US Appeals WTO Ruling

On Jan. 7, a trade representative for the United States filed a notice of appeal to Valerie Hughes, the Appellate Body Secretariat of the World Trade Organization, informing her and the rest of the world that the United States wants the opportunity to defend its case against Antigua before the WTO's Appellate Body.

". . . It defies common sense that the United States would make a commitment to let international gambling operate within our borders." -Richard Mills United States

A dispute settlement body filed a report in November 2004 ruling that the United States violates its global trade commitments by prohibiting its citizens from gambling online. The panel also recommended that to bring itself in line with its trade obligations, the United States should alter its online gambling policies to permit the cross-border trade of gambling services.

That the United States is appealing the dispute panel should come as no surprise, considering how adamantly it rejected the panel's 287-page report. From the moment the report was privately disclosed to the parties involved in the case, Richard Mills, a spokesman for U.S. Trade Representative Robert Zoellick, called the findings a "deeply flawed panel report" that he and his team intended to "vigorously argue."

At the heart of the issue lies the question of whether the United States has committed itself to permitting the cross-border trade of gambling services. The three-member dispute panel came to the conclusion that the United States has in fact bound itself to adhere to the Central Product Classification (CPC) system of the United Nations, albeit inadvertently. Because the CPC classifies gambling as a recreational service, the United States is bound to allow the cross border-trade of gambling services. It must, therefore, amend or repeal its prohibitory federal laws (The Wire Act, The Travel Act and the Illegal Gambling Business Act) as well as certain state laws to come into conformity with its trade obligations, according to the panel.

Mills rejects the claim that the United States has bound itself to online gambling commitments. When the report was published in November for public domain, Mills stated, "Throughout our history, the United States has had restrictions on gambling, like many other countries. Given these restrictions, it defies common sense that the United States would make a commitment to let international gambling operate within our borders."

The notice to appeal maintains that the U.S. position on Internet gambling is consistent with its trade agreements. It also indicates that the United States will not introduce many new arguments to its case but instead will attempt to prove that the dispute panel made several errors throughout its report. The United States will not file its full written brief until Friday.

Mark Mendel, the lead attorney for Antigua in the case, is confident the dispute panel's ruling will not be overturned. "We do not consider it likely that the appellate body will take a significantly different view on these issues from the panel," he stated.

"We do not consider it likely that the appellate body will take a significantly different view on these issues from the panel" -Mark Mendel Antigua

Philippe Vlaemminck, an expert in both WTO law and gambling law, believes the appellate body could reverse the decision and rule that the United States has not committed itself to the CPC and, therefore, gambling services. He also disagrees with the way several of the case's issues were dealt with by the dispute panel, and he thinks that some of those issues will appear before the appellate body.

The case has drawn great interest from all over the world, with spectators coming forward to show support for both sides of the battle. Online gambling operators like Sportingbet are eager for an Antigua victory to open up the massive U.S. gaming market.

"If Antigua wins," said Sportingbet's CEO Nigel Payne, "this means the U.S. will have to open up its borders to international gaming companies. They will have to properly regulate the industry and open themselves to foreign competition."

But the United States is not without its global supporters. Recently, the International Federation of Horseracing Authorities, whose headquarters are in Paris, issued statements backing the U.S. cause. Louis Romanet, president of the IFHA and director general of France Galop, France's racing authority, stated, "We strongly support national integrity over betting policies and rules. These policies should not be left to international bodies and the principals of free trade. Gambling is simply not a service like any other, but has to be regulated according to the specific perceptions of moral, public order and consumer protection in each individual country."

The IFHA is also unhappy with the way Antigua-based sports books use its horseracing information. "In addition to our concerns over national integrity, we are also displeased about the lack of intellectual property rights protection in Antigua," said Alan Marzelli, vice president of IFHA and CEO of the U.S. Jockey Club. "Betting companies can operate from these islands while pirating our racing data. There is no excuse for hosting Web sites that do not pay any license for the horseracing date upon which they base their business model."

The IFHA says it will call upon member states of the WTO--including Mexico, Japan, Canada, the European Union and Chinese Tapai--to back the U.S. appeal.

The appeal will be heard by three members of a permanent seven-member appellate body that broadly represents the range of WTO membership. The hearing should begin in Geneva near the end of February and should not last more than two months.