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WTO Dispute Panel Recommends Change in U.S. Law

11 November 2004

The much anticipated final report of the World Trade Organization's dispute panel that handled Antigua and Barbuda's case against the United States was finally published yesterday. It has been public knowledge since March that the panel decided in favor of Antigua by ruling that certain U.S. policies regarding online gambling violate the terms of the General Agreement on Trade in Services (GATS), but the release of the 287-page report had been delayed for many months while the parties sought to negotiate a compromise. The inevitable recommendation of the panel is that the U.S. should bring itself in line with the GATS by removing its prohibitory policies on online gambling.

Although the U.S. argued several times throughout the panel's proceedings that it never intended to establish commitments for gambling and betting services during the Uruguay Round of trade talks that created the WTO and the GATS in 1995, the panel states that "the scope of a specific commitment cannot depend upon what a Member intended or did not intend to do at the time of the negotiations." Instead, the panel declares that the U.S. Schedule of commitments includes gambling and betting services under sub-sector 10.D, entitled "Other recreational services (except sporting)."

In building its case, Antigua cited several measures that the U.S. enforced in order to institute a prohibition on online gambling within the states, in contradiction of its market access commitments under the GATS. Of the many measures invoked by Antigua, the panel found that the certain laws at both the federal and state levels did indeed contradict specific market access commitments for gambling and betting services.

At the federal level the Wire Act, the Travel Act and the Illegal Gambling Business Act were found to violate terms of the GATS while state laws in Louisiana (§ 14:90.3), Massachusetts (§ 17A of chapter 271), South Dakota (§ 22-25A-8) and Utah (§ 76-10-1102(b)) are also violations.

The U.S., through all of the above listed measures, "fails to accord services and service suppliers of Antigua treatment no less favourable than that provided for under the terms, limitations and conditions agreed and specified in its Schedule, contrary to Article XVI:1 and Article XVI:2 of the GATS."

The panel also ruled that the Wire Act, the Travel Act and the Illegal Gambling Business Act are neither provisionally justified under Articles XIV(a) and XIV(c) of the GATS nor consistent with the requirements of the chapeau of Article XIV of the GATS.

The panel therefore recommends that the WTO's Dispute Settlement Body should request that the U.S. brings the above mentioned laws into conformity with its obligations under the GATS. Such conformity would of course mean eliminating the U.S.'s general prohibition on offshore gambling services.

U.S. representatives say they intend to appeal the ruling before the WTO's seven-member appeals body. They have 60 days to file the appeal to the trade judges, who must then issue a final ruling within three months.

Richard Mills, a spokesman for U.S. Trade Representative Robert Zoellick, made the U.S.'s intent clear as early March when he stated, "We intend to appeal and will argue vigorously that this deeply flawed panel report must be corrected by the appellate body."

He reiterated American opposition to the ruling yesterday, saying, "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."

Even assuming the probable scenario that Antigua does win again on the appeal, it is still too early to guage what impact the WTO decision will have on I-gaming regulations in the U.S. Most insiders agree that the United States is not about to abandon its policies of protecting public morality simply because the WTO orders it so. In the likely case that the U.S. does refuse, WTO rules would allow Antigua to impose trade restrictions, normally in the form of special tariffs, on imports from the U.S. But since Antigua is reliant on American exports, increasing the prices on American goods could end up causing as much harm as good to its own economy.

The publication of the panel's decision comes after a series of meetings between American and Antiguan delegates failed to reach a compromise. As Antigua's Finance Minister Dr. Erol Cort explained, "We held five face-to-face meetings with various branches of the U.S. government, but ultimately, we concluded that the elements necessary for an amicable resolution would not be forthcoming at this time from the United States."

He added, "At the conclusion of our last meeting, it was fairly obvious to me and my delegation that the time had now come for us to take the next logical step and call for the release of the Panel's Final Report."

Sir Ronald Sanders, the former foreign affairs representative for Antigua who handled the WTO proceedings while former Prime Minister Lester Bird was in office, has for a long time been critical of the U.S.' constant manner of delaying the proceedings.

Last week the BBC printed an interview with Sir Ronald, who seemed displeased that the new Antiguan government had spent so much time negotiating with the U.S. when it was apparent from the beginning that it had no intention of compromising. Sir Ronald spoke about how media reports indicated that Washington was supposed to send a high-level delegation to the fifth negotiations meeting with Antiguan representatives, but instead "a technical delegation that had already been involved in the WTO process was what arrived in St. John's plus the U.S. Ambassador to Barbados and the Eastern Caribbean." He added, "This was not a delegation that could negotiate outside of its brief and it would be surprising if the U.S. delegation took any different position during the negotiations held in Antigua than it had in the WTO process."

Speculating on what happens next, Sir Ronald stated, "It can be expected that the U.S. will appeal the panel decision but it can do so only on certain technical grounds and the essential findings of the report will not change. Even after the panel pronounces on the U.S. appeal, it will be several months before the DSB (Dispute Settlement Body) makes a binding recommendation to the U.S.

"During this process, every attempt will be made by the U.S. for further procedural delays. This is normal. But, it emphasizes why Antigua and Barbuda is right to move forward with the panel report as swiftly as the WTO procedures will allow."

When IGN interviewed Sir Ronald in March after he obtained a victory in the dispute, he had this to say: "The rope does have an end. It isn't an unending rope. And so they will have to do it [amend their laws], either because Antigua has got its judgment in this or because the dispute settlement mechanism says that they are spitting in the face of the decision and therefore decides to take its own action. The WTO could very well levy other hardships on them that have nothing to do with what we can do as a country. They can levy things from all over the world on the U.S. if they want to continue to disregard a ruling of the panel and the dispute settlement body--because what they would then be saying is that they are bigger than the WTO except when they win."

The islands of Antigua and Barbuda were once economically dependent on tourism, but hurricanes in the 90s forced them to look to I-gaming and other industries for income. It is estimated that online gambling operations employ about 3,000 of the islands' 67,000 residents.

Click here to view a copy of the WTO dispute panel's final report.

WTO Dispute Panel Recommends Change in U.S. Law is republished from iGamingNews.com.
Bradley Vallerius

Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials.

Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

Bradley Vallerius Websites:

www.FortheBettorGood.com
Bradley Vallerius
Bradley P. Vallerius, JD manages For the Bettor Good, a comprehensive resource for information related to Internet gaming policy in the U.S. federal and state governments. For the Bettor Good provides official government documents, jurisdiction updates, policy analysis, and many other helpful research materials.

Bradley has been researching and writing about the business and law of internet gaming since 2003. His work has covered all aspects of the industry, including technology, finance, advertising, taxation, poker, betting exchanges, and laws and regulations around the world.

Bradley Vallerius Websites:

www.FortheBettorGood.com