Antigua considers new case against USA at World Trade Organization

antigua-wto-online-gambling-caseMany in the gambling industry thought they’d received an early Christmas gift following December’s surprise announcement by the US Department of Justice that the Wire Act pertained only to online sports betting. For the nation of Antigua, it was like getting a Christmas gift they’d been promised years ago, but appeared to have got lost in the mail. For Antigua, the DoJ opinion appeared to be the first serious acknowledgement US authorities had given the World Trade Organization’s ruling that America needed to get its online gambling house in order.

In 2003, when Antigua first asked the WTO to examine America’s online gambling stance, America’s defense centered on its proclaimed necessity to protect its citizens from the perils of online gambling. In 2005, a WTO Appellate Body concluded that America had the right to insist on such protection, but it couldn’t claim to be protecting its citizens from foreign firms while simultaneously permitting its domestic horse racing industry to offer interstate online wagering. This contradiction was a clear violation of US obligations under the General Agreement on Trade in Services (GATS). The WTO gave the US 11 months to either allow Antigua access to the US market or shut down US domestic online horse wagering.

A year went by without any action from the US, so Antigua went back to the WTO. In March 2007, a WTO Compliance Panel determined that the US had not lived up to its obligations and thus sanctions should be imposed. When it came time to determine the amount of those sanctions, Antigua went high ($3.4b) and the US went low ($500k). In December 2007, the WTO decided Antigua was entitled to $21m in annual damages. If the US refused to pay, Antigua was permitted to collect by other means, such as disregarding intellectual property obligations to the US. Antigua has yet to exercise this option, still hoping the US will choose to honor its treaty obligations. In the meantime, the total outstanding claim has accumulated to over $120m.

mark mendel
Mark Mendel

Mark Mendel, Antigua’s lead attorney in the WTO dispute with the US, told that the DoJ’s pre-Christmas bombshell had “vaporized … the entire defense. The American government has now admitted that we were right all along in our assertions about US gaming law. It is going to be very hard for them to fall back on the ‘old reliable’ that they ban all remote gaming because it is incapable of regulation. I am hopeful that they will realize at this point that settlement is in everyone’s best interest and engage on a constructive basis with Antigua.”

Problem is, as Mendel knows all too well, “to date, [the Americans] have simply ignored the whole thing.” It’s tempting to conclude that the US attitude towards the WTO is like how Robert De Niro’s character in Casino described the betting habits of Joe Pesci’s character Nicky Santorro. “When he won, he collected. When he lost, he told the bookies to go fuck themselves. I mean, what were they going to do, muscle Nicky? Nicky was the muscle.”

Looking ahead, Mendel says Antigua is considering a number of options, including “commencing a new case altogether.” In arriving at the $21m annual compensation figure, the WTO used a formula that considered only Antigua’s theoretical share of the US online horse wagering market. Given the imminent expansion of online betting options in the US, that horse-racing-only formula now seems even more insufficient.

The US intransigence toward the WTO ruling is in sharp contrast to its response when the shoe is on the other foot. For five years, the US was locked in a similar battle with China over that nation’s refusal to allow an unimpeded flow of Hollywood films into the country. China’s argument – that it blocks US movies to protect the morals of its citizens – directly mirrored the US anti-gambling stance. Yet the US claimed to be “troubled by the lack of any apparent progress by China” on complying with WTO rulings and warned that China could face US trade sanctions if it failed to bring itself into compliance.

But hope springs eternal. In February, the US and China agreed on a deal that would allow 14 extra US films per year into the country. China also agreed to bump up the US share of Chinese box office receipts from around 15% to 25%. The US Trade Representative trumpeted the agreement as having removed barriers that “artificially reduced the revenue US film producers received from their movies in the Chinese market. This agreement will help to change that.”

So compromise is possible. But as one of the chief importers of Chinese-made goods, the US held significant leverage in this tilt. Antigua is simply too tiny, its trade with the US too insignificant, for the US to worry about blowback from ignoring the WTO ruling. Which is sad, because the international agreements nations enter into are valid only if the rules apply to all parties equally. America prides itself on being a Christian nation. On this Easter weekend, it’s worth remembering that Christ instructed his followers that whatever they did to the least of His brothers, they also did unto Him. The US should think hard about how they treat the least of their trading partners, lest the rest of the world draw unhappy conclusions about US attitudes towards other international agreements.