Online gambling case pits Antigua against U.S. and challenges WTO

[jetset]

ROW OVER ONLINE GAMBLING DEAL WITH U.S. GROWS

Did the US really make meaningful concessions to EU, Canadian and Japanese negotiators?

Last week's disappointing deal between the United States and three fellow World Trade Organisation nations seeking compensation in the wake of an online gambling dispute could be short-lived according to reports from the Brussels HQ of the EU reaching the Financial Times this week.

The FT reveals that high hopes that greeted the deal have been almost immediately dashed by a look at the small print, and major online gambling members of the Remote Gaming Association have already indicated their dismay and intention to pursue further satisfaction (see previous InfoPowa report)

The dispute arose when the US lost a WTO dispute with Antigua and Barbuda over discriminatory legislation on Internet gambling, and instead of moving to comply with WTO requirements, chose to take the unprecedented step of withdrawing all commitments regarding gambling from its Treaty obligations.

That opened the Americans to compensation claims from fellow WTO member nations, and a negotiated settlement that noone seemed able to quantify took place in favour of the 27 nation EU bloc, Canada and Japan. This allegedly made warehousing, courier and testing service sector concessions as compensation, with little benefit for damaged gambling firms.

But within 24 hours of the deal being unveiled last week, the US issued a “clarification” that left European companies doubtful of the deal’s benefits, and trade experts questioning whether it would stick.

The Office of the US Trade Representative (USTR) said the US Postal Service had allowed foreign competitors to handle overseas mail for 20 years. All it was doing was making the decision legally binding so it could not be reversed. Sensitive sectors such as domestic delivery and storage at ports and airports would remain closed.

“There will be no effect on the terms of competition and no supplier of such delivery services will receive any advantage,” said USTR spokeswoman Susan Schwab, the day after the deal. It would not involve “any change in US law and practice”.

An official added that this had “real value” and the EU agreed. “It gives the sector legal certainty. There is real value in binding the commitments,” said a spokesman for Peter Mandelson, the EU trade commissioner.

However, company officials and their lobbyists on both sides of the Atlantic are not so sure. “To us, this market was already liberalised and we have been operating in it for many years. It is too early to evaluate what long-term benefits this decision would have,” said a spokesman for the German courier.

TNT, the Dutch operator that has a 1 percent hold in the US market, said: “De facto nothing really changes although current affairs are legally better backed through the WTO.”

Market leader UPS declined to comment. “We’re looking into the details,” FedEx spokesman Howard Clabo said.

A USTR official said it was “a rebalancing of legal commitments”.

Nao Matsukata, a former USTR official who is now policy adviser at Alston & Bird, the law firm, said his old office appeared to be attempting to stop short of legal changes that would require congressional sanction. “If they have agreed legally binding commitments that must have the approval of Congress as they do not have fast-track authority. I would expect to see congressional leaders taking a look at this,” he said.

The World Trade Organisation appeared to have washed its hands of the issue, with officials claiming that it was up to the US and trading partners to agree adequate compensation between them. Washington would then notify the WTO of changes to US services commitments.

Several nations have yet to accept US offers.

[lots0]

So can anyone tell me.... What good is the WTO?

[jetset]

MUSIC INDUSTRY PAYS FOR U.S. ONLINE GAMBLING INTRANSIGENCE

WTO arbitration award adds little to trade body's credibility

Reaction to last week's World Trade Organisation decision to award $21 million in annual retaliatory measures to the Antiguan government in its online gambling dispute has gathered momentum over the weekend, with a prominent music industry publication roundly condemning the decision.

Music2dot0.com thoroughly examined the decision and its implications for the US music industry and was critical of the price that industry has to pay for US trade infringements in a totally unrelated field of international business, and the manner in which the US Trade Representative has manouevred in the long-running dispute.

Although the US has lost the case on principles, the retribution it has faced as a consquence has hardly been an effective deterrent, and the credibility of the WTO has not been enhanced by the affair.

Music 2.0 gives a detailed and accurate summary of the events which brought about the WTO confrontation and its consequences, describing the affair as a bizarre situation exposing the duplicity the USTR, which takes a holier-than-thou moral view when it comes to other nations, but indulges in protectionist activities for its own selective trade interests.

The article goes on to examine the implications of the award of the WTO arbitration panel, which in the absence of an effective way to sanction the collection of damages or impose effective trade sanctions against the US, allowed Antigua to suspend its WTO obligations to the US in respect of copyrights, trademarks and other forms of intellectual property including industrial designs, patents and the protection of undisclosed information to the tune of $21 million a year until the US is again in compliance with WTO requirements.

This could take place sooner rather than later, as with the removal of gambling from its treaty obligations already in process, the US will become compliant with the WTO.

And the decision is non-appealable, unless the US further discriminates against its tiny Caribbean neighbour by expansion in the online gambling field, in which case a re-assessment of damages could be undertaken.

In any case, retaliatory sanctions was not the first prize for the Antiguans, according to Finance Minister Dr. Errol Court, who has repeatedly said that Antigua favoured a negotiated settlement whereby it was given equal online gambling opportunities to the protected American companies in the field.

The Music 2.0 piece draws particular attention to the WTO Appellate Body conclusion that the US had the right to prevent offshore betting as a means of protecting public order and public morals, but since the US was not applying the rules equally to American operators who were notably offering remote betting on horse and dog racing, this was a clear violation of trade laws.

"It sounds like a contradiction in terms but there we have it, the tiny Caribbean nation of Antigua is now allowed the right to distribute music, movies and software produced in the US without obligations to pay US rights holders," the article continues.

"As Antigua has now been given carte blanche to distribute music as such, this has major implications globally in that companies registered in Antigua, can distribute US copyrighted music for free or for their own profit and would be to some measure, operating legally - based on this latest WTO ruling.

"As a result of the US wanting to protect the billions of dollars in domestic gambling interests above all, we now have a situation where the WTO has officially deemed it fair game for US musicians’ (and film and software producers’) products to be distributed and consumed by Antiguan businesses without any recourse to revenue. Musicians are certainly going to be thrilled that their own government has allowed a situation to arise where they are just a mere pawn in the game resulting in the fruits of their labor being given away for free to a foreign government."

Music 2.0 is critical of the big money lobbying behind political and government decisions, pointing out that legal actions and public policies are often enacted and lobbied for by large corporations, in order to preserve their own profitability.

And the difficult situation that Antigua faces in deploying its retributionary measures is examined too, with references to what may be intimidatory tactics by USTR spokesmen urging delays and hinting at decreased Antiguan investment. Quoting the New York Times, the article comments: “Even if Antigua goes ahead with an act of piracy or the refusal to allow the registration of a trademark, the question still remains of how much that act is worth. The Antiguans could say that’s worth $50,000, and then the U.S. might say that’s worth $5 million. The U.S. is going to dog them on every step of the way.”

"The US continues to complain to WTO about China and even goes to the extent of almost interfering with China’s internal laws in its effort to obtain greater control of music, movie and software distribution in China while seeking to reduce the levels of piracy of US content that exists in the country.

"However, it will be rich irony if the US sees fit to ignore this recent WTO ruling allowing Antigua (and offshore companies from all over the world registered there) to legally pirate US music, but then use this very same body to seek sanctions against China on charges of piracy of US copyrighted products."

Quoting Lode Van Den Hende, an international trade lawyer with the firm of Herbert Smith in Brussels, Music 2.0 makes the point that the U.S. is not behaving as one would expect. "One day they’re out there saying how scandalous it is that China doesn’t respect W.T.O. decisions, but then the next day there’s a dispute that doesn’t go their way and their attitude is: The decision is completely wrong, these judges don’t know what they’re doing, why should we comply?”

Music 2.0 opines that with the latest ruling, Antigua has now set a precedent for other countries to sue the United States for unfair trade practices, and in retaliation be within its rights to withdraw its recognition of US intellectual property rights.

Mark Mendel, the high profile legal counsel for Antigua, is also quoted: “Antigua was not aiming for this judgement, rather, they simply would like for the US to follow the rules of the WTO by allowing Antiguan gaming operators to offer horse race betting to Americans, just as American gaming operators are currently allowed to do. Until they do meet the legalities of the WTO rulings it will be legal to sell copyrighted materials.”

The value of such dealings could accumulate, according to Mendel - adding up to hundreds of millions of dollars over time. More worryingly for the US music industry, the retaliation could include the right to distribute digital music, where there is no reliable resource to monitor revenues, and for all practical purposes Antigua could be getting an unlimited free pass "...to gorge themselves silly on US copyrighted and trademarked products."

Antiguan Finance Minister Dr. Errol Cort, who has been deeply involved in the dispute for his government, says that the $21 million annual retaliatory amount will remain in place until the U.S. comes in compliance with the rulings and recommendations of the WTO’s Dispute Settlement Body, or until it reaches a mutually agreed settlement with Antigua and Barbuda under Article 21 of the GATS agreement."

Cort said his government was pleased to be recognised as having a legitimate WTO case, but disappointed with certain aspects of the decision.

“Although we are pleased that the extraordinary sanction of the suspension of intellectual property rights protection for U.S. interests has been given to us –only the second such authorisation in WTO history –we are disappointed with the segment of the decision limiting our annual compensation to such a mere fraction of our industry’s lost revenues,” Minister Cort said.

The minister reiterated that the objective of this process is not to actually apply sanctions, but to encourage the United States government to negotiate with his government towards a fair and mutually satisfactory resolution of the dispute.

“Despite the size of the award, the value of WTO-sanctioned suspension of intellectual property rights should not be underestimated. We think that this decision, as terribly flawed as it may be, should still have the desired result of getting the U.S. to sit down with us and seek an amicable resolution to our disagreement.

"In this regard, we look forward to meeting with the U.S. delegation in the very near future in an effort to have this matter fully resolved,” the minister said.

[nielsenj]

I just read an interesting analysis of the WTO ruling on Casino City Times with the conslusion being that:

The only real loser in this deal is the online gambling industry. Without the threat of a significant WTO decision against the U.S., it's highly unlikely that Congress will pass any legislation to either repeal the UIGEA or create a regulated an environment for online gambling in the near future.

You can read the full article at: http://www.casinocitytimes.com/news/...ntentID=170396

[lots0]

I think once this current US administration is out of power (sure seems like a lot of people are waiting for them to be gone) the US Trade Representative will be different and things will change... again.

I don't buy into all these gloom and doom scenarios. As soon as the music and software people start to realize what the US trade representative gave away the law suits are gonna start flying.

The US Trade Representative can not give away company A's products to protect company B's income and that is just what they have done.


Added: To Antigua, I think any song for 2 cents and any software for a nickel would be good pricing... LOL
The sooner you guys get going selling the super cheep and legal knockoffs, the sooner the US music and software companies are gonna start filing lawsuits...

[Mousey]

Even handed article on FOXnews.com (surprise!) written by Balko of Reason magazine. If this particular article has been referenced already, please forgive.
Internet Gambling Ban: Why You Should Oppose It

Early on in the article he discusses the weirdities of the WTO dispute and then goes into how this stupid gambling ban affects us all.

the final bits says:

...
The other reason even non-gamblers ought to be concerned about all of this is that it will be difficult for the government to enforce this ban without giving law enforcement some exceptionally broad powers. Federal authorities can't arrest the owners of gaming sites because they're based offshore, in countries where gambling is legal (unless they're foolish enough to come to the U.S.). The only option, then, is to go after the gamblers themselves. That means deputizing banks, credit card companies, and Internet Service Providers to start monitoring their customers spending and web surfing habits. Because the penalties against these companies for violating the law are likely to be severe and because the law specifically exempts them from liability for over-enforcement, your bank and ISP are likely to err on the side of banning legal transactions and erroneously reporting you to federal authorities than to err on the side of leaving you alone.

You needn't make your living playing Texas Hold 'Em to worry about the effects of the government requiring your bank and ISP to spy on you. If there's any good news in all of this, it's that technology and globalization have made it increasingly difficult for Congress to enforce its own morality on our private behavior.

The bad news is that because of that, the government will continue to seek increasingly broad powers to get its way.

[Rollo]

So can anyone tell me.... What good is the WTO?

IMHO, none... and I hope it falls apart, personally. Back when they were contemplating the whole WTO thing, a lot of us were very opposed to it... and still are. The main issue was the fear that the WTO would subjugate local liberties and national sovereignty to international corporate interests. I still feel that the WTO is a bad, bad thing. So, this situation is really a win-win from this perspective... either online gambling comes back or the WTO takes a hit... I hope.

It may be that other nations in the long run decide it's in everyone's best interests to pretend Antigua never happened.

[Mousey]

I haven't seen any follow up on this...

Antigua and US to discuss Internet gambling dispute


Minister of Finance and the Economy Dr. Errol Cort
WASHINGTON D.C., United States, January 17, 2008 - Antigua and Barbuda's finance minister, Errol Cort is set to have talks with a United States Trade Representative today in an effort to bring resolution to the Internet gaming dispute between the two countries.

Cort left the island on Wednesday for today's meeting with the US official, Susan Schwab.

"We believe this matter can be settled in an amicable way because we enjoy an excellent relationship with the United States," he said.

"I am therefore hopeful (we can) come to some broad understanding in terms of settlement."

Antigua and Barbuda officials have already been given the go-ahead by the World Trade Organisation (WTO) to target U.S. services, copyrights ...

[jetset]

U.S. CONGRESSMAN WANTS DETAILS ON THE WTO SETTLEMENT

Oregon politician calls for support in demanding full details of America's concessions

US politicians appear to be increasingly disturbed over the lack of detail on US deals with other World Trade Organisation members following its unilateral withdrawal of gambling from the original US WTO agreement.

This week Oregon Congressman Peter DeFazio requested that the US Trade Representative come clean on trade concessions made to foreign trading partners without Congressional approval.

DeFazio's inquiry raises the possibility of Congressional intervention to void new market access commitments granted by the USTR to the European Union and other complainants as compensation for the much publicised United States trade violation at the WTO regarding Internet gambling (see previous InfoPowa reports).

And Congressman DeFazio went further, communicating with other members of Congress this week and encouraging them to join him in calling for the USTR to provide a copy of the concession agreement between the United States and the 27 nation European Union which agreed a deal with the USTR last year.

DeFazio, and all representatives of the American people are right to be concerned; the US Trade Representative has recently rejected a Freedom of Information Act request for details of its deal with the EU, claiming the agreement was classified for national security reasons!

"There is a concern that the USTR may have been ambitious in its use of a 'national security' classification to avoid any publicity of which new business sectors are to be subject to the GATS (General Agreement on Trade in Services) treaty," said DeFazio in a letter dated March 6 2008.

"The issue will be whether the USTR abused its authority by granting new market access to the EU without first securing the consent of the trade committees in Congress," said Nao Matsukata, formerly Director of Policy Planning for USTR Robert Zoellick and now a Senior Advisor for Alston & Bird, LLP.

"Ultimately, this could invalidate the deal with the EU and cause various WTO Members to revisit the issue of fair compensation from the United States."

DeFazio's acivities come in a week where the European Union, under pressure from EU gambling companies badly hit by discriminatory US anti-online gambling laws, is to open an investigation into US legislative activities that may constitute trade agreement violations (see previous InfoPowa report). The European Commission is to run the investigation, which could take between 5 and 7 months.

The investigation is the result of a Trade Barriers Regulation complaint filed by the Remote Gambling Association (RGA), which represents the largest remote gambling companies in Europe.

The RGA claims the U.S. is in violation of international trade law by threatening and pursuing criminal prosecutions, forfeitures and other enforcement actions against foreign Internet gaming operators, while allowing domestic U.S. online gaming operators, primarily horse betting and lotteries, to flourish.

After the investigation, the EU could pursue discussions with the U.S. to find an appropriate solution to end the discrimination.

If the parties cannot settle the matter themselves, the EU could bring a case against the U.S. to the WTO.

Meanwhile, the Central American country of Costa Rica has reached a settlement with the United States Trade Representative as an affected party in the WTO judgment received by Antigua and Barbuda at the expense of the United States. Antigua was given authority to circumvent it's own WTO trade obligations with the US to the tune of $21 million annually.

Costa Rican media reported this week that Costa Rica's Exterior Minister Marco Vinicio Ruiz had accepted a settlement that maintains the online gambling restrictions of its gigantic American neighbour but opens up other [and again undetailed] WTO markets and opportunities in research and development, warehousing, testing and technical analysis and certain postal and courier services.

[silcnlayc]

Antigua threatens to allow piracy

Gov't hopes to settle trade dispute with US

By WILLIAM TRIPLETTThe government of Antigua is likely to abrogate intellectual property treaties with the U.S. by the end of March and authorize wholesale copying of American movies, music and other "soft targets" if the Bush administration fails to respond to proposals for settling a trade dispute between the two counties, according to the lawyer representing the Caribbean island nation.
The Motion Picture Assn. of America has been closely following the case with tremendous concern, an org official said, fearing that the copying could be extensively damaging and that -- worse -- a dangerous precedent could be set for other small countries angry at U.S. trade policy.

"It is not our preferred option to punish the MPAA or others for the U.S. government's intransigence, but the U.S. has refused to negotiate fairly," said Mark E. Mendel, who represents Antigua.

Goods and materials that would be copied include "virtually everything from pharmaceuticals to music, anything with IP protection that can be duplicated, though we'll go for softer targets first," Mendel said.

Antigua has previously suggested it might retaliate as such -- with approval from the World Trade Organization -- but has never stipulated when. So far, the U.S. Trade Representative has dismissed that threat simply as a negotiating ploy.

"Antigua would be breaking the law if it did that," said USTR spokesman Sean Spicer.

The WTO ruled last year that Antigua was entitled to $21 million in damages because of a dispute with the U.S. over Internet gambling. But Antigua has not received WTO approval to procure its damages via reproducing and selling domestically U.S.-copyrighted goods and materials, Spicer added.

"They continually engage in disinformation," Mendel responded. "The reality is, yes, we have to go before WTO and request their authorization for IP sanctions against the U.S., but we can do that at any time and the WTO will agree. That is 100% guaranteed."

Mendel acknowledged his client would like such entities as the MPAA, the recording industry and Microsoft -- orgs that depend on IP protection -- to pressure the Bush administration into negotiating a "preferred" settlement, which would allow Internet gambling between Antigua and the U.S.

But he insisted the threat was neither idle nor empty. "Perhaps the U.S. doesn't think we're serious," Mendel said. "We are."

The case dates back to 2003, when Antigua claimed that the U.S. unlawfully prevented Antigua's online gambling operators from accessing American markets although the U.S. allowed domestic online bets for horse racing. Antigua claimed $3.4 billion in losses and took its grievance to the WTO, which agreed, but awarded only $21 million in damages.

Mendel said his client has been trying ever since to work out an agreement that would allow online gambling between the two countries, but instead the U.S. has responded by "using every possible appeal, counterattack and side attack it could think of. We've been through five separate full-blown WTO proceedings on this and have won every step of the way."

The most recent victory was in December, when the WTO ruled that Antigua could exact damages by ignoring IP agreements with the U.S. should a negotiated settlement fail.

Mendel said the U.S. promised then to respond to proposals for settling the dispute. "We have been waiting for three months already and there's been nothing," he said. "If the U.S. doesn't come in with something by the end of March, my suggestion to the Antiguan government will be to forge ahead and impose IP sanctions."

In a letter to the USTR about the potential effects of Antigua's retaliation, sent prior to December's ruling granting $21 million in damages, the MPAA wrote: "The proposed retaliation would be impossible to manage. The real and resulting economic harm would vastly exceed any amount the (WTO) might approve, even the grossly exaggerated amount ($3.4 billion) for which Antigua seeks approval, plus the economic harm would extend to other WTO members.

"MPAA believes it would be very difficult to insulate other WTO members from the effects of Antigua's proposed retaliation," the letter continued. "The unfortunate reality is that the failure to offer or enforce adequate protection of intellectual property rights in Antigua could foster abuses in other countries."
http://www.variety.com/article/VR111...&cs=1&nid=2562