Dear Prudence: Allowances Under International Trade and Investment Law for Prudential Regulation in the Financial Services Sector

Journal of International Economic Law (2016) 19(4)

35 Pages Posted: 4 Oct 2016 Last revised: 6 May 2017

See all articles by Andrew D. Mitchell

Andrew D. Mitchell

University of Melbourne - Law School

Jennifer Hawkins

PriceWaterhouseCoopers LLP

Neha Mishra

University of Melbourne, Law School, Students

Date Written: October 3, 2016

Abstract

Governments impose prudential regulations to ensure the stability of the financial sector and protect depositors and investors. However, these regulations may also restrict trade in financial services. The Annex on Financial Services of the World Trade Organization’s (‘WTO’) General Agreement on Trade in Services (‘GATS’) contains an exception allowing countries to take measures for ‘prudential reasons’ to protect the ‘integrity and stability of the financial system’ or to ‘protect investors, depositors, policy holders or persons to whom a fiduciary duty is owed by financial service suppliers’. Corresponding provisions appear in numerous other trade and investment agreements. The WTO has now issued its first ruling on the prudential exception in Argentina — Financial Services. The ruling of the Panel recognizes the policy space necessary for countries to determine their own prudential reasons for taking measures. As disputes regarding prudential exceptions are likely to increase in the coming years, two key challenges remain in applying such exceptions: adopting an integrated international approach to prudential regulation, given the diverse views held amongst countries; and identifying effective measures in preventing risks to the financial sector.

Keywords: Prudential Exception, Financial Services, GATS Annex on Financial Services, International Investment Agreements

JEL Classification: K33

Suggested Citation

Mitchell, Andrew D. and Hawkins, Jennifer and Mishra, Neha, Dear Prudence: Allowances Under International Trade and Investment Law for Prudential Regulation in the Financial Services Sector (October 3, 2016). Journal of International Economic Law (2016) 19(4) . Available at SSRN: https://ssrn.com/abstract=2847444

Andrew D. Mitchell (Contact Author)

University of Melbourne - Law School ( email )

University Square
185 Pelham Street, Carlton
Victoria, Victoria 3010
Australia
+61383441098 (Phone)
+61393472392 (Fax)

HOME PAGE: http://www.law.unimelb.edu.au/staff/Andrew%20Mitchell

Jennifer Hawkins

PriceWaterhouseCoopers LLP ( email )

1301 Avenue of the Americas
New York, NY 10019
United States

Neha Mishra

University of Melbourne, Law School, Students ( email )

University Square
185 Pelham Street, Carlton
Victoria, Victoria
Australia

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