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Emily D. Swoboda

Insights: Between a Rock and a Hard Place

23 May 2007

Three weeks ago, the office of the United States Trade Representative announced it would use a World Trade Organization (WTO) procedure to clarify its ban on I-gaming, which had been at the center of a four-year dispute between the United States and the twin-island nation of Antigua and Barbuda (Antigua). It said it intended to withdraw gambling entirely from its commitments with respect to the General Agreement on Trade in Services (GATS) because it never intended, when it signed the treaty in the early '90s, to include Internet gambling services.

Over the course of the dispute between the United States and Antigua, through the initial 2005 ruling and a series of appeals, the WTO has consistently ruled in favor of Antigua, ordering the United States to bring its laws into compliance with WTO trade regulations. But the United States has not only ignored the rulings, it passed in September 2006 the Unlawful Internet Gambling Enforcement Act, which bars U.S. banks from processing online gambling transactions.

In a new twist, however, the United States on Tuesday waived its right to appeal the most recent decision, leaving it open to further complaints from other WTO members.

So, IGN asked the experts:

What consequences could the United States face after announcing plans to revise its commitments with respect to GATS?

Patrick O'Brien: Yesterday's news is not surprising. Once the United States started the process to withdraw its commitment, the appeal became moot. It was admitting that Antigua had won and had entered the next phase--damage control.

It could have ignored the WTO. The problem with this solution is that the WTO benefits the United States more than any other nation in the world, and ignoring it would have set a dangerous precedent, encouraging other countries, such as China, to do likewise. This option was totally unacceptable.

The United States could have granted concessions to Antigua to offset the country's purported losses in Internet gambling. The problem with this solution is that it would only be a matter of time before another country filed a similar complaint against the United States, and if it were a significant party, such as the United Kingdom or the EU, the compensatory concessions could have been significant.

It could concede that it had inadvertently made a mistake (which is probably true) and then seek to revise its commitment.

This is the option it has chosen, rather than to continue to defend an indefensible position. The downside for the United States (and upside for the industry) is that the withdrawal of the concession must be accepted by the members of the WTO.

So, whereas in settling Antigua's suit it only had to grant compensatory concessions to Antigua, in seeking to withdraw its commitment, it is subject to claims from all members of the WTO seeking compensation for future damages resulting from the withdrawal of the commitment. The question now is whether the United Kingdom will seek compensation or otherwise oppose the U.S. withdrawal of its commitment to the WTO. In WTO matters, all the nations of the EU have agreed amongst themselves to act as a single body and work through the EU. So, it is a matter of whether the EU, which has been attempting to enforce free trade in gambling within the EU, will now take the next step and attempt to enforce free trade within the WTO. If the United Kingdom or the EU is ever to take a position in this matter they must do it now, because once the modification is made, there will be no course of action open to them.

Patrick O'Brien spent 25 years as a Special Agent with the U.S. Customs Service prior to joining Greenberg Traurig. In those years, he occupied numerous important positions, including Special Agent in Charge of South Florida and the Caribbean, and Assistant Regional Commissioner, New York, where his primary responsibilities involved combating money laundering, drug smuggling and illegal exports of arms and technology. In addition, as the Director of Internal Security for Customs he was responsible for all Customs corruption prevention programs and corruption investigations worldwide. His clients include offshore gaming operators and offshore banks, which he assists with foreign and U.S. compliance issues, as well as money laundering detection and prevention.

Insights: Between a Rock and a Hard Place is republished from
Emily D. Swoboda
Emily D. Swoboda