Saturday, December 22, 2007

U.S. owes Antigua and Barbuda: $21 mil/year

$21 Million Is a Far Cry From the $3.4 Billion That Was Sought

A World Trade Organization arbitrary panel has ruled that Antigua and Barbuda are entitled to $21 million a year from the United States, far below the $3.4 billion that the Caribbean countries sought in its claim against the United States concerning Internet gambling.

The panel ruled for that dollar amount because it only took into account the money Antigua and Barbuda is losing through online horse-racing wagers, which are legal in some states.

Mark Mendel, the lead attorney in this case, said that all the WTO panels leading up to the settlement acknowledged the widespread use of online gambling in the U.S. despite the U.S.’s continued attempts to snuff it out. But the panel that ruled on the compensation amount refused to account for all sectors of online wagering that takes place in the U.S., it only took into account the online wagers that are taxed and regulated.

“They basically reversed themselves,” Mendel said. “Why they did that, I don't know and probably never will.”

Antigua and Barbuda, which acts as a single member of the WTO, filed its complaint against the U.S. through the WTO in 2003. The basics of the claim is that because the U.S. allows certain forms of online wagering (horse betting), but continues to try to stop its citizens from accessing other forms of online gambling (including horse-betting wagers from offshore companies) it violates a portion of the General Agreement for Trades and Services (GATS) that covers recreational activities, including online gambling.

WTO arbitration panels have repeatedly ruled in favor of the smallest member of the WTO, and the $21 million annual settlement is what the panel believes the island nation of Antigua and Barbuda is entitled to. The $3.4 billion figure that Antigua and Barbuda sought is the amount the island nation estimated will be lost annually by its online gambling companies because of the U.S.'s stance against online gambling.

Potential Monopoly?

Antigua and Barbuda claims that the fact that U.S. legislators and enforcement agencies have actively worked to stop its citizens from doing business with companies located in Antigua and Barbuda — but continues to allow certain forms of remote gambling within its borders — means the U.S. is essentially allowed to create a monopoly. One of the main goals of the WTO is to prevent membership countries from monopolizing industries that are covered in WTO agreements.

In a conference call, Mendel predicted that in several years, states will begin to operate online poker rooms. If this happens, Mendel says he will again go after the U.S. through the WTO for Antigua and Barbuda.

But there are questions about whether he would be able to seek compensation through the WTO because of the U.S.'s decision to revise a portion of the GATS that covered recreational activities, including online gambling. The official stance of the office of the U.S. Trade Representative (USTR) is that it wasn’t aware that parts of the GATS would cover online gambling, and that's why it decided to revise the agreement instead of comply with arbitrators' rulings.

In May, the USTR announced that instead of complying with the WTO panel’s ruling by opening its market to online gambling companies, it would instead revise portions of the GATS that it signed in 1995. Although member countries have the right to do this, no country has ever performed this maneuver.

By WTO rules, the decision to revise the agreement opened up the U.S. to compensation claims by all members of the WTO, and a handful of countries that allow online gambling and host online gambling companies filed for compensation. In the last several weeks, some of the countries that filed have settled with the U.S.

The revision of the GATS agreement is still being processed through the WTO. The USTR says that once this is complete, gambling will be excluded from the U.S.’s commitments to the WTO, and the U.S. will no longer be out of compliance with the WTO ruling.

What this means is that Mendel may not have a case, because the U.S. will no longer have to submit to WTO rules concerning the online gambling industry.

Therefore, if states began to open online rooms or any other form of online wagering, the U.S. would still have the right to stop its citizens from accessing online gambling and poker companies located off shore with no fear of ramifications from the WTO.

Only one legislator, Jim Kasper of North Dakota, has tried to pass legislation that would allow online poker rooms to open within North Dakota's borders. His movement quickly failed, in part because his fellow legislators feared a long and expensive legal battle with the federal government. Currently, there are movements within states to allow online poker.

The Rest of the World

The European Union, Japan, Canada, India, Costa Rica, and Macao joined Antigua and Barbuda in seeking sanctions against the U.S. through the WTO. Earlier this week, the U.S. settled with the E.U., Japan, and Canada. Those countries will receive sanctions that affect U.S. postal and courier, research and development, and storage and warehouse sectors. A monetary figure was not released. Negotiations with India, Costa Rica, and Macao continue.

Gambling companies, particularly the WTO powerhouse the UK, encouraged their host countries to play hardball with the U.S. and seek sanctions in the billions of dollars in order to try to force the U.S. to revisit its anti-online gambling stance. Instead, the trade representatives from these countries settled for much less, essentially letting the U.S. off for significantly less than what the gambling industry and the countries will lose (in the form of taxes) from being cut off from U.S., the largest gambling market in the world.

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