US May Be Target in Gambling Dispute

5/23/07 - Washington Post - View Source

By Bradley S. Klapper

GENEVA, May 22 -- The Caribbean nation of Antigua and Barbuda is seeking compensation from the United States over its restrictions on Internet gambling sites based overseas, and on Tuesday asked other countries to join in as it targets Washington over its failure to comply with global trade rules.

The World Trade Organization ruled that the restrictions were illegal.

Antigua, the smallest country to successfully litigate a case in the WTO's 12-year-history, also threatened to target U.S. trademarks, copyrights and telecommunications companies after the WTO on Tuesday formally adopted a landmark decision reached in March on the gambling restrictions.

"Not only do we think that members should press claims for compensatory adjustments as a matter of economic self-interest, but we also believe it is important that the process is made as difficult as possible for the United States," Ambassador John W. Ashe of Antigua told the WTO's dispute settlement body.

The gambling dispute is threatening to become one of the most complicated the WTO has ever handled and could soon spark a series of compensation negotiations between the United States and such other trading powers as the European Union.

After losing the case, the United States announced that it would take an unprecedented legal step to change the international commitments it made as part of the 1994 General Agreement on Trade in Services (GATS) treaty regulating the trade in services among the 150 members of the WTO. As a result, the United States declined to challenge Tuesday's adoption of the Internet gambling ruling, because it says its legal maneuver effectively ends the case.

Juan Millan, a U.S. trade lawyer, told the Geneva-based trade body that the procedure, which no government had previously used to avoid a WTO ruling, was invoked "in order to bring the United States into compliance and to resolve this dispute permanently."

"This modification will ensure . . . the original U.S. intent of excluding gambling from the scope of U.S. commitments," he said.

The United States argues that it is also exempt from negotiating compensation to governments, as required in the GATS clause allowing countries to rewrite their services commitments, because Internet gambling was never explicitly mentioned in the negotiations of the early 1990s.

The March ruling upheld the U.S. right to prevent offshore betting as a means of protecting public order and public morals. But it said it was illegal to target online gambling, without equally applying the rules to U.S. operators offering remote betting on horse and dog racing.

The former British colony in the Caribbean had been promoting electronic commerce as a way to end the country's reliance on tourism, which was hurt by hurricanes in the late 1990s. There are 32 licensed online casinos in Antigua, employing 1,000 people and generating a yearly revenue of about $130 million. Seven years ago, its casinos had an annual income closer to $1 billion.

The European Union has stressed that it would act in support of its interests, a reference to the British-based companies that lost millions because of the U.S. restrictions. Officials in Brussels said, however, that they had yet to notify Washington whether they would submit a compensation claim.