Prudential Agreement Definition
In addition, since the beginning of the Uruguay Round negotiations, WTO members have protected their regulatory sovereignty over prudential measures, with the prudential exception being a delicate compromise.202 Members have probably put in place a broad exception to give governments sufficient leeway to make regulatory decisions in the financial sector.203 Thus, CETA , in its “high-level principles” for the application of the prudential supervision exception, was adopted. International trade or international investment treaties – including the World Trade In the World Trade Organization (WTO) General Agreement on Trade in Services (GATS) 12 – aim to liberalise financial services markets and facilitate an ever-increasing range of assets and financial markets. These contracts generally provide a political space that allows governments to regulate for prudential reasons, which may exceed trade and investment liberalization.13 In particular, paragraph 2, point a), of the GATS Annex (annex) contains the following exception or “carve-out” that has been complied with in several other trade and investment agreements. Prudential measures have rarely been challenged in international investment tribunals. Most early ILOs did not contain a specific surveillance provision with the exception of the GATS. However, prudential reasons may continue to be used to justify breaches of investment obligations in the absence of explicit prudential exemptions, as explained below. In addition, the NAFTA regulatory exception75 is mentioned in the “NAFTA Services” chapter (Chapter 14), but begins with “nothing in that part,” so it applies to nafta Part 5 measures, including the investment chapter (Chapter 11). More recently, regulatory exemptions on the model of paragraph 2, point a) of the GATS annex have also been introduced with respect to investment obligations under the Canadian FIPA model and the AMERICAN ILO model. In Argentina- Financial Services Panama argued, unsuccessfully, before the panel, that the GATS prudential exception was available only as a defence for measures that are national rules and procedures for technical standards, licences and qualifications in Panama.139 Panama`s argument depended on the title of the GATS monitoring exception: “Domestic Regulation.”140 Panama`s position was not that the prudential exception could only justify measures that are inconsistent with incompatible measures. (Article VI of the GATS). “141, but that the prudential exception would cover possible inconsistencies with the GATS, as one of the national rules covered by Article VI.142 of the GATS was one of the provisions covered by Article VI.142 of the GATS, however, the panel appeared to view the adoption of Panama`s argument as an inappropriate restriction on the scope of the prudential exemption.143 Governments impose prudential rules to ensure the stability of the financial sector and protect depositors and investors.