Casinos.co.uk: Casino News Archive
Thursday 1st April 2004
WTO PANEL RULES AGAINST UNITED STATES
Late this month (March 2004), a WTO Dispute Resolution Panel (the “Panel”) released a confidential report to WTO Member State Parties in the WTO dispute United States - Measures Affecting The Cross-Border Supply Of Gambling And Betting Services, WT/DS285. The confidential decision reportedly finds that the United States is violating its commitments under the General Agreement on Trade in Services (GATS) by not providing market access and/or national treatment under GATS to Internet gambling services provided by operators licensed by the Government of Antigua and Barbuda.
At issue in this case is the provision of internet gambling services to customers in the United States from operators located in Antigua and Barbuda. Antigua and Barbuda argued that certain U.S. federal laws in combination with various U.S. state laws have the effect of a complete prohibition on the supply of gambling and betting services from outside the United States to consumers in the United States. Antigua and Barbuda asserted that the United States has made a GATS commitment in relation to gambling and betting services on its schedule of specific commitments and thus, the claimed total prohibition on gambling and betting services provided from outside the United States violates various U.S. obligations under GATS, including GATS Article XVI (market access), Article XVII (national treatment), Article VI (administration of U.S. measures), and Article XI (relating to restrictions on international transfers and payments).
Although the final version will not be released to the public until late May at the earliest, the United States has already announced its intention to appeal the adverse ruling to the WTO Appellate Body. “We intend to appeal and will argue vigorously that this deeply flawed panel report must be corrected by the Appellate Body,” said Richard Mills, a spokesman for U.S. Trade Representative Robert Zoellick, in a press statement made March 24th.
Potential Implications for U.S. Laws and Enforcement Policies with Respect to Internet Gambling
The ramifications of the panel report cannot be fully appreciated until it is publicly released. However, Internet gambling service providers should not be lulled into believing the WTO Panel Report has changed U.S. laws or policies, or that the Department of Justice will halt its ongoing investigations into potentially illegal on-line activities. The WTO report is not final and will be appealed.
Moreover, even if the Appellate Body ultimately agrees with the Panel’s decision, such a decision does not affect U.S. law. Only Congress and the President can amend U.S. law, and we have witnessed years of efforts of the U.S. Congress to amend tax laws to comply with the WTO Subsidies and Countervailing Measures Agreement. Here the stakes are tiny in comparison, and the U.S. Government may prefer to allow Antigua and Barbuda to impose trade sanctions (which will also harm that country) or pay compensation rather than amend its laws. Although certainly the U.S. Administration could in theory adapt and narrow its reading and enforcement of those laws in response to the case, such a decision is unlikely given the quickly announced decision to appeal. Such an attitude would also be in direct conflict with existing US government policy. In short, the release of the confidential report changes nothing from the perspective of the legal risk of providing internet gambling services in the United States.
The panel report could, however, have significant ramifications for the United States and other WTO Members in the area of services (GATS). Relatively few WTO dispute settlement cases have involved GATS, but services are an increasingly important part of U.S. exports and the exports of other developed nations. To reach the reported result, the Panel must necessarily have concluded that: (1) Antigua and Barbuda met their prima facie case; and (2) the United States made a commitment in relation to gambling and betting services in its schedule of GATS commitments. Both findings, if upheld on appeal, could have implications for the WTO dispute resolution generally and, trade in services and on-line gaming more specifically.
Potential Implications for WTO Dispute Settlement
First, the United States argued that Antigua and Barbuda failed to meet the burden of proof as to the existence and meaning of the U.S. measures it is challenging. Antigua has argued that it is challenging every piece of U.S. legislation that could be construed as forming a part of the United States’ total prohibition on the cross-border supply of gambling and betting services and that the statutory provisions that it has submitted are those most likely to form part of the total ban. The United States contended that Antigua and Barbuda cannot make out a prima facie case unless it specifically identifies each measure it is challenging and explains how each of these specific measures is interpreted under U.S. law. To reach its reported decision, the Panel must have sided with Antigua and Barbuda. If upheld by the Appellate Body, this decision would make it easier to bring WTO dispute settlement cases in situations involving large numbers of laws and regulations. Instead of establishing their cases out front, small WTO member states would be able to rely on the Panel process to bring out whatever facts and laws the Panel believes is relevant to its decision. This reduces the cost of the lawsuit, and also provides some opportunities for “gaming” the system. If the requirements of a prima facie case are lower, WTO complainants can hold back evidence and supporting argumentation.
Potential Implications for GATS and Internet Services
Second, the Panel necessarily made another significant decision by finding that the United States made a commitment in relation to gambling and betting services in its schedule of GATS commitments. Antigua and Barbuda claimed that the U.S. has made a commitment for gambling and betting services within Sector 10 of the U.S. schedule, which covers recreational, cultural, and sporting services. Sector 10A of the U.S. schedule covers entertainment services and Sector 10D covers other recreational services (except sporting). Antigua and Barbuda argued that gambling services are covered under Sector 10.D of the US schedule because the corresponding United Nations Central Product Classification (the “CPC”), which defines all goods and services, and the Services Sectoral Classification List (MTN.GNS/W/120) entry, section 96492, specifically mentions gambling and betting services. However, the United States has responded that, although other countries chose to use the CPC as the basis for their schedules, the United States chose not to, and so is not bound by the category descriptions contained in the CPC.
Regardless of the precise rationale used by the Panel to find a GATS commitment by the United States, the Panel nevertheless read “other recreational services” broadly – to include a topic not specifically stated, based on a schedule (the CPC) not adopted by the United States. If the Appellate Body affirms, this would form a basis for other WTO members to argue for the opening of other service sectors not explicitly mentioned in other WTO member GATS schedules. In short, it could encourage WTO GATS disputes over commitments the respective countries never considered they made. This is unlikely to encourage WTO members to be generous with services commitments in Doha and future WTO negotiating rounds.
In addition, it is possible (although we do not know at this time) that the Panel determined that the United States failed to honor its commitment to extend national treatment under Article XVII to Antiguan internet services and service suppliers. Since the United States treats internet gambling services identically under the law, such a decision would likely have rested on the grounds that internet gambling services and services suppliers are “like” land-based (e.g. casino) gambling services and service suppliers. If the Panel made such a “like services” finding, and it is upheld by the Appellate Body, the ruling could be a significant for internet service suppliers, who could use it to attack other restrictions imposed by WTO Members on internet services only. Thus, depending on its precise findings, this panel report could have broad implications for many types of internet-based services which have become substitutes for conventional services.
Potential Implications for Internet Gambling
Finally, and most important from the perspective of internet gambling service providers, this decision could have long term implications if upheld by the Appellate Body. Although the United States may prefer to allow Antigua & Barbuda to impose trade sanctions rather than change its law, a decision by the Appellate Body (and indeed even this decision) would open the doors to future WTO dispute settlement cases in the internet gambling area. Other WTO members with active internet gaming industries (for example, England) and more economic clout vis-ŕ-vis the United States may follow Antigua’s lead. If so, the United States may need to take another look at its laws and policies on Internet gambling.
Potential Implications for the EC Internet Gaming Policy Developments.
The EC Commission, who has the sole and exclusive competence on cross border services in GATS, did intervene in this case on behalf of the European Community. It is the Commission’s view that this case provides a unique opportunity to clarify whether the US GATS schedule had to be interpreted in accordance with the standards used by the EC and most of the WTO Members (the CPC). At the same time the Commission did consider that taking the side of Antigua and Barbuda was without further risks as the European Community has made no commitment regarding gambling services.
As such the outcome of the WTO case can have no impact on the current EC debate on gambling. Both the review of the e-commerce directive and the discussion about the Services directive are only addressing Internal market questions whereby the Commission intends to study whether there is a clear benefit to regulate gambling ( and on-line gambling) at European level rather than to maintain the current national regulatory systems before taking any regulatory initiative. The Amsterdam Treaty protocol on subsidiarity requires indeed the Commission to make such study.
However, if the Appellate Body upholds the Panel Report, which is at this stage premature to rely upon, it would mean that other WTO Members can use the decision to argue that the US has a commitment to allow cross border supply of gambling services from their internet gambling service suppliers. Article XVI GATS requires indeed each Member to accord to services and service suppliers of any other Member treatment no less favorable than that provided for under the terms, limitations and conditions agreed and specified in its Schedule.
Considering the recent policy developments regarding remote gambling in the UK, it will be interesting to see what the UK position will be in relation to this WTO case. The DCMS position paper on “The future regulation of remote gambling” from April 2003 is highly interesting in this regard. It expresses “the Government’s desire to see Britain become a world leader in the field of online gambling and yet , at the same time, be sensitive to any reservations that there may be in other jurisdictions” Does this mean that the UK shall take any opportunity to press the EC Commission to continue the WTO process to get access to the US gambling market for European, understand British, online gambling service suppliers or shall the UK Government be sensitive to the US reservations? The answer to this question could decide about the emergence of a new transatlantic trade dispute.
From a European perspective, it will also be interesting to see to what extent the WTO panel has investigated whether the US measures can be saved under Article XIV GATS. Article XIV GATS sets out the circumstances in which states could be excused for not complying with their obligations under the GATS. It states, inter alia, that Member governments shall not be prevented from adopting and enforcing certain specific kinds of regulations, such as measures “necessary to protect public morals or to maintain public order” or measures “necessary to secure compliance with laws or regulations”, provided that such measures are neither “arbitrary or unjustifiable discrimination” nor “a disguised restriction on trade in services”. Based on a statement made by US Trade Representative Robert Zoellick on March 25th, it appears that the Panel completely ignored the public moral exception, which could be grounds for an appeal to the Appellate Body.
In its gambling jurisprudence, the European Court of Justice has paid considerable attention to several public order objectives to assess whether or not national gambling restrictions are in harmony with the EC Treaty principles. The interpretation of Article XIV GATS by the WTO panel, could also have an impact on the way European courts will evaluate the proportionality of national gambling restrictions.
Source:OnlineCasinoNews
| Discuss this story in the Gambling.co.uk Forums. Last five forum Posts: |
|
|
|
|
|
|
|
|
|
