Bridges Weekly Trade News Digest • Volume 11 • Number 19 • 30th May 2007
Antigua Asks Other Countries To Pressure US In Gambling Dispute
Antigua and Barbuda has appealed to other WTO Members to help make it harder for the US to avoid complying with dispute rulings against Washington’s restrictions on foreign-based internet gambling.
WTO dispute panels and the Appellate Body have, in a series of decisions, agreed with Antigua’s complaint that the US’ multilateral commitments to liberalise its "recreational services" sector prevent it from legally shutting its borders to overseas-based internet gambling operators. The US has insisted that it would continue to maintain the barriers, prompting Antigua to question the efficacity of WTO dispute settlement for small economies.
In an unusual attempt to make the restrictions WTO-compliant, Washington on 4 May announced that it would use General Agreement on Trade in Services procedures to modify its multilateral liberalisation commitments to explicitly exclude internet gambling (see BRIDGES Weekly, 9 May 2007).
Washington has maintained that it never meant to open its market to cross-border gambling when scheduling its commitments during the Uruguay Round, and thus should not be penalised. Therefore, it says that it need not provide compensation to countries that might one day be negatively affected by the change, even though GATS Article XXI requires Members to do so when seeking to alter their commitments. It has sought to justify its restrictions by arguing that they are necessary to protect public morals - as permitted by WTO rules under certain circumstances.
Antiguan Ambassador John Ashe strongly criticised the US’ move at the Dispute Settlement Body’s meeting on 22 May. "There is something clearly wrong with the concept that after a long, difficult struggle covering years of dispute resolution at the WTO an offending Member could ultimately avoid the consequences of its loss by withdrawing the commitment that gave rise to the claim in the first place," he argued.
Ashe encouraged all WTO Members to demand compensation from the US if it sought to close off the sector, noting that they did not need to have an existing internet gambling industry in order to do so. "Not only do we think that members should press claims for compensatory adjustments as a matter of economic self-interest, but we also believe it important that the process is made as difficult as possible for the United States," he said.
Mark Mendel, lead counsel to the Antiguan government on the case, said that both of the US’ arguments were lacking. First of all, he noted that a dozen WTO Members, including EU states and Senegal, had managed to explicitly exclude cross-border gambling from their services commitments during the Uruguay Round (an additional 80-odd excluded recreational services in general). The US did not do so, nor did it make market access for foreign gambling companies conditional on meeting local licensing requirements. This allowed Antiguan operators unfettered access - until the US started to change its policies. In fact, prior to 1998, US officials had even met with their Antiguan counterparts to discuss how the sector could be better regulated.
As for the public morals defence, Mendel added, its credibility was questionable given that a new US law on gambling, introduced last October, places no restrictions on internet gambling within a single state, such as California, but bans all financial transactions related to it when the betting company is based in another US state or another country. Indeed, the US has a major domestic remote gambling industry. "The whole US case was predicated on remote gambling being bad," Mendel said. "To suggest that it is only bad when it crosses a border is nonsense."
The US’ request to change its services commitments was circulated to WTO Members on 8 May. According to standard procedures, they will have 45 days, or until 22 June, to file a request for compensation. To date, no countries have done so.
If the EU, home to several British internet gambling companies that have had to shut down their US operations because of the new law, were to file a claim, the US "would find themselves in very deep water if they tried to withdraw the commitment," Mendel opined.
In the meantime, Antigua will proceed with its efforts to get the US to comply with the rulings. Although most kinds of retaliation by the 80,000-strong island nation would likely be imperceptible in the US - and harmful to itself - Mendel said that Antigua could seek to make up the damage it has suffered by ‘cross-retaliating’ against US intellectual property, in addition to some services such as telecommunications. Although countries are expected to first seek sanctions in the same sector as the offending measures - tariffs where goods are concerned, market-opening commitments for services - WTO rules allow them to seek compensation in other areas, such as intellectual property, if this is more likely to encourage compliance.
Ashe reiterated to WTO Members at the 22 May meeting that what his government wanted most was a mutually acceptable compromise. However, he said "the US never engaged with us in any discussions with a view to settlement or compromise. The only solution we were ever offered by the United States was for us to abandon our claim and go away."
Under GATS rules, countries changing their services commitments should try to maintain at least a comparable level of overall liberalisation. Sources suggest that it may be acceptable to Antigua if the US negotiates the withdrawal of its gambling liberalisation commitments, so long as it leaves access open for Antigua-based companies.
The Associated Press reports that online gambling revenues in Antigua have fallen to USD 130 million from USD 1 billion seven years ago.
ICTSD reporting; "Plot thickens in US-Antigua Internet gambling dispute," ASSOCIATED PRESS, 22 May 2007.