WTO Ruling on Internet Gambling

[tech]

There are conflicting reports on today's ruling depending on which spin you believe, but generally it seems that the U.S. lost on most of the major points. I personally doubt anything will change as a result of this, but it is a step in the right direction.

Article: http://biz.yahoo.com/ap/050407/wto_i...ling.html?.v=3

Findings: http://www.majorwager.com/articles/findings.pdf

[Broken Glass Can]

Press Release - U.S. Trade Representative

WASHINGTON - The United States won an important victory today when the World Trade Organization (WTO) Appellate Body sided with the United States on key issues in a challenge to U.S. laws on internet gambling.


"This win confirms what we knew from the start – WTO Members are entitled to maintain restrictions on internet gambling," said Acting U.S. Trade Representative Peter F. Allgeier. "We are pleased that the Appellate Body has agreed with our position that the U.S. gambling laws at issue here protect public order and public morals. By reversing key aspects of a deeply flawed panel report, the Appellate Body has affirmed that WTO Members can protect the public from organized crime and other dangers associated with Internet gambling. This is also a victory for the federal and state law enforcement officers and regulators who protect the public from illegal gambling and its associated risks of money laundering and organized crime."


"U.S. restrictions on internet gambling can be maintained," Allgeier said. "This report essentially says that if we clarify U.S. internet gambling restrictions in certain ways, we’ll be fine."


The Appellate Body found that the concerns addressed by the three U.S. federal gambling laws at issue in this dispute "fall within the scope of ‘public morals’ and/or ‘public order’" under an exception to WTO rules for trade in services. It merely found that, for this exception to apply, the United States needs to clarify one narrow issue concerning internet gambling on horse racing. USTR will be exploring possible avenues for addressing this finding. USTR will not ask Congress to weaken U.S. restrictions on internet gambling.


The next step in the process is for the WTO’s Dispute Settlement Body to formally adopt the panel and Appellate Body reports within 30 days. There is no further appeal.


Background


This dispute concerns Antigua’s allegation that U.S. state and federal laws prohibiting the cross-border supply of gambling services (e.g., Internet and telephone gambling) are inconsistent with U.S. obligations and our schedule of specific commitments under the General Agreement on Trade in Services ("GATS"). Antigua argued that the United States violated the market access provisions of the GATS by barring supply of gambling services on a cross-border basis – such as supply of gambling services by Internet from Antigua-based websites.


The Panel released a final report to the parties on May 25, 2004. The parties suspended the panel proceedings for settlement negotiations from June through October 2004. The final panel report was made public on November 10, 2004.


In today’s report, the Appellate Body reversed key aspects of the panel’s finding that U.S. federal laws did not meet the requirements for application of WTO exceptions for "public morals" and "public order." As a result, the Appellate Body found that U.S. laws qualify for these exceptions, except that the United States must clarify a narrow issue relating to Internet gambling on horse racing. The Appellate Body also found that Antigua failed to prove that any of the state laws at issue were inconsistent with WTO rules. However, the Appellate Body found that the United States made a GATS market access commitment for gambling services during the Uruguay Round.

[tech]

Yeah, that is the U.S. version -- here is the other side of the story: http://business.timesonline.co.uk/ar...558865,00.html

[M.B.E.]

Relevant links are here on the WTO site.

I perused some bits of the Appellate Body's decision today and as far as I can tell, they agreed that the U.S. federal laws (but not the state laws that were considered) were prima facie infringements of Article XVI of GATS, so the issue became whether the federal laws fell under the exception in Article XIV of GATS.

The exception applies if (among other things) the measures in question are "necessary to protect public morals or to maintain public order". The Appellate Body found that the U.S. had met this criterion. It seems to me that this is the crucial issue, and on this issue the U.S. was successful.

However, an additional criterion that the U.S. had to satisfy, in order to have the benefit of the Article XIV exception, was that the "measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail". And here the Appellate Body found that certain provisions of the Interstate Horseracing Act could be seen as providing an exception to the Wire Act for bets placed by Americans with a service in a different state of the U.S., but not a foreign country. This, the Appellate Body found, was "arbitrary or unjustifiable discrimination" by the U.S. against Antigua.

Therefore, the United States ultimately was found to be contravening GATS, but only because of those provisions of the Interstate Horseracing Act.

Hence if my understanding of today's decision is correct, it's unlikely that the U.S. will now have to start allowing foreign companies to offer online gaming services. The U.S. will not have to repeal the Wire Act or the Illegal Gambling Business Act; instead it could comply with today's decision by amending the Interstate Horseracing Act.

I should emphasize that I'm not an expert in international trade law so I may have gotten some important details totally wrong. Also I didn't read today's decision very carefully; I just looked at a few sections.

[tech]

Hey MBE, I agree with most of what you said. The key difference according to the people I talked to (and my own reading) is that the WTO says that the U.S. cannot use the morals exception as long as they allow electronic horse betting. Thus, they either have to allow foreign entities access to these markets or exclude them altogether. From what I have been told, there is no way in hell that they are going to get rid of off-track betting, so they are going to be in violation of this ruling. As I said though, that doesn't mean jack squat from a practical perspective ... the U.S. pretty much does what it wants to do anyway, regardless of compliance with the WTO.

[Broken Glass Can]

[ QUOTE ]
... the U.S. pretty much does what it wants to do anyway, regardless of compliance with the WTO.


[/ QUOTE ]

Exactly. We don't let foreigners make our decisons for us.