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

[james01]

Very interesting article from the International Herald Tribune:

But not complying with the decision presents big problems of its own for Washington. That is because Mendel, who is claiming $3.4 billion in damages on behalf of Antigua, has asked the trade organization to grant a rare form of compensation if the U.S. government refuses to accept the ruling: permission for Antiguans to legally violate intellectual property laws by allowing them to distribute copies of U.S. music, movie and software products, among others.

Here is the full article:
http://www.iht.com/articles/2007/08/...ble.php?page=1

[jetset]

ANTIGUA WTO CLAIM TO ESCALATE?

USA could be faced with a $7 billion bill if WTO takes action

The Caribbean island nation of Antigua and Barbuda, which came out top in a David and Goliath World Trade Organisation tussle with the United States over online gambling (see previous InfoPowa reports) could be about to raise the stakes in its claim for compensation.

In a report in the Antigua Sun newspaper this week a figure of up to $7 billion is mentioned, as the nation's legal representative Mark Mendel warns the U.S. to expect billions more in sanctions as the country prepares to file its claim.

In June, Antigua and Barbuda initiated an effort to impose trade sanctions valued at US$3.4 billion annually on the United States, filing a claim for concessions primarily through the suspension of Antigua’s copyrights, trademarks, industrial designs and patents obligations to the U.S.

“The US$3.4 billion is just what we’re entitled to by virtue of them not having complied with the decision,” Mendel said, explaining that Antigua has not yet filed a claim to address the GATS withdrawal issue. “We haven’t even told them what that claim will be yet. The only thing I told them is it’ll be at least as big as our other claim."

The newspaper reports that in addition, the European Union has filed a $15 billion claim against the U.S. for its withdrawal from its GATS commitments. Earlier this year there were also indications from Japan, Brazil and China that claims may be laid.

Mendel told the Antigua Sun that he met with representatives from the office of the U.S. Trade Representative (USTR), at their request, at the beginning of August. He said that the meeting, however, made no progress.

“We’ve asked them to give us some proposals as to how they could solve things with us and they have yet to really give us any firm proposals, so it was a very inconclusive meeting," Mendel revealed. " I think the reason that they alled the meeting was just so that they could say that they did so.”

That meeting was with the branch of the USTR dealing with the GATS commitment. A separate group from the USTR is handling the dispute resolution aspect of the conflict between the two countries. Mendel says that he is still looking to that group to address how the case can be settled.

This Friday (end August), Antigua and Barbuda’s representatives go back to the WTO to present a justification of the $3.4 billion sanction it officially sought to claim last month.

Mendel has maintained from the start that the $3.4 billion in sanctions are justifiable. As he explained it, the sanctions were calculated by an internationally recognised firm of economists and were based on calculations that took into account the size and value of the global internet gaming market as well as Antigua and Barbuda’s market share.

He assured the Antigua Sun that the amount in sanctions was “completely defensible.”

“It’s a massive number but, after talking to the economists and going through everything, it is a very realistic number,” he said. He acknowledged that the figure is several times Antigua and Barbuda’s GDP, but pointed to the massive wealth created for Antigua and Barbuda and its online gambling companies by the industry, wealth which Mendel said has been almost destroyed by the actions of the U.S.

“I think we’re still in the driver’s seat and I feel optimistic about it. It’s tough and we’re the smallest guys in the world taking on the biggest but I think we’re doing well,” he said.

[dhayman]

It will certainly be interesting to see how this plays out. My initial gutt says that the Bush Administration will ignore this as usual, and play the hand that the WTO needs the US more than the US needs it. But, the following recent events may make this interesting nonetheless:

o EU jumping on the bandwagon. Antigua and Barbuda by itself, may have
not put enough scare into this thing;

o Tony Blair stepping down. Will his successor be as patronizing to Bush ?
Doubtful....

o Alberto Gonzalez resigning. The DOJ is now scrambling, and surely the
implementation enforcement of UIGEA cannot be on their immediate
agenda radar;

o US clamoring to the WTO about China's improper practices. Is this not
calling the WTO kettle black ?

o IMEGA timing is impeccable. Could they win getting an injunction on
UIGEA ?

Like I said, it will be interesting how this plays out over the next month or so.

[jetset]

WTO LATEST (Update)

US considering international claims arising from its intention to withdraw online gambling treaty obligations

The World Trade Organisation argument over online gambling between the United States and Antigua and Barbuda....and by extension now the European Union, Australia, Brazil, Canada, Costa Rica, India, Macao and Japan...continues to develop, according to an article in the Antigua Sun this week.

The article reports that the US is unlikely to back down from its position on online gambling, despite facing billions of dollars in claims. Instead, it is maintaining that withdrawal from World Trade Organisation (WTO) trade obligations to grant market access to Internet gambling companies is the best way to resolve the ongoing dispute with Antigua and Barbuda.

The Antigua Sun interviewed an official in the office of the US Trade Representative, who curiously insisted on remaining anonymous, but said: “We are trying to clarify, by using Article 21 of the GATS agreement (General Agreement on Trade in Services) that our obligations should not extend to gambling."

For the USA, the downside of this strategy (see previous InfoPowa reports) is that the US must reach settlements with all WTO member states which file compensation claims as a consequence of the unprecedented withdrawal of obligations. Thus far, it is understood that the USTR is considering compensatory claims from the European Union, Australia, Brazil, Canada, Costa Rica, India, Macao and Japan. The official denied sight of a $15.5 billion claim allegedly submitted by the EU, and said that publicly discussing amounts under discussion would not help a negotiating process.

“We are actively working to negotiate, under Article 21, with all of the WTO members which made claims, and there are eight of them," he said. "We believe we can reach an expeditious solution using this procedure.

“We’ve been quite pleased, to date, that the members who have made claims seem to be approaching this issue with a sense of seriousness and realism and that they generally seem determined to reach a solution,” the trade official told the Caribbean newspaper.

The US trade official emphasised that the WTO requires the parties to keep the details of their talks confidential in order to promote negotiated settlements, but said that the claimant nations are not submitting total values to their claims at this point.

He added that all eight countries have argued that they have, in one way or another, an interest in gambling in the US. “Those interests can take various forms and, in fact, they vary quite drastically across these eight members, so their claims obviously reflect the differences in the nature of the way they believe they would be affected by our proposal to clarify that gambling is not included in our obligations,” he said.

The deadline for the conclusion of the Article 21 process is 22 September but extensions are understood to be possible. The US withdrawal of of its GATS commitment is being treated as a separate, though connected issue, to the trade claim being pursued by Antigua and Barbuda at the WTO.

Last Friday, Antigua and Barbuda presented a written submission to justify its US$3.4 billion per year claim against the US (see previous InfoPowa report). As Antigua and Barbuda’s attorney at the WTO Mark Mendel explained it, the methodology paper was a description of how Antigua and Barbuda came up with its damages. The US response to the submission, he said, is due on 19 September and then Antigua and Barbuda will get a chance to respond to the US position on 4 October.

“The decision is made by the same panel that we were before last time, which was very sympathetic to us and it will rule on this issue before the end of November,” Mendel said.

The USTR official declined to comment on Antigua and Barbuda’s submission, pointing out that there has been insufficient time to study it carefully, but the US continues to hold the position that the damages being claimed appear disproportionate. “Our view is that the figure seems excessive, but we’re going to have to study the economic methodology that’s been put forward and we’re going to have to have our own economists look at it and we will have a response to it,” he said.

[SlotsWizard]

the US is unlikely to back down from its position on online gambling, despite facing billions of dollars in claims

That doesn't sound very promising to us neglected US citizens.

I'd like to know how the WTO complainants can come up with a finite figure to settle? Surely if the US continued to "allow" its citizens to play online indefinitely, the total revenue which is now considered lost wouldn't be a fixed amount? I'm curious about how each figure was calculated.

[chuchu59]

Maybe the claims are calculated to a certain date only. Hopefully, there will be changes after the elections. The only way forward must be regulation of online gaming and for once they should look at what the UK is doing IMO.

[james01]

Here is another update from yesterday:

US refusing to budge in online gaming dispute with Antigua

The United States continues to resist compliance with a World Trade Organization ruling regarding the double standards inherent in US online gambling regulations.

The Antigua Sun printed excerpts of an interview with an official from the United States Trade Representative (USTR) office which outlined the basic US strategy for resisting the ruling. “We are trying to clarify, by using Article 21 of the GATS agreement (General Agreement on Trade in Services) that our obligations should not extend to gambling,” the unnamed official said.

In addition to reaching settlement with Antigua, the US will also have to negotiate settlements with European Union, Australia, Canada, Costa Rica, India, Macao and Japan. Antigua proposed a controversial compensation model a few weeks ago, whereby the country would be allowed to violate US intellectual property laws with a gross cap of $3.4 billion per year. The US has until September 19th to present its response to that claim, and then Antigua will have until October 4th to present their rebuttal.

The US official claimed that negotiations with all members were going smoothly. “We’ve been quite pleased, to date, that the members who have made claims seem to be approaching this issue with a sense of seriousness and realism and that they generally seem determined to reach a solution; and we continue to believe that this Article 21 process is really the path that is most likely to lead to a resolution of this issue,” the trade official told the SUN. Antigua’s lawyers disagreed strongly with this assessment, arguing that the US seemed to have called the meeting simply to give the appearance of cooperation.

The final decision on the issue will be issued by the end of November. Mark Mendel, attorney for Antigua, likes his side’s chances when the matter comes to hearing. “The decision is made by the same panel that we were before last time, which was very sympathetic to us,” Mendel told the Sun.

[jetset]

SMALL NATIONS CAN WIELD BIG STICKS

Silicon Valley and Hollywood lobbying US government over possible WTO consequences

The World Trade Organisation dispute which the tiny island nation of Antigua has won against the unbalanced posture of the United States on Internet gambling has generated mainstream world press coverage for the pastime like never before, and continues to do so.

This week, a Newsweek report on the David vs. Goliath nature of a struggle that has the United States on the back foot was picked up by several leading mainstream publications, again drawing attention to the consequences for the American government of taking the unprecedented step of withdrawing its WTO treaty obligations agreed in the Uruguay Round.

Titled "The Caribbean Hold 'Em," the Newsweek piece recaps the events leading to today's situation (see previous InfoPowa reports) and opines that the issue has proved that small nations can wield large digital sticks.

The final WTO ruling, which the organisation is expected to begin enforcing next (October) month, could oblige America to overhaul its prohibitive stance on online casinos, not just in relation to Antigua but to a host of others—including the EU, Japan and Australia, reports Newsweek.

That would double the size of the $15 billion-a-year online gaming industry almost overnight, it quotes the Safe and Secure Internet Gambling Initiative, a pro-gaming pressure group. And since the WTO might allow nations that have been hurt by U.S. gaming laws to flout American intellectual-property law in response, the dispute is already spreading to Hollywood, Silicon Valley and beyond.

The article quotes now internationally known Antigua legal representative Mark Mendel: "I was laughed at when I first brought the case. They totally underestimated me."

More important, the United States underestimated the remarkable power that even tiny countries wield in today's digitised global economy. Usually, when trade laws are broken, the WTO allows export sanctions to be imposed on the violating nation. But since Antigua hardly has the muscle to bring any meaningful sanctions against the United States, trade experts expect that the WTO will likely take another approach and allow Antigua to flout intellectual-property law.

If America doesn't fold on gaming, opines Newsweek, next year Antiguans could well be selling billions of dollars of legally pirated copies of everything from Microsoft software to Disney movies without paying the copyright owners a penny.

"Intellectual property is the perfect sanction item," says Nao Matsukata, a former senior trade official for the United States. "It gives small countries like Antigua absolute leverage." The WTO has allowed the use of IP as a stick once before, in the famous EU-Ecuador banana squabble (the threat of it was enough to make the EU cut a deal). But experts expect it will become common policy in the future, and see online gaming as a test case for its effectiveness.

It's no surprise that lobbyists from Silicon Valley and Hollywood are now storming Capitol Hill, pushing for a deal. Last month the Motion Picture Association of America urged the U.S. trade representative to negotiate with Antigua in order to prevent bootlegging.

But the Bush administration is staunchly refusing to bend on virtual gaming. The (surprisingly weak) legal line is that America never intended to include gambling under its WTO obligations, which were signed in the mid-1990s.

No dice, says the WTO. "The United States has a legal commitment; they can't just say 'oops' and be done with it. What kind of precedent would that set?" asks one WTO insider, who spoke to Newsweek on condition of anonymity because he did not want to be quoted discussing an ongoing case.

Ultimately, this leaves the United States with a very weak hand to play. It could continue to deny that the WTO has legislation over its internal gambling laws. But that would undermine the overall credibility of the organization by showing it to be unable to enforce its rulings—and America needs a strong WTO to mediate prickly conflicts with, say, China, over things like Internet censorship and the mass manufacturing of fake designer goods.

Eight other WTO members, including the European Union, Australia and Japan, are now lining up to claim compensation from the United States over online gaming.

"The EU is almost licking its chops," Antigua's lawyer Mendel told Newsweek. "In total, this could come to $100 billion in sanctions. "

He added that giant American bricks-and-mortar casinos like Harrah's and MGM are making plans to move into the online sector as soon as the U.S. trade stance becomes clear.

They could get a sign as early as this week. September 22 is the first WTO deadline for America to cut a deal with Antigua and the other nations. But one WTO insider predicts that the only announcement on that day will be that the deadline has been extended.

"This won't happen fast; America is going to dig its heels in," says Sallie James, trade-policy analyst at Washington's Cato Institute.

"But if I had to bet, I would say that by this time next year America will have changed its laws." And in this case, that means all bets will be on.

[thelawnet]

Antigua ALREADY violates US copyright - the government when I was there (and probably still now) stole US TV signals via satellite and distributed them and sold them as 'cable TV'.

[jetset]

Looks like the horserace industry and the DoJ may be heading for a disagreement on online gambling.....

http://www.msnbc.msn.com:80/id/20842389/