Antigua is not a major trading partner, yet the long-term implications of this ruling outweigh the short-term ones, as U.S. gambling commitments under GATS expose state and local government gambling regulations to further WTO challenge.
“U.S. trading partners should take note that while the United States is advocating vigorously that other countries should bind more service sectors to GATS rules to facilitate the entry of U.S. service providers into their markets, the United States is not willing to abide by those same rules, especially when a challenge comes from a small, developing country,” [international trade lawyer Lori] Wallach said. (From Deadline for U.S.Compliance With WTO Gambling Ruling Comes and Goes With No U.S. Action, by Public Citizen April 4/06)
Victory! Awaiting compliance:
*Pogue Mahone
CD Audio
Featuring the Pogues on Bob Dylan's classic, When the Ship Comes In
Oh the time will come up
When the winds will stop
And the breeze will cease to be breathin'.
Like the stillness in the wind
'Fore the hurricane begins,
The hour when the ship comes in.
Oh the seas will split
And the ship will hit
And the sands on the shoreline will be shaking.
Then the tide will sound
And the wind will pound
And the morning will be breaking.
Oh the fishes will laugh
As they swim out of the path
And the seagulls they'll be smiling.
And the rocks on the sand
Will proudly stand,
The hour that the ship comes in.
And the words that are used
For to get the ship confused
Will not be understood as they're spoken.
For the chains of the sea
Will have busted in the night
And will be buried at the bottom of the ocean.
A song will lift
As the mainsail shifts
And the boat drifts on to the shoreline.
And the sun will respect
Every face on the deck,
The hour that the ship comes in.
Then the sands will roll
Out a carpet of gold
For your weary toes to be a-touchin'.
And the ship's wise men
Will remind you once again
That the whole wide world is watchin'.
Oh the foes will rise
With the sleep still in their eyes
And they'll jerk from their beds and think they're dreamin'.
But they'll pinch themselves and squeal
And know that it's for real,
The hour when the ship comes in.
Then they'll raise their hands,
Sayin' we'll meet all your demands,
But we'll shout from the bow your days are numbered.
And like Pharaoh's tribe,
They'll be drownded in the tide,
And like Goliath, they'll be conquered.
April 3/06 - No compliance. Goodlatte and Leach bills 'the utterance of a government official without any independent legal effect,' expand U.S. Prohibtion 2.0.
USTR quoting DoJ to Antigua on U.S. gambling ban (Prohibition 2.0):
Good morning, Mr. Chairman, Ranking Member Scott, and Honorable Members of the Subcommittee. Thank you for inviting me to testify today. My name is (2003 Presidential Rank Award Recipient) Bruce G. Ohr and I am the Chief of the Organized Crime and Racketeering Section in the Criminal Division of the Department of Justice. I would like to commend Congressman Goodlatte, as well as Congressman Leach and Senator Kyl, for their tireless efforts and longstanding commitment to provide law enforcement with additional tools to combat Internet gambling. Today, I am pleased to offer the views of the Department of Justice on H.R. 4777, the Internet Gambling Prohibition Act.
Since the Department of Justice last appeared before you on this topic, we have continued investigating and prosecuting illegal Internet gambling. For example, in January 2006, the United States Attorney's Office in St. Louis announced a $7.2 million settlement with the Sporting News to resolve claims that the Sporting News promoted illegal gambling from early 2000 through December 2003 by accepting fees in exchange for advertising illegal gambling. As part of this settlement, the Sporting News will conduct a public service campaign to advise the public of the illegality of commercial Internet and telephonic gambling.
On April 11, 2005, the United States Attorney's Office of the District of Massachusetts indicted 13 individuals on racketeering charges, which included allegations that the enterprise used an offshore gambling office in San Jose, Costa Rica and that customers of the enterprise's sports betting business were able to place bets over the Internet and through the use of a toll-free telephone number. The operator of the offshore gambling office was Todd Westerman, who pled guilty on January 10, 2006. Two other defendants have also entered guilty pleas. The trial date for the remaining defendants has not yet been set by the court. (See 12 indicted in gambling, racketeering by Shelley Murphy at boston.com April 12/05).
The Department of Justice generally supports the efforts of the drafters of H.R. 4777 because this legislation amends an existing criminal statute and it applies equally to wagering over the Internet and over the telephone.
While the Department believes that 18 U.S.C. § 1084 already encompasses both types of wagering, the proposed amendments in H.R. 4777 strengthen our position and assure the continued viability of Section 1084 into the future.
Further, the Department also supports the proposals to increase the penalty for a violation of Section 1084, to prohibit the acceptance of certain forms of payment, such as credit cards, for Internet gambling, and to provide for civil enforcement action against such activity. Finally, H.R. 4777 also provides law enforcement with a method to cut off the transfer of funds to and from illegal Internet gambling businesses. (Note: But see the letter by 5,000 members of the Independent Community Bankers of America addressed to the same committee, describing the exscessive burden the bill places on financial institutions). The Department of Justice, however, has concerns regarding some of the provisions of H.R. 4777, including that sections of this proposal may weaken current law and standards and that it would also permit gambling over the Internet from the home and favor certain industries over others.
The Department of Justice views the existing criminal statutes as prohibiting the interstate transmission of bets or wagers, including wagers on horse races. The Department is currently undertaking a civil investigation relating to a potential violation of law regarding this activity. We have previously stated that we do not believe that the Interstate Horse Racing Act, 15 U.S.C. §§ 3001-3007, amended the existing criminal statutes. H.R. 4777, however, would change current law and amend Section 1084 to permit the interstate transmission of bets and wagers on horse races. H.R. 4777 also permits "intrastate" wagering over the Internet without examining the actual routing of the transmission to determine if the wagering is "intrastate" versus "interstate."Under current law, the actual routing of the transmission is of great importance in deciding if the transmission is in interstate commerce. The Department is concerned that these two proposals would weaken existing law.
The Department also opposes provisions in the bill that weaken or alter existing federal law or standards pertaining to civil injunctive relief. The Justice Department believes that Rule 65 of the Federal Rules of Civil Procedure should be the sole standard used by courts in considering whether to grant injunctive relief and what form this relief should take. Rule 65 is the well-established standard that federal courts use in all cases in which a party is seeking injunctive relief. That provision leaves it to the discretion of the district court judge to determine on a case-by-case basis what form the relief should take. Proposed subsection 1084(i)(3), however, limits the relief that can be granted against an Internet service provider. The Department believes that the judge who has reviewed the specific evidence in the case should have the authority, as he or she currently does under Rule 65, to fashion the appropriate remedy or relief.
The Department is also concerned that H.R. 4777 permits gambling from the home, which raises issues about gambling by minors and compulsive gambling. We also have concerns about the requirement for the "secure and effective customer verification and age verification to assure compliance with age and residence requirements." Unlike casinos, online gambling businesses cannot see their customers in order to do onsite age verification. The exception for intrastate wagering in subsection 1084(d)(l) requires that the bettor be physically located in the state at the time that the wager is made, not that the individual be a resident of that state. Verifying residence would not be sufficient to meet this requirement. For example, if only state residency is subject to verification, an Internet gambling customer could be a resident of the state but be physically located in another state when the wager is made. Further, under this verification requirement the state must have the verification system, not the gambling business. This implies that the verification would not be occurring at the time of the actual transmission of bets and wagers. Even if this requirement were changed to verification of physical location, however, the Department believes that further study is needed as to whether existing technology can address compliance where a bettor places bets using his or her cell phone or laptop computer using a WiFi or similar wireless Internet access.
As the Department has stated on prior occasions, we also have concerns about compulsive gambling and other deleterious effects if Internet gambling is permitted. Because it is so easy to access and use, Internet gambling could exacerbate the problems and temptations facing compulsive gamblers. For example, the United States Attorney's Office in New Mexico recently charged a bank executive with fraud charges for stealing $5 million from Union Bank. The executive pled guilty to a criminal information charging him with felony theft, embezzlement or misapplication of funds. The executive admitted that he used most of the money to fund Internet gambling accounts.
As we have noted on several occasions, as a general matter the Department believes that Internet gambling should remain illegal. The Department of Justice is concerned about Internet gambling because of the potential for gambling by minors and compulsive gambling, the potential for fraud and money laundering, and the potential for involvement of organized crime. For example, a recent indictment charged members of the Uvari Group, which included associates of the Gambino Organized Crime Family. The Uvari Group established wagering accounts for their customers with off-site gambling business and the customers placed bets on horse races and other sporting events over the Internet and the telephone.
We also are concerned that this bill would permit interstate wagering by the horse racing industry. Under H.R. 4777, other industries could only conduct intrastate wagering. As expressed earlier, it is the Department's view that the Interstate Horseracing Act did not change Section 1084. H.R. 4777, however, expressly permits interstate wagering on horse racing. The Department questions why, under the provisions of H.R. 4777, one industry will be able to accept interstate wagers while other industries that are also regulated by the states cannot.
Finally, the Department of Justice also has some drafting concerns with the legislation, including several of the definitions slated to be added to Section 108 1. For example, since the definition of the term "bet or wager" requires that the activity be "predominately subject to chance," we are concerned whether this definition is sufficient to cover card games, such as poker. In addition, the definition of the term "information assisting in the placing of bets or wagers" should include the receipt of information by the gambling business from bettors or third parties, and not just information sent by the gambling business. For example, as drafted, the receipt of line information would not be covered. ... (From the Statement of Testimony of Bruce G. Ohr, Chief, Organized Crime and Racketeering Section, Criminal Division, DOJ, Before the Committee on the Judiciary Subcommittee on Crime, Terrorism, and Homeland Security, House of Representatives, concerning H.R. 4777, THE "INTERNET GAMBLING PROHIBITION ACT", presented April 5/06)
Quote:
Note: Title 18 U.S.C. § 1084(d) provides that: When any common carrier, subject to the jurisdiction of the Federal Communications Commission, is notified in writing by a Federal, State, or local law enforcement agency, acting within its jurisdiction, that any facility furnished by it is being used or will be used for the purpose of transmitting or receiving gambling information in interstate or foreign commerce in violation of Federal, State or local law, it shall discontinue or refuse, the leasing, furnishing, or maintaining of such facility, after reasonable notice to the subscriber, but no damages, penalty or forfeiture, civil or criminal, shall be found against any common carrier for any act done in compliance with any notice received from a law enforcement agency. Nothing in this section shall be deemed to prejudice the right of any person affected thereby to secure an appropriate determination, as otherwise provided by law, in a Federal court or in a State or local tribunal or agency, that such facility should not be discontinued or removed, or should be restored. See also Chapter II of the Antitrust Division Manual.
Antigua replies:
Quote:
First, Antigua and Barbuda considers that the United States has taken no measures to comply with the recommendations and rulings of the DSB. ...
Second, despite having insisted to the Article 21.3(c) arbitrator that the United States would pursue a legislative remedy to bring itself into conformity with the recommendations and rulings of the DSB in DS285, the United States asserted it was in compliance on 10 April 2006 by reference to the DOJ Statement. However, the DOJ Statement does not constitute a "measure" for purposes of the DSU. The DOJ Statement is nothing but an utterance of a government official without any independent legal effect under United States law or under the GATS, the DSU or any other WTO agreement. (emphasis added) ...
Third, the DOJ Statement is nothing more that a restatement of the position taken by the United States during the course of DS285 that was ultimately found unpersuasive by both the panel and the Appellate Body. Assuming, arguendo, that an utterance by a government employee can constitute a "measure" for purposes of the DSU, Antigua and Barbuda does not believe that a simple restatement of a legal position taken by a party to a dispute during its regular course can be considered a "measure taken to comply with the recommendations and rulings" of the DSB within the meaning of Article 21.5 of the DSU. (From Recourse to Article 21.5 of the DSU by Antigua and Barbuda Request for the Establishment of a Panel
... The (House Judiciary) committee took brief note of Antigua's written objections before proceeding to approve both bills. ...The United States lost the WTO case because the United States has a longstanding policy of sanctioning online and telephone wagering on horse races. The WTO ruled it is a discriminatory trade practice for the United States to permit this form of remote gambling while trying to ban similar forms of online gambling offered by Antiguan operators (emphasis added) ... (From an AOGA press release of May 25/06)
When all is said and done, however, the antiglobalization movement should mobilize its vast commitment and moral force into a proglobalization movement on behalf of a globalization that addresses the needs of the poorest of the poor, the global environment, and the spread of democracy. It is the kind of globalization championed by the Enlightenment - a globalization of democracies, multilateralism, science and technology, and a global economic system designed to meet human needs. We could call this an Englightened Globalization.
What then would the focus of a mass public movement aimed at an Enlightened Globalization? It would be, first and foremost, a focus on the behavior of the rich governments, especially the most powerful and wayward of the rich governments, the United States. It would insist that the United States and other rich countries honor their commitments to help the poor escape from poverty, as well as honor their commitments to limit environmental degradation including human-made climate change and the loss of biodiversity. Such a movement would continue to shine a spotlight on corporate responsibility, but would urge more rather than less investment by major multinational companies in the poorest countries. . (emphasis added) (From the chapter entitled, Our Generation's Challenge, at pgs. 358-9)
Antigua and Barbuda trade officials noted that the passing of the deadline (April 3/06) without any attempt at compliance by the United States was “greatly disappointing” to their twin-island state. They also added that, like many developing countries, Antigua and Barbuda was encouraged to sign up to the WTO agreements as a way to achieving some diversity and prosperity for the 70,000 citizens out of the limited resources available to the tiny country. “While we realised the decision was going to present the Americans with some difficulties, we are surprised and disappointed by the apparently cavalier attitude of the USTR toward this very important issue to our country,” said Dr. John W. Ashe, Antigua and Barbuda’s Ambassador to the WTO. (From a press release of the Antigua government April 3/06).
3. In considering what concessions or other obligations to suspend, the complaining party shall apply the following principles and procedures:
(a) the general principle is that the complaining party should first seek to suspend concessions or other obligations with respect to the same sector(s) as that in which the panel or Appellate Body has found a violation or other nullification or impairment;
(b) if that party considers that it is not practicable or effective to suspend concessions or other obligations with respect to the same sector(s), it may seek to suspend concessions or other obligations in other sectors under the same agreement;
(c) if that party considers that it is not practicable or effective to suspend concessions or other obligations with respect to other sectors under the same agreement, and that the circumstances are serious enough, it may seek to suspend concessions or other obligations under another covered agreement;
...T he U.S. has said it's now conforming with the WTO rulings and that "it is up to each member to decide what means it chooses to omply.'' Clarifying existing laws on interstate horseracing or federal criminal laws "was a possible means, but not the only means, for compliance," the U.S. said, according to a document submitted to WTO arbitrators.
The U.S. says the prohibitions pre-dating last month's law apply to both foreign and American betting services, and the WTO's decision only applies to gambling on horseracing, which is allowed to discriminate against foreign companies. WTO judges found that a U.S. argument in favor of a ban in the interests of "public morals'' can stand only as long as the prohibitions don't allow American companies to carry bets while banning foreign rivals.
The WTO is expected to rule on whether the U.S. has respected its ruling in the first half of next year. Unless the U.S. wins the case Antigua will seek sanctions in the form of withdrawing intellectual property protection for U.S. trademarks or copyright, (Antigua lead counsel Mark) Mendel said. Such sanctions, known as "cross-retaliation," are legal at the WTO when an economy can't afford to impose sanctions in the form of higher customs duties. "It's the only possibility we have" to retaliate, he said. (emphasis added)
EOG 1- How can the case that Antigua has before the WTO help BetOnSports?
Mark Mendel, Antigua's lead counsel- It could be of substantial benefit. The WTO ruled that the US was in violation of its treaty obligations, and although there is nothing in US law that would absolutely require the US to observe this treaty obligation, it is very much in its best interest to do so, as the US is a massive beneficiary of the WTO dispute resolution process. BOS could assert that on the basis of the WTO ruling and past US compliance efforts, it had every reason to believe that the US was going to comply with the ruling and sanction cross-border gaming in one form or another... (emphasis added)
The United States has suffered a new setback in a four-year-old legal battle with Antigua and Barbuda over U.S. restrictions on Internet gambling, a U.S. trade official said on Thursday. At issue is an April, 2005 World Trade Organisation ruling against U.S. prohibitions on online horse race betting. Since then, the U.S. Congress has passed additional legislation to ban betting over the Internet.
* Gretchen Hamel, a spokesman for the U.S. Trade Representative's office, confirmed press reports that a WTO panel "did not agree with the United States that we had taken the necessary steps to comply" with that ruling. (emphasis added)
At the same time, Hamel downplayed the decision contained in a preliminary, confidential report to the two parties. "The panel's findings issued today involve a narrow issue of federal law" and the United States will have opportunity to submit comments to the WTO before it issues its final, public report in March, Hamel said. ... The United States will decide after the final panel decision ruling in March whether to appeal. The Bush administration may not have to ask Congress to pass new legislation in any case, Hamel said. "The panel report clarifies that compliance does not necessarily require new legislation, but could instead involve other steps, such as administrative or judicial action," she said.
Quote:
* Editor's Note: Hamel is listed at the excellent Washington public money tracker, Legistorm, as a 'Congressional Staffer,' with frequent postings as a Republican press secretary - more a scribe than a decision-maker.
The Financial Services Regulatory Commission (FSRC) announced that it has commenced the overhaul of the Interactive Gaming and Interactive Wagering Regulations which govern the operations of online gaming companies licensed by the state ... Substantively the amendments will seek to reinforce Antigua & Barbuda's compliance and commitment to international best practices and best-known industry standards. ... the exercise is two- fold, as the jurisdiction will take the opportunity to follow through on its commitment to the United Kingdom and other participating nations in a public communiqué to develop and implement international minimum standards for regulating remote gaming.
... The commission is working closely with the Antigua & Barbuda Gaming Association to achieve the key objectives and will engage other stakeholders with vested interests in the sector and its development. A symposium will be held next week ... to review the amendments and to provide an opportunity to consult and discuss the revisions. A draft of the regulations will be posted on the official government's website prior to the meeting.
The commission has engaged the services of * Frank Catania of Catania Consulting Group and associate Joseph Kelly (a business law professor at Buffalo State College) to assist in the regulatory exercise... Catania ... was selected by Best Lawyers in America as a top legal expert in gaming. His associate, Joseph Kelly, is widely regarded as an expert on Internet gaming law, and his Internet gambling law article (in the William Mitchell Law Review (Vol. 26 was unavailable online March 25/07) was cited three times as authority by the United States National Gambling Impact Study Commission. Both Catania and Kelly previously assisted with updating and amending portions of the gaming regulations and are familiar with the workings of Antigua & Barbuda's Interactive Gaming and Wagering Regulations.
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* Editor's Note: Although the Catania Consulting Group site states that Frank Catania "serves as Of Counsel to the law firm of Sterns & Weinroth," we were unable to find him listed among that firm's gaming attorneys when we checked March 30/07.
What is to follow Antigua's legal victory over the U.S. and does it really have any impact at all? What protection do other jurisdictions afford gaming operators and the punters/players themselves? Are the banks and credit card companies going to cater to the demands of governments like the U.S. or challenge them? What are the hazards involved beyond relentless badgering, discomfort and legal fees? This is where you will learn what those involved on the frontlines of this battle see as the likely result.
McChesney Emanuel / Consul General NY / Antigua & Barbuda
Joseph Kelly, Esq. / Professor of Law, Business Dept. / Buffalo State College
Mark E. Mendel, Esq. / Partner / Mendel Blumenfeld, LLP
Dispute Settlement Body (DSB) Compliance Panel reaffirms two previous rulings, 'U.S. has failed to comply'.
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To view the 41-page compliance panel review of March 30/07, click on all documents at the WTO.
Cut to the chase:
Quote:
... In this way, the United States Congress has provided confirmation that, under US domestic law, the original Panel's finding was correct, that is:
"[T]here is ambiguity as to the relationship between on the one hand, the amendment to the IHA and on the other, the Wire Act, the Travel Act and the Illegal Gambling Business Act."
This provision also shows that since the original proceeding the United States had an opportunity to remove the ambiguity and thereby comply with the recommendations and rulings of the DSB. Instead, rather than take that opportunity, the United States enacted legislation that confirmed that the ambiguity at the heart of this dispute remains and, therefore, that the United States has not complied.
For the reasons set out in this Report, the Panel concludes that the United States has failed to comply with the recommendations and rulings of the DSB in this dispute. (From paras. 6.134-7.1 at p. 41) (footnotes omitted)
Why gambling? Antigua has a thriving tourism economy, right?
Far between sundown's finish an' midnight's broken toll
We ducked inside the doorway, thunder crashing
As majestic bells of bolts struck shadows in the sounds
Seeming to be the chimes of freedom flashing
Flashing for the warriors whose strength is not to fight
Flashing for the refugees on the unarmed road of flight
An' for each an' ev'ry underdog soldier in the night
An' we gazed upon the chimes of freedom flashing.
Quote:
... Antiguan authorities also argued that restrictions barring U.S. residents from betting at offshore casinos were harming efforts to diversify its economy. Antigua, a former British colony in the Caribbean, 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 Antigua, employing 1,000 people and generating yearly revenue of around $130 million. Seven years ago, its casinos had annual income closer to $1 billion(emphasis added)
Antigua is the smallest country to successfully litigate a case in the WTO's 12-year history.
Why the panel's fuss over the January U.S. breach of confidentiality of the interim report?
Quote:
To view the 41-page compliance panel review of March 30/07, click on all documents at the WTO.
Quote:
"The Panel notes with concern that the confidentiality of the Interim Report has been breached, in spite of the fact that the confidentiality requirement was accepted by the Parties (as reflected in the Working Procedures). The Panel wishes to remind the Parties that the Interim Report is strictly confidential, and that breaches of the confidentiality requirement are unacceptable because they affect the credibility and integrity of the WTO dispute settlement process. (From para. 5.6, reiterated at para. 5.10)
Quote:
Editor's Note: First, the breach is a clear demonstration for all the world to see that the U.S. is unwilling to follow even a basic rule of procedure, even when it had agreed to be bound by the rule. Second, it's an invitation to Third parties to the dispute and indeed all WTO Member nations to express concern at a trading partner's disrespect for process. Peer pressure is, after all, the cornerstone of these trade agreements. And third, it may go toward securing more effective suspensions of trade concessions. The WTO is still quite new, and this dispute features an especially unusual pairing. As a result, the approving panel might be more inclined to agree with a similarly unusual approach to settlement - especially when Goliath drags his heels and flouts basic procedures as the U.S. has done here.
How did Third Parties respond to U.S. insistence that it's been in compliance all along?
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The United States submits that the "measures taken to comply" in this dispute are the same measures that were at issue in the original proceeding because those measures are consistent with its WTO obligations, only the United States did not meet its burden of showing that they satisfied the requirements of an affirmative defence in the original proceeding. The United States submits that it has complied with the DSB recommendations and rulings by presenting new evidence and arguments during this compliance proceeding that do meet the burden of showing that the measures at issue satisfy the criteria of the chapeau of Article XIV of the GATS. (emphasis added) (footnotes omitted) (para. 6.4)
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Editor's Note: All parties to these proceedings are no doubt grateful for assertions like this simply for comic relief, but this is also the sort of desperate, twisted logic that might have come from a law professor too long in the tooth. Whatever the reasons for United States Trade Representative (USTR)'s argument here, neither panelists nor Third Parties were having any of it:
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The European Communities has major difficulties with the notion that a party to a dispute that needs to bring inconsistent measures into conformity could simply present the same "old" measures again in a compliance proceeding, without showing any relevant change in these measures or any modification of any aspect of these measures. In its view, an implementing party that is not bringing any new measures before a compliance panel must provide cogent reasons consistent with the dispute settlement system to support such a move. (footnotes omitted) (para. 6.6)
Well, yes, agreed Japan:
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Japan argues that the ordinary meaning and structure of Article 21.5 of the DSU indicate that the "measures taken to comply" cannot be the same measures that were the subject of the original dispute. (footnote omitted) (para. 6.7)
China, too, expressed impatience at America's heel-dragging:
Quote:
China argues that, according to the plain language of Article 21.5 of the DSU, there should be a time sequence between the "measures taken to comply" and the recommendations and rulings of the DSB. (footnote omitted) (para. 6.5)
Director General of the WTO, Pascal Lamy, speaking to a closed session of a meeting with CARICOM Ministers of Trade here today, observed that the preservation of the rules-based multilateral trading system on which the WTO was based, will ensure that, over time, the US will move to implement the rulings and recommendations of the WTO Dispute Settlement Body (DSB).
Responding to a question put to him by Antigua and Barbuda's Minister of Finance and the Economy, the Honourable Dr. Errol Cort who wanted to know how the WTO intends to ensure that the rights of its smallest members are treated in the same manner as its largest, DG Lamy opined that
it is in the best interest of the major trading nations of the world to ensure that the organs of the WTO are seen as fully functional and, in the case of its Dispute Settlement system, that its rulings and recommendations are respected and fully implemented. (emphasis added)
* Lamy also noted that, in his view - and the historical record supports this - the U.S. has unfailingly implemented the rulings and recommendations of the DSB in all instances, even in those cases where such rulings have gone against it. This, he noted, was incumbent upon all WTO members if for no other reason but to ensure the integrity of the organization's institutions.
... "We will be keeping a close watch on developments surrounding the anticipated introduction of the Frank Bill, on which we anticipate that there will be no major progress in the near term" says Minister Cort. "However, my government is of the view that it is a step in the right direction, given that the current law has had a deleterious effect of online gaming everywhere to the point where the European Union's internal market chief, Charlie McCreevy, has hinted that he may challenge the ban at the WTO," he added. (emphasis added)
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* Editor's Note: Oh, yeah? Check the accounting PokerPulse has been tracking here.
... all of which means the U.S. must act in some way?
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Yes, if the U.S. wants the world to continue doing business with it. Members that choose to remain in breach of trade obligations do so at their political peril, especially so in an increasingly interdependent world.
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Article 3.7 of the DSU provides that if measures are found to be inconsistent with the provisions of any of the covered agreements, in the absence of a mutually agreed solution, the first objective of the dispute settlement mechanism is usually to secure "the withdrawal of the measures" concerned. In a similar vein, Article 22.8 of the DSU provides that the suspension of concessions or other obligations shall be temporary and shall only be applied until such time as the measure found to be inconsistent with a covered agreement 'has been removed." Both of these provisions contemplate that compliance with the standard recommendation applicable in a so-called "violation" case will require a change regarding the measure found inconsistent with a covered agreement. (emphasis added) (footnote omitted) (para. 6.17)
Casinos, Indian tribes and other groups spent millions ($25 million in 2006, a slight increase over the previous year's total, but down from the $28.5 million spent four years ago) lobbying Congress last year as lawmakers considered bills to ban wagering online and off Indian reservations. The industry is expected to spend millions more this year as those issues heat up again in Washington.
... The spending came amid controversy over public corruption scandals involving convicted former lobbyist Jack Abramoff, who admitted to bilking wealthy American Indian gaming tribes. "Even though we didn't have anything to do with it, we all tend to get labeled," said Frank Fahrenkopf Jr., president of the American Gaming Association, which spent $900,000 last year lobbying on behalf of commercial casinos.
Still, the gambling industry fared pretty well in Washington, he said. And he expects casinos will do even better this year because of a new cast of leaders in Congress who understand the industry. They include Senate Majority Leader Harry Reid, a Nevada Democrat who has been a strong casino advocate; Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee; and Rep. John Conyers, D-Mich., the House Judiciary Committee chairman. The industry also has Republican allies in powerful posts, including Sen. John Ensign, a Nevada Republican, who now heads the National Republican Senatorial Campaign Committee.
... Poker Players Alliance, which lobbied heavily against the ban recently, hired former New York senator and poker enthusiast Alfonse D'Amato to lead the group's effort (to repeal the ban) this year. D'Amato's message to former colleagues the U.S. government could generate $3 billion in taxes a year if it regulated the industry.
... The alliance already has some support in Congress for repealing the ban. Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, told The Financial Times last week that the Internet gambling ban was one of the "stupidest" bills ever passed. Meanwhile, two Nevada lawmakers, eps. Shelley Berkley, a Democrat, and Jon Porter, a Republican, are drafting a proposal to study ways to regulate online gambling.
... Although efforts to ban off-reservation gaming died in Congress, the Interior Department is considering regulations that could restrict development of new Indian casinos on off-reservation sites. Dozens of tribes who want to build casinos — in some cases hundreds of miles from their reservations — are lobbying against the rules. But many wealthy gaming tribes support new regulations, saying the practice has led to "reservation shopping." Tribal governments are also monitoring the actions of the National Indian Gaming Commission, which wants to make bingo machines used in certain Indian casinos work slower so they won't resemble Las Vegas-style slot machines. Despite the high-stakes measures affecting Indian casinos that Congress considered last year, the $16 million tribes spent on lobbying was about 25% less than they spent in 2003, according to the Center for Responsive Politics. Experts attribute the drop-off to the Abramoff scandal. (emphasis added)
The Office of the United States Trade Representative today informed the World Trade Organization (WTO) it intends to clarify its WTO commitments with respect to Internet gambling services.
The United States is invoking procedures under Article XXI of the General Agreement on Trade in Services (GATS) in order to clarify its commitment involving “recreational services,” which was interpreted in the course of WTO dispute settlement as including a U.S. commitment to allow Internet gambling services.
“U.S. laws banning interstate gambling have been in place for decades. Most WTO Members have similar laws. Unfortunately, in the early 1990s, when the United States was drafting its international commitments to open its market to recreational services, we did not make it clear that these commitments did not extend to gambling. Moreover, back in 1993 no WTO Member could have reasonably thought that the United States was agreeing to commitments in direct conflict with its own laws,” said Deputy United States Trade Representative John K. Veroneau. “Neither the United States nor other WTO Members noticed this oversight in the drafting of U.S. commitments until Antigua and Barbuda initiated a WTO case ten years later. In its consideration of this matter, the WTO panel acknowledged that the United States did not intend to adopt commitments that were inconsistent with its own laws. However, under WTO rules, dispute settlement findings must be based on the text of commitments and other international documents, rather than the intent of the party. The United States strongly supports the rules-based trading system and accepts the dispute settlement findings. In light of those findings, we will use WTO procedures for clarifying our commitments.”
Background:
In the course of a dispute originally filed by Antigua and Barbuda in 2003, the United States’ GATS schedule was found to have included a market access commitment covering Internet gambling based outside of the United States. This finding was a result of imprecision in the drafting of the 1994 U.S. GATS schedule, combined with the application of formal treaty interpretation rules under which a country’s intent is not determinative. In fact, as even the WTO panel recognized, gambling or betting services are generally prohibited or highly restricted in the United States for reasons of public morality, law enforcement and protection of minors and other vulnerable groups, and the United States never intended to make a GATS commitment covering gambling.
The dispute has now completed the compliance phase, and the report of the compliance panel is scheduled to be adopted by the WTO Dispute Settlement Body (DSB) on May 22, 2007.
In light of these developments in the WTO dispute, the United States has decided to make use of the established WTO procedures to correct its schedule in order to reflect the original U.S. intent – that is, to exclude gambling from the scope of the U.S. commitments under the GATS. The GATS provides that when a Member modifies its services schedule, other Members who allege they will be affected by this action may make a claim for a compensatory adjustment to other areas of the GATS schedule. However, since no WTO Member either bargained for or reasonably could have expected the United States to undertake a commitment on gambling, there would be very little, if any, basis for such claims.
How will the U.S. withdraw gambling services from the GATS?
1. (a) A Member (referred to in this Article as the “modifying Member”) may modify or withdraw any commitment in its Schedule, at any time after three years have elapsed from the date on which that commitment entered into force, in accordance with the provisions of this Article.
(b) A modifying Member shall notify its intent to modify or withdraw a commitment pursuant to this Article to the Council for Trade in Services no later than three months before the intended date of implementation of the modification or withdrawal.
2. (a) At the request of any Member the benefits of which under this Agreement may be affected (referred to in this Article as an “affected Member”) by a proposed modification or withdrawal notified under subparagraph 1(b), the modifying Member shall enter into negotiations with a view to reaching agreement on any necessary compensatory adjustment. In such negotiations and agreement, the Members concerned shall endeavour to maintain a general level of mutually advantageous commitments not less favourable to trade than that provided for in Schedules of specific commitments prior to such negotiations.
(b) Compensatory adjustments shall be made on a most-favoured-nation basis.
3. (a) If agreement is not reached between the modifying Member and any affected Member before the end of the period provided for negotiations, such affected Member may refer the matter to arbitration. Any affected Member that wishes to enforce a right that it may have to compensation must participate in the arbitration.
(b) If no affected Member has requested arbitration, the modifying Member shall be free to implement the proposed modification or withdrawal.
4. (a) The modifying Member may not modify or withdraw its commitment until it has made compensatory adjustments in conformity with the findings of the arbitration.
(b) If the modifying Member implements its proposed modification or withdrawal and does not comply with the findings of the arbitration, any affected Member that participated in the arbitration may modify or withdraw substantially equivalent benefits in conformity with those findings. Notwithstanding Article II, such a modification or withdrawal may be implemented solely with respect to the modifying Member.
5. 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.
U.S. to compensate not just Antigua but all Member nations with an interest in the super-sized U.S. cconsumer market?
Costs, trade-offs that affect the ongoing GATS negotiations:
- The Internet gambling market is large and growing rapidly
- Any WTO nation is free to join the negotiations, not just Antigua
- The EU and other nations are seeking U.S. commitments already on:
Water services
Postal services
Education
Electricity Services
Yes, and slide 22, which cautions:
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If the WTO upholds the U.S. commitment on gambling, GATS covers domestic, not just Internet, gambling.
GATS market access rules - prohibit states from limiting the number of service providers, operations or legal structure.
GATS national treatment rule - would prohibit states from limiting licenses based on nationality, residency or presence.
Slide 23 illustrates with a few examples from New Jersey:
Quote:
Potential market access conflicts
- license limited to hotel and convention centers
- 100% ownership required (no joint ventures)
- Must be New Jersey corporation
- Limits on foreign currency volume per day
Potential national treatment conflicts
- office required in facility
- must bank in New Jersey
- employees must reside in New Jersey
Antigua & Barbuda has called on the 150 members of the World Trade Organisation (WTO) to file claims for compensation against the United States – the latest move in its trade dispute with the US over Internet gambling. Yesterday in Geneva, the WTO Dispute Settlement Body’s ruling on the matter was formally adopted by the WTO. That ruling declared the US in continued violation of its commitments under the WTO General Agreement on Trade in Services (GATS) in relation to the restrictions placed on remote gambling. Since the ruling was issued in March, however, the US has declared its intention to change its GATS commitments so that it is no longer pledged to allow access to Internet gambling companies, a move that it says will effectively put an end to the dispute with Antigua & Barbuda.
In response to this, Antigua & Barbuda’s attorney at the WTO Mark Mendel said that Antigua & Barbuda is actively encouraging WTO members to claim compensation from the US if it attempts to break the treaty. Mendel explained that this option is open to members of the organisation, who can file a claim for “future damages” based on the failure of the US to honour its GATS commitment, even if they have no current stake in the Internet gambling industry. “We have our decision. We have the WTO ruling in our favour and they can’t unilaterally change that,” he said, explaining Antigua & Barbuda’s position on the US tactic. To attempt to do so, he added, could be extremely expensive for the US government. “Any WTO member can file a claim for compensation against them and although we are very small and we as a country may not have that much of an impact on the American economy, if as many countries as we think might file claims do, then that can have an extraordinary impact,” he said. ... the hope is that the US will rescind its decision to back off from its treaty commitment and return to responsible negotiations. ... implications of the US manoeuvre expand beyond the Internet gambling issue.
“We met with the Chinese delegation and they have a very considerable interest in the use of this tactic and whether the US is going to comply with their obligations to China under the same scenario. If you can just unilaterally withdraw your commitments, then it changes the whole landscape and it’s something that I don’t think anybody really expected or anticipated,” Mendel said. (emphasis added)
Eight nations so far reach out for a share in unprecedented GATS-slash compensation.
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Antigua's estimate of $3.443 billion (U.S.) in potential losses was conservative, (Antigua's lead counsel Mark) Mendel said, suggesting that the EU and other countries could claim substantially higher sums. This, he suggested, could ultimately push the cost of compensation so high that the U.S. would have to face changes to unrelated services sectors - affecting access to crucial markets - merely to protect its domestic gambling sector.
The Caribbean island nation of Antigua and Barbuda is no longer alone in its efforts to make it harder for the US to avoid complying with multiple WTO dispute rulings against Washington's restrictions on overseas internet gambling. Eight Members, including the EU, Costa Rica, and Japan served notice before a 22 June deadline that they will seek compensation for lost revenues potentially worth billions of dollars if the US uses rarely-invoked General Agreement on Trade in Services (GATS) procedures to explicitly exclude internet gambling from its multilateral liberalisation commitments.
Meanwhile, Antigua announced that it would seek to impose USD 3.443 billion in annual retaliatory sanctions against a range of US patents, copyrights, trademarks, and other intellectual property, as well as services companies. ... In the document detailing the sanctions it intends to impose (WT/DS285/22), Antigua observed that retaliating against US goods or services would have a "disproportionate adverse impact" on its own population: 48.9 percent of the country's goods and services imports come from the US, but total bilateral trade accounts for less than 0.02 percent of the US' total exports. It thus argued that retaliating in services alone - for instance, by barring some US services companies from operating in the country - would be vastly inadequate to recoup the over USD 3.4 billion in losses it claims to have suffered.
Antigua claims that prior to the US's move to block overseas gambling, the sector accounted for over 10 percent of GDP, and was the fastest growing segment of the island nation's roughly USD 900 million economy.
WTO rules provide for countries to ordinarily retaliate under the specific WTO agreement that has been violated - that is, sanctions against goods when merchandise trade is at issue, services for services, and so forth. However, if this is unlikely to be effective, they allow governments to 'cross-retaliate' against other sectors, such as intellectual property. This has been extremely rare in practice: in 2000, Ecuador received the right to impose USD 200 million in sanctions against EU intellectual property in a dispute over trade in bananas, but chose not to do so.
Antigua argued that cross-retaliation was necessary, since its gaming industry and overall economy would continue to suffer serious losses unless the US withdrew its gambling restrictions. It thus asked for authorisation to suspend its WTO obligations to protect US copyrights, trademarks, industrial designs, patents, and data protection, as well as to suspend liberalisation commitments in the communication services sector. ... However, even if Antigua were to be allowed to legally break US patents, trademarks, and copyrights, the legitimate copies thus produced would only be eligible for sale in the country's tiny internal market. It is not clear whether Antigua could, for instance, export copied drugs to say, the EU, without breaching international or domestic rules.
The potential cost to the US of maintaining its current course jumped dramatically last month when seven other Members notified the WTO that they would seek compensation if Washington moved to alter its services commitments. The identity of the countries is confidential, as is the compensation they might seek. However, gambling industry news sources suggest that apart from Antigua, they are the EU, Costa Rica, India, Canada, Macau, Australia, and Japan. Gambling companies based in Costa Rica and the UK have been hit hard by the US ban, losing business as well as share value. ...
US officials have expressed scepticism about the merits of the compensation claims. There is little precedent to indicate how the compensation claims might unfold. GATS Article XXI has been used only once in the WTO's history, when the EU made new market-opening commitments as compensation for withdrawing certain concessions that had been offered by some of the ten countries that acceded to the bloc in 2004. In theory, compensation should be offered under the GATS; the rules do not mention whether this could be done under other WTO agreements. Procedurally, if governments cannot agree on compensation, they can seek arbitration. ...
Another 15 nations support Antigua's bid to re-open U.S. gambling market:
Antigua and Barbuda says it has gained the full support of fellow Caribbean Community (CARICOM) member states in its ongoing Internet gambling dispute with the United States. Prime Minister Baldwin Spencer said regional leaders have thrown their full support behind his country and were calling on the US to respect the World Trade Organization (WTO) recent ruling on the issue. "This matter has been fully ventilated at the conference and the position of CARICOM is that Antigua and 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," he told a news conference.
... Following the case the Spencer administration filed 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 4,000 jobs and a lost opportunity to earn millions of dollars in foreign exchange. (emphasis added)
In a most remarkable development following closely on the heels of a meeting in Washington between US President George W. Bush and heads of government of Caribbean Community (CARICOM) States, the United States has taken an action at the World Trade Organisation (WTO) that will hurt the economies of Caribbean banana exporting countries.
On July 12th, the Dispute Settlement Body of the WTO agreed to set up a panel to examine the US complaint against the EU banana regime. Undoubtedly, the decision of the Panel will go the route of every other panel that has pronounced on this issue since May, 1997: it will instruct the EU to change its banana importing regime to stop any advantage, however miniscule, that African, Caribbean and Pacific (ACP) states enjoy.
This is because WTO rules - formulated largely by the world's richest nations especially the U.S. and the EU - say in general terms that the rules apply equally to all however large or small, rich or poor. ... the EU banana importing regime would be wrong to give any advantage, however slight, to small and vulnerable countries. The EU regime, which has been battered since 1997 because of challenges at the WTO led by the US, does give a little advantage to small Caribbean countries to supply a miniscule amount of the EU's banana imports. And, this is the point: it is a little advantage for only a very small share of the market. Equity and fairness should dictate that a little advantage in these circumstances is wholly acceptable.
... If this most recent request by the U.S. ... wasn't' so seriously harmful to small Caribbean countries, it would be laughable... The reality, however, is that it is not any of the Latin American nations named in the complaint that the US is trying to protect; it is U.S. multinational companies such as Chiquita that have large banana plantations in these countries. It was these multinationals who were behind the first U.S. complaint to the WTO back in 1995. ... Latin American banana exports to the EU - largely from the plantations controlled by Chiquita, Dole and Del Monte - already have four-fifths of the market. The remaining paltry one-fifth is shared between the ACP countries.
...Having refused itself to comply with a WTO Panel ruling that found against the US and in favour of the small Caribbean island, Antigua and Barbuda, over Internet gaming, the USTR's office boldly states in its complaint against the EU banana regime that: "The EC failed to bring its import regime for bananas into compliance with its WTO obligations by the end of the reasonable period of time". It seems that rules can be conveniently invoked and even more conveniently ignored. (emphasis added)
Quote:
Editor's Note: We asked Sir Ronald July 20/07 whether he believed the bananas iniative was a reaction to the WTO compensation claims announced in response to the U.S. decision to withdraw gambling services from GATS, but he said no, "it has much more to do with Chiquitas lobbying as presidential elections oom."
United States Trade Representative Susan C. Schwab today announced that the United States has requested a World Trade Organization panel to review whether the European Union’s (EU) banana import regime breaches the EU’s WTO obligations.
The U.S. request relates to the EU’s apparent failure to implement the WTO rulings in a 1996 proceeding initiated by Ecuador, Guatemala, Honduras, Mexico and the United States. That ruling said the EU’s banana regime discriminates against bananas originating in Latin American countries and against distributors of such bananas, including several U.S. companies. The EU was under an obligation to bring its banana regime into compliance with its WTO obligations by January 1999.
”We regret that efforts between the EU and its Latin American trading partners to negotiate a solution to the banana issue have not been successful,” said Ambassador Schwab. “We share the concern of Ecuador and several other Latin American banana exporters regarding the continued existence of a discriminatory tariff rate quota in the EU’s current banana regime. We are hopeful that this formal step will facilitate the removal of that discrimination.”
A similar request for panel establishment was submitted by Ecuador on February 23, and a compliance panel was composed in response to that request on June 15. Ecuador and the United States had been authorized once before by the WTO to take action against the EU for its failure to implement the 1996 rulings. The United States terminated that action after the EU committed to shift to a tariff-only regime for bananas no later than January 1, 2006.
Despite these commitments, the EU banana regime put in place on January 1, 2006 features a zero-duty tariff rate quota that is allocated exclusively to bananas from African, Caribbean, and Pacific (ACP) countries. Bananas of Latin American origin do not have access to this duty-free tariff rate quota and are subject, instead, to a 176 euro/ton duty.
With the deadline fast approaching for the signing of a new agreement that will impact greatly on Caribbean trade, a one-day workshop on the regional consultation on the new Economic Partnership Agreement (EPA) was held at the Sunset Shores hotel, St Vincent on Wednesday September 25. Journalists from Barbados, Dominica, St Lucia, St Kitts, Antigua and Grenada were flown to St Vincent to attend the workshop which was aimed at creating a greater understanding of what the new EPA set to be implemented by Dec. 31/07 meant for the region.
The new agreement being negotiated between the European Union (EU) and the African, Caribbean and Pacific (ACP) States, will replace the non-reciprocal preferences ... and ... remove barriers to trade between the EU and the ACP. Before ... EPA, ... countries were allowed to send goods and services from their regions into Europe under what they called preferential arrangements. ACP countries were given full access to the European market for predetermined quantities of their produce. No tariff or duties were applied at European ports although duties were applied to European products entering ACP markets. ... Today, such preferential arrangements no longer exist because the ]World Trade Organization has deemed ... it discriminates against other countries.
In 1996, the European Union went to the WTO to seek a waiver to allow the ACP sufficient time to put new measures in place for a smooth transition to the new trade agreement. For the past 10 years, ACP countries have been operating under the waiver for the Cotonou agreement. If the new agreement is signed, the EPA will replace that waiver. While there are some parts of the draft of the new agreement that are workable, like the supporting and building upon of the regional integration process, tariff liberalization is one of the key issues creating sticking points in negotiations as regional consultants say, there are sectors that need to be protected and should therefore be excluded from tariff reduction. They say that safeguards are necessary for select agricultural products in the face of competition.
According to Jethro Green, chief coordinator for CaFAN, the hotel industry is also a sector that needs to be protected as it could be affected greatly if the waiver is signed. “Additionally, our agricultural and small business cannot survive an open market,” he said. He then referred to Mexico’s free trade agreement with the European Union which resulted in an attempt by the union to exploit cheap labour to get cheap goods, to sell in lucrative markets to make more money.”
The WTO sets the flooring for tariff reduction. Countries would be free to go beyond WTO stipulations but not any less. The formation of a new integration unit, Cariforum, which includes the OECS countries and the Dominican Republic has also been a cause for concern as, (Christopher) Sinclair (from the Caribbean Policy Development Center) put it, "The Dominican Republic is like a sore thumb sticking out. “Normally Caricom negotiates as Caricom in the ACP but because we regionalised, the EU stipulated that we negotiate as what is called Cariforum, which is Caricom and the Dominican Republic. So you add now a different color to that arrangement. We have our own integration arrangement in the Caribbean called CSME of which to Dominican Republic is not a part. The EU insisted that if we are going to negotiate and the Dominican rep is part of the process they have to join with Caricom to negotiate as one unit.” He says that proves difficult as Caricom is not fully implemented as an economic unit with the Dominican Republic, which has always looked northwards to the U.S. rather that southward towards the islands. ... There are fears that the agreement will have the reverse effect and increase rather than reduce poverty and that the new EPA will be just another CWC experience. Failure to meet the deadline will result in the expiration of the WTO waiver for the Cotonou Agreement.
Not everyone is pleased with the agreement, though:
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Consistently, the approach the EC has been taking is not conducive to fostering an EU-ACP cooperation on the basis of ‘equality of the partners and ownership of the development strategies,’ in which ‘the ACP States shall determine the development strategies for their economies and societies in all sovereignty’, as the Cotonou Agreement mandates them to. This report has shown that the EC has:
● dismissed pro-development proposals from the ACP
● shown disregard towards ACP institutions and processes
● persisted in forcing the Singapore issues onto the negotiating table even where they are clearly not wanted
● increasingly taken advantage of the ACP’s dependence on aid to place immense pressure on the ACP to accept its proposals
● threatened the loss of market access to non-LDC countries unwilling to sign an EPA in direct contravention to the EC’s obligation under the Cotonou Agreement to provide at least equivalent market access on 1 January 2008
● refused to consider alternatives despite the fact that the ACP have requested them and research has shown they exist
● ignored the dissenting voices of actors mandated by the Cotonou Agreement to be actively involved in the EU-ACP so-called ‘partnership’
● insisted on meeting the end of year deadline despite the African and Pacific regions clearly stating that more time is needed for pro-development trade agreements to be reached. (From Partnership under pressure: an assessment of the European Commission’s conduct in the EPA negotiations by Mari Griffith (Tearfund) and Sophie Powell (Traidcraft), with input from Matt Griffith (CAFOD), Tim Rice (Action Aid), Tzvetelina Arsova (Christian Aid), Paul Cook (Tearfund), Mike Gidney (Traidcraft) and Paul Goodison (European Research Office), Conclusion and recommendations, p. 31)
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