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Kevin Smith

WTO Sets Deadline for US Compliance

22 August 2005

Chalk up a victory for Antigua and Barbuda in its ongoing World Trade Organization dispute with the United States.

A WTO-appointed arbitrator ruled last week that the United States has until April 2006 to comply with a ruling made in April 2005 regarding U.S. restrictions on cross- border Internet gambling services.

The United States had filed paperwork asking the arbitrator to clarify what a "reasonable period of time" was for adopting legislation in line with the April '05 ruling. The United States argued that at least 15 months was needed for the American legislative process to resolve the issue, but Antigua angled for quicker resolution. The arbitrator, Claus-Dieter Ehlermann of Germany, set a deadline for April 3, 2006.

At the heart of the case is whether the United States' prohibitive stance toward Antigua's online gambling industry is a violation of WTO rules.

The United States argues that it has the right to ban foreign companies from offering U.S. consumers services that are considered illegal in the United States, while Antigua argues that because the United States allows online race wagering, it should allow other forms of online gambling as well.

Antigua Finance and Economy Minster Dr. Errol Cort, who has spearheaded Antigua's case, is pleased with the arbitrator's ruling.

"We believe that in his decision, the arbitrator has sent a clear message to the U.S. that it is expected to comply fully with the recommendations and rulings of the DSB (Dispute Settlement Body)," Cort said, "and to do so within a clearly defined timeframe"

Ehlermann said the reasons given by the United States for needing at least 15 months to address the issue didn't hold water, "particularly given the acknowledged flexibility in the United States legislative process."

Had Washington's request been granted, the United States would have had until the end of July 2006 to comply.

Mark Mendel, a legal advisor to Antigua and Barbuda, would have liked for the deadline to be even sooner.

"For us, even a period of one month is too long," Mendel said. "Under the circumstances, however, we are very pleased with the outcome. At the end of day--in this case, April 3, 2006--we hope that the U.S. will present to the Appellate Body a comprehensive plan on how it intends to grant full market access to our gaming operators."

Antigua argued in its original complaint (lodged in March 2003) that its online gambling industry, which is aimed at reducing the country's dependence on tourism, was being harmed by U.S. prohibitions.

U.S. officials contend, however, that Internet gambling is illegal if it involves activity on U.S. soil, and have vowed to prosecute those involved in the practice.

With the arbitrator's ruling in hand, the case moves back to the DSB; the United States is required to keep the body informed on steps it is taking to implement the recommendations and rulings of the Appellate Body.

The United States Trade Representative's press secretary, Neena Moorjani, said on Friday that the USTR would examine the ruling and do its best to comply with the April 2006 deadline. She pointed out, however, that even with the shorter time frame, the United States isn't necessarily looking to loosen its restrictions on Internet gambling.

"USTR will not ask Congress to weaken U.S. restrictions on Internet gambling," Moorjani explained. "We had asked for 15 months to comply, as it was our reasonable and realistic estimate of the necessary amount of time. But we are studying the arbitrator's award and will do our utmost to comply."

Part of the process, she acknowledged, will be addressing interactive race wagering.

"In order to implement the findings all we need to do is clarify one narrow issue concerning Internet gambling on horseracing," Moorjani said. "This does not involve weakening U.S. restrictions on Internet gambling."

Antigua has a population of about 68,000 and is home to many online gambling sites, which draw millions of dollars from U.S.-based players.

WTO countries whose trade partners have failed to comply with dispute rulings can be authorized to impose sanctions--usually in the form of extra tariffs--on goods or services from the offending nations.

Click here to view a copy of the arbitration report regarding the deadline for compliance.

WTO Sets Deadline for US Compliance is republished from
Kevin Smith
Kevin Smith