other hand, countries that have also
not entered into an agreement of that kind, but have begun negotiating one with Argentina
42,
Argentina explained 43 that the rationale for distinguishing between cooperative and non-
cooperative jurisdictions in Decree No. 589/2013 relates to Argentina's capacity to access
information necessary to secure compliance with Argentina's laws and regulations. Therefore, if
a country has reached an agreement on exchange of effective tax information with Argentina, or is
likely to do so in the near future, as negotiations to that end have begun, Argentina considers that
there is a low risk of its not being able to access the information required to determine whether
the operation in question reflects legitimate commercial objectives rather than being guided by tax
evasion purposes. Argentina considers that the hypothesis of the initiation of negotiations acts as
a sufficient incentive in most cases to encourage the conclusion of this type of agreement. In this
connection, Argentina has concluded agreements providing for retroactive cooperation with respect
to periods preceding their entry into force.
54. On the other hand, if a country has not participated in negotiations for the signing of
an information exchange agreement with the fi scal authorities of Argentina, the Argentine
authorities have no reason to believe that they will be capable of accessing the information
required for those same purposes. Consequently, from the standpoint of the risk that the
Argentine authorities might not have access to the information needed to secure compliance with

37 Argentina's first written submission, Explanatory Annex No. 2, para. 69.
38 Argentina's opening statement at the second substantive meeting of the Panel, para. 26.
39 Panama's opening statement at the first substantive meeting of the Panel, para. 51.
40 Argentina's second written submission, para. 73.
41 Ibid.
42 Panama's opening statement at the first substantive meeting of the Panel, para. 53.
43 Argentina's responses to the Panel's set of questions to the parties (13 February 2015), response to
question No. 49.

- B-52 -

Argentina's laws and regulations, these two categories of countries are undoubtedly in a situation
that is not like.
55. For these reasons, in the unlikely event that the Panel finds that Panama has demonstrated
that Argentina acted inconsistently with Articles II.1 and XVII of the GATS, Argentina has shown
that its defensive tax measures, the requirements for the establishment of companies in the city of
Buenos Aires, and the authorization of repatriation of investments are justified under Article XIV(c)
of the GATS.
B. The measures at issue are justified by virtue of the prudential carve-out of
paragraph 2(a) of the Annex on Financial Services
56. Concerning measure 5 (alleged restrictions on access to the Argentine reinsurance and
retrocession market), Argentina has invoked the prudential carve-out with respect to the alleged
violation of the most-favoured-nation obligation under Article II of the GATS as well as with
respect to the alleged violation of Article XVI of the GATS.
44
57. The measure in question is a measure adopted for the following prudential reasons referred
to in paragraph 2(a) of the Annex on Financial Services: first, to ensure the integrity and stability
of the financial system; secondly, for the protection of policy holders or persons to whom
a fiduciary duty is owed by a financial service supplier; and thirdly, for the protection of investors
and depositors.
58. Argentina considers that the requirement that insurers provide certain supplementary
information to the National Insurance Supervisory Authority (SSN) in order to receive
authorization to conduct reinsurance transactions with foreign reinsurance entities from their
country of origin involving individual risks lo wer than US$50 million establishes a reasonable
threshold which contributes to the prudential object ive of strengthening reinsurers that operate in
the national territory, thereby creating an active, sound and competitive domestic sector capable
of coping with systemic risks and guaranteeing the solvency necessary for reinsurers which
operate in that sector.
59. The parties are not in disagreement as to the fact that the list of prudential reasons
mentioned in the prudential carve-out is not exhaustive. This was explicitly indicated by Panama.
45
60. The experience of the financial crisis points to the likelihood that some insurance companies
may become involved in certain activities, freque ntly of themselves unrelated to insurance, and
may therefore also become originators and amplifiers of systemic risks.46
61. Owing to the impact that the reinsurance sector may have on the financial sector and given
the possibility that reinsurers may become originators and amplifiers of systemic risks and their
capacity to cause disruptions in the primary insurance sector and the economy in general, the
strengthening of entities operating in the dome stic reinsurance market and guaranteeing their
solvency are a measure adopted to "ensure the integrity and stability of the financial system",
as provided for in paragraph 2(a) of the Annex on Financial Services.
62. The measure in question also meets the prudential objective of "protection of … policy
holders or persons to whom a fiduciary duty is ow ed by a financial service supplier", as referred to
in paragraph 2(a) of the Annex on Financial Services. A domestic market made up of weak
reinsurance entities liable to insolvency may be responsible for the non-fulfilment of their coverage
obligations with respect to the primary insurers that are policy holders, which in turn could fall into
financial distress and see their own lines of direct insurance jeopardized.
63. This measure meets the prudential objective of "protection of investors [and] depositors"
mentioned in paragraph 2(a) of the Annex on Financial Services. As indicated earlier, in line with
the thinking of the International Association of Insurance Supervisors (IAIS), a crisis generated by
a failing in the reinsurance sector that might in turn generate a loss of confidence or a disruption

44 Argentina's first written submission, paras. 566 and 568. Argentina's second written submission,
para. 84.
45 Panama's second written submission, para. 2.660.
46 Idem. p. 13.

- B-53 -

in the primary insurance sector could create the conditions for a financial crisis in the event that
the insurance sector loses its ability to invest in financial instruments.47
64. The prudential carve-out, unlike other provisio ns of the GATT or the GATS, does not require
that the measure be "necessary" to achieve the established objective. Third parties such as the
United States agreed, the European Union expressed a similar opinion and Brazil considered that
the prudential carve-out gives Members ample policy space to adopt comprehensive measures
designed to protect against various risks to financial stability.
48
65. If the drafters of the prudential carve-out had intended that it apply more strictly, they
would have provided a less deferential standard, such as that of "necessity".
66. The interpretation of the prudential carve-out in this case must take account, in addition to
the above, of the particular circumstance that Argentina is a developing country.
The establishment of a threshold for foreign reinsurance contracts is a specific regulation adopted
by a developing country like Argentina for a prudential purpose related to the strengthening of
reinsurers operating in the national territory, so as to generate a more active, robust and
competitive domestic sector capable of coping wi th systemic risks, as well as to guarantee the
necessary solvency of reinsurers.
67. Argentina has invoked the prudential carve-out also with regard to the alleged violation of
GATS Article II in relation to the alleged restrictions on access to the capital market for suppliers
from non-cooperative countries – measure 6 – and has indicated that the objectives of the
measure include prevention of risks related to money laundering and financing of terrorism
49,
preservation of the integrity and stability of the financial market 50, protection of financial
consumers51, protection of investors52, monitoring of transactions involving negotiable securities 53,
ensuring transparency54 and the integrity, stability and efficient functioning of the capital market.55
68. The Financial Action Task Force (FATF) reco gnizes the duty to counter "threats to the
integrity of the financial system" caused inter alia by money laundering. For its part, the
International Organization of Securities Commissions (IOSCO), the international body recognized
worldwide as having responsibility for the adoption of global standards for the securities sector,
has required regulators like Argentina's National Securities Commission to establish policies and
procedures to minimize the risk of intermediaries being used as vehicles for money laundering.
C. Panama has failed to demonstrat e that the measures at issue are
inconsistent with Articles I:1, III:4 and XI:1 of the GATT 1994
69. In addition, Panama has failed to demonstrate that Argentina's treatment of the entry
of funds as a presumptively unjustified increase in wealth, or its transfer pricing regime, are
inconsistent with Articles I:1, III:4 and XI:1 of the GATT 1994.
1. Panama has failed to demonstrat e that the measures at issue are
inconsistent with Articles I:1 and XI:1 of the GATT 1994
70. With regard to Panama's allegations based on Articles I:1 and XI:1 of the GATT 1994,
Argentina has explained that both the presumption of unjustified increase in wealth and the
transfer pricing regime are not measures "imposed on or in connection with importation or
exportation" under Article I:1, or measures maintained "on the importation" or "on the
exportation" of any product under Article XI:1. Both measures lay down methods for the

47 "Hence, in the area of investment activity, the insurance industry can act as an amplifier of systemic
risk." See International Association of Insurance Supervisors (IAIS), "Systemic risk and the insurance sector",
48 Argentina's responses to the Panel's set of questions to the parties, 13 February 2015, paras. 32, 33
and 34; response to question No. 85.
49 Argentina's first written submission, paras. 524-531.
50 Ibid. paras. 499-517, 564 and 567.
51 Ibid paras. 518-519.
52 Ibid paras. 520-522 and 562.
53 Ibid paras. 532-546.
54 Ibid paras. 548-549.
55 Ibid paras. 562-563 and 566.

- B-54 -

determination of revenue subject to internal taxation in Argentina. The fact that such revenue may
derive in part from import or export transactions does not mean that Argentina's domestic tax
measures are border measures subject to the disciplines of Articles I:1 and XI:1 of the GATT 1994,
nor is it sufficient to demonstrate that the "centre of gravity" of taxes on earnings in Argentina is
the importation or exportation of goods
56, in accordance with the criterion established by the
Appellate Body in China – Auto Parts.
71. With regard to the legal background to meas ure 2 (presumption of unjustified increase in
wealth) within the scope of application of Articl e I:1, Panama has stated that this measure is
a "rule and formality in connection with exportation" and cites paragraph 7.410 of the Panel report
in US – Poultry (China), without offering any kind of argument regarding the applicability of that
case to the measure at issue.
72. Argentina has indicated that, regardless of any claim under Article I:1 in that dispute and in
the present case, the fact is that there are elements of analysis central to each of the measures
which show a clear contrast between the two cases, such as may be seen in their object,
architecture and design, their context and the effect and scope of each of them. In this connection,
Argentina considers that Panama has not provided arguments as to how that Panel's finding can
apply to this specific case. Moreover, it added that it is reasonable to presume that the analytical
framework under which the Panel analysed Article 727, as well as its conclusions, do not have the
same degree of applicability in the present dispute.
57
73. Argentina has pointed out in particular, with regard to the scope and effect of measure 2,
that the real effect of the measure is that all taxpayers are required equally to keep documentary
evidence of the transactions they carry out58, in order to keep available the normal and customary
details needed to verify the tax position of all ta xpayers and to be able to determine the object of
taxation.
74. Moreover, with respect to measure 3, Argentina has emphasized that the determination
of transfer prices makes it possible to establish the basis of assessment for the earnings tax.
Argentina has explained that the basis of assessment is integral to the tax, and that the measure
is therefore excluded from the scope of Article XI:1 of the GATT 1994.
59
75. Argentina has also pointed out, as Panama confirmed in the document entitled
"Constitutional principles in the matter of taxation" (Exhibit PAN-83), that the rule requiring
conformity with statute establishes that "there can be no tax without a legal basis", for which
reason "in order for a tax to be imposed, it must conform to the formal requirements of a law ",
and that " the law must define the taxable transaction and the elements thereof: subject, object,
tax base, tax rate".
60
76. In short, Argentina maintains that the measure in question is a tax measure relating to the
determination of the basis of assessment for th e tax, and this is expressly acknowledged by
Panama when it states that this measure "affects the tax base on which the earnings tax is
computed".61
77. Without prejudice to the foregoing and in th e hypothetical event that the Panel were to
consider that the measure in question does not constitute a tax and is subject to the application of
Article XI:1 of the GATT 1994, Argentina has pointed out that the measure in question, which
consists in providing a certain type of information to the tax administration, would also not be
inconsistent with Article XI:1 of the GATT 1994, because the measure challenged does not in itself
have the effect of restricting imports or exports as such.

56 Panama appears to be in agreement with Argentina. See Panama's first written submission,
para. 4.263.
57 Argentina's responses to the Panel's set of questions, response to question No. 92.
58 Ibid.
59 Argentina's responses to the Panel's set of questions, response to question No. 93.
60 Ibid.
61 Argentina's responses to the Panel's set of questions, response to question No. 92.

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2. Panama has failed to demonstrate that Argentina's transfer pricing
regime is inconsistent with Article III:4 of the GATT 1994
78. Nor has Panama been able to demonstrate that Argentina's transfer pricing rules are
inconsistent with Article III:4 of the GATT 1994. Argentina's transfer pricing rules constitute rules
relating to the calculation of income subject to tax in Argentina in transactions between Argentine
taxpayers and related parties located abroad. This measure sets out the criteria for establishing
the real value of the transaction as if it were an arm's length transaction for the purpose of
assessing and collecting earnings taxes in Argentin a. In terms of their application, these are not
measures "affecting [the] internal sale, offering for sale, purchase, transportation, distribution or
use" of products in Argentina, within the meaning of Article III:4 of the GATT 1994.
62
79. However, even assuming, only for the sake of argument, that Argentina's transfer pricing
regime is in some way a measure that falls within the scope of Article III:4, Panama has failed to
demonstrate that the products in question are " like" within the meaning of Article III:4 of the
GATT. As was noted previously, the Appellate Body in US – Clove Cigarettes explained that the
regulatory concerns underlying a measure may be relevant to an analysis of the "likeness" criteria
under Article III:4 of the GATT 1994, to the extent they have an impact on the competitive
relationship between and among the products concerned ".63 The regulatory concerns that led
Argentina to distinguish between cooperative and non-cooperative jurisdictions directly impact the
conditions of competition between products from those categories of jurisdictions, and this
suggests for the same reasons that these products are not "like" in the sense of Article III:4 of the
GATT 1994.
64
80. In order to assert that measure 3 tends to favour products of national origin, it is not
enough to state that the measure grants less favourable treatment, but it ought to have been
demonstrated – and this was not done – that measure 3, combined with a direct tax applied to all
Argentine taxpayers, applies to imported products in such a way as to protect local production.
65
81. In the unlikely event that the Panel were to find that Argentina acted inconsistently with
Articles I:1, III:4 and XI of the GATT, Argentina has demonstrated that its measures were justified
under Article XX(d) of the GATS. Argentina incl udes for reference the arguments it made in
connection with Article XVI(c) of the GATS as a basis for concluding that the treatment it applies to
the entry of funds as an unjustified increase in wealth and its transfer pricing regime are
"necessary to secure compliance with laws or regulations" within the meaning of Article XX(d)
of the GATT.
66
V. Conclusions
82. The defensive anti-abuse measures are not WTO-inconsistent, and only an erroneous
interpretation like the one promoted by Panama could generate such inconsistency and call into
question the progress made by the Global Foru m and the G-20 in respect of transparency and
exchange of tax information. 67 A systemic interest is at stake in this dispute: the efforts of the
international community led by the Global Forum and with G-20 encouragement, in the area of
fiscal cooperation and transparency.68
83. Argentina has endorsed the statement by Panama to the effect that "there is no possible
conflict of rules between the WTO legal order and the commitments of the member jurisdictions of

62 Argentina's second written submission, para. 99.
63 Appellate Body report, US – Clove Cigarettes, para. 119. Panama appears to be in agreement on this
matter. See Panama's responses, response to question Nos. 31 and 33.
64 Argentina's second written submission, para. 100.
65 Argentina's comments on Panama's responses to question No. 91, and Argentina's responses to the
Panel's set of questions to the parties, responses to question Nos. 83 and 84.
66 Argentina's second written submission, para. 101.
67 See Argentina's comments on Panama's responses to the Panel's set of questions, comment on
response No. 67.
68 Second substantive meeting of the Panel, Argentina's closing statement.

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the Global Forum", and has consistently expres sed views along these lines in its previous
statements.69
84. All the members of the Global Forum, includin g Panama, know that there will be no effective
forward movement on the international cooperation agenda on transparency and exchange of
information for tax purposes in the absence of de fensive measures against those jurisdictions that
refuse to exchange tax information. For this reason, any restriction of this kind that might occur in
the WTO framework would jeopardize the effort at international coordination that has been so
effective in promoting tax transparency.
70
85. For the foregoing reasons, Argentina respectf ully requests the Panel to reject in their
entirety Panama's claims and allegations concerning the Argentine measures challenged on
grounds of alleged violations of the GATS and th e GATT 1994. In the unlikely event that the Panel
were to consider that Argentina acted inconsistent ly with Articles II:1, XVI and XVII of the GATS,
Argentina has established, in the alternative, that the measures are justified, as has been shown in
each case, under Article XIV(c) or, alternatively, under Article XIV(d) of the GATS, and Article II(a)
of the Annex on Financial Services of the GATS. Should the Panel consider that Argentina acted
inconsistently with Articles I:1, III:4 and XI:1 of the GATT 1994, Argentina has demonstrated that
its measures are justified under Article XX(d) of the GATT 1994.
71

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ANNEX C
ARGUMENTS OF THE THIRD PARTIES
Contents Page
Annex C-1 Integrated executive summary of the arguments of the Kingdom of Saudi Arabia C-2
Annex C-2 Integrated executive summary of the arguments of Brazil C-4
Annex C-3 Integrated executive summary of the arguments of the United States C-6
Annex C-4 Integrated executive summary of the arguments of the European Union C-11

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ANNEX C-1
INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS
OF THE KINGDOM OF SAUDI ARABIA*
I. INTRODUCTION

1. Thank you Mr. Chairman, and Members of the Panel. The Kingdom of Saudi Arabia would
like to take this opportunity to provide its views on one particular systemic issue relating to the
interpretation of the General Agreement on Tariffs and Trade 1994 ("GATT") which has been raised
in this dispute: the meaning and proper application of GATT Article XI.

2. The Kingdom recognizes that GATT Article XI is not at the core of this dispute, which
involves primarily rights and obligations under the General Agreement on Trade in Services
(GATS). In fact, the GATT Article XI claim has been presented as an "alternative" claim in this
case, and an alleged violation that occurs as a consequence of the measures' effect on service
suppliers engaged in trading goods. However, not being at the core of the case does not mean that
the GATT Article XI claim is unimportant or that th e interpretation and application of the provision
can be any less rigorous. The Panel's analysis of Article XI must be just as rigorous as it would be
if it were the primary basis of the alleged violations in this dispute.

3. The Kingdom will address two specific points relating to the proper interpretation of GATT
Article XI: first, the specific type of "restricti ons" prohibited by GATT Article XI; and second the
requirement to satisfy an appropriate burden of proof for establishing a violation of GATT
Article XI.

II. GATT ARTICLE XI:1 DOES NO T PROHIBIT ALL RESTRICTIONS

4. Turning to the first point, GATT Article XI does not prohibit all restrictions. GATT Article XI:1
forbids "prohibitions or restrictions" on imports or exports, but "duties, taxes or other charges" on
imports or exports are expressly excluded from this proscription. The permissibility of duties, taxes
or other charges is unqualified. Thus, even if such duties, taxes or other charges are designed to
restrict the quantity of imports or exports, they are not prohibited by GATT Article XI.

5. Also, GATT Article XI prohibits only quantitati ve restrictions. The Appellate Body explained in
China – Raw Materials that GATT Article XI:1 imposes a "general obligation to eliminate
quantitative restrictions".
1 The Appellate Body added that "the use of the word 'quantitative' in
the title of the provision informs the interpretation of the words 'restriction' and 'prohibition' in
Article XI:1 and XI:2", and therefore that "Article XI of the GATT 1994 covers those prohibitions
and restrictions that have a limiting effect on the quantity or amount of a product being imported
or exported".2

6. The provisions of GATT Article XI must be in terpreted in light of their stated purpose to
eliminate quantitative restrictions. Any interpretation of GATT Article XI that expands its coverage
to all prohibitions or restrictions, whether or not related to import or export quantities, would
contradict the Appellate Body's ruling and render the Article's title meaningless.

7. As a result, in assessing whether a measure is an impermissible restriction on imports or
exports under GATT Article XI:1, a panel should first determine whether the measure is expressly
outside of the Article's proscriptions because it is a duty, tax, or other charge. If the challenged
measure is not expressly permitted by GATT Article XI:1, the panel should next determine whether
the measure imposes a formal quantitative restriction, such as a set numerical limitation or
prohibition on imports or exports. If the measur e does not impose such a formal quantitative
restriction, the panel then should examine the measure's design, architecture and structure in
order to determine whether it has a "limiting effect" on import or export quantities. If, after such

* This text was originally submitted in English by the Kingdom of Saudi Arabia. The Kingdom of
Saudi Arabia requested that its oral statement serve as its integrated executive summary.
1 Appellate Body Report, China – Raw Materials, paras. 319-320.
2 Ibid. para. 320. (emphasis added)

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an examination the panel cannot conclude that the measure is a quantitative restriction, the
measure is not prohibited by GATT Article XI:1.

III. A PARTY MUST MEET ITS BURDEN OF PROOF THAT A MEASURE IMPOSES A
PROHIBITED QUANTITATIVE RESTRICTION

8. I would also like to address briefly the issu e of the burden of proof. The complainant bears
the burden to establish a prima facie case of a violation for each element of each claim, based on
factual evidence and legal arguments.
3

9. In the case of an alleged violation of GATT Article XI:1, the complaining party has the
burden to establish that the challenged measure is not a duty, tax or other charge, and that it is a
prohibited quantitative restriction on imports or exports. Although this requirement may in some
cases be difficult, the complexity of a measure, or its interaction with other measures, does not
diminish the complaining party's burden of proof. GATT Article XI should not be extended to
prohibit measures that are not quantitative restrictions.

10. This issue of evidentiary burden is all the more important in a case in which a violation of
GATT Article XI is presented as an alternative cl aim and as a consequence of violation of GATS
provisions, as in the present matter. A measure which is not a quantitative restriction based on an
analysis of its design, architecture and structure is not prohibited by Article XI:1, even if one might
speculate that the operation of the measure may at some point lead to less trade.

IV. CONCLUSION

11. Mr. Chairman, Saudi Arabia respectfully requests the Panel to confirm that GATT Article XI:1
prohibits only quantitative restrictions on im ports or exports, and only those quantitative
restrictions not in the form of a duties, taxes or other charges. This is what the treaty requires, as
explained by the Appellate Body.

12. This concludes the statement of the Kingdom of Saudi Arabia. I thank you for your attention.

3 Appellate Body Report, US – Gambling, paras. 140-141.

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ANNEX C-2
INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF BRAZIL*
1. Brazil hereby presents its integrated executive summary, where it provides a brief
description of the main points presented in its Third Party Submission and Oral Statement.

(a) The prevention of fiscal fraud and othe r deceptive practices and the protection of
the financial system are legitimate objectives to be pursued by Members

2. Brazil believes that international efforts to regulate financial services are crucial not only for
the stability of the international financial system, but also for the security of economies worldwide.
As markets are intertwined at unprecedented levels, crises in the financial system can rapidly spill
over to other sectors of the economy and generate severe impacts on income, employment and
trade.

3. Brazil is convinced that guidelines and regulations derived from such international efforts
can be fully designed and adopted harmoniously with WTO law. Specifically on what concerns the
measures under dispute, Brazil considers that the objectives they pursue can be justified under the
disciplines of the GATS, particularly under the Annex on Financial Services. In this sense, it is
worth recalling that the GATS itself recognizes the utility of international standards of relevant
international organizations in assessing whether domestic regulations from a Member are
consistent with its obligations under the Agreement, as expressed in its Article VI:5 (b).

(b) The GATS grants Members significant discretion to regulate and protect the
financial system

4. As Brazil recalled in its Third Party Submission, the idea that service regulations could
distinguish service providers based on objective criteria lies on the very basis of the commitments
under the GATS. Accordingly, already during the preparatory works, it was understood that such
distinctions would not even require further justification under Article XVI inasmuch as they would
not violate obligations or commitments under the Agreement, particularly, under Article XVII (NT)
and Article II (MFN).
1

5. Brazil believes that, even if a challenged measure adopted under the auspices of
international efforts to regulate financial services were found to be inconsistent with Articles II and
XVII of GATS, it could still be justified under GATS, particularly under Articles XIV (c) and (d), and
under its Annex of Financial Services, paragraph 2. If read and interpreted harmonically, in
Brazil´s views, these three provisions can just ify measures necessary to prevent deceptive and
fraudulent practices, or aimed at ensuring the equitable or effective imposition or collection of
direct taxes, or taken for prudential reasons or to ensure the integrity and stability of the financial
system.

6. Article XIV(d), for instance, allows for Members to adopt measures to equalize levels of
taxation between domestic and foreign service providers, thus levelling the playing field with
regard to taxes and letting comparative advantages be more effective. In this sense, it could be
considered similar to a "Border Tax Adjustment" under the GATT, that is, a corrective charge
targeting discrepancies in taxation.

7. Moreover, Brazil believes that the Annex of Financial Services of the GATS give Members a
greater margin of control over financial services and institutions and oversight of these operations,
as measures affecting the supply of financial services have a direct impact on the economic
system. Accordingly, there is a specific exception under this Annex, in its paragraph 2(a), that
allows Members to adopt measures for "prude ntial reasons", "[n]otwithstanding any other
provisions of the Agreement".

* This text was originally submitted in English by Brazil.
1 MTN.GNS/W/210. Note by the Secretariat. Applicability of the GATS to Tax Measures. 1 December
1993.

- C-5 -

8. As Brazil indicated in its Written Submission, one of such prudential reasons, as exemplified
by the provision, is to "ensure the integrity and stability of the financial system". This seems to
give Members a rather large policy space to take comprehensive actions designed to protect the
financial stability from various risks. More importantly, it allows that instead of reacting to
individual risks posed in specific sectors or areas of the financial world, Members may act
preemptively and plan ahead, since many of the threats to financial stability may come from
multiple and complex factors in various markets, as the recent global financial crisis of 2008
demonstrated.

9. Accordingly, Brazil understands that the only limitation imposed on a Member by this
exception is not to adopt measures for prudential reasons "as a means of avoiding the Member's
commitments or obligations under the Agreement". Thus, any Member invoking the prudential
exception would bear the burden of proving that this right was properly used – for which
international standards, guidelines and practices would be useful.

10. In addition, Brazil understands that, differe ntly from other exceptions under the GATS, the
prudential exception does not require proving ne cessity (e.g. as under the General Exceptions –
Article XIV), or proportionality (e.g. as under the Restrictions to Safeguard the Balance of
Payments – Article XII).

(c) The fact that two services are in a comp etitive relation in the relevant market may
not be enough to render them "like" in the case of financial services.

11. Even though the concept of "likeness" in trade in services has not been analyzed as
thoroughly as the same concept in connection wi th trade in goods by the WTO Dispute Settlement
System, Brazil still believes that there may be some similarities in the assessment of likeness
between these two sectors, such as whether the good s or services in question are in a competitive
relationship in the relevant market, so as to be considered "like". Nonetheless, there could be
factors irrelevant in respect of the "likeness" analysis of goods which may be determinative in
respect of "likeness" in services, such as thos e related to the characteristics of the service
providers under analysis and the regulatory fram ework of the territory where the provider is
located – inasmuch as such framework affects the way such provider operates in the market.

12. In this sense, given the intangible nature of services, the fact that two services are in a
competitive relation in the relevant market may not be enough to render them "like" in the case of
financial services. As the global financial crisis of 2008 demonstrated, reckless management, such
as inappropriately low capitalization and excessi ve leveraging, aggravated by poor government
oversight and insufficient requirements on transparency, is a very undesirable characteristic from
the point of view of both the consumers and the governments, as it increases the risk of the
services provided. Consequently, the aforementi oned characteristics of the providers and the
regulatory framework of the territory where they are located – to the extent that such framework
affects operations – could be viewed as elements relating to the characteristics of the service, just
as the physical properties of goods are a key elem ent to identify the relevant characteristics of a
product.

13. In this regard, Brazil also recalls that the Panel in the China – Electronic Payment Service
dispute has clarified that in some instances a sepa rate inquiry into the "likeness" of the service
suppliers may be necessary, inasmuch the presumption that service suppliers that provide "like
services" are also "like" may not be applicable to all cases. Despite the apparent utility of this
second criterion, Brazil would like to emphasize that its applicability still needs to be considered on
a case-by-case basis, in order to avoid that inappropriately strict criteria render "unlike" all service
providers in a given segment.

- C-6 -

ANNEX C-3
INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE UNITED STATES*
I. Interpretative Questions Under Articles II and XVII of the GATS

1. De jure versus de facto less favourable treatment. The United States considers that there is
a difference between treatment based on origin alone, and treatment based on origin-neutral
factors related to services or service suppliers of a particular Member or Members. For example, if
a Member simply bans cross-border construction services supplied from certain WTO Members in
its regulations, this differential treatment coul d be said to be based exclusively on origin,
consistent with the reasoning in China – Publications and Audiovisual Products . However, if a
country determines that it will only allow construction service suppliers with experience using a
particular type of material, and that material is only found in specific countries, this would not be
differential treatment based exclusively on origin.

2. That Argentina's measures distinguish among regulatory conditions in the home jurisdictions
of service suppliers (and thus the measure designates countries as "cooperating" or "non-
cooperating") means that the treatment accorded by the measures is not exclusively linked to the
origin of the service suppliers, and that the measures do not accord de jure differential treatment
based on origin. The EU's argument to the contrary – that the distinction is based on origin
because the measures list countries as "cooperating" or "non-cooperating" – misconstrues the
meaning of "based on origin." The measure itself indicates differentiation based on conditions that
prevail in particular jurisdictions and raise concerns regarding the authorities' ability to tax
payments for services supplied from those jurisdiction. The listing of countries is thus simply a
means for the regulator to identify which payments raise those concerns.

3. "Like services" and like service suppliers" analyses. An issue before the panel in this dispute
with respect to likeness is whether the regulatory framework in a service supplier's home
jurisdiction can render two services or service suppliers not "like" for purposes of Article II or XVII
of the GATS. In the U.S. view, this may be the case if the regulations in question affect the supply
of the service in the relevant market.

4. Even if the two services were in direct competition and could be considered like, however,
the United States considers that the difference in regulatory treatment of the two suppliers may
nonetheless render the two service suppliers unlike. As the panel in China – Electronic Payment
Services stated, the fact that two or more service suppliers provide the same service may give rise
to a presumption that the service suppliers themselves are also "like". But this presumption may
be overcome if the responding party demonstrates that the service suppliers are not like, despite
the likeness of the services provided.

5. Given a difference in regulatory treatment by their home country authorities, it may be that
a Member complained against views the two supplie rs as unlike and accords differential treatment
on that basis. Where such a difference in regulation affects the service suppliers as service
suppliers, in that the regulations affect how they supply the service, a panel may find that those
service suppliers are not like for purposes of Articles II.1 and XVII of the GATS. Other factors may
also affect the likeness of service suppliers, such as their size or relevant experience. Regulations,
including those concerning fiscal transparency, could affect the way in which the service is
supplied. Regulations concerning fiscal transparency in a home jurisdiction could affect, for
example, the risks associated with the supply of a service. Such a risk may constitute a factor of
likeness, even it if does not affect consumer perceptions or otherwise affect the competitive
relationship between the services or services suppliers.

6. The United States notes that a regulatory differentiation, such as a risk or potential risk
associated with the supply of a service, may be a relevant factor under more than one provision of
the GATS (for example, the "likeness" analysis , "less favourable treatment" analysis, and the
analyses under the prudential exception or othe r exceptions). The Appellate Body has observed

* This text was originally submitted in English by the United States.

- C-7 -

that the same evidence may be relevant to "different inquiries" under "different Articles" and may
serve a "different purpose." Argentina appears to identify a risk associated with the supply of
services by suppliers from "non-cooperating" countries that may not be associated with the supply
of services by suppliers from "cooperating" countries, including the risk that Argentina will not be
able to enforce its taxation laws and guarantee the integrity of its taxable base.

7. The United States does not take a position on Argentina's views but does consider that, as a
general matter, regulatory differentiations based on the risks or potential risks posed by a service
or service supplier compared to the risks or pote ntial risks posed by another service or service
supplier can be factors of "likeness" under the national treatment or most-favoured-nation
provisions of the GATS. The Appellate Body found in EC – Asbestos that the relative risks
associated with particular products can be a relevant – and even dispositive – factor of likeness.
The Appellate Body reasoned that it can be pr esumed in the context of Article III.4 of the
GATT 1994 that risk factors associated with a prod uct will affect the physical properties of the
product or consumer tastes and habits and that, th erefore, such risks need not be analyzed as a
separate criterion of likeness.

8. Similarly, in the context of Articles II and XVII of the GATS, such relative risks or other
bases for regulatory differentiations may be factors in the analysis of whether services or service
suppliers are "like." In addition, it cannot necessarily be presumed that risks or other bases for
regulatory differentiations among services and service supplier will affect consumer tastes and
habits (or otherwise affect the competitive relationship among services or services suppliers). The
supply of services often is highly regulated precisely because key differences among services or
suppliers are not readily apparent to consumers, and regulation in part seeks to ensure that
services meet certain standards and requirements. A likeness analysis may need to consider such
factors as: how a service or service supplier is re gulated; the nature and character of that service
or service supplier; how that service or service supplier is perceived by consumers; and the nature
and extent of a competitive relationship between services or service suppliers. Each of these
factors, though at times related, is potentially relevant by itself to whether services or services
suppliers are "like." An analysis focused solely on the nature and extent of a competitive
relationship may not adequately take account of all the relevant factors of likeness.

9. Relevance of approach to interpreting Articl e 2.1 of the TBT Agreement. Articles II and XVII
of the GATS should be interpreted using customary rules of interpretation of public international
law (DSU Article 3.2) – that is, in accordance wi th the ordinary meaning of their terms, in their
context, and in light of the treaty's object and purpose. Context includes the preamble, as well
other covered agreements. Article 2.1 of the TBT Agreement is relevant context, and the Appellate
Body's approach to that interpreting that provision may provide a useful perspective when
interpreting the "less favourable treatment" concept in Articles II and XVII of the GATS.

10. In US – Clove Cigarettes, the Appellate Body set out observat ions on the specific contextual
factors informing its interpretation of the national treatment obligation – and specifically the
concept of "less favorable treatment" – under th e TBT Agreement. Among the specific contextual
factors that the Appellate Body considered were: the preamble of the TBT Agreement; the unique
characteristics of the subject covered under the provision at issue (in that case, technical
regulations); and the relationship between the TBT Agreement and other covered agreements and
the availability of exceptions.

11. Preamble. The Panel's analysis of less favorable treatment should reflect the object and
purpose of the GATS, as set forth in the preamble, to, inter alia , balance progressive trade
liberalization with Members' right to regulate to meet national objectives. The third recital of the
preamble affirms the Members' desire to achieve "p rogressively higher levels of liberalization of
trade in services." The sixth recital recognizes the right of Members "to regulate, and to introduce
new regulations, on the supply of services within th eir territories in order to meet national policy
objectives […]." An analysis consistent with this object and purpose should take into consideration
that a measure taken to meet certain national policy objectives – including other regulatory
objectives – does not necessarily accord "less fa vourable treatment" even where it modifies the
conditions of competition to the advantage of some domestic services or service suppliers
compared to a like services or service suppliers of another Member.

12. The Appellate Body applied this approach in interpreting less favorable treatment under TBT
Article 2.1 in US – Clove Cigarettes . First, the Appellate Body observed that the preamble of the

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TBT Agreement reflects both a "trade liberalization" objective and an aim at "reducing obstacles to
international trade", qualified and counterbalanced by the affirmation of Members' right to regulate
to "fulfill certain legitimate policy objectives." This observation led in part to the Appellate Body's
finding that, "the object and purpose of the TBT Agreement is to strike a balance between, on the
one hand, the objective of trade liberalization and, on the other hand, Members' right to regulate.
This object and purpose therefore suggests that Article 2.1 should not be interpreted as prohibiting
any detrimental impact upon competitive opportunities for imports in cases where such a
detrimental impact on imports stems exclusively from a legitimate regulatory distinction." The
preamble of the GATS, recognizing the objective to balance progressive trade liberalization with
Members' right to regulate to meet national objectives similarly supports an interpretation of less
favorable treatment that requires more than a simple finding of detrimental impact in order to find
a breach of the national treatment provision.

13. Nature of the covered subject. In interpreting TBT Article 2.1, the Appellate Body considered
it significant that the TBT Agreement concerns only technical regulations, which are defined as
"document[s] which lay[] down product characteri stics […]." The Appellate Body observed that,
by their very nature, technical regulations (unlike the broader scope of measures covered under
Article III.4 of the GATT 1994) draw distinctions among products. Article XVII of the GATS, like
Article III.4 of the GATT 1994, applies to all measures (not to a particular type of measure, like
Article 2.1 of the TBT Agreement). While there is no separate agreement covering an analogue to
technical regulations in the services context, th ere are many types of measures that may, in a
similar way, draw distinctions among services or services suppliers. In fact, the supply of services
is carefully regulated, and services and services suppliers are often defined and distinguished by
the particular regulatory framework to which they are subject. Thus, measures affecting trade in
services may have unique characteristics that could inform the "like services", "like services
suppliers" or "less favorable treatment" analyses.

14. Relationship to other covered agreements an d the availability of exceptions. The Appellate
Body in US – Clove Cigarettes also considered the TBT Agreement's relationship to the GATT 1994,
and the fact that the GATT 1994 contains genera l exceptions while the TBT Agreement does not.
With respect to the relationship, the Appellate Body noted that technical regulations are subject to
the national treatment obligations in both agreem ents, and that the national treatment provisions
"are built around the same core terms, namely, ‘like products' and ‘treatment no less favourable.'"
The Appellate Body further noted that the na tional treatment obligation in the GATT 1994 is
counterbalanced by general exceptions, whil e the national treatment provision in the
TBT Agreement is not. The language of the ge neral exceptions in the GATT 1994 is largely
reflected, however, in the sixth recital to the TBT Agreement.

15. Applying a similar analysis to the GATS, it should be noted that, unlike the preamble to the
TBT Agreement, the preamble of the GATS does not enumerate particular policy objectives. The
general exceptions to the GATS, which are part if the context in which to interpret Articles II and
XVII, are in the form of a closed list, and they do not necessarily cover all of the "national policy
objectives" referenced in the preamble or all of the regulatory objectives reflected in the provisions
of GATS. For one, there are exceptions in the GA TS in addition to the general exceptions. And
other provisions reflect additional regulatory objectives, such as transparency (Article III),
ensuring the competence and ability of service suppliers (Article VI:4), competition (Article IX),
and access to public telecommunications access (Annex on Telecommunications). Therefore, an
interpretation of Articles II and XVII of the GATS, in light of the right to regulate set out in the
preamble, would need to take account of all potential bases for regulation and not only those
reflected in the general exceptions.

16. The Panel's interpretation of Articles II an d XVII of the GATS should take account of any
relevant regulatory distinctions among services and services suppliers. In interpreting Article 2.1 of
the TBT Agreement, the Appellate Body factored in legitimate regulatory distinctions in its analysis
of less favorable treatment. For the reasons set out above, the United States considers that, in the
context of measures affecting trade in services, regulatory differentiations among services or
services suppliers are relevant as a factor in the analysis of which domestic service or service
supplier is "like" the foreign service or service supplier.

- C-9 -

II. Article XIV(c)

17. Article XIV(c) of the GATS allows Members to take measures that would otherwise be
inconsistent with the GATS, if those measures are necessary to secure compliance with laws or
regulations that are not themselves inconsistent with GATS. In its third party submission, the EU
states that Article XIV(c) "would appear to permit measures to secure compliance with law or
regulations that address concerns from the perspective of the service user", such that "a measure
that only addresses concerns of the tax authorities to collect revenue would not appear to fall
under the scope of this provision." The United States does not consider that the text of
Article XIV(c) of the GATS supports the interpre tation proposed by the EU. While each of the
concerns listed in the subparagraphs of Article XIV(c) would include concerns relating to the users
of services, nothing in the text of the provision suggests that these concerns would be limited to
services users only. Indeed, Article XIV(c) does not mention "users" or "consumers" in any of its
subparagraphs, including subparagraph (i), at issue here. Therefore, in determining whether a
measure relates to "the prevention of deceptive and fraudulent practices", the Panel's analysis
should not depend on the intended target of such practices. Rather, findings under Article XIV(c)
should rest solely on whether the underlying measure is WTO-consistent, without regard to who
the measure protects.

III. Article XIV(d)

18. Article XIV(d) states that "nothing in this Agreement shall be construed to prevent the
adoption or enforcement by any Member of measures … (d) inconsistent with Article XVII, provided
that the difference in treatment is aimed at en suring the equitable or effective imposition or
collection of direct taxes in respect of services or service suppliers of other Members." Footnote 6
then provides a list of illustrative measures that would satisfy that condition. Therefore, any
measure found to be inconsistent with Article XVII must either fall into one of the measure
descriptions in the footnote, or otherwise be "aimed at the equitable or effective imposition or
collection of direct taxes." The exception does not require that the measure be "necessary to"
achieve the equitable or effective imposition or co llection of direct taxes. Therefore, it is not
necessary to demonstrate that no other less trade restrictive alternative measure is available. If
the measure is in fact aimed at the equitable or effective imposition or collection of direct taxes
within the meaning of footnote 6, the measure will satisfy the first step in the GATS Article XIV
analysis, and a panel must then continue its analysis to determine compliance with the
requirements of the chapeau.

IV. Paragraph 2(a) of the A nnex of Financial Services

19. The Panel posed two questions to third part ies concerning paragraph 2(a) of the GATS
Annex on Financial Services (the "prudential exce ption"). The Panel first asked for views on the
"steps" that "should be followed by the Panel in its analysis" of the prudential exception. The Panel
also asked for views on the EU's suggestion that the second sentence of the prudential exception
requires an assessment as to "whether the measure at issue, as it is effectively applied, genuinely
pursues a prudential objective or, to the contrary, if it is used as a means to avoid the
commitments and obligations of the respondent." In that regard, the Panel sought input on the
EU's suggestion that the rationale of the sentence is "comparable" to that of the chapeau to the
general exceptions in Article XX of GATT 1994 and Article XIV of GATS.

20. This dispute raises an issue of first impressi on, the resolution of which will have important
systemic implications. WTO Members consider this to be a critical exception with respect to
commitments undertaken in the GATS, and in discussions on financial services in meetings of the
Council for Trade in Services, Members have recognized the prudential exception's broad scope
and have chosen not to limit expressly the measur es that Members may take under the exception.
At a more basic level, Members' broad conception of the prudential exception informed the scope
of the commitments and country-specific limitation s that they negotiated and inscribed in their
schedules of specific commitments and MFN exemptions because, as the Council for Trade in
Services has stated, "any measure taken in acco rdance with paragraph 2(a) of the Annex on
Financial Services constitutes an exception to the agreement and should not be scheduled."
Members have also incorporated and relied on the exception or similar exceptions in numerous
bilateral and plurilateral trade and investment ag reements. The United States therefore considers
that the context of this dispute warrants a cautious approach.

- C-10 -

21. In the event that the Panel must analyze the prudential exception in this case, it should
interpret the actual text of the exception, rather than importing standards derived from the
differently worded texts of other GATT and GATS provisions. As the Appellate Body has made
clear, interpretation of a WTO provision "must be based above all upon the text of the treaty."
The Appellate Body has further stated that "[a] treaty interpreter must begin with, and focus upon,
the text of the particular provision to be interpreted. It is in the words constituting that provision,
read in their context, that the object and purposes of the states parties to the treaty must first be
sought." In that way, it is "the task of the treaty interpreter to give meaning to all the terms of
the treaty."

22. Paragraph 2(a) of the Annex on Financial Se rvices provides that "a Member shall not be
prevented from taking measures for prudential reasons, including for the protection of investors,
depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service
supplier, or to ensure the integrity and stability of the financial system." Thus, according to the
text, for a Member's measure to fall within the exception, the Member must, as an initial matter,
identify a "prudential reason" "for" which the measure was "tak[en]." These reasons are not
exclusive; the exception makes clear that its scope is broad and encompasses other prudential
reasons or considerations beyond those expressly listed in the provision. This is a critical point in
the view of the United States.

23. By its terms and unlike the general exceptio ns, the prudential exception provides that a
measure must be taken " for prudential reasons." That text neither requires nor permits an
assessment of "the extent to which the measure contributes to the realization of the end pursued,"
whether under a test related to "necessity," or whether the measure is "relating to" a particular
end ( e.g., "rational relationship" or "reasonableness" test). With respect to the prudential
exception, Members considered preliminary suggestions to include a reasonableness requirement
but ultimately rejected the limitation and omi tted it from the exception. Where the Member
identifies a prudential reason for which the challenged measure was taken, the Panel must then, in
accordance with the second sentence of the exception, consider whether the measure is "used as a
means of avoiding the Member's commitments or obligations under the Agreement."

24. In the U.S. view, there is no basis to a pply a test developed from the language of the
chapeau in the general exceptions in GATT and GATS – which enumerates multiple circumstances
under which those exceptions would not apply – to the much more narrowly focused anti-abuse
language in the prudential exception. Indeed, with respect to the chapeau to the general
exceptions, the Appellate Body has explained that, although the chapeau represents "one
expression of the principle of good faith," it is the actual text of the provision that matters because
the "task" at hand "is to interpret the language of the chapeau." By contrast, the anti-abuse
provision of the prudential exception states only that measures "shall not be used as a means of
avoiding" GATS commitments. Together with the fi rst sentence of the exception, which requires
only that a measure be "tak[en] … for prudential reasons," this provision does not permit the
"taking" of a measure in order to circumvent a Member's GATS commitments.

- C-11 -

ANNEX C-4
INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE EUROPEAN UNION*
1. INTRODUCTION

1. The European Union would like to stress that it shares the concerns of Argentina about
tackling tax evasion and avoidance, including aggr essive tax planning and harmful tax practices.
The European Union considers that WTO Members have a wide range of measures at their disposal
to achieve such an objective, including improving information exchange between tax authorities
and appropriate anti-abuse measures. However, in taking such measures, WTO Members must
comply with their obligations under WTO law.

2. CLAIMS
 UNDER THE GATS

2.1. ARTICLE II:1 OF THE GATS (MFN)

2. The obligation of MFN treatment in Article II:1 of the GATS is part of the general obligations
and disciplines contained in Part II of the GATS. He nce, in contrast to the obligations of market
access in Article XVI of the GATS and national tr eatment in Article XVII of the GATS, it applies
regardless of any specific commitments made by the WTO Member in question. Nonetheless, a
WTO Member may maintain measures inconsistent with the MFN obligation in Article II:1 if such
measures are listed in the Member's Annex on Arti cle II exemptions, or if they are consistent with
any of the exceptions under the GATS.

3. The analysis of a measure under Article II:1 involves three steps: (i) it must be determined
whether the measure is covered by the GATS; (ii) it must be examined whether the services or
suppliers at stake are "like"; and (iii) it must be established that the measure treats the services
or suppliers from one WTO Member less favourably than the like services or suppliers from another
country.

4. (i) The European Union re calls that the absence of actual trade effects does not preclude a
WTO Member from successfully bringing a claim against a measure under WTO law. It is thus not
necessary to show actual trade effects to substantiate a claim under a WTO provision prohibiting
discrimination. However, a careful analysis of the contested measure and of its implications in the
marketplace based on its design, structure and ex pected operation is needed. The European Union
considers that the measures at issue are covered under the GATS.

5. (ii) It is necessary to determine whether the services or service suppliers are "like".
Article II:1 of the GATS refers to likeness of services as well as of service suppliers. A situation
where such presumption of "likene ss" of service suppliers could apply is in cases, like the present
one, where the distinction made by the measures at issue is exclusively based on the supplier's
origin. It appears that the measures at issue operate de jure by reason of origin. Given the design
of Argentina's measures, the European Union considers it irrelevant at this stage of determining
likeness how the list was drawn up. To the extent the market where the measure at issue operates
considers that suppliers from jurisdictions with laws and regulations that hamper cooperation
against tax fraud or tax evasion are not in a competitive relationship with suppliers from
jurisdictions that facilitate such cooperation, the suppliers can be considered to be "unlike".

6. (iii) WTO Members have the obligation to accord any more favourable treatment given to
any country "immediately and unconditionally" to other WTO Members. The Panel needs to
determine whether the measures at issue modifies the conditions of competition to the detriment
of foreign services or service suppliers, and whether such an effect can be attributed genuinely to
the measures at issue. In the European Union's view, the fact that Argentina maintains discretion
in selecting the countries falling under the category of "beneficiary countries" may be relevant for
the Panel's analysis. In this respect, the European Union doubts that Argentina applies "objective
criteria" when selecting the countries that are includ ed in the list in question. Whereas the criteria

* This text was originally submitted in English by the European Union.

- C-12 -

established by the Global Forum may be considered as "objective", Argentina may include a
country in the list when the country at issue merely accepts to starting negotiations with a view to
concluding a bilateral agreement to exchange information on tax matters. That is, Argentina may
include a country in the list regardless of whether the country at issue meets the objective criteria
of the Global Forum or whether it commits to comply with them. Such a wide discretion may lead
to discrimination. There may indeed be other countries that are currently not on the list of
"cooperating" jurisdictions, but would be ready to initiate a process of negotiations.

2.2. ARTICLE
 XVII OF THE GATS (NATIONAL TREATMENT)

7. In order to establish a violation under Article XVII:1 of the GATS, the complainant needs to
demonstrate the existence of three elements: (i) it must be determined whether Argentina has
undertaken national treatment commitments with respect to the services sector and mode of
supply at stake; (ii) it needs to be demonstrated that the measures at issue affect trade in
services; and (iii) it must be established that the measures accord less favourable treatment to
services or service suppliers of other Members, in comparison to like domestic services or
suppliers.

8. (i) In respect of maritime and transport insurance services, as well as reinsurance and
retrocession services, Argentina inscribed "none" for modes 1 to 3. Hence, in respect of these
services and modes of supply, Argentina has a full national treatment commitment, without any
limitations. (ii) It is not necessary to show actual trade effects to substantiate a claim under a
WTO provision prohibiting discrimination. (iii) The European Union recalls that Article XVII:1 of the
GATS refers to the treatment of both services and service suppliers. To determine likeness of
services, the panel should take into account th e "nature and characteristics" of the services
transactions at stake. If the services "are essentially or generally the same in competitive terms",
they should be considered "like services". With respect to the likeness of service suppliers, the
determination of the existence of "like services " raises a presumption that the suppliers that
provide these services are also "like". In cases where the distinction made by the measure at issue
is exclusively based on the suppliers' origin and the suppliers under the measure "are the same in
all material aspects except for origin", the "like service suppliers" requirement is met. Once the
"likeness" of the services or suppliers is estab lished, it must finally be considered whether the
measures at issue "modif[y] the conditions of competition in favour of services or service suppliers
of the Member compared to like services or service suppliers of any other Member", as specified in
Article XVII:3 of the GATS.

2.3. ARTICLE
 XVI OF THE GATS (MARKET ACCESS)

9. The market access obligation in Article XVI of the GATS applies only to the extent Argentina
has made a specific commitment to apply this obligation in the services sector and mode of supply
at stake, and subject to the terms, limitations and conditions specified in Argentina's Schedule of
specific commitments. Where Argentina has made a market access commitment for the service
sector and mode of supply at stake, this entails an obligation not to restrict market access through
the use of six types of measures.

10. In the European Union's view, the analysis und er Article XVI requires (i) an examination of
the precise terms of Argentina's Schedule of commitments to determine whether there is with
respect to the services and mode of supply at issue a market access commitment; and (ii) a
determination that the challenged measures constitute impermissible limitations falling within the
scope of one of the measures listed in sub-paragraphs (a) to (f) of Article XVI:2 of the GATS.

11. (i) As indicated in Article XX:3 of the GATS, WTO Members' Schedules of commitments are
an integral part of the GATS. With respect to the services sector at issue – reinsurance and
retrocession – Argentina's Schedule of specific commitments specifies the entry "None" for market
access in Mode 1. This means that Argentina made a full market access commitment, without
limitations. With regard to Mode 3, Argentina has specified that "[t]he authorisation of the
establishment of new entities is suspended". This limitation does not indicate any end date for the
suspension of granting new authorisations. The fact that Argentina's domestic legal framework for
reinsurance changed in 1998, and became more op en to the establishment of new entities, does
not affect the obligations Argentina undertook in the framework of the GATS. Argentina's
commitments in its Schedule of commitments are the minimum liberalisation commitments to
which Argentina has bound itself internationally. Unilateral liberalisation does not affect the extent

- C-13 -

of Argentina's international obligations. It is immaterial, absent any specific commitment in that
regard, to conduct an analysis of the modification s in the domestic legislation of the WTO Member
that made the commitments at issue. The commitments in the Schedule represent the only
possible benchmark for the evaluation of whether less favourable treatment occurred.

12. (ii) It must be established that the challenged measures constitute a limitation falling within
the scope of sub-paragraph (a) of Article XVI:2 of the GATS. The European Union wonders whether
the measure at issue as it is described by Panama, i.e. the prohibition to supply reinsurance and
retrocession services by means of Modes 1 or 3 in case the suppliers originate in the excluded
countries, qualifies as a measure that imposes a quantitative limit on the number of service
suppliers in the sense of Article XVI:2(a) of the GATS. The measure appears to impose a
qualitative requirement, namely that the reinsurance and retrocession service suppliers must not
originate in countries that fail to meet the minimum transparency standards in respect of tax
information. There is no limit on the total number of service suppliers that could provide their
reinsurance or retrocession services in Argentin a through Modes 1 or 3. Therefore, the Panel may
find it appropriate to scrutinise this measure only under Article II:1 of the GATS rather than under
Article XVI:2(a) of the GATS.

2.4. ARTICLE
 XIV OF THE GATS (EXCEPTIONS)

13. Article XIV of the GATS has a two-tiered structure. A panel must examine first, whether a
measure is provisionally justified under one of the paragraphs of Article XIV; and, second, whether
the measure meets the requirements of the chapeau of Article XIV.

14. In order to assess the measures at issue under subparagraph (i) of Article XIV(c) of the
GATS, the Panel must determine whether (i) they are adopted to secure compliance with laws and
regulations which are not inconsistent with the pr ovisions of the GATS; (ii) they are adopted to
ensure the enforcement of laws and regulation that relate to the prevention of deceptive and
fraudulent practices; and, (iii) they are necessary to secure compliance.

15. The European Union questions whether measures that seek to protect a WTO Member's tax
revenues fall under Article XIV(c) of the GATS. Subparagraphs (i) to (iii) in Article XIV(c) appear to
specify measures posing concerns to the users of the services in question. In other words,
Article XIV(c) would appear to permit measures to secure compliance with law or regulations and
that address concerns from the perspective of the service user. In this respect, a measure that
only addresses concerns of the tax authorities to collect revenue would not appear to fall under the
scope of this provision.

16. Even if the scope of Article XIV(c) would extend to measures that concern tax matters, it is
not obvious that Argentina's measures would qualify under subparagraph (i) of that provision. The
European Union considers that particular attention should be paid to the question whether the laws
and regulations with which the measures at issue allegedly seek to secure compliance aim at
preventing deceptive or fraudulent practices . It is not straightforward whether some of the
practices that taxpayers adopt in order to pay fewer taxes in accordance with the relevant laws are
deceptive or fraudulent; or rather concern tax avoidance practices. It does not seem that the
measures mentioned in subparagraph (i) of Article XIV(c) encompass also measures relating to the
prevention of tax avoidance.

17. Once it would be determined that the measur e at issue qualifies under subparagraph (i) of
Article XIV(c), the Panel must determine whether the measure is applied in a manner that meets
the conditions in the chapeau of Article XIV. The chapeau requires that the measures are not be
applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination
between countries where like conditions prevail or a disguised restriction to trade in services.

18. In this respect, the European Union considers that the apparent discretion in the decision by
Argentina whether to designate a territory as a "cooperating" jurisdiction for the purpose of tax
information matters raises concerns as to whether the manner in which the measures are applied
violates the conditions in the chapeau of Article XIV.

19. Article XIV(d) of the GATS contains an exception for measures that are found to be
inconsistent with the national treatment obligatio n of Article XVII of the GATS. Hence, it does not
provide a justification for violations of any other GATS obligations. A measure will be justified

- C-14 -

provided the difference in treatment is aimed at en suring the equitable or effective imposition or
collection of direct taxes in respect of services or service suppliers of other Members. The third
measure described in footnote 6 indeed concer ns measures that apply to non-residents or
residents "in order to prevent the avoidance or evasion of taxes, including compliance measures".
Thus, Article XIV(d) directly speaks to measures adopted with the aim of preventing tax evasion or
tax avoidance, hence WTO Members are legitimately entitled to adopt measures in order to
prevent tax evasion or tax avoidance insofar as they do so in a WTO compatible manner.

20. Once it is established that the measure at issue qualifies as a measure under paragraph (d)
of Article XIV of the GATS, the panel must assess the application of this measure under the
chapeau of Article XIV.

2.5. PARAGRAPH
 2 (A) OF THE GATS ANNEX ON FINANCIAL SERVICES (PRUDENTIAL
EXCEPTION)

21. The European Union first of all notes that the scope of the prudential exception is
determined by the scope of the GATS Annex on Financial Services, in which it is contained.
Paragraph 1(a) of the Annex indicates that it "applies to measures affecting the supply of financial
services". The European Union does not consider that this means that only measures directly
regulating the financial services sector would be caught within the scope of the prudential
exception. Nonetheless, a Member invoking Paragraph 2(a) is required to establish how such
measures "affect[] the supply of financial services".

22. First, the party that invokes the provision has to demonstrate that the measure adopted is
taken for prudential reasons. Paragraph 2(a) provides an indicative list of such prudential reasons.
Second, the last sentence of Paragraph 2(a) specifies that where the measures at issue "do not
conform with" the GATS, "they shall not be used as a means of avoiding the Member's
commitments or obligations under the [GATS]". Hence, even if a measure violating the GATS
pursues a prudential objective, it must be determ ined whether, through the use of this measure,
the Member is trying to avoid its commitments and obligations under the GATS.

3. CLAIMS
 UNDER THE GATT 1994

3.1. ARTICLE I:1 (MFN)

23. Article I:1 of the GATT 1994 does not requir e that any advantage has to apply in the exact
and same manner to all imports irrespective of their source. Members are allowed to introduce
legislation of any kind as long as they do not modify the conditions of competition to the detriment
of like imported products. Article I:1 preserves the equality of competitive opportunities for like
imported products from all Members and, thus, prohibits imposing conditions that have a
detrimental impact on the competitive opportunities for like imported products from any Member.

3.2. ARTICLE
 III:4 (NATIONAL TREATMENT)

24. In the European Union's view, requiring additional information from imported products
(when compared to the information requested from domestic products) may alter the conditions of
competition and, ultimately, may cause less favourable treatment contrary to Article III:4 of the
GATT 1994.

3.3. ARTICLE
 XI:1 (QUANTITATIVE RESTRICTIONS)

25. Article XI:1 of the GATT 1994 contains one the general prohibition of quantitative
restrictions. The provision encompasses a limiting condition on the importation, thereby covering
those prohibitions and restrictions that have a limiting effect on the quantity or value of a product
being imported or exported. It forbids any measure instituted or maintained by a Member,
irrespective of its legal status, that prohibits or restricts the importation of products. A measure is
thus inconsistent with Article XI:1 of the GATT 1994 when it bans the importation of products or
includes a condition that limits importation or restricts market access for imported products.

26. The Panel should determine whether the measure at issue affects the importation of goods
or imported products. The target in Article XI:1 is exclusively those restrictions which relate to the
importation itself, and not to already imported products.

- C-15 -

3.4. ARTICLE XX (D) OF THE GATT 1994 (GENERAL EXCEPTIONS)

27. Article XX (d) imposes a "two-tiered" test. It must first be established whether the measure
is provisionally justified under paragraph (d). Second, the measure must be examined under the
introductory clause (the "chapeau") of Article XX.

28. With regard to the first tier of the test, two elements must be shown: (i) the measure must
be one designed to "secure compliance" with laws or regulations that are not themselves
inconsistent with some provision of the GATT 1994; and (ii) the measure must be "necessary" to
secure such compliance.

29. The European Union does not question the need for WTO Members to adopt measures in
order to fight against tax fraud or avoid the legitimate collection of taxes. However, the
European Union wonders to which extent the measures at issue contribute to the mentioned
objective if Argentina can select countries, such as Panama, that do not meet the relevant
international transparency requirements.

30. Even if Argentina succeeds in demonstrating that the measures at issue are provisionally
justified under subparagraph (d) of Article XX, the Panel would still need to analyse whether the
measure meets the requirements in the chapeau of Article XX, which prevents a WTO Member
from applying measures in a manner that constitutes (a) "arbitrary or unjustifiable discrimination
between countries where the same conditions prevail" or (b) "a disguised restriction on
international trade". The Panel should thus evaluate whether the distinctions that Argentina draws
do not amount to arbitrary or unjustifiable discrimination between countries where like conditions
prevail, or a disguised restriction of international trade.

4. CONCLUSION

The European Union considers that this case raises important questions on the interpretation of
various provisions of the GATS and the GATT. While not taking a final position on the merits of the
case, the European Union requests the Panel to care fully review the scope of the claims in light of
the observations made in this submission.