U.S. dodges major sanctions in WTO case

The United States will be sanctioned $21 million annually for its restrictive Internet gambling laws and regulations, the WTO announced Friday. The ruling allows Antigua and Barbuda to lift certain copyright and trademark protections on U.S. goods and services to collect the money.

Antigua and Barbuda had asked the WTO to impose $3.4 billion in sanctions, saying the U.S. had effectively closed its entire online gambling market to the world by passing the Unlawful Internet Gambling Enforcement Act (UIGEA) in October 2006 and maintaining that online gambling was illegal. And while previous WTO rulings backed that logic, the WTO's final decision focused on horse racing.

"The real point (of this ruling) is the WTO said the U.S. violated the GATS (General Agreement on Trades and Services) by allowing interstate interactive horse racing bets (from only domestic operators)," said Buffalo State Business Law professor Joe Kelly, an expert in U.S. gambling law. "The original win for Antigua was narrowed down on appeal."

The United States withdrew all online gambling from its GATS schedule of commitments following as a result of the previous WTO rulings. And it was offering Antigua $500,000 in annual compensation for changing its trade commitments.

The ruling by the WTO arbitration panel is final and can not be appealed, but the U.S. is asking for Antigua and Barbuda to delay imposing any sanctions and give compensation negotiations a chance.

"The United States has already initiated the formal process under the WTO for clarifying its schedule of commitments and is engaged in compensation negotiations with Antigua and six other WTO members that have claimed to be affected," said United States Trade Representative Spokesman Sean Spicer. "We announced a compensation agreement with three of those Members earlier this week, and are continuing discussions with the others. We would expect that Antigua would not suspend its WTO commitments to the United States while that process is underway."

The request from the U.S. to delay the sanctions stems from concerns that the lifting of intellectual property restrictions could severely damage American software and entertainment companies.

"It (the sanctions) would establish a harmful precedent for a WTO Member to affirmatively authorize what would otherwise be considered acts of piracy, counterfeiting, or other forms of IPR (intellectual property rights) infringement," said the USTR in a statement.

"Once the process of clarifying the U.S. schedule of commitments is complete, any issues in our bilateral dispute with Antigua will be moot, and there will no longer be any basis for suspending WTO commitments in accordance with the arbitrator's award," Spicer added.

The WTO ruling is the second major setback this week for the online gambling industry, which had been counting on international pressure to help force the U.S. to open its market to foreign operators. On Monday, the U.S. and EU reached a deal that gives the EU access to the warehouse, postal and courier sectors of the U.S. economy as compensation for not being able to access online gaming. Industry insiders had been hoping the U.S. would face penalties in excess of $100 billion.