U.S. ATTACKED OVER W.T.O. DECISION

25 May 2007

America tries to avoid compensation clause as support for Antigua mounts

The World Trade Organisation dispute over online gambling with Antigua moved centre stage again in Geneva, Switzerland Tuesday as the Antigua and Barbuda delegate criticised the USA and asked other countries to join it in seeking compensation from Washington for its failure to comply with global trade rules.

Ambassador John Ashe of Antigua told the WTO dispute panel that his country may target U.S. trademarks, copyrights and telecommunications companies after the WTO ruled in March that the U.S.'s continued restrictions on online gambling were illegal (see previous InfoPowa reports).

The finding, and the US non-compliance and subsequent decision to take the unprecedented step of amending its original 1994 WTO trade agreement obligations, means that the USA could face compensatory claims arising from the amendment, a clause its Trade Representative is trying to evade.

Ambassador Ashe has other ideas: "Not only do we think that members should press claims for compensatory adjustments as a matter of economic self-interest, but we also believe it is important that the process is made as difficult as possible for the United States," he told fellow WTO delegates.

In a statement to members, Antigua's representative said: "There is something clearly wrong with the concept that after a long, difficult struggle covering years of dispute resolution at the WTO an offending member could ultimately avoid the consequences of its loss by withdrawing the commitment that gave rise to the claim in the first place. As far as we are concerned, our dispute has been resolved and the United States remains obligated to comply," said Dr Ashe.

The ambassador seized the moral high ground in his communication, saying: "In a system that is replete with references to good faith, fair dealing and cooperative resolution of disagreements, it is the failure of the United States to engage with Antigua that is most troubling.

"We are unable to understand why there was no effort to find some middle ground. We ourselves were and remain ready to find a fair and reasonable solution. But we need the other side to show up to do so."

At the meeting, the Brazilian delegation declared its unequivocal support of the Antiguan position, making clear that the actions of the United States in the case threaten the integrity of the entire dispute resolution system, particularly with respect to small and developing countries. India expressed similar concerns while the European Union noted its disappointment that the United States had failed to engage Antigua and other concerned countries over a reasoned approach to the provision of these services.

The US action to withdraw its commitment now leaves it open to claims for damages from all WTO members who may consider themselves adversely affected by the withdrawal. Under WTO procedures, any of the 150 members can file a claim, all of which must either be resolved by agreement or arbitrated before the United States can actually withdraw the commitment.

"While we will not know until the filing deadline in mid-June," said Mark Mendel, Antigua's legal advisor in the case. "We have heard rumblings that substantial trading partners such as the EU are seriously considering filing claims for compensatory adjustments. The potential adverse impact upon completely unrelated American business interests could be massive."

Major UK public companies, in particular were hard hit by US anti-online gambling measures last year, losing billions of dollars.

The online gambling dispute is threatening to become one of the most complicated the WTO has ever handled and could soon spark a series of compensation negotiations between the U.S. and other trading powers such as the European Union, Associated Press bulletins confirmed, reporting that claims filed against the US for withdrawal of commitment could run to many billions of dollars

At the Geneva meeting, the United States conceded defeat in its long-running battle with the small Caribbean nation of Antigua and Barbuda and announced it would not be appealing the most recent adverse decision rendered by a WTO dispute panel. The U.S. declined to challenge Tuesday's adoption of the Internet gambling ruling, because it says that its legal manoeuver [to amend its original obligations] effectively ends the case.

The United States announced that it had initiated action to withdraw its treaty obligations with respect to gambling and betting services in an attempt to preclude Antigua and other nations from capitalising on the WTO decisions in favour of Antigua.

Associated Press reported that Juan Millan, a U.S. trade lawyer, told the Geneva-based trade body that the procedure - which no government had previously used to avoid a WTO ruling - was invoked "in order to bring the United States into compliance and to resolve this dispute permanently. This modification will ensure...the original U.S. intent of excluding gambling from the scope of U.S. commitments."

The U.S. contends that it is also exempt from negotiating compensation to governments - as required in the GATS clause allowing countries to rewrite their services commitments - because Internet gambling was never explicitly mentioned in the negotiations of the early 1990s.

The March ruling upheld the U.S. right to exclude offshore betting as a means of protecting public order and public morals. But importantly it said it was illegal to target online gambling, without equally applying the rules to U.S. operators offering remote betting on horse and dog racing.

Brazil and India on Tuesday both said the U.S. was obliged by law to compensate Antigua if it wants to now redefine its services obligations. The E.U. questioned how the new clarification of the U.S. ban on online betting would eliminate the discrimination that allows for U.S. companies providing offshore betting on horses and other services to remain in business.

Chief legal counsel for Antigua, Mark Mendel said: "The American defense was predicated on their theory that Internet gambling was worse than gambling in bricks and mortar shops. If they believed that, they would eliminate all remote gambling in America. They have not done that. It's just blatant trade protectionism."

Mendel told The Associated Press that Antigua would seek retaliatory sanctions against the U.S., since U.S. negotiations to rewrite its services obligations " could take years," requiring the consent of the WTO's other members.

"In the meantime, there's nothing to prevent us from seeking our remedies and we absolutely will," he said.

In an interview with the news service, Mendel said the Antiguan nation of 80 000 people was looking at different ways to recoup its losses - a challenge for such a small country facing the world's biggest economic power. Antigua's legal efforts were largely bankrolled by U.K.- owned Internet gambling operators with servers licensed in the country.

"Maybe we'll target telecoms. Intellectual property rights - that's a way we can possibly fight back," Mendel speculated.

The E.U. has stressed at every stage in the four-year dispute that it would act in support of its interests - a reference to the U.K.-based companies that lost billions because of the U.S. restrictions. Officials in Brussels said, however, they had yet to notify Washington whether they would submit a compensation claim.

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