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The Impact of Russiia's WTO Accession_Eng

The Impact of Russiia's WTO Accession_Eng

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Published by Alptekin Dag
The Impact of WTO Accession on the Russian Financial Services Sector – What Can Investors Expect?
The Impact of WTO Accession on the Russian Financial Services Sector – What Can Investors Expect?

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Published by: Alptekin Dag on Jul 26, 2012
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07/26/2012

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Moscow 5162448.1
 
The Impact of WTOAccession on the RussianFinancial Services Sector – What Can Investors Expect?In this issue:
I. Introduction
On 16 December 2011, the WTO Ministerial Conference in Genevaapproved Russia’s WTO accession package and issued a formal invitationfor Russia to become the WTO’s 153th Member. Once the RussianParliament ratifies the accession package (which should take place insummer 2012), Russia will be a fully-fledged WTO Member.
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 To be sure, Russia’s membership in WTO brings a great opportunity forforeign investors and trading partners in
many 
different industry sectors toride the wave of the growing Russian economy. The country holds a vastwealth of highly educated and talented people, an enormous store ofnatural resources and unparalleled capacity for development of its value-added economy. There is no doubt that Russia will make wise use ofstate-of-the-art technological advances based on its Soviet scientificlegacy.For investors in the financial services sector, one of Russia’s mostpromising and growing sectors, this has a special meaning. Internationaltrade and investment relations will now become based on a full-scaleWTO regulation and subject to enforcement through WTO dispute
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Until Russia’s accession to the WTO and the completion of ratification procedures, traderelations with the EU, USA and other countries will remain regulated by international tradebilateral agreements.
 
 
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Moscow 5162448.1
 settlement. This is likely to result in a more predictable and stableenvironment for trade and investment relations with Russia.The accession package is an Accession Protocol (the
“AccessionAgreement”
)
2
running to over 1,000 pages. It lists the specific marketaccess commitments in goods and services, including financial servicesagreed between Russia and WTO Members. Also adopted was a 600-page Working Party Report spelling out how Russia will bring its nationallegislation in line with WTO requirements.But will restrictions be imposed on foreign banks and insurers doingbusiness in Russia? Can foreign banks expect the doors to open up forbranches, for example? Will prior restrictions on access to the Russianinsurance market for foreign insurers drop away completely? Given thestill fledgling nature of the Russian financial services sector, the country’sWTO negotiation team made special arrangements which will impact onthese and other issues, including in respect of European and US financialservice providers.Understanding the rights and obligations of companies and of publicauthorities arising from Russia’s entry into the WTO system will thus beessential for anyone doing business in Russia, and in particular thefinancial services sector. The author highlights below some key issues ofwhich bankers, insurers and other financial service providers will wish totake note.
II. Russia and the EU1. WTO
By ratifying the Accession Agreement Russia will accede to GATS (theGeneral Agreement on Trade in Services) and will bring its national
2
 
Upon entry into force of the Accession Agreement, Russia will accede to the MarrakeshAgreement Establishing the World Trade Organization (the
“WTO Agreement”
) and otherWTO Multinational Trade Agreements annexed to the WTO Agreement, including theGeneral Agreement on Trade in Services (the
"GATS"
).
 
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Moscow 5162448.1
 regulation of market access to services in line with the basic principles ofWTO - market access, national treatment (the
“NT”
)
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and most-favorednation treatment ( the
“MFN”
).
4
 GATS provisions to some extent improve the market access for EUinsurance companies and banks (e.g. allowing 100% foreign ownership ofRussian insurance companies, insurance branching). However, accordingto the GATS rules, Russia (as other WTO Members) took advantage ofthe carve outs known as
“list of exemptions from MFN treatment” 
and
“schedules of specific commitments” 
which allow a Member to deviatefrom GATS rules and identify to which services sectors and under whatconditions the GATS rules and principles will not apply.
List of Exemptions from MFN Treatment 
A WTO Member may maintain particular measures inconsistent with MFNtreatment, in principle, for not more than ten years and subject to reviewafter not more than five years. Russia did not specify any particularmeasures relating to the financial services sector that will not receive MFNtreatment. However, there is a general all-sector MFN exemption inrespect of measures based on any existing or future internationalagreements concerning investment activity or movement of naturalpersons supplying services.
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Schedule of specific commitments 
Russia has the following specific commitments schedule in respect offinancial services:
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NT means that imports of goods and services must be treated no less favorably thanlike goods and services produced domestically.
4
MFN means that imports of goods and services originating from one member countrymust be treated no less favorably than imports of goods and services from any other country.
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The latter applies to all parties of the Partnership and Cooperation Agreement signedbetween EU and Russia and also to CIS countries.

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