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Summary of Working Paper No. 67-1996

IV.3.2: The Participation Rights under the World Trade Organization General Agreement on Trade in Services(GATS): The Case of International Northern Sea Route Shipping Transportation Services

By Peter Ørebech, Norwegian College of Fisheries Science, University of Tromsø, Tromsø, Norway

The introduction of the Northern Sea Route (NSR) as the third international waterway is an improper concept that lacks a just legal foundation. Equalizing the NSR with the Suez and Panama routes means, in strict legal terms, establishing a treatment-no-less-favorable regime. Maritime transport services are in principle covered by GATS, but will be fully incorporated as an Annex to the GATS if and when such is decided by Member States according to a draft by the Negotiating Group on Maritime Transport Services (NGMTS). Flying the flag or having membership of a society qualifies the "another Member" status according to GATS legislation. The service delivered by such a ship or such a person does have the origin of that Member.

The problem with the NSR is how to gain shipowner' acknowledgement of the NSR as one of the three international seaways of the world. Since Russia will presumably become a WTO Member in the near future, NSR transportation will come under WTO jurisdiction. If all NSR states take part in the forthcoming shipping annex to GATS (See Decision on Negotiations on Maritime Transport Services paragraph 6), then all national legislation on participation that relates to ships transporting along the NSR or in port is restricted by WTO provisions. Most NSR freights between Europe and the Asian Far East will then be included by the same system of provisions. I antisipate that the GATS provisions on shipping transportation will come into force.

The focus is on trade in services, not the service as such, i.e. the execution of services (GATS Article I:1). What is protected is the equal right to offer, ask for, negotiate and conclude shipping transportation contracts.This includes all manner of transportation from regular steamship liners to spot-market operated or chartered vessels. In view of harsh weather conditions and ice-covered waters, the NSR transportation provisions must be given close attention. One crucial task is to prevent shipping companies form resorting to sub-standard ships to counterbalance unequal participation rights (see INSROP Report no. 20, 1995).

The implication of GATS liberties is that any shipowner from a GATS Member can provide services to consumers in any of the territories of other Members when operating any of the Members. National arrangements that apply only to transiting ships would no longer be valid; e.g. special taxes and charges specified by GATS provisions on "National Treatment". National regulation applying just to some transiting GATS memberstates ships is contradictory to the GATS the Most-Favored-Nation Treatment Clause, i.e. the fundamental principle of equality based upon the treatment received by any third country.

According to drafting history and subsequent praxis, the notion "service rendered" means consular fees, custom fees and statistical fees. The notion is purely legal and has nothing to do with service in an economic sense. Domestic "service" imposed on imported merchandise or service has to be of at least one of the kinds of aforementioned fees. Different kinds of charges could, by analogy to GATT Article VIII:1 (a), not exceed the handling cost of the transportation in question, e.g. expenses for guiding ships through an ice-covered stretch of the NSR.