On Friday, the deadline arrives for World Trade Organization (WTO) members to request compensation from the United States if they believe the country's refusal to revise its position on I-gaming--in its current manifestation, declared illegal by the WTO--will adversely affect online gambling businesses. Late Tuesday afternoon, news broke that the European Union had notified the United States of its intention to seek compensation, after the October 2006 enactment of the Unlawful Internet Gambling Enforcement Act (UIGEA) effectively laid waste to a market worth an estimated $15.5 billion.
So, IGN asked the experts:
What does this move by the European Union mean, and will other WTO members step forward to seek restitution?
Bruce Zagaris: The announcement that the European Union is seeking compensation from the United States for withdrawing its GATS commitment on Internet gaming services is significant, both from political and economic perspectives. Until now, Antigua and Barbuda has been fighting alone against the superpower.
Recently, Brazil said it would demand compensation and now the European Union joins. Economically the European Union has many firms adversely impacted. So it has a right to demand substantial compensation. It is likely also to have an impact on other countries who may also demand compensation, so that the economic consequences for the United States will be quite high.
It will also likely galvanize the 40 or so jurisdictions the U.S. Stop Tax Haven Abuse Act will blacklist. Those governments are likely to file a petition in the WTO against the United States for its discriminatory treatment of financial services.
Bruce Zagaris is the founder and editor-in-chief of the International Enforcement Law Reporter. He is a partner in the law firm of Berliner, Corcoran & Rowe LLP, based in Washington, D.C. Bruce obtained his B.A., J.D. and LL.M. from George Washington University. He is an expert in the field of international law; his work has appeared in numerous law reviews, and he has been quoted in the Wall Street Journal, the New York Times, CNN, and CNBC.
Mark Mendel: We expect a few other countries to submit claims as well. What it really means is that the United States is in a horrible position, as the combined claims for compensation in the potentially very lucrative remote gambling market could be in the double-figure billions. All of a sudden, you will find other industries in the United States facing high import tariffs or import restrictions from the European Commission (EC) and other countries that may well be disastrous for those industries--which need not have any connection with gambling at all. This move by the United States to try to remove the gambling commitment is likely to be quite a blunder as these innocent industry participants get punished in order that the United States can maintain trade barriers to free competition in gambling services.
The EC will be able to demonstrate a very large damages figure due to the withdrawal of the commitment--several billion annually, we expect. The EC will then have the ability to offset that several-billion figure in high tariffs against various American goods and services as it may pick and choose. So, for example, an American auto-parts maker could find its exports to Europe hit with massive tariffs that effectively shut it out from the market.
It will be interesting to see how this plays out, but I would consider this another poorly thought-out strategy by the United States that is going to prove extremely problematic very quickly.
Mark Mendel has practiced law in El Paso since 1981, mainly in the areas of business, tax and finance law. His business practice is focused on financing matters, including registered public offerings of debt and equity securities, private placements of offerings of small and large businesses, securitized lending transactions and large, offshore offerings of securities. He spends a significant amount of time on the representation of Mexican and other foreign individuals and business entities in financing and business transactions in the United States and elsewhere. In addition, a large part of his practice focuses as bond counsel and underwriters counsel in public and private offerings of municipal debt. Since 1998, Mark has devoted a substantial part of his practice to representing Internet gaming companies, culminating with his representation of Antigua and Barbuda in its WTO dispute over cross-border gambling services with the United States.