CRUNCH WEEK FOR WTO DISPUTE

14 December 2007

Friday deadline for US compensation response


After years of litigation, political manouevring and agreed postponements of previous deadlines, it looks as if Friday this week may see some firm developments in the United States response to its World Trade Organisation dilemma.

Mark Mendel, a private attorney representing Antigua, told Reuters ahead of an expected ruling by the WTO arbitration panel on Friday that he expects to succeed with a claim for compensation that could be worth up to $3.44 billion a year in "cross retaliation" moves as a response to US actions against the Antiguans over online gambling.

In an April 2005 ruling, the WTO found a U.S. law allowing only domestic companies to provide online horse-race gambling services discriminated against foreign companies, reports The Guardian newspaper. The United States has argued Antigua is entitled to only $500 000 in compensation because of that ban.

But Antigua - which built an online gambling industry to replace declining tourist revenues - claims the damage to its economy by protectionist and discriminatory online gambling bans demands significant compensation.

The Caribbean islanders specifically want WTO permission to suspend copyright protections on American movies, music and software so its domestic manufacturers can export those products to the United States and potentially other markets, Mendel said.

"I think we provided plenty of proof to justify our figure ... We feel pretty confident it should be a high number," Mendel said. "I think there's no doubt that we're going to get the ability to cross-retaliate."

Last year, the U.S. Congress tightened restrictions on Internet gambling by making it illegal for banks and credit card companies to make payments to online gambling sites. In addition, the Bush administration announced in May it was retroactively excluding gambling services from market-opening commitments it made as part of the 1994 world trade agreement.

That opened the door for the European Union, Japan, India and other trading partners to seek "compensation" from the United States in the form of increased access to another U.S. service market, such as insurance or air travel.

European Union online gambling companies, angry about being shut out of the lucrative U.S. online gambling market, have urged the EU to seek as much as $100 billion in compensation. Although EU Trade Commissioner Peter Mandelson has played down that suggestion, he has said the United States would have to provide "substantial" compensation to satisfy the EU.

The latest deadline for finishing those talks is Friday - the same day the WTO will rule on Antigua's damages request.

Nao Matsukata, senior policy adviser with U.S. law firm Alston & Bird, said he expected the U.S.-EU compensation talks would drag on past Friday and be influenced by the arbitrator's report.

"The Antigua report could clearly advantage one side or another depending on how it comes out," said Matsukata, whose firm represents UC Group, a British company which process online payments including the gaming sector.

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