Inside Asian Gaming

A 21 36 t face value, the ongoing dispute be- tween Antigua and the United States regard- ing remote gambling would appear to be an issue of little consequence—a largely unno- ticed case involving a small nation fighting for the opportunity to market a marginal product, in this instance parimutuel-related online services, to Americans. But a recent World Trade Organization ruling on the case, and the US government’s reaction to it,has created amaelstromof con- troversy that could have long-term ramifica- tions for the economies of the United States, the European Union and other nations. For those unfamiliar with the Internet gaming feud between Antigua and the Unit- ed States, it essentially stems from a 2004 de- cision by the US government that prohibited non-US Internet gaming companies from operating inside its borders—something the United States as aWTO member was entitled to do so long as domestic businesses were also barred from offering online wagering. However, the US law had provisions allow- ing for the continuation of online parimutuel wagering by US-based companies. Antigua appealed to the WTO, arguing that unless the US online gaming ban was consistently applied to both domestic and international providers, it was protectionist and thereby Antigua Fallout The US attempts to slam the door on the World Trade Organisation’s Antigua ruling, before the consequences of its protectionist measure widen illegal. In 2005, the WTO sided with Antigua and gave the United States 18 months to ei- ther lift the ban on foreign operators or with- draw the exemption. It was expected that the two sides would eventually find common ground and settle the lawsuit. But then, in 2006, the United States created the Unlawful Internet Gam- bling Enforcement Act (UIGEA), essentially shutting-off the US market to online wager- ing. Once this happened, the stakes in Anti- gua’s WTO case became much higher—with some legal experts believing a pro-Antigua compromise could provide the loophole necessary to reopen the US market to over- seas-based online gaming providers. Meanwhile, the time allotted for US com- pliance to the WTO’s 2005 Antigua ruling expired in March, and the WTO issued an interim report that, once formally adopted, would give Antigua the right to seek eco- nomic compensation from the United States government. But once the WTO formally adopted the interim report in late May, the United States reacted in a way few had expected: The gov- ernment took the unprecedented step of abrogating its participation in certain inter- national commitments outlined in the GATS treaty, the legal document that regulates the services trade between the WTO members. Lawyers for the United States claimed that this maneuver ended Antigua’s case and brought the nation into WTO compliance. US lawyers also argued that the United States was exempt from having to negotiate compensation with nations that claimed eco- nomic hardship because of its changes to GAT provisions—as required by the WTO—since Internet gambling was never part of the origi- nal GATS treaty negotiated in the 1990s. International reaction to this measure was swift and largely negative to the United States. “Not only do we think that members should press claims for compensatory ad- justments as a matter of economic self-inter- est, but we also believe it is important that the process is made as difficult as possible for the United States,”Ambassador John Ashe of Antigua reportedly told the WTO’s dispute settlement body. Mark Mendel, chief legal counsel for Anti- gua, told an audience gathered at the Global Interactive Gaming Summit & Expo in Mon- treal that Antigua would do whatever it took to get the US back to the negotiating table, including targeting US trademarks and copy- rights, which he claims the WTO ruling clears Antigua to do. “It’s hard to see this as anything other than protectionist,” Mendel said.“It’s hard to believe the US thinks it can get away with this, but then again, the current administra- tion has not shown a lot of intellectual flex- ibility in the past.” Indeed, the next phase of this confron- tation could get quite nasty for the United States. Brazil and India have already sided with Antigua,saying the United States should compensate the nation if it redefines its GATS services obligation. The European Union has yet to give its verdict, but considering the million of dollars in business its member na- tions have lost when the United States closed itself to Internet gambling, its hard to believe the reaction will be positive. By Paul Doocey, Editor of International Gam- ing andWagering Business (IGWB) magazine. Reprinted with permission from IGWB .