WTO Speculation

The WTO dispute panel handling the case of Antigua and Barbuda vs. the United States decided that the United States violates its commitments under the General Agreement on Trade and Services (GATS) by maintaining policies that prohibit financial institutions from processing interactive gambling transactions; this much we know to be true.

Which exact sections of the agreement the panel has charged the United States with breaking remains unknown, however, because the verdict will remain confidential until it has been translated into the necessary different languages--a process that should be completed at the end of June.

Attendees at the Global Interactive Gaming Summit and Expo last month received a bit of intuitive speculation about what the panel may have found, courtesy of international trade law specialist Kay Georgi of Coudert Brothers LLP.

According to Georgi, the panel more than likely ruled against the United States for violating one of two key elements of GATS. "Did the U.S. deny these businesses 'market access' or did they fail to provide foreign sites with 'national treatment?" she asked.

Georgi first presented the possibility that the dispute panel may have ruled the United States violated GATS on the grounds of National Treatment. Under GATS, the United States has an obligation to treat foreign services and supplies no less favorably than its own similar services and supplies. If indeed the panel has charged the United States with violations of national treatment, then it believes that Internet gambling and terrestrial gambling are similar enough to warrant the same kind of treatment. In that case, the United States is at fault because it allows U.S.-based companies to offer gambling services to U.S. residents (in terrestrial casinos), but denies foreign companies the opportunity to offer similar services to its residents (via the Internet).

If the panel ruled that U.S. policy violates GATS on the grounds of Market Access, Georgi said, then Antigua succeeded in arguing that U.S. policy constituted a general prohibition on gambling services. By inducing a prohibition, the U.S. government distorts its residents' economic practices, thereby denying Antiguan operators access to the U.S. market.

Expect a long battle regardless of what the panel has ruled. The next step after the ruling is made public is for the WTO dispute board to adopt the decision. Georgi said this process usually takes 20 to 60 days, but the United States--whose lawmakers and trade representatives have adamantly denounced the panel's decision--will likely file its notice of appeal before the adoption takes place.

The case would then be argued before the WTO's appellate body. If the United States loses again, it will have 30 days to tell the WTO what it plans to do.

And of course there is the wild card. Compliance would demand a policy change, but it's evident to anyone gauging the situation in the United States that lawmakers are not going to enact speedy legislation to change its policies just because the WTO declares that it must. (Remember how the United States handled a United Nations decision that opposed its interests last year?)

Then again, policy change may not even be necessary. The United States might be able to resolve the situation by making a monetary payment to Antigua, and the fee is not likely to be large enough to worry the States.

Another possibility is that Antigua could impose sanctions against the United States, although that is not a threat that will make policymakers sweat. Perhaps they would sweat, however, if a wealthier country with more liberal gaming laws--say, perhaps, the United Kingdom--were to piggyback on the case and try to get a piece of the sanctions. But would the United Kingdom do that to a friend?

One last consideration is how badly Antigua wants the United States to legalize gaming. As gaming attorney Patrick O'Brien mentioned in April, "The only reason Antigua has a viable Internet gaming industry is because it is illegal in the United States. If the United States were to legalize Internet gaming, the operators would not be located in Antigua, but in Las Vegas, and Antigua would have no gaming industry at all. So, what we can expect as an end result is for the United States to be compelled to make some relatively minor trade concessions to Antigua to offset some portion of the purported damages."