23/12/2004 -- Mark Mendel
Mark Mendel, lead counsel for Antigua, brushes away the spin and presents the simple truth behind the nation’s victory over the US at the WTO and what it means for the egaming industry
The
decision of the World Trade Organisation (WTO) in favour of Antigua against the
US over internet gambling surprised virtually everyone. How could a tiny country
have convinced the WTO to rule against the US in such a sensitive area? What are
the implications of the decision for other countries? Will the US abide by the
decision or refuse to acknowledge the victory?
Just the facts
Without
exception, critical commentary has been clouded by instinct rather than focused
on the law and facts. Actually, our case is quite simple. Under the WTO’s general
agreement on trade in services (GATS), the US agreed gambling services could be
provided to consumers on a cross-border basis free from restrictions. Yet US law
makes provision of gambling services from Antigua to these customers illegal.
Given the commitment, those laws violate GATS. A ‘morals’ exception contained
in GATS could not excuse the US because the exception required the US to prove
its laws ‘necessary’ to protect the morals concerned. To establish this, it must
show that there are no less trade-restrictive options available to address those
concerns. This the US was unable to do – after all, prohibition is not regulation.
In
developing the case, we were influenced by the widespread global acceptance of
the WTO dispute resolution process and that the WTO has proven a neutral, rules-oriented
body in addressing disputes.
We were also confident the US could not demonstrate
any generalised moral aversion to gambling – which in one form or another is legal
in 48 of the 50 states. Perhaps Americans broadly opposed gambling 40 years ago,
but times have changed and now the US is a gambling nation. Conceding this, the
US’s argument was that internet gambling poses unique ‘risks’ that can be dealt
with only by prohibition.
This theory was never proven and is greatly undermined
by the concession of the US Justice Department that any state could, if it wanted,
offer internet gambling to anyone within the borders of that state without violating
US law.
Critically, Antigua never asserted that the US had no right to regulate
cross-border gambling services, and indeed has always advocated joint regulation
or some other regulatory scheme to address concerns of the US government. However,
the US has consistently and unequivocally refused to discuss our proposals.
Further,
we also made it clear that Antigua was pursuing its claim only on behalf of our
industry and not for egaming in general. As such, our case was specifically designed
around facts unique to Antigua. The WTO decision confirms that, and so far as
the decision affects cross-border gambling services, it is unlikely to have any
short-term benefit for other countries.
Vested US interests
Will
the US simply refuse to obey the decision? This ignores the fact that the US,
perhaps the biggest beneficiary of the WTO dispute resolution process, has aggressively
used the WTO to the advantage of domestic industry and has a record of respecting
dispute resolution determinations.
In short, the US has a vested interest
in preserving the integrity of the dispute resolution process for reasons that
we suspect vastly outweigh its dissatisfaction with any particular decision. Further,
the US was the prime mover behind the movement to liberalise trade in services
and to sell the WTO to developing countries like Antigua. If it ignored the decision,
expressly or in practice, what message would that send to the developing world?
The WTO cannot be a one-way street to benefit large economies at the expense
of the small. If, as we expect, the decision is upheld on appeal, the US will
have many more reasons to accept than to reject it.