Disappointing WTO Decision in Antigua vs. US Online Gaming Case

by Lou on December 25, 2007

The World Trade Organization Issues a Decision
On December 21 a World Trade Organization (WTO) arbitrary panel ruled that Antigua is entitled to $21 million a year from the United States, a far cry from the $3.4 billion that Antigua sought in its claim against the US regarding online gaming.
The WTO’s ruling took into account only money Antigua lost through online horse-racing wagers, instead of all online gaming. The panel chose not to account for all online wagering that takes place in the US. Instead, it only awarded Antigua compensation from online wagers that are taxed and regulated.

While that’s the underlying logic to the WTO’s decision, it seems the WTO simply decided to throw Antigua a bone, and a small one at that, while allowing the US to pursue their course of unfair trade practices at a bargain price. Call it a tax on ufair trade practices, or the small cost of moralistic legislation that will cause the US to stay out of step with most of the rest of the world, while prohibiting citizens like you and me to play poker with our own money from the privacy of our own homes. There’s a larger cost too, the loss of billions in tax revenue and job creation that would accrue to the US if they were to regulate and tax online gaming.

Some Background on this Case
Antigua’s claim against the US is predicated on the US allowing certain forms of online wagering, such as horse race wagers, but prevents access to other forms of online gambling and therefore violates those sections of the General Agreement for Trades and Services (GATS) that cover online gambling.

Who’s Still Chasing Down the US; Who Settled Their Claims
The European Union, Japan, Canada, India, Costa Rica, and Macao joined Antigua in seeking sanctions against the US. The US settled with the EU, Japan, and Canada, but negotiations with India, Costa Rica, and Macao continue.

Letting the Fish Off the Hook
While online gaming companies urged their host countries to stand tough against the US in order to force them to reviser online gambling laws, the EU settled for smallish concessions. This let the US off the hook for much less than the amount that would be lost to the gaming industry itself as well as lost taxes to their host countries that are excluded from the US online gaming market—the largest in the world.

This Decision Can’t Be Appealed

The decision issued by the WTO arbitrary panel cannot be appealed, although the WTO must first approve the arbitrator’s decision before Antigua can act, and that approval will not come until January.

WORLDWIDE REACTION TO THE WORLD TRADE ORGANIZATION’S DECISION
Because there are so man y parties involved in this case, there are reactions from many quarters, and the issues involved in this case still comprise a very unsettled situation.

The Remote Gambling Association
Online gaming in the US is anything but neatly tied up and put aside in a box. The Remote Gambling Association, a trade association representing European internet gambling companies, plans to file a complaint against the United States for violating WTO rules by targeting foreign gaming companies while not prosecuting US online gaming operators.

The RGA said the WTO decision fails to address “…discriminatory and protectionist US practices against European and other foreign online operators in the form of selective prosecution related to trade in gambling services.”

The RGA’s Clive Hawkswood said: “How would US investors and businessmen feel if they invested in a business in the UK based on international law commitments, and then suddenly the UK not only passed new laws forcing them to shut down their business, but then tried to throw them in jail for past activities while still allowing their domestic competitors to continue on doing the same thing? That’s what is happening to our industry in the US.”

Safe and Secure internet Gambling Initiative
Jeffrey Sandman, spokesperson for The Safe and Secure internet Gambling Initiative, said the RGA’s action should encourage lawmakers to regulate internet gambling through Representative Barney Frank’s proposed internet Gambling Regulation and Enforcement Act.

According to Sandman, “It is time for the US to end its hypocritical practices that discriminate against foreign online gambling operators, while allowing US gambling operators to accept bets for certain forms of gambling. Regulation of internet gambling should be supported as a means to resolve this trade dispute.”

Trade Law Expert, Professor Joseph Weiler
Joseph Weiler, a professor of law at New York University, commented, “What is particularly troubling is that these prosecutions for past activity are still continuing. To compound it by selecting only non-US targets is even more troubling. To clarify the situation for the future for all is one thing, but that does not seem to be the case here.”

Anti-Gambling Advocate, Representative Bob Goodlatte
“Considering that Antigua and Barbuda were asking for over $3 billion in compensation, and they were only awarded a token $21 million, this decision is a partial victory for the U.S.,” said Rep. Bob Goodlatte, (R-VA), a staunch opponent of all online gaming—except, of course, for online horse race wagering. The inconsistency there stems from the fact that the horse race industry is a major contributor to Goodlatte’s campaigns. For the full story on how Rep Goodlatte’s philosophical inconsistencies, see my blog entry dated December 3, 2007.

Financial Services Roundtable
The Financial Services Round Table warned that regulations being drafted to enforce the Unlawful internet Gambling Enforcement Act (UIGEA) will present major compliance obstacles unless the Bush administration clarifies its conflicting views on online betting.

Bank of America
The Bank of America said that the Government should provide a list of specific entities that banks are forbidden to take payments from. “Without a definition of what is legal,” the Bank of America stated that “financial institutions will be forced to block legitimate transactions in order to avoid the possibility of permitting an illegal transaction.”

Antigua’s Reaction
Antigua’s finance minister Errol Cort described the WTO’s decision as a setback for the small Caribbean nation. Antigua had sought to apply $3.4 billion in trade sanctions against the US to compensate the nation for lost revenue due to unfair trade practices, but were instead awarded $21 million by the WTO.
Still, Cort is hopeful, saying “We think that this decision, as terribly flawed as it may be, should still have the desired result of getting the US to sit down with us and seek an amicable resolution. We look forward to meeting with the U.S. delegation in the very near future.”

Read the Full WTO Decision
The full text of the WTO decision can be accessed here:

PDF version of WTO decision: http://www.wto.org/english/tratop_e/dispu_e/285arb_e.pdf

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