How we slayed the giant

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.

 

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