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Commentary by Nelson Rose
#132 © Copyright 2007, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I Nelson Rose, www.GamblingAndTheLaw.com
Gambling and the Law®:
From Bad To Much Worse In The W.T.O.
The Bush Administration has again taken a bad situation and made it much, much worse.
As usual, the problem appears to be incompetence. Bush’s lawyers made arguments in response to Antigua’s complaint in the World Trade Organization (”W.T.O.“) that would have earned them, at best, a grade of ”D“ if this had been a law school class.
In April 2005 the Appellate Body of the W.T.O. issued a long opinion, which, all in all, wasn’t too bad for the U.S. The main finding were:
1) The U.S. had agreed (probably accidentally) to let in all forms of gambling from other W.T.O. countries, when it signed the General Agreement on Trade in Services treaty.
2) But the U.S. won on the argument that it had to prohibit people betting from their homes and offices because it has reasonable fears that remote gaming would harm Americans. The D.O.J. presented enough evidence to convince the W.T.O. that the federal statutes involved were necessary to protect American "public morals" and "public order."
3) But then the U.S. lost on the minor issue of cross-border betting on horseracing. Congress not only had created an Interstate Horseracing Act (”I.H.A.“), it amended that Act in December 2000 to expressly allow individuals to bet on horseraces from their homes by phone or computer, so long as the bets were legal under state laws where they were made and accepted.
Bush’s lawyers raised the rather unique legal argument that Congress had not actually authorized interstate horseracing when it passed a statute expressly authorizing interstate horseracing. The D.O.J. argued that the Wire Act continued to outlaw all cross-border betting of all kinds, and that the I.H.A., being a civil statute, could not amend this criminal law. Besides being factually questionable, given the large, established interstate horseracing industry, the argument was legal nonsense. And the W.T.O. politely said so.
The W.T.O. held that the express language of the I.H.A. allowed cross-border betting between states of the U.S., but not with foreign nations. Since there was no way the U.S. could justify this discrimination against Antigua, the W.T.O. ordered the U.S. to make changes to fulfill its treaty obligations.
The remedy was simple: Change the Interstate Horseracing Act into an International Horseracing Act. It would take an act of Congress, but nobody should have cared if people from a state could bet with licensed O.T.B. operators who had been licensed by their own state, other states or other nations.
But the Republican-controlled Congress was not going to pass, and President Bush was not about to sign, a law that looks like it expanded legal gambling that would not directly raise one cent of tax revenue and might even hurt some U.S. businesses. Leaders of Congress, like then-Sen. Majority Leader Bill Frist (R.-TN), who later rammed through the Unlawful Internet Gambling Enforcement Act, did not want to be seen as having to change an American law to abide by a decision of foreign powers.
The W.T.O. required the U.S. to show that it was now in compliance with its treaty obligations by April 3, 2006. This is where the Bush Administration showed its unique aptitude for taking even the most fouled up situation and making it worse. Bush’s lawyers took the bizarre position that, even though the U.S. had done literally nothing, it was now in compliance – because it deserved to win the first time!
Imagine making the same losing arguments to the exact same judges.
So, of course, the U.S. lost.
But taking ridiculous positions can lead to more than losing a case. It is insulting to the judges, and can tempt a decision-maker to reexamine the entire record, to find more things wrong.
It did this, in a document of 41 pages of tiny print, which the W.T.O. took a year to write. The W.T.O. now declared that not only U.S. federal laws, but also the laws of many states discriminate against Antigua’s licensed Internet operators. And that the U.S. discriminates not only on cross-border betting on horseraces, but on all forms of remote wagering, even those purely intrastate and having nothing to do with horseracing.
The W.T.O. has the power to enforce its decision. One proposal is to exempt Antigua from all American copyrights, allowing it to sell movie and music DVDs and CDs without paying any royalties.
The U.S. is now left with only a few options – none of them good.
1) Congress could outlaw all remote wagering. Eighteen states allow people to bet from their homes, not only on horseraces, but also on dograces, sports events (in Nevada) and jai alai. It is unclear whether the larger multistate lotteries and linked progressive slot machine networks would also have to go. But, even if the federal government had this power, it would mean devastating these industries and throwing tens of thousands of people out of work.
2) Or, Congress could amend the Wire Act to expressly allow Antigua’s licensed sports and race books and casinos to take bets from the United States. We know that Pres. Bush would never sign such a law. And he can’t, if it means that the federal government will overrule a state’s policy toward gambling. The U.S. would drop out of the W.T.O. before it forced states like Utah to permit Internet gambling.
Ignoring the decision is not an option; not if the U.S. wants China and other nations to respect the W.T.O.
So, the U.S. is going to have to pay off Antigua. It will probably be cash. Fortunately, Antigua is small, so if will be only a few tens or hundreds of millions of dollars.
But what happens if the next complaint in the W.T.O. is filed by the European Union?
END
© Copyright 2007. Professor I Nelson Rose is recognized as one of the world’s leading experts on gambling law. His latest books, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.
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Antigua asks WTO to authorize US$3.4 billion in trade sanctions against U.S.
GENEVA: The tiny Caribbean nation of Antigua and Barbuda asked the World Trade Organization on Tuesday for the right to authorize US$3.4 billion (€2.5 billion) in commercial sanctions against the United States for its failure to comply with a ruling that its Internet gambling restrictions are illegal.
Washington acknowledged that its online betting ban was ruled illegal by the WTO, but challenged Antigua's right to retaliate because it says it is in the process of changing the details of its obligations under the 1994 General Agreement on Trade in Services. The U.S. also rejected the amount requested by Antigua as "patently excessive."
The WTO set up an arbitration panel to rule on the matter.
"The level sought by Antigua and Barbuda is several times higher than Antigua and Barbuda's annual gross domestic product of all goods and services," U.S. trade lawyer Juan Millan told the WTO's dispute settlement body.
The U.S. made the unprecedented move to explicitly remove online betting from the services agreement after losing a WTO ruling earlier this year. Australia, Canada, Costa Rica, India, Macao, Japan and the 27-nation European Union have all joined Antigua in filing compensation claims as a result, but those are separate from the twin-island nation's ongoing WTO dispute with the United States.
Millan said Washington accepted that U.S. gambling laws were not in compliance with its WTO obligations. But he said Antigua's request for retaliation was unnecessary because the U.S. was negotiating compensation with all interested WTO members — despite having originally argued that it was exempt from sanctions or having to pay compensation.
Antigua, the smallest country to successfully litigate a case in the World Trade Organization's 12-year-history, had its documents circulated among the delegates at the meeting, but was not present for the discussion. It has said it will target U.S. trademarks and copyrights if Washington refuses to change its legislation.
The March ruling upheld the U.S. right to prevent offshore betting as a means of protecting public order and public morals. But it said it was illegal to target online gambling, without equally applying the rules to American operators offering remote betting on horse and dog racing.
Antigua had been promoting electronic commerce as a way to end the country's reliance on tourism, which was hurt by a series of hurricanes in the late 1990s. There are 32 licensed online casinos in the former British colony, employing 1,000 people and generating a yearly revenue of around US$130 million (€94 million). Seven years ago, its casinos had an annual income closer to US$1 billion.
Last year, Washington stopped U.S. banks and credit card companies from processing payments to online gambling businesses outside the country. The decision closed off the most lucrative region in a market worth US$15.5 billion (€11.2 billion) last year. About half of the world's online gamblers are based in the United States.
Antigua gets Caricom support on Internet gambling
Saturday July 07 2007
Antigua & Barbuda said it has gained the full support of fellow Caricom member states in its ongoing Internet gambling dispute with the United States.
PM Baldwin Spencer said regional leaders have thrown their full support behind his country and were calling on the US to respect the World Trade Organisation (WTO) recent ruling on the issue. The regional leaders will conclude their 28th Heads of Government conference on Wednesday.
”This matter has been fully ventilated at the conference and the position of Caricom is that Antigua & Barbuda should be fully supported by Caricom in this matter because it should have serious implications for the region going forward as we seek to develop the financial services sector in the region.“
The WTO recently ruled against the US in an online gaming dispute with Antigua and agreed that actions taken by Washington to prohibit access by Antiguan companies to US markets were illegal. It ruled that the US position was contrary to its General Agreement on Trade in Services commitment and instructed it to bring its laws into conformity with its trade agreement.
Following the case, the Spencer administration file formal trade sanctions against the US, demanding US $3.4 billion in compensation for failing to open its domestic market to remote gambling services, a move it said resulted in the loss of over 400 jobs and a lost opportunity to earn millions of dollars in foreign exchange.
7 NATIONS FILE COMPENSATION CLAIMS AGAINST THE U.S.A.
Canada and Australia join earlier nations in filing for compensation on WTO withdrawal by America
It appears that Canada, Australia and Macau-China have joined Antigua and Barbuda, the 27 nation European Union, India, Costa Rica, Macau and possibly Japan in considering compensation claims against the United States following its unilateral and unprecedented decision to remove gambling from its decades-old World Trade Organisation trade obligations (see previous Online-Casinos.com/InfoPowa reports).
The Casino City information site this week reported that "...an official familiar with the case said compensation claims by Antigua and Barbuda, the EU, India, Costa Rica, Canada, Macau and Australia were made last week in response to America's decision to exclude online gambling from its General Agreement of Trade in Services Agreement (GATS) schedule."
Japan has also lodged a letter of interest in the case, but has not asked for compensation, the official told the gambling information site. "It's rather premature to say how things will proceed from here," the source added.
The government of Antigua and Barbuda is seeking $3.44 million in compensation. A Costa Rican official has confirmed that his country is also seeking compensation, but declined to offer details of the claim.
The Americans have so far indicated that they do not think that compensation is due, but have taken a softer line on the Antigua and Barbuda issue which ignited the WTO confrontation, hinting that the door to further negotiation may still be open.
It is thought highly unlikely that the US will remove its "carve-out" discriminatory policy that allows horse racing, state lotteries and fantasy gaming in the USA to operate over the Internet, however. This is at the heart of the dispute, as other forms of Internet gambling have been attacked through a law that imposes financial transaction bans with online gaming companies.
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