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TWN Info Service on Finance and Development (Jan19/01)
22 January 2019
Third World Network


Venezuela’s WTO complaint targets US ban of its cryptocurrency

Published in SUNS #8826 dated 17 January 2019

Geneva, 16 Jan (Kanaga Raja) – Venezuela has initiated a dispute against the United States at the World Trade Organisation (WTO) last week over certain US measures relating to trade in goods and services, including a US Presidential Executive Order that bars any US-based financial transactions in Venezuela’s new “Petro” cryptocurrency.

In raising the dispute, Venezuela had sought consultations with the US, the first step in the formal dispute settlement process at the WTO.

Venezuela’s request for consultations with the US was circulated to WTO members on 8 January.

In its communication (WT/DS574/1), Venezuela has argued that the United States has imposed certain coercive trade restrictive measures on the Bolivarian Republic of Venezuela in the context of attempts to isolate the country economically.

In this context, Venezuela referred inter alia to those trade restrictive measures under which, through the United States Executive Branch, persons are put on the Specially Designated Nationals and Blocked Persons List (“SDN List”) – the United States blacklist.

According to the Venezuelan communication, the regulatory framework encompassing the unilateral coercive trade restrictive measures imposed by the United States on Venezuela includes, but is not limited to, the following:

Statutes:

(a) Venezuela Defense of Human Rights and Civil Society Act of 2014 (“VDHRA”);

(b) International Emergency Economic Powers Act (“IEEPA”), 50 U.S.C. =A7=A7 1701 1706; and

(c) National Emergencies Act (“NEA”), 50 U.S.C. =A7=A7 1601 1651.

Regulations:

(d) 31 CFR Part 591 – Venezuela Sanctions Regulations (“VSR”).

Executive Orders:

(e) Executive Order 13692 Blocking Property and Suspending Entry (into US) of Certain Persons Contributing to the Situation in Venezuela (9 March 2015);

(f) Executive Order 13808 Imposing Additional Sanctions with Respect to the Situation in Venezuela (24 August 2017);

(g) Executive Order 13827 Taking Additional Steps to Address the Situation in Venezuela (19 March 2018);

(h) Executive Order 13835 Prohibiting Certain Additional Transactions with Respect to Venezuela (21 May 2018); and

(i) Executive Order 13850 Blocking Property of Additional Persons Contributing to the Situation in Venezuela (1 November 2018).

According to the Venezuelan communication, this regulatory framework provides for: (i) inclusion on blacklists; (ii) coercive trade restrictive measures concerning the sovereign debt market; and (iii) coercive trade restrictive measures concerning digital currency.

Venezuela said the unilateral coercive trade restrictive measures imposed by the United States on the Bolivarian Republic of Venezuela violate its obligations under Articles I:1, II:1, III:4, V:2, X:3, XI:1 and XIII:1 of the GATT 1994.

The coercive trade restrictive measures also violate the United States’ commitments under Articles II:1, XVI:2 and XVII:1 of the GATS.

VENEZUELA’S DIGITAL CURRENCY

On the discriminatory coercive trade restrictive measures with respect to transactions in Venezuelan digital currency, adopted pursuant to Executive Orders 13808, 13827 and 13835, Venezuela said that the coercive trade restrictive measures of the United States to which Venezuelan financial services and financial service suppliers are subject, under which suppliers receive treatment less favourable than that accorded to like services and service suppliers of WTO Member States not subject to the measures, are in violation of Article II:1 of the GATS.

Furthermore, inasmuch as digital currencies originating in the United States are not subject to the same prohibitions as Venezuelan digital currencies, the United States is according less favourable treatment to Venezuelan financial services and service suppliers than to like domestic financial services and service suppliers, in violation of Article XVII:1 of the GATS.

[In a guest post on the International Economic Law and Policy (IELP) blog, Sandeep Thomas Chandy, Research Fellow at the Centre for Trade and Investment Law, said that if Venezuela’s claim goes to the panel stage, the WTO would be dealing with a dispute involving cryptocurrencies for the first time.

[Providing some background, Thomas Chandy noted that Venezuelan President Nicolas Maduro had launched the country’s cryptocurrency, the Petro, in late 2017, and that like almost all cryptocurrencies, the Petro is also reported to be based on distributed ledger technology. However, Thomas Chandy pointed out, unlike popular cryptocurrencies like Bitcoin and Litecoin, Petro was stated to be backed by Venezuela’s reserves of oil, gasoline, gold, and diamonds.

[In his post, Thomas Chandy said: “Venezuela has challenged the US Presidential Order banning Petro under Article II (MFN) and Article XVII (National Treatment) of the GATS. While an MFN violation would be relatively easy to establish, the National Treatment violation would require Venezuela to identify the sector/ sub-sector in the US Schedule of Commitments which can include cryptocurrencies and then establish that the US is acting inconsistently with its commitments.”

[He added: “One way for Venezuela to establish the violation of National Treatment would be by stating that the underlying technology (distributed ledger technology) is being given treatment “no less favourable than that [the US] accords to its own like services and service suppliers”. For this, Venezuela would have to identify the specific sector/sub-sector involving blockchain
technology in the US Schedule of Commitments. However, the dinosaur-era 1991 Central Product Classification (CPC) does not have any specific sector/sub-sector which can include cryptocurrencies or the technology running it. The closest sector/sub-sector would be “Computer and Related Services” and “data” related commitments under the Telecommunications sector (distributed ledgers are essentially a computer database). [In its GATS schedule of specific commitments], both these sectors/ sub-sectors have been marked as “None” [no limitations or restrictions] by the US.

[For the view that distributed ledgers are included in these sectors/sub-sectors, Thomas Chandy has cited the Appellate Body ruling in China – Audiovisual dispute as being pertinent. (That ruling said): “In this respect, we note that GATS Schedules, like the GATS itself and all WTO agreements, constitute multilateral treaties with continuing obligations that WTO Members entered into for an indefinite period of time, regardless of whether they were original Members or acceded after 1995. … interpreting the terms of GATS specific commitments based on the notion that the ordinary meaning to be attributed to those terms can only be the meaning that they had at the time the Schedule was concluded would mean that very similar or identically worded commitments could be given different meanings, content, and coverage depending on the date of their adoption or the date of a Member’s accession to the treaty.”

[Thomas Chandy said that according to this, new services and technological developments can be read into the generic terms in the Schedules.

[Thomas Chandy further said: “Another way for Venezuela would be to argue that Petro is a digital security in the form of a cryptocurrency because it is backed by assets. This argument will depend on whether a suitable sector/sub-sector is available under the Financial Services Commitments. One plausible sub-sector could be “Trading of Securities and Derivative Products and Services Relate d Thereto” on which US has taken full commitments. Venezuela can then state that the Executive Order banning Petro is inconsistent with US commitment.”

[“It remains to be seen if Venezuela will take this dispute to the Panel stage and if they retain this claim to that stage. If they do, it would be interesting to see how the Panel would interpret the outdated Schedule to state that Petro/distributed ledgers are part of the Schedule,” he added.

[The full post by Thomas Chandy on the IELP blog can be found at: https://worldtradelaw.typepad.com/ielpblog/2019/01/guest-post-venezuela-challenges-us-blockade-of-its-national-cryptocurrency-at-the-wto.html]

OTHER CLAIMS MADE BY VENEZUELA

Apart from the banning by the US of its national cryptocurrency, Venezuela also highlighted the discriminatory measures imposed by the US on goods of Venezuelan origin, adopted pursuant to the VDHRA, the IEEPA, Executive Order 13692 and the VSR, in violation of:

(i) Article I:1 of the GATT 1994, because they accord products of Venezuelan origin treatment less favourable than that accorded to products from WTO Member countries that are not subject to the coercive and trade restrictive measures.

More specifically, in comparison to goods from WTO Member countries not subject to the coercive trade restrictive measures, Venezuelan goods face, as a result of these measures, a greater regulatory burden in terms of conditions governing importation, as well as restrictions on who can perform this import function, and unfair market opportunities once importation has taken place. All of this denies Venezuelan goods the equality of opportunities guaranteed by Article I:1 of the GATT;

(ii) Article III:4 of the GATT 1994, because they accord products of Venezuelan origin treatment less favourable than that accorded to products of US origin. In comparison to products of US origin, products of Venezuelan origin face greater regulatory burdens and unfair market opportunities as a result of these coercive trade restrictive measures;

(iii) Article V:2 of the GATT 1994, because they require the detention and seizure of certain goods transiting through the territory of the United States to another WTO Member country; and

(iv) Article XI:1 of the GATT 1994, because they operate as specific prohibitions on importation and exportation between the United States and the Bolivarian Republic of Venezuela, and constitute prohibited quantitative restrictions on the importation of products of the territory of a Member and on the exportation of products destined for the territory of another Member.

Even if the coercive trade restrictive measures imposed on the Bolivarian Republic of Venezuela by the United States were not prohibited as quantitative restrictions, they would violate Article XIII:1 of the GATT 1994, inasmuch as like products of third country WTO Members are not subject to equivalent prohibitions, said Venezuela.

Venezuela had also pointed to discriminatory measures with respect to Venezuelan gold, established in Executive Order 13850, which it said prohibit trade in Venezuelan gold in the United States and by United States persons.

The measures in question appear to be inconsistent with the US obligations under various provisions of the GATT 1994, in particular, but not limited to, the following:

(i) Article I:1 of the GATT 1994, because they allow for the acquisition of Venezuelan gold with treatment less favourable than that accorded to gold for WTO Members not subject to the coercive trade restrictive measures;

(ii) Article II:1(a) and (b) of the GATT 1994, because they accord the commerce of Venezuela treatment less favourable than that provided for in the appropriate Part of the United States’ Schedule of Concessions;

(iii) Article III:4 of the GATT 1994, because the United States does not accord Venezuelan gold treatment no less favourable than that accorded to like products from the United States;

(iv) Article X:3(a) of the GATT 1994, because the United States has not administered laws, regulations, decisions and rulings in relation to the measures in question in a uniform, impartial and reasonable manner; and

(v) Article XI:1 of the GATT 1994, because, through the measures in question, the United States has instituted a prohibition and, therefore, restrictions other than duties, taxes or other charges, on the importation of products from the territory of the Bolivarian Republic of Venezuela.

Venezuela has further highlighted discriminatory coercive trade restrictive measures with respect to the liquidity of the Venezuelan debt, adopted pursuant to Executive Orders 13808, 13827 and 13835.

It said given that the United States has undertaken to liberalize the financial services sector in its Schedule, it cannot maintain or adopt the measures described in Article XVI:2(a)-(f) of the GATS with respect to financial services, unless it has reserved the right to do so in its Schedule.

Even if the United States, in its Schedule, appears to have reserved the right to adopt such measures in certain modes of supply, it has not reserved the right to adopt such measures in all modes of supply. Since the coercive trade restrictive measures of the United States constitute prohibited measures under Article XVI:2(a) and (b) in all modes of supply, they violate Article XVI:2 of the GATS.

According to the Venezuelan communication, discriminatory coercive measures restricting trade with respect to certain Venezuelan persons and prohibiting the provision of services by and the receiving of services from these persons, as adopted pursuant to the VDHRA, the IEEPA and the VSR, violate Article II:1 of the GATS in as much as they accord less favourable treatment to Venezuelan services and service suppliers.

The measures appear to nullify or impair the benefits accruing to the Bolivarian Republic of Venezuela directly or indirectly under the cited agreements, it said.

In addition to, and irrespective of, the multiple violations of WTO obligations identified above, the Bolivarian Republic of Venezuela considers that, as a result of the application of the measures in question, the attainment of the objectives of the GATT 1994 is being impeded within the meaning of Article XXIII:1(b) of the GATT 1994.

Furthermore, the measures in question appear to nullify or impair the benefits that the Bolivarian Republic of Venezuela could reasonably have expected to accrue to it under the US specific commitments under the GATS within the meaning of Article XXIII:3 of the GATS, it said.

 


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