Antigua wins WTO case

[jetset]

UNITED STATES LOSES W.T.O. APPEAL

World Trade Organisation appeal panel judges that American government is discriminatory when it comes to online gambling

A ruling the tiny Caribbean nation of Antigua and Barbuda has been keenly anticipating was made by World Trade Association officials this week, who found in favour of the islanders in their long David and Goliath tussle over online gambling with massive neighbour the United States.

The U.S. ignored a WTO dispute ruling that found it discriminates against foreign gambling companies and nations by banning payments to gaming Web sites while allowing bets on its own soil, the global trade body's highest judges said.

The victory was immediately greeted with significant jumps in online gambling company shares trading on the London stock exchange - at Party Gaming Plc shares jumped as much as 16 percent.

Antigua and Barbuda, a Caribbean nation of 80 000 people and the smallest government ever to lodge a WTO complaint, scored an initial victory against U.S. online gambling restrictions when the WTO found in April 2005 that the U.S. had pledged to open the industry to competition 10 years earlier.

Today's (Friday) ruling rejects a U.S. appeal against that.

The U.S. exacerbated its weak position in the dispute by passing legislation five months ago aimed at denying the estimated $12 billion global business to American residents, who accounted for half of the market at the time. The U.S. Unlawful Internet Gambling Enforcement Act banned credit card companies from processing payments to online betting sites, causing extensive international commercial damage to companies and investors in the process.

Antiguan Finance Minister Dr. Errol Cort said that the ruling offers hope to the global online gambling industry currently under siege by the U.S. Department of Justice. "It [the WTO ruling] vindicates all that we have been saying for years about the discriminatory trade practices of the United States,'' Dr. Cort said in a statement.

A spokesperson for the U.S. Trade Representatives Office, Gretchen Hamel, agreed that the ruling had gone against her country, but insisted that the U.S. would maintain a ban on Internet gambling financial transactions to "....protect public order and public morals'' as long as it doesn't discriminate against foreign companies."

"We are currently reviewing our options,'' Hamel said, without commenting further on the widespread forms of betting permitted throughout the USA that have not been the subject of negative legislation.

The U.S. has argued that the prohibitions pre-dating the UIGEA in October 2006 apply to both foreign and American betting services, and the WTO's decision only applies to gambling on horseracing, which is an exempted activity under the law, to discriminate against foreign companies.

The U.S. added that its latest [UIGEA] law isn't covered by the WTO ruling and said that its 1995 commitment to open gambling to foreign companies was "an oversight" by the Clinton administration.

Aside from extensive international damage to investments and companies, the UIGEA has caused income for the 32 registered online casinos in Antigua and Barbuda to fall to $130 million a year from $1 billion in 2000, the Antiguan government claims. The country developed online gambling to boost a tourism-dependent economy after several hurricanes in the 1990s.

Antigua successfully argued in its complaint that the U.S. protects its domestic gambling industry while failing to live up to its international commitments.

The UIGEA has been widely criticised, both within and outside the USA. Congressman Barney Frank, chairman of the influential House Financial Services Committee, who is about to launch an attempt to repeal the Act, described it as "the stupidest law ever passed."

Charlie McCreevy, commissioner for the European Union's internal market, labeled the U.S. law "a protectionist measure'' early this year (2007), saying the EU should complain to the U.S. after Congress passed the legislation barring credit card companies from processing payments.

When the UIGEA was enacted, U.K. Culture Secretary Tessa Jowell compared it to the American alcohol ban of the 1920s, saying the measure may force online gambling underground into an unregulated black market.

"This is a smashing success for Antigua in every possible way,'' John Ashe, the Caribbean island nation's ambassador to the WTO in Geneva, said in a statement. "The ruling clears up any lingering doubt that Antigua has obtained a clear and convincing win over the United States and it is now time for the United States to meet its international trade obligations.''

Antigua may seek sanctions in the form of withdrawing intellectual property protection for U.S. trademarks or copyright. Known as "cross-retaliation,'' such sanctions are legal at the WTO when an economy can't afford to impose sanctions in the form of higher customs duties on goods.

[Auditor]

If the US does not comply. It will open the door to other countries, like China, to ignore WTO rulings as well. The GATS rule was established by the US and they will not even follow their own law, unreal.

[sdaddy]

This is a very positive development, but I'm wondering if the U.S. can keep appealing this decision and dragging it out.

Realistically, how much longer can this go on before the U.S. is under imminent threat of sanctions if it does not comply with the WTO?

[Da_Gambla]

There are several legal routes the US can take. First off, just sitting around waiting buys them time and is certainly a sound legal strategy. By 'them', I do mean the US based B&M casinos that want the US market share, and they want that market to be HUNGRY, which is why we are being starved right now.

Secondly, the US has every legal right to enforce its Taxation laws. For example, the WTO cannot challenge or enforce any sanctions against the European VAT. Therefore, US legislatures will obviously start trying to figure out a way to force income from abroad to be taxed in the form of a W9. I would imagine there would be a lax in those laws, or the levels of taxes collected on gambling winnings from US based casinos (so as to encourage US play within the US).

These are complicated things that need to be sorted out, so I'm sure the US will stand firm on the new law and just sit and wait for awhile. Although the WTO ruling is interesting, the US does not have any previous history of being forced to do anything.

- Keith

[vinylweatherman]

Antigua may seek sanctions in the form of withdrawing intellectual property protection for U.S. trademarks or copyright. Known as "cross-retaliation,'' such sanctions are legal at the WTO when an economy can't afford to impose sanctions in the form of higher customs duties on goods.

This last bit could prove interesting, given the internet. If protection ceases, then Antigua could allow P2P file sharing networks to base main index servers there to replace the losses of casinos. This will make the sanction really bite, but it will bite the asses of the big private corporations with much to lose, such as the Music, Film and Software industries. These corporate monoliths will move to protect their own interests, and will want an end to these sanctions at the earliest possible opportunity, even if this means pressuring the US government to comply with the WTO ruling despite their moralistic and/or protectionist attitudes.
Microsoft has been stung by large EU fines for attempting to drive out the competition, and they still resist more openness of it's OS so that competitor software can be written to interface more smoothly to effectively compete with the Microsoft inclusive packages such as Media Player and Internet Explorer.

[lots0]

When Antigua files the paper work with the WTO for sanctions and I have no doubt they will, the fire works will start for real.

[Rollo]

Unfortunately, I don't think much will happen and the US can ignore the ruling pretty much with impunity as all it does is give Antigua the right to impose sanctions on the U.S. to compensate ... which it's powerless to do becuase it has a miniscule economy.

If the EU won such a case that would be different but even there, who woud really want to get into a trade war with the world's biggest market over a minor industry like online gambling? Nations violate the WTO all the time.

I'm not even sure this really applys to online gambling as a whole per se as the US treats US companies the same as foreign companies with respect to online sportsbetting, poker, and casino games - it's illegal for everyone. This may only apply to the carve outs like horse racing. I'm not sure about that one, though.

Anyway, it's sure not bad news for a change, but don't get your hopes up that this will change anything. On the contrary, it's likely to get worse before it gets better.

[sdaddy]

Originally Posted by Rollo

Unfortunately, I don't think much will happen and the US can ignore the ruling pretty much with impunity as all it does is give Antigua the right to impose sanctions on the U.S. to compensate ... which it's powerless to do becuase it has a miniscule economy.

I disagree. If Antigua chooses to exercise "cross-retaliation" against the U.S., as is allowed under the WTO rules, then the effects could be significant. You wouldn't need a large economy to have companies start reselling U.S. copyright-protected materials for discount over the internet. The level of infrastructure is probably no more than what is needed for Antigua to house its current internet gambling operations.

[Rollo]

I'd agree if not for the fact that this is happening on a massive scale in places like Russia and China already... illegally.

I really don't think the U.S. is suddenly going to change the law due to the Antigua situation and I don't think there are any industry experts think so either. The U.S. has all sorts of pressure that they can use to persuade nations such as Antigua which are in their back yard.

I wish it would provoke a change in the U.S. law, but I highly doubt it will. More likely nations such as the U.S. will try change the rules of the game if they don't like the outcome.

[winbig]

Sanctions against the USA? That'll be the day. Hell, the USA even ignores UN rulings.