WTO Action on Chinese App Ban: Possible Defenses in India’s Quiver

In June 2020, 20 Indian soldiers were martyred while protecting Galwan valley from Chinese invasion. The clash and subsequent martyrdom of 20 soldiers catapulted the nation into a frenzied demand for boycotting Chinese goods. Although the government made no official comment on a complete boycott of Chinese goods, it did, however, ban 59 apps (“the app ban”) from accessing the Indian market. The ban was effected citing a need to safeguard India’s integrity, sovereignty, security and data privacy of its citizen.

After the release of the ban notification, the Chinese embassy hinted at a possible WTO claim against the ban. If such a claim is raised, India is most likely to rely on exceptions under Article XIV bis and Article XIV(c)(ii). This article aims to analyze the efficacy of these exceptions in defending the app ban.

Applicability of GATS to app ban

WTO General Agreement on Trade in Services (GATS) governs the “production, distribution, marketing, sale and delivery of a service” across international borders. GATS works on the basis of a positive list compiled under the Central Product Classification (“CPC”) and the Services Sectoral Classification List (W/120), this means that any service not included in this list would be counted out of the services governed by GATS.

Service provided by many software applications do not find an explicit mention of under these lists. But this does not mean that the digital services provided by these apps should be counted out of the GATS framework. This is because the service listed under the CPC and W/120 are technologically neutral in nature. Moreover, regardless of the technological evolution, the functions that are referred to in the W/120 and UN CPC are largely similar to today. Therefore, services provided via mobile apps can be covered by one or other criteria of W/120 and CPC. Hence, any restriction on apps should be governed by GATS.

India’s Gats Obligations

The app ban violates Most Favored Nation, National treatment, Market access obligations. The ban is only on Chinese apps which implies that the Indian government is giving unequal and unfair treatment to Chinese software companies as compared to similar companies from India and other nations (except China). Implying a violation of MFN and NT commitments. Furthermore, it also prohibits a few Chinese companies from accessing Indian markets, thus violating the Market access commitment. However, such violations are condoned if they fall under any of the exceptions provided under GATS agreement.

The GATS agreement has three broad exceptions- 1. Security exceptions (Article XIV bis) 2. Restrictions to Safeguard the Balance of Payments (Article XII), 3. General Exceptions (Article XIV). For India’s case Security exception under Articles XIV and XIV bis are most suitable.

Viability of Security exception

Article XIV bis gives WTO members liberty to take any measure which is necessary for protecting its ‘essential security interest’, given they are taken either in time of war or other emergencies in international relations.

In Russia – Measures Concerning Traffic in Transit it was held that for successfully invoking this exception the measure taken by the member will have to pass a three-fold test i) whether the measure was taken in a time of war or emergency in international relations ii) whether the measure was considered necessary for the protection of its essential security interests iii) whether the measure is “not implausible” to protect essential security interests.

 An emergency in international relations is “a situation of armed conflict, or of latent armed conflict, or of heightened tension or crisis, or of general instability engulfing or surrounding a state.” The India-China standoff in the Galwan valley escalated to a violent clash between both the sides resulting into causalities on India’s side, heightening border tensions between the countries. Therefore, the current Indo-china relations qualifies as an emergency in international relations.

The second part of the analysis requires India to ascertain that the ban of Chinese mobile applications is necessary for India’s security interests. ‘Essential Security Interest’  is defined as “interests which relate to the quintessential functions of the state, namely, the protection of its territory and its population from external threats, and the maintenance of law and public order internally”.

The Chinese apps gave Chinese companies access to millions of Indian citizens’ personal data. This has to be viewed in light of China’s problematic National Intelligence Act, 2017 (NIA act). Article 7 of the act creates a legal obligation on Chinese corporations to assist their intelligence services whenever asked for. Further Article 9, makes provisions for providing incentives for companies which contribute to national intelligence efforts. The access to millions of Indians’ data together with the provisions of the NIA act clearly indicates that India is vulnerable to the unauthorized use of Indian citizen’s data by China. Moreover, in a world where access to a country’s citizens’ data can be used to sway elections, protecting citizen’s data from external threats becomes an ‘Essential Security Interest’.

The last phase of the test requires India to prove that the measure was not ‘so remote from, or unrelated to’, the India-China standoff, that it is implausible that the measure was introduced to protect India’s essential security interests. As discussed above, the app ban was effected keeping in mind the possibility of China’s unauthorized use of Indian citizens’ data. Therefore, efforts made by India to restrict the Chinese state’s access to India’s datastore is a plausible measure to ensure that India’s security is protected.

Hence, India is likely to successfully argue that the ban was done to protect its essential security interests.

Viability of seeking an exception under Article XIV(c)(ii)

Article XIV(c)(iii) allows a country to flout any of their GATS obligations, if it is done to secure compliance with privacy and data protection laws of the member-country, given that such measure is not arbitrary or discriminatory towards particular member(s).  Under this article a two-tiered analysis is followed – i) whether the measure falls within the scope of one of the subparagraphs of Article XIV ii) does it fulfil the requirement of the chapeau of Article XIV (Chapeau Test).

For the first tier of the test, India will have to show that the measures are designed to secure compliance with the relevant Indian law, that such law is not inconsistent with the GATS and that such measure was ‘necessary’.

For the former most part, the notification makes it clear that the measure is taken to stop unauthorized mining and profiling by the banned apps, thus aiming to secure compliance with provisions of Information Technology Act and Rules. Moreover, a measure explicitly mentioned under article XIV(c) is consistent with GATS. Therefore, the requirement of the second part is also met as measures taken to protect the privacy of individuals finds explicit mention in paragraph (ii) of Article XIV(c).

To show the measure is ‘necessary’ the objective pursued should be important, the measure should significantly contribute to the objective and should outweigh the trade-restrictiveness of the measure. As discussed before protecting the privacy of citizens is an important objective. Moreover, banning the apps ensures that the Chinese state is not able to citizen’s data for nefarious purposes. Also, the objective of the ban outweighs the trade restrictiveness as India has banned only the ones suspected of using data for unauthorized compilation, mining and profiling. Moreover, the measure is only interim and the app owners will be given the opportunity to present their side.

The second tier of the two-tiered analysis requires that the measures should be applied in a manner that is not arbitrary or constitutes unjustifiable discrimination, or a disguised restriction on trade in services.

China might claim that the ban is discriminatory as only Chinese apps were targeted. The US- Gambling case recognizes that instances of non-enforcement might not be related to discriminatory intent. However, in India’s case the prime reason for the non-enforcement on a prima-facie basis to be the estranged India-China relations. A possible counter to this can be that China is the only countries which mandates its companies to contribute data to its national intelligence units, therefore calling for differential treatment. Moreover, similar concerns have been raised by the USA, Australia and Hong Kong. Therefore, India can pass the Chapeau by arguing that discrimination is justifiable.

Conclusion

It is almost certain that India will be able to successfully defend its position under the Security exception. Though, it might face some difficulty in pleading exception under Article XIV(c). But as discussed above, it is not completely impossible to pass the Chapeau test. In the likelihood of a WTO action, India will be able to reasonably defend its position by relying on exceptions under Article XIV(c)(iii) as well as Article XIV bis.


ABOUT THE AUTHOR

Mitali Kshatriya

IMG_20200717_213945

Mitali Kshatriya is third-year B.A. LLB(Hons.) student at Dr Ram Manohar Lohiya National Law University, Lucknow. She is interested in areas of international trade law, dispute resolution and technology law.

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