Is Internet gambling in U.S. legal or not? U.S., Antigua disagree [econ]

[Declan McCullagh <declan () well com>]

Below are three press releases:
1. Antigua claiming victory: online gambling is legal!
2. U.S. claiming victory: online gambling is not legal!
3. Antigua claiming surprise at U.S. victory claim

My own humble effort at decrypting this is here:
http://news.com.com/2100-1030_3-5658636.html

-Declan

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ANTIGUA WINS WTO GAMING RULING
April 7th, 2005 (Antigua) - The World Trade Organization (WTO) appellate 
body today upheld a ruling in favour of Antigua in the trade dispute 
with the US regarding cross-border online gambling.  This is a landmark 
victory for Antigua as the first, and smallest, WTO member to defeat the 
United States, the largest member, in this well-respected international 
trade court.
“The impartial dispute resolution machinery of the WTO has functioned as 
we had expected,” says Mark Mendel, lead legal counsel for Antigua’s 
case. “Justice has been served and potential compliance issues facing 
various US corporations and the US Department of Justice will now be 
resolved in a manner favorable to fair and responsible international 
commerce.”
Reacting to rumours to the effect that the US is claiming victory in the 
case, Mr. Mendel noted “the Appellate Body recommended that the WTO 
cause the US laws to be brought in conformity with the GATS.  The ruling 
also notes that the US laws in effect discriminate against foreign 
commerce.  Unless the US wants to repeal all of its laws that currently 
permit any form of domestic remote gambling and also adopt laws to 
affirmatively prohibit it in all forms country-wide, they will have to 
provide Antigua fair access.”
The WTO ruling is anticipated to pave the way for new media 
opportunities for Antiguan gaming operators.  Previously US companies 
such as Citibank, Chase Manhattan, Bank of America, Clear Channel 
Communication, Discovery TV, Yahoo and MSN were discouraged from 
conducting financial transactions or broadcasting advertisements 
involving online gaming products. The WTO determination is expected to 
end subpoenas or threats of prosecution from the United States Justice 
Department to US companies who choose to do business with Antigua 
offshore gaming companies. “This is a country-specific ruling,” says 
Mendel, “but it may have far-reaching implications.”
In the ruling, the Antiguans argued that it is inappropriate to treat 
businesses that conduct transactions online as if they are unequal to or 
somehow less credible than traditional brick-and-mortar operations. 
Additionally, it was underscored that it is inappropriate for the US 
government to assume an industry lacks integrity in the absence of 
objective evidence.
The US now faces compliance issues that will require the United States 
government to thoughtfully address its approach to on-line gaming rather 
than simply prohibiting it altogether.  Mendel states that this WTO 
ruling will ultimately result in US companies making accommodations to 
Antiguan gaming operators.
 “At the end of the day,” said Mendel, “we expect that major internet 
search engines, including Google and Yahoo, financial institutions and 
credit card service providers will be required to accept advertising 
from Antiguan internet gaming sites as they do currently with US gaming 
interests, including hundreds of American casinos and state lotteries.”
For further information please contact: Jools Moore or Joslyn Tinker
+44 (0) 207 395 0500
From the US to the UK: 011 44 207 395 0500


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http://ustr.gov/Document_Library/Press_Releases/2005/April/U.S._Internet_Gambling_Restrictions_Can_St_as_U.S._Wins_Key_Issues_in_WTO_Dispute.html

U.S. Internet Gambling Restrictions Can Stand as U.S. Wins Key Issues in 
WTO Dispute
        04/07/2005


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.


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ANTIGUA SURPRISED BY US VICTORY CLAIMS IN WTO CASE

April 7th, 2005 (Antigua) - Antigua today expressed surprise at claims 
of victory by US trade representatives in the online gaming WTO case 
between the two countries.

 “The Appellate Body recommended that the WTO cause the US laws to be 
brought in conformity with the GATS,” said Mark Mendel, lead legal 
counsel for Antigua, reacting to US claims of victory in the case.  “The 
ruling also notes that, in effect, the US laws discriminate against 
foreign commerce.  Unless the US wishes to repeal all of its laws that 
currently permit any form of domestic remote gambling and adopt laws to 
affirmatively prohibit it in all forms country-wide, then they will have 
to provide Antiguan online gaming companies fair access to the US market.”

The WTO Appellate Body clearly upholds key elements of the initial 
ruling in favor of Antigua. However, the US has interpreted the ruling 
as allowing the US ban on foreign online gambling activity to remain in 
place.  Although a portion of the initial ruling was reversed by the 
appellate group, the overall result remains substantially the same – in 
Antigua’s favor.

Evidence of the Antigua triumph is further indicated by the Panel’s 
findings that the US made a commitment with respect to gambling and 
betting services under the General Agreement on Trade in Services (or 
“GATS”); that key federal laws are contrary to those commitments and 
violate the “market access” provision of the GATS; and that the US did 
not meet its complete burden of proof under its claimed Article XIV 
“morals” defense to Antigua’s claims.

The US has said that the WTO reversed a number of important rulings. In 
fact the only substantive part of the report that the Appellate Body 
reversed was the finding that the lack of consultations between the US 
and Antigua meant that the US had not met the “necessity” burden under 
Article XIV.

However, the Appellate Body ruled that the US had not met their burden 
of proof, under the second part of Article XIV. The US failed to show 
that their laws were not discriminatory in practice. In failing to 
present a valid argument in respect of the second part of Article XIV, 
their defence has been deemed to fail overall in the eyes of the WTO.

-ends-

For further information please contact: Jools Moore or Joslyn Tinker

+44 (0) 207 395 0500

From the US to the UK: 011 44 207 395 0500




Jools Moore
Cancan Communications
4 Flitcroft Street
London WC2H 8DJ
T. +44 (0) 20 7395 0509
M.+44 (0) 771 773 4606
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