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Antigua vs. United States: Online Gaming Jason Symoniak, Brandon Thurner, Enkhtsetseg Sodnom & Annette Valenzuela March 17, 2010 Context of the Case In the last two decades, online gambling has grown in popularity U.S. Federal and State law is extremely complex and ambiguous, resulting in a very complicated legal framework governing online gambling U.S. efforts to prosecute foreign providers of online gambling services prompted Antigua and Barbuda (henceforth referred to as “Antigua”) to file a complaint in the WTO, asserting that the U.S. had violated various commitments under GATS Ultimately, the WTO DSB ruled in favor of Antigua, highlighting the potential for GATS commitments to have unpredicted consequences and potentially increasing the leverage that small countries have over larger, more developed members of the WTO Countries Involved The United States of America: Population: 306,800,000 GDP: $14.26 Trillion Antigua: Population: 88,100 GDP: $1.1 Billion Panel and Appellate Body Proceedings March 21, 2003 – Antigua requested consultations with the United States Antigua claimed that the cumulative effect of Federal and State legislation was to prevent the supply of gambling services from other WTO members. June 12, 2003 – Antigua requested the establishment of a panel. This panel was composed on August 25, 2003. The panel issued its ruling on November 10, 2004. Most notably: Three U.S. Federal laws and provisions of four states prohibited the cross-border supply of service, violating GATS Article XVI The U.S. could not claim exemption under GATS Article XIV, as domestic betting on horseracing was legal Judicial Economy was exercised in regards to GATS Articles XI and XVII Panel and Appellate Body Proceedings Cont. U.S. Federal Legislation in Question: Travel Act of 1952 Illegal Gambling Business Act of 1955 The 1961 Wire Act • This piece of legislation was the most relevant, as it expressly prohibited the transmission of certain types of bets via wire-based communication networks. State law in Louisiana, Massachusetts, South Dakota, and Utah were also found to be in violation of GATS Panel and Appellate Body Proceedings Cont. Following the initial ruling of the panel, both sides appealed certain issues. On April 7, 2005 the Appellate Body issued its ruling. Most notably: The initial panel decision should not have issued a ruling on eight state laws. The Appellate Body upheld the finding that U.S. commitments granted full market access in gambling and betting services. It was upheld that the three Federal Acts in question were inconsistent with GATS Article XVI:1 and XVI:2. The U.S. failed to show that the Acts in question satisfied the conditions necessary to cite Article XIV in defense of the Federal legislation. The DSB adopted the Appellate Body report on April 20, 2005. Implementation and Compliance Proceedings The U.S. stated its intention to comply with the DSB’s recommendations within a reasonable amount of time in May 2005. By June 2006, Antigua was unsatisfied with the progress which was made. They filed for the reestablishment of the original panel, and the panel reconvened on August 16, 2006. On March 30, 2007, the panel ruled that the U.S. had failed to comply with the rulings and recommendations of the DSB. This prompted Antigua to request the permission of the DSB to suspend the application of their obligations under GATS and TRIPS, pursuant to GATS Article 22.2. The U.S. objected to the level of suspension and concessions of obligations proposed by Antigua in retaliation. On December 21, 2007 it was ruled that Antigua was to be compensated via the suspension of U.S. Intellectual Property Rights whose annual value was not to exceed $21 million. General Agreement on Trade in Services (GATS) GATS – established in January 1995 Extends the multilateral trading system from goods to services All WTO members are signatories to GATS WTO Agreements and Provisions GATS Articles II – Most Favoured Nation Treatment VI – Domestic Regulation VIII – Monopolies and Exclusive Service Suppliers WTO Agreements and Provisions: II GATS Articles XI – Payments and Transfers XVI – Market Access XVII – National Treatment Consistency Article VI: 1 and 3 – Domestic Regulation Antigua failed to demonstrate the issues are inconsistent Article XIV – General Exceptions United States tried to invoke General Exceptions a) and c) “Moral Defense” Inconsistency Appellate Body upheld Panel’s finding – United States acts inconsistently with the following articles: Article XV - Subsidies Article XVI – Market Access Appellate Body also: Reversed the Panel’s finding and found the United States measures are permissible under Article XIV(a) of GATS Upheld Panel’s finding the United States had failed to show adherence to the chapeau of Article XIV Position of the U.S. Policy makers’ concerns are: • Possible bankruptcy • Easy access for children and college students • Opportunity for criminal and terrorist organizations to launder money Article XIV(a) – Moral Defense • Necessary to protect public morals or to maintain public order Position of Antigua U.S. argument is inconsistent with its obligation under several GATS articles • Article II – Most favorable Nation • Article XI – Payment and Transfer • Article XVI – Market Access • Article XVII – National Treatment Implementation The U.S. and Antigua failed to agree on time period for implementation in accordance with Article XXI (3) (b) • Article XXI (3) (b) - Modification of Schedule • If no affected Member has requested arbitration, the modifying Member shall be free to implement the proposed modification or withdrawal. Implementation Cont. June 6, 2005 Antigua requested a reasonable time period through binding arbitration pursuant to Article XXI (3)(c) August 19, 2005 Arbitrator established a time period for implementation of 11 months and two weeks Compliance Proceedings May 24, 2006 June 8, 2006 The U.S. and Antigua agreed on certain procedures under Articles XXI and XXII Antigua requested consultation under Article XXI (5) December 20, 2006 Panel report was delayed Compliance Proceedings Cont. March 30, 2007 Panel concluded that the U.S. had failed to comply with the recommendations and ruling May 22, 2007 DSB adopted the Article XXI (5) report • The Council for Trade in Services shall establish procedures for rectification or modification of Schedules. Any Member which has modified or withdrawn scheduled commitments under this Article shall modify its Schedule according to such procedures. Proceedings Under Article XXII June 21, 2007 July 23, 2007 Antigua requested authorization from DSB, under Article XXII (2) to suspend the U.S. TRIPS agreement U.S. claimed that Antigua’s proposal does not follow the principles and procedures of Article XXII (3) December 21, 2007 The arbitrator authorized the suspension and settled on a figure of $21 million annually Observations & Outcomes Reputational Considerations WTO & the U.S. Cross-Agreement Retaliation Amount of sanctions Type of sanctions permitted Suspension of Intellectual Property Rights Observations & Outcomes Cont. Define Internet-Gambling Globally traded good/service Regulatory measures Revisiting legislation Wire Act National v. International Interests Domestic Policymakers Lobbying/Interest Groups Domestic Consumers Foreign policy measures Foreign producers/services of internet-gambling Sources Country Report: Organization of Eastern Caribbean States. Economist Intelligence Unit. London: March 2010. Country Report: The United States of America. Economist Intelligence Unit. London: March 2010. Kirby, Mitchell E. The Mouse That Roared: Implications of the WTO Ruling in US – Gambling. Fall 2008. http://findarticles.com/p/articles/mi_7753/is_200810/ai_n32306613/pg_21/?tag=content;col1 Malawer, Stuart S. WTO Law, Litigation and Policy: Sourcebook of Internet Material. Rivlin, Gary. New York Times. August 2007. Gambling Dispute With a Tiny Country Puts U.S. in a Bind. http://www.nytimes.com/2007/08/23/business/worldbusiness/23gamble.html?_r=2&pagewanted=all Wohl, Issac. USITC. The Antigua-United States Online Gambling Dispute. July 2009. http://www.usitc.gov/publications/332/journals/online_gambling_dispute.pdf World Trade Organization. http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds285_e.htm World Trade Organization. WTO Analytical Index. The General Agreement on Trade in Services: An Introduction: WTO Article 22. March 2006.