Panagiotis Delimatsis

Transparent Financial Innovation in a Post-Crisis Environment

The recent stunning failure of financial institutions has put regulatory intervention high on the agenda of governments. Adequate risk monitoring, including by credit rating agencies (CRAs), as well as measurement and management have proven a daunting task, whereas regulation of innovative financial instruments has not brought about adequate disclosure and transparency. Before the recent financial crisis, financial innovation was regarded as inextricably linked with economic growth and aggregate welfare. In the wake of the crisis, criticism as to the utility of financial innovation became more unequivocal. After reviewing the virtues and pitfalls of financial innovation, the article analyses the main transparency initiatives undertaken in the EU and the USA in the aftermath of the crisis to harness various financial innovations that have marked the history of financial markets in the past three decades, including hedge funds, derivatives, and credit ratings. Furthermore, the article critically assesses the likely impact of such regulations on the future of financial innovation. In addition, the article reviews the approach to financial innovation that the General Agreement on Trade in Services (GATS) of the World Trade Organization adopted in the 1990s and assesses the likely impact of the recent financial crisis on this stance. As the perimeter of regulation grows and countries become more suspicious about home-country financial regulation, trade in financial services is unlikely to remain unaffected. Nevertheless, the GATS appears to be running out of analytical tools, a fact that undermines its global role. Within this new landscape, the GATS is bound to adapt. The Author 2013. Published by Oxford University Press. All rights reserved., Oxford University Press.

Developing Trade Rules for Services: A Case of Fragmented Coherence?

This paper presents the results of a four-year project tackling several issues relating to multilateral and preferential trade in services. One of the underlying organising principles of our research on services trade has been a presumed fault line between the innate coherence that is achieved through multilateral rules and commitments, on the one side, and the more inherently fragmented nature of preferential solutions or rules, on the other. Doubtlessly rooted in the way mainstream trade theorists and economists more broadly have long championed multilateralism over its peripheral brethren, such a perception proceeds from the assumed second-best nature of preferential, or non-WTO-centric, policy and rule-making approaches. Our key messages put forward concrete proposals to improve regulation of services trade. We find, inter alia, that: a) fragmentation is a source of policy and innovation apt to inform multilateral rule-making, while theatres at the periphery may yield superior outcomes or more politically palatable bargains; b) the adoption of a necessity test applicable across services sectors at the multilateral level would improve the quality of services trade regulation domestically; c) the current treatment of labour mobility under GATS is not conducive to an optimal global governance of migration; d) when examing likeness, both service-related and supplier-related factors have to be considered to decide whether there is competitive relationship in the marketplace; e) Overlapping multilateral and bilateral rules on investment blur the rights and obligations of domestic authorities and foreign investors in services; f) co-ordination between the WTO and arbitral panels so that similar principles are intepreted in a uniform manner can lead to a more coherent international investment framework in services.

Financial Innovation and Transparency in Turbulent Times

The stunning failure of a number of banks during the recent crisis has put regulatory intervention high on the agenda of governments. Adequate risk monitoring, including by credit rating agencies, measurement, and management have proven to be a daunting task, whereas regulation of innovative financial instruments has not brought about adequate disclosure and transparency. After critically reviewing the virtues and pitfalls of financial innovation, this paper offers an analysis of the main transparency initiatives undertaken in the E.U. and the U.S. in the wake of the crisis to harness various financial innovations that have marked the history of financial markets in the last three decades. The paper argues for better managed regulatory cooperation at the international level and warns against institutional deficiencies of the new regulatory frameworks in the E.U. and the U.S. One key message of the paper is that more regulation may hamper financial innovation; yet better regulation may direct entrepreneurial talents to financial innovations that enhance societal wellbeing and still yield reasonable returns.

Concluding the WTO services negotiations on domestic regulation – hopes and fears

The negotiations under the aegis of the World Trade Organization (WTO) on the creation of rules on domestic regulations affecting trade in services have entered a critical stage. Within a general atmosphere of reflection and reluctance characterizing the Doha negotiations, this is the only front in recent years in which tangible progress is evident. This paper critically analyses the potential rules that Members currently appear to support and attempts to identify their shortcomings as well as those modifications or clarifications which are necessary to improve the impact and efficacy of the forthcoming rules (so-called ‘disciplines on domestic regulation’ in the parlance used in the General Agreement on Trade in Services – GATS). At the heart of the paper lies a thought-provoking proposal for a necessity test applicable across services sectors. Arguably, only a necessity test can allow for the elimination of unnecessary barriers to trade in services and regulatory arbitrariness.

Services of general interest and the external dimension of the EU energy policy

Services of general interest (SGI) are a key component of the EU economy, accounting for 26 % of GDP and 30 % of employment within the EU. They cover economic and non-economic activities alike. They are to be distinguished from services of general economic interest (SGEI), which are economic activities which deliver outcomes in the overall public good and which would be supplied under conditions less favourable to the consumers in terms of quality, safety, affordability, equal treatment or universal access if the State did not intervene. As the SGEI is a particularly developed concept within the EU, the relevant discussions inevitably focus on their function and organization at the EU level. Less is said about the external aspects of such services. One of the most promising areas for such discussions is the energy sector, whereby the EU is called upon to show leadership not only due to global concerns relating to sustainable development, but also due to the EU’s dependence on external energy sources. Against this backdrop, this chapter discusses the external dimension of the EU energy policy in the area of SGI. After a review of the role of SGI in the energy sector, the chapter focuses on the external aspects of the EU energy policy, tentatively discussing ends and means. In the next section an analysis of the SGI within the broader scope of the EU external action is offered. In this regard, the concept of public services in the context of energy is examined through a discussion of the relevant rules in the WTO General Agreement on Trade in Services (GATS ), the role of energy services in the GATS and some relevant provisions in a number of free trade agreements (FTAs) that the EU concluded jointly with its Member States.

The law, economics and politics of international standardisation

In an era of increased reliance on private regulatory bodies and globalised economic activity, standardisation is the field where politics, technical expertise and strategic behaviour meet and interact. International standard-setting bodies exemplify the rise of transnational governance and the challenges that it brings about relating to institutional choice, legitimacy, procedural and substantive fairness or transparency. This book takes a more empirical-based approach focusing on the mechanics of international standard-setting. It constitutes a multidisciplinary inquiry into the foundations of international standard-setting, an empirically under-researched yet important area of international informal lawmaking. Contributors expertly examine the peculiarities of international standardisation in selected issue-areas and legal orders and shed light on the attributes of international standard-setters, allowing comparisons among standard-setting bodies with a view to identifying best practices and improve our understanding about standardisation processes.

Transnational Private Regulation in Professional Services

The objective of this study is to map the landscape of transnational private regulation (TPR) in professional services. Transnational private regulation in professional services examines the emerging body of rules created by private actors in a manner that leapfrogs national borders. Driven by the forces of globalization of business, these actors aim to offer handy solutions to global professionals through rule-making activities that take place ‘in the shadow of the law’ and the traditional forms of State regulatory making. Domestic self-regulated professional associations typically draw their legitimacy by an act transferring powers from public bodies to such associations. However, transnational professional associations claim legitimacy through the participation of domestic private bodies. This ‘derived legitimacy,’ which partly is the result of the willingness on the side of domestic professional associations of better serving global business, can be highly problematic, notably when it comes to enforcement. This study examines TPR in professional services through the use of four criteria: legitimacy, effectiveness, enforcement, quality.

International Trade Regulation and the Mitigation of Climate Change. World Trade Forum

What can trade regulation contribute towards ameliorating the GHG emissions and reducing their concentrations in the atmosphere? This collection of essays analyses options for climate-change mitigation through the lens of the trade lawyer. By examining international law, and in particular the relevant WTO agreements, the authors address the areas of potential conflict between international trade law and international law on climate mitigation and, where possible, suggest ways to strengthen mutual supportiveness between the two regimes. They do so taking into account the drivers of human-induced climate change in energy markets and of consumption.

National Tax Regulation, International Standards and the GATS: Argentina—Financial Services

Can a WTO Member discriminate against foreign suppliers of services located in jurisdictions that refuse to share information with a government to permit it to determine if its nationals engage in tax evasion? Does it matter if the Member uses standards developed by an international body as the criterion for deciding whether to impose measures? In Argentina—Financial Services the WTO Appellate Body held that services from jurisdictions that share financial tax information may be different from services provided by jurisdictions that do not cooperate in supplying such information. It overruled a Panel finding that measures to increase taxes on financial transactions with non-cooperative jurisdictions were discriminatory. We argue that the AB reached the right conclusion but that an important opportunity was missed to clarify what WTO Members are permitted to do to enforce their domestic regulatory regimes, and how international standards could have a bearing on this question. By giving consideration to arguments that the likeness of services and service suppliers may be a function of prevailing domestic regulatory regimes, the AB increased the scope for confusion and future litigation.

Sustainable Standard-Setting, Climate Change and the TBT Agreement

The increased importance of environmental protection led to the introduction of sustainability-related criteria in standard-setting practices. A discomfort with the functioning, working methods and certain rigidities of the global standardizing bodies such as the ISO led to a mushrooming of a new generation of private standard-setters at the transnational level that wanted to have a more direct influence over global production and supply chains. Many of these initiatives started as coalitions of relatively powerful downstream retailers or as domestic hybrid initiatives that went global due to their good reputation in setting standards for business conduct. Against this background, this paper reviews the current landscape of voluntary sustainability standards (VSS) globally as a means to organize, coordinate and manage efforts for corporate responsibility as well as climate change mitigation and adaptation. As these schemes grow in prominence, their effects on trade flows also become more visible and sometimes even worrisome. The paper analyses in particular whether the rules set out in the WTO Agreement on Technical Barriers to Trade (TBT) and the Code of Good Practice can tame this increasingly important form of transnational rule-making.