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ANTIGUA HANDED DECISIVE VICTORY IN WTO GAMBLING CASE
The World Trade Organisation today released the decision of a three-member panel established to assess the compliance of the United States with the 2005 ruling by the trade body against the United States in the dispute over Internet gambling brought by the Caribbean country of Antigua and Barbuda.
Antigua’s original triumph in April 2005 is reaffirmed in this final report, with the WTO panel decisively ruling that the US has done nothing to comply with the original ruling. By rejecting US arguments that the country applies its laws against remote gambling in a non-discriminatory fashion, the WTO has handed Antigua a resounding victory, and offers hope to the global online gambling industry currently under siege by the US Department of Justice.
Dr. John W. Ashe, Antigua’s Ambassador to the WTO, stated, “This is a smashing success for Antigua in every possible way. The report will sweep away any lingering doubt that Antigua has obtained a clear and convincing win over the United States in this matter. It is now time for the United States to meet its international trade obligations to Antigua and work with us in a constructive manner to resolve this dispute.”
Featuring prominently in the WTO’s new decision was the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA) - a baldly protectionist measure to stamp out non-domestic supply of remote gambling services - and the high-profile prosecutions of a number of foreign service providers in recent months.
Following the 2005 decision of the WTO’s appeals body, the United States had asserted that it had only to clarify a “narrow” point of US law regarding horse racing in order to come into compliance with the ruling. Today’s decision, while also noting that the United States had failed to provide any clarification at all on the horse racing issue, pointed out that Antigua had demonstrated that a “flourishing remote account wagering industry” exists in the United States, despite US claims that it prohibited all remote gambling throughout the country. Critically as well, the panel took note of the fact that US law does not prohibit remote gaming that occurs solely within the borders of a particular state - an exemption which was confirmed in the UIGEA.
“We are extremely pleased by this most positive report of the panel,” announced The Honourable L. Errol Cort, Minister of Finance and the Economy for Antigua. “It vindicates all that we have been saying for years about the discriminatory trade practices of the United States in this area, and we look forward to the United States opening its markets on a fair and balanced basis as the WTO agreements and the international community require.”
Kaye McDonald, Antigua’s Director of Gaming, expressed her relief at the decision, “The principles in this well-crafted opinion will be clear to everyone. This really is a landmark day for our country and I simply could not be more pleased.”
Although the United States may appeal this latest finding back to the appeals body of the WTO, the head of Antigua’s legal team, Mark Mendel, believes that the chances of reversal are remote. “The panel’s logic is impeccable and the law and facts are just as much in our favour as they could possibly be. The United States on one hand prohibits competition in remote gambling from Antigua while on the other promoting and protecting a massive domestic industry. If the WTO agreements apply under any scenario, they apply here.”
Antigua, a small, twin-island nation in the Caribbean Sea, is one of the smallest WTO members, with a population of only about 80,000. It has dedicated significant resources since the early 1990s in an attempt to diversify its economy with a closely regulated and supervised cross-border gaming industry. Despite having offered on many occasions to work with US officials on a cooperative basis to ensure the safety and fairness of the Antiguan services offered to American consumers, Antigua’s efforts have been consistently rebuffed, with US officials opting instead to embark on an aggressive assault on the offshore provision of gaming services.Comment -
USA is not the world and god bless more and more nations wont dance if they want them to. Apart from this gambling issue in future they have to take many defeats on different fronts.Comment -
JC, I thought this was it. How many more times can the US appeal? It is getting ridiculous...
SeanComment -
MENDEL BLUMENFELD, LLP
30 March 2007
M E M O R A N D U M
Summary of Report of the Compliance Panel
United States – Measures Affecting the Cross-Border Provision of Gambling and Betting Services – Recourse to Article 21.5 of the DSU by Antigua and Barbuda
Introduction
The Report of the Panel (the “Report”) was issued on 15 February 2007 to Antigua and the United States, and is now available for review by other persons and public discussion. The Report represents a comprehensive and compelling victory for Antigua in the proceeding. In addition to clearly ruling that the United States remains out of compliance with the rulings and recommendations rendered against the United States by the Dispute Settlement Body (the “DSB”) of the World Trade Organisation (the “WTO”) in the original proceeding back in April 2005, the Report also contains some very helpful findings regarding the DSB rulings and should go a long way in dispelling any doubts as to the nature and extent of Antigua’s overall success in the case. In particular, the Report sets out much more clearly than was done in the original report of the Appellate Body what was found against the United States and what its continuing obligations are.
Status of United States’ Compliance
In the Report, the Panel basically made precisely the findings which we asked them to make. The three major findings with respect to compliance were as follows:
• The United States has taken no action towards compliance with the DSB recommendations and thus is out of compliance (para. 6.38)
• The United States was not entitled in the compliance proceeding to reargue the case that failed before the original panel and the Appellate Body (paras. 6.57, 6.85)
• Even assuming that the United States was entitled to present new, or more, argument on its failed case, based upon the materials before the Panel in this proceeding the United States case would still fail (para. 6.110).
Other Major Findings of the Panel
The Panel also made findings or came to conclusions that were not directly related to compliance by the United States but that have a significant impact on the case going forward. These include:
• A key ruling that the United States was not entitled to maintain its offending measures–the Wire Act, the Travel Act and the Illegal Gambling Business Act (para. 6.26)
“The original Panel found that, by maintaining these three measures, the United States was acting inconsistently with its obligations under (...) the GATS. The Appellate Body upheld this finding. Neither the Panel nor the Appellate Body found that the United States was entitled to maintain these measures under [the ‘public morals’ exception] or any other article in the covered agreements.”
• An important clarification that, because the United States measures were inconsistent with the GATS and the United States did not satisfy both parts of the “public morals” exception, it lost the case (paras. 6.28-6.29)
“[T]here was no finding in the original proceeding that the measures at issue in this dispute were consistent with the United States’ obligations under the GATS, notwithstanding an invocation of the [‘public morals’ defence]. Instead, there was a finding that maintaining these measures was inconsistent with the United States’ obligations, which was the basis for the recommendation of the DSB.”
“It is true that the Appellate Body found that the United States had demonstrated that the measures at issue were ‘justified’ under paragraph (a) of [the ‘public morals’ defence]. However, this was not a finding on [the defence] in its entirety. The Appellate Body expressly confirmed that [the defence] contemplates a ‘two-tier analysis’ – first, under one of the paragraphs of Article XIV and then under the chapeau. There was no finding that the measures were consistent with the chapeau or with Article XIV in its entirety nor, hence, with the United States’ obligations under the GATS.”
• Another key clarification that the United States attempt to justify its offending measures under the “public morals” exception had failed (para. 6.64)
“The Appellate Body’s findings in this dispute, which use the terms ‘show’, ‘demonstrate’ and ‘establish’, indicate that the United States failed to discharge its burden of proof. This was a ruling on the defence in relation to the measures at issue. It was not equivalent to a statement that the Appellate Body ‘does not rule’ or an exercise of judicial economy. Instead, it indicates that the United States’ affirmative defence failed.”
• A key clarification that the United States’ use of the “public morals” exception is based upon an assertion that its measures do not discriminate at all between domestic and foreign service providers–meaning that the United States says that so-called “remote” gambling is completely prohibited in the United States (para. 6.100)
• With respect to the Interstate Horseracing Act itself, the Panel stated that it would appear that the language of the statute allows interstate remote gambling notwithstanding the Wire Act (para. 6.105)
• Based upon significant evidence provided to the Panel by Antigua regarding various State regulatory schemes for remote gambling on horse racing as well as facts regarding specific operators, a conclusion that there is significant domestic remote gambling in the United States (para. 6.116)
“The evidence regarding these suppliers demonstrates the existence of a flourishing interstate remote account wagering industry on horseracing in the United States operating in ostensible legality.”
• A key finding that the Wire Act does not prohibit remote wagering within the United States to the extent that the wagers do not cross State lines, affirming Antigua’s argument that the individual States themselves are by and large free to permit or to prohibit intrastate remote gambling as they see fit (para. 6.121)
• A key observation that, in light of recent prosecutions by the United States of foreign operators such as BetonSports and WWTS combined with a clear lack of prosecutions of domestic operators, remote, interstate, wagering under the IHA is “tolerated, even if not authorized under federal law.” (para. 6.128)
• With respect to the “Unlawful Internet Gambling Enforcement Act of 2006,” key observations that the United States Congress (1) appears to have recognised that regulation of remote gambling is feasible and (2) affirmatively decided to retain any ambiguity regarding the IHA rather than “clarifying” it in the way the United States had argued to the Panel (paras. 6.130, 6.133)
What the Ruling Means
Although the United States can, and most likely will, appeal the Report to the WTO’s Appellate Body, the Panel’s reasoning is sound and by and largely unassailable. While it is possible that the Appellate Body may have language of its own or dilute some of the findings in one way or another, it is extremely unlikely that the key findings will be changed in any material respect. The appeal, if there is one, will take about three months, so we can expect a final resolution of the issue sometime in the summer.
The Report has three major implications:
• It concludes that the United States is out of compliance with an adverse WTO decision
• As a result, Antigua will be free to impose trade sanctions against the United States, if Antigua affirmatively decides to do so, directed at “encouraging” the United States to meet its international trade obligations to Antigua
• It will make it virtually impossible for the United States to continue to maintain the pretense that it somehow “won” the dispute or that the WTO had ruled that the United States was entitled to prohibit the provision of Internet gambling services from Antigua
Conclusion
The Report represents an outstanding, positive result for Antigua in this dispute. While we were confident that we would prevail on the issue of United States non-compliance with the DSB rulings, the Report is much more positive and beneficial for our case than we had expected. All other things being equal, such a clearly adverse ruling might be expected to encourage the United States to consider negotiating with Antigua in a meaningful way to resolve the dispute.Comment -
Excerpt from another article:
The horseracing lobby will never allow the eliminiation of off-track betting over the internet. I believe that this is the best news the internet gambling industry has ever seen and that it will be the catalyst for the eventual legalization of online gambling in this country.The Geneva-based trade referee has said Washington can maintain restrictions on online gambling, as long as its laws are equally applied to American operators offering remote betting on horse racing.
To avoid the penalties, the U.S. government would then have to either permit Americans to gamble over foreign-based sites or eliminate exceptions for off-track betting on horses, including over the Internet, as permitted under the 1978 Interstate Horseracing Act.Nothing but the truth!Comment -
The only hope is making it legal in usa, it will never be legal to bet offshore.Comment -
This is a GREAT VICTORY for Antigua, and a demonstration that the USA can be beaten before the WTO or other "court-like" body
Unfortunately the reality is, the USA does NOT respect it's agreements and obligations thereunder.
One must only look as far as the Lumber dispute between Canada and the USA, where the USA once again "welched" on an agreement. In the end it took 20 years of litigation, and countless dollars, and even at this point, not all funds / damages were covered or paid by the USA.
I doubt the outcome between Antigua and the USA will be much different.
One can only liken the lack of honor, integrity and ethics of the USA to a crack whore, who will promise you anything you want to get something from you, then only honor what suits them or begets them benefitComment -
Thanks for the report, JC. I painstakingly read the opinion. While it's pretty clear that the US lost convincingly (and looked like an ass during the proceedings with all the frivolous US arguments), what do yuo think will happen next? After the appellate body tells the US they lose their appeal in 3 months?Comment -
The decision is nice, the enforcement of the decision is a bit weak. Honestly I'd just like my neteller money back and we'll call it even.Comment -
Nope, would break the wire act, but poker or casino would be fine, one can assume.
SeanComment -
Taking sports bets is federally illegal except in MT, NV, OR, and DE as they were grandfathered in. NJ had the option to get an exemption and declined years ago. Atlantic City is considering a lawsuit vs the federal gov now.
Now running casinos and poker are not outlawed by federal law, and yes, NV does do some of this virtual stuff.
SeanComment -
I think there will be a negotated settlement after Bush is out of office with countries and it will be become a regulated industry once they find a way to tax winnings off of it, the government would love to find everyone that makes money to pay taxes on their winnings and I believe that they want to have legit and have good off shore companies that will not rip-off United States citizens in the process. I see it being regulated eventually but I believe it will be after this president gets out of office in 2009 and if a Democrat gets elected then that will be their way to not raising taxes and being able to balance the federal budget also. There could be plenty of good things coming out of this. It sure proves that probition has never worked and will never work.Comment -
It's a $12B industry. The budget is a multi trillian dollar issue.
SeanComment
