WASHINGTON, DC -- (PRESS RELEASE) -- The international
Internet gambling dispute, potentially valued at billions of dollars,
continues. Costa Rica and Antigua separately filed for World Trade
Organization (WTO) arbitration on January 28, seeking compensation from the
United States as a result of the U.S. withdrawal of its commitment on
cross-border gambling services. The new arbitration requests could
potentially derail the settlement for compensation agreed to late last year
by the U.S. and the E.U.
The arbitration filing makes it possible for the E.U. to reconsider its
settlement with the U.S. and join the arbitration proceeding, opening up a
new phase in the Internet gambling trade dispute.
"The decision by Antigua and Costa Rica to take the United States to
arbitration will test the limits of the WTO process and squarely challenge
the U.S. resolve to withdraw its GATS commitments," said Nao Matsukata,
formerly Director of Policy Planning for USTR Robert Zoellick and now a
Senior Advisor for Alston and Bird LLP. "If the U.S. finds the decision of
the WTO arbitrator unacceptable, under procedures outlined in the GATS, it
could unilaterally withdraw, creating an unprecedented crisis of confidence
in the global trading system. The best solution remains for Congress to
pass legislation that would create a legal and regulated framework for
online gaming in the United States and for the United States to remain in
the GATs schedule to provide all providers legal protection under the WTO."
U.S. withdrawal from GATS following this new arbitration carries the
risk of expensive new sanctions levied against U.S. exports and
intellectual property. "If the U.S. withdraws following another adverse
arbitral decision, the country would face potential retaliation from all
WTO Members affected by the arbitration, a pool of countries including the
EU, Canada, and Japan," added Matsukata. "Inviting sanctions at a time when
both the U.S. Administration and Congress are both striving to stimulate an
economy on the edge of recession seems foolhardy at best, especially when
draft domestic legislation already exists that would create a renewed flow
of both business and tax revenues throughout the nation's gaming sectors."
Lode Van Den Hende, a W.T.O. expert and trade attorney with Herbert
Smith in Brussels said, "There is a real possibility that the arbitration
body will find that unless the U.S. provides commercially meaningful
compensation to Costa Rica and Antigua, it cannot withdraw its commitment
on gambling, without risking trade sanctions from the affected parties."
Costa Rica's action raises questions about what India and Macao might
do as the other nations that have yet to come to terms with the U.S. over
the withdrawal of the Article XXI commitment related to cross-border
Under the WTO's GATS Article XXI rules, any country withdrawing its
market access must provide compensation to affected countries that
maintains a general level of mutually advantageous commitments not less
favorable to trade than that provided for in schedules of specific
commitments prior to the negotiations. The U.S. negotiated settlements with
four of the eight nations seeking compensation - the E.U., Japan, Canada,
and Australia, providing compensation, in the form of markets access to
U.S. domestic postal services, warehousing, R & D, and technical testing
Costa Rica, Macao, India and Antigua did not reach an agreement with
the U.S. over the withdrawal of its gambling commitment, as the above
market sectors offered by the U.S. were of no commercial interest to those
After the WTO ruled that the U.S. had violated trade rules in barring
Antiguan online gaming operators from the U.S. market, the U.S. withdrew
its WTO obligations with regard to free trade in the gambling area. The
U.S. decision to withdraw its market commitments, in order to comply with
the WTO, is the first instance of such an action by a WTO member. The
action by the U.S. sets a precedent that other WTO members could copy in
order to back out of their own commitments once they consider them
inconvenient. In turn, the Costa Rican and Antiguan arbitration requests
are the first ever in response to a withdrawal of commitments.
It is possible that these arbitration requests will impact the way in
which Antigua decides to implement the $21 million per year in trade
sanctions it received as compensation for U.S. noncompliance with WTO
rulings in the gambling dispute. An option available is for the country to
take the compensation in the form of intellectual property waivers.
"It is time for the U.S. to end its hypocritical practices that
discriminate against foreign online gambling operators, while allowing U.S.
gambling operators to accept bets for certain forms of gambling," said
Jeffrey Sandman, spokesperson for the Safe and Secure Internet Gambling
Initiative. "Regulation of Internet gambling should be supported as a means
to resolve this trade dispute."