This article is from Inside Trade, a highly regarded periodical in trade circles.
Gambling Panel Hints At Broader U.S. Compliance Problem
________________________________________ _______
Date: April 6, 2007
The latest World Trade Organization dispute settlement panel in the U.S.-Antigua
gambling dispute rejected U.S. efforts to reargue the case that it had lost
before the Appellate Body, saying that allowing the U.S. to do so would run
afoul of dispute settlement rules.
The U.S. had tried to make the case that it was eligible for an exemption from
its services trade obligations under Article 14 of the General Agreement on
Trade in Services even though the Appellate Body had rejected that argument.
With the exemption, the U.S. could justify its Internet gambling ban as a
measure to protect public morals.
In rejecting the U.S. arguments, the panel ruled that the U.S. has not complied
with the Appellate Body ruling because it has taken no action to prove that it
does not apply its Internet gambling restrictions in a discriminatory manner.
The Appellate Body had ruled the U.S. was discriminatory in its application of
the Wire Act, U.S. Illegal Gambling Business Act, and the Travel Act, citing in
particular the Interstate Horseracing Act, which the Appellate Body said
appeared to allow some forms of Internet gambling in the U.S.
But the compliance panel did raise the possibility that if it had been able to
reopen the case, it could have found that more than a clarification of the
relationship between the IHA and the three federal laws was required from the
United States in order to comply with its WTO obligations. Specifically, the
panel implied that the Wire Act itself might have to be changed in order for the
U.S. to be able to invoke the GATS exemption and therefore comply with those
obligations.
According to Mark Mendel, Antigua’s lead lawyer in the case, the Wire Act itself
is discriminatory because it allows Internet gambling within a state, but not
across state or international borders. The compliance panel said that any
finding that the Wire Act does not on its face discriminate between countries
would overlook the fact that its prohibition does not apply to remote wagering
in the United States to the same extent as interstate or foreign commerce.
Similarly, the panel noted that the Unlawful Internet Gambling Enforcement Act,
enacted in October 2006, does not include intrastate transactions in its
definition of “unlawful Internet gambling.”
According to Mendel, the panel statement makes clear that the Wire Act itself is
discriminatory and, along with the UIGEA, would have to be changed for the U.S.
to qualify for the Article 14 exemption. The U.S. argument under Article 14 was
predicated on the idea that the U.S. does not permit Internet gambling, which
the compliance panel shot down more conclusively, Mendel said.
The idea that the U.S. would have to change federal law in order to comply with
its WTO obligations seems at odds with the apparent U.S. government view that
the U.S. only needs to clarify the relationship between the IHA and U.S. federal
laws in order to come into compliance with its WTO obligations.
Opponents of the WTO have long argued that the Appellate Body ruling opens the
door to new challenges by other trading partners. A senior European Union
official has stated in public that the European Commission may consider bringing
a WTO case against U.S. gambling restrictions. But Mendel expressed doubts that
the EU would ever choose to bring its own case against gambling restrictions in
the U.S., as member states do not have a unified policy on this issue.
The compliance panel based its argument that it could not reargue the underlying
case on its reading of the Dispute Settlement Understanding Article 17.14, which
states that an Appellate Body report shall be “unconditionally accepted by the
parties to the dispute.”
The WTO will adopt the compliance panel report by no later than May 30 unless
the U.S. decides to appeal the decision. A USTR spokeswoman said that the U.S.
is currently reviewing its options. If the U.S. decides to appeal, a decision
could be reached by the end of the summer, according to Mendel.
Antigua has made several offers to the U.S. for an acceptable negotiated
solution, but so far the U.S. has been unresponsive, according to Mendel. One
idea would be to allow remote gambling services from Antigua for a three-year
period and at the same time conduct an overall assessment of the gambling
industry, including services provided by Antigua, to see whether and how the
industry can be regulated, he said.
If the U.S. continues to ignore its WTO obligations, Antigua would most likely
not choose to apply retaliatory tariffs, but would rather look to suspend the
application of trademarks and copyrights in Antigua provided for by the
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS),
Mendel said.
This is both because the applications of punitive tariffs would have little
effect on the U.S. given the small volume of trade involved and because their
application would hurt consumers in Antigua, Mendel said.
However, Mendel said he expected the U.S. to eventually comply with its WTO
obligations, as the U.S. has never before refused to comply with the findings of
the WTO, in part because it would undermine the rule of law in the WTO.
Gambling Panel Hints At Broader U.S. Compliance Problem
________________________________________ _______
Date: April 6, 2007
The latest World Trade Organization dispute settlement panel in the U.S.-Antigua
gambling dispute rejected U.S. efforts to reargue the case that it had lost
before the Appellate Body, saying that allowing the U.S. to do so would run
afoul of dispute settlement rules.
The U.S. had tried to make the case that it was eligible for an exemption from
its services trade obligations under Article 14 of the General Agreement on
Trade in Services even though the Appellate Body had rejected that argument.
With the exemption, the U.S. could justify its Internet gambling ban as a
measure to protect public morals.
In rejecting the U.S. arguments, the panel ruled that the U.S. has not complied
with the Appellate Body ruling because it has taken no action to prove that it
does not apply its Internet gambling restrictions in a discriminatory manner.
The Appellate Body had ruled the U.S. was discriminatory in its application of
the Wire Act, U.S. Illegal Gambling Business Act, and the Travel Act, citing in
particular the Interstate Horseracing Act, which the Appellate Body said
appeared to allow some forms of Internet gambling in the U.S.
But the compliance panel did raise the possibility that if it had been able to
reopen the case, it could have found that more than a clarification of the
relationship between the IHA and the three federal laws was required from the
United States in order to comply with its WTO obligations. Specifically, the
panel implied that the Wire Act itself might have to be changed in order for the
U.S. to be able to invoke the GATS exemption and therefore comply with those
obligations.
According to Mark Mendel, Antigua’s lead lawyer in the case, the Wire Act itself
is discriminatory because it allows Internet gambling within a state, but not
across state or international borders. The compliance panel said that any
finding that the Wire Act does not on its face discriminate between countries
would overlook the fact that its prohibition does not apply to remote wagering
in the United States to the same extent as interstate or foreign commerce.
Similarly, the panel noted that the Unlawful Internet Gambling Enforcement Act,
enacted in October 2006, does not include intrastate transactions in its
definition of “unlawful Internet gambling.”
According to Mendel, the panel statement makes clear that the Wire Act itself is
discriminatory and, along with the UIGEA, would have to be changed for the U.S.
to qualify for the Article 14 exemption. The U.S. argument under Article 14 was
predicated on the idea that the U.S. does not permit Internet gambling, which
the compliance panel shot down more conclusively, Mendel said.
The idea that the U.S. would have to change federal law in order to comply with
its WTO obligations seems at odds with the apparent U.S. government view that
the U.S. only needs to clarify the relationship between the IHA and U.S. federal
laws in order to come into compliance with its WTO obligations.
Opponents of the WTO have long argued that the Appellate Body ruling opens the
door to new challenges by other trading partners. A senior European Union
official has stated in public that the European Commission may consider bringing
a WTO case against U.S. gambling restrictions. But Mendel expressed doubts that
the EU would ever choose to bring its own case against gambling restrictions in
the U.S., as member states do not have a unified policy on this issue.
The compliance panel based its argument that it could not reargue the underlying
case on its reading of the Dispute Settlement Understanding Article 17.14, which
states that an Appellate Body report shall be “unconditionally accepted by the
parties to the dispute.”
The WTO will adopt the compliance panel report by no later than May 30 unless
the U.S. decides to appeal the decision. A USTR spokeswoman said that the U.S.
is currently reviewing its options. If the U.S. decides to appeal, a decision
could be reached by the end of the summer, according to Mendel.
Antigua has made several offers to the U.S. for an acceptable negotiated
solution, but so far the U.S. has been unresponsive, according to Mendel. One
idea would be to allow remote gambling services from Antigua for a three-year
period and at the same time conduct an overall assessment of the gambling
industry, including services provided by Antigua, to see whether and how the
industry can be regulated, he said.
If the U.S. continues to ignore its WTO obligations, Antigua would most likely
not choose to apply retaliatory tariffs, but would rather look to suspend the
application of trademarks and copyrights in Antigua provided for by the
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS),
Mendel said.
This is both because the applications of punitive tariffs would have little
effect on the U.S. given the small volume of trade involved and because their
application would hurt consumers in Antigua, Mendel said.
However, Mendel said he expected the U.S. to eventually comply with its WTO
obligations, as the U.S. has never before refused to comply with the findings of
the WTO, in part because it would undermine the rule of law in the WTO.
