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01 February
2008 Costa Rica
Files For Arbitration In WTO Gambling
Dispute The international
Internet gambling dispute, potentially valued at
billions of dollars, continues. Costa Rica and
Antigua separately filed for World
Trade Organization
(WTO) arbitration on January 28 2008, seeking
compensation from the United States as a result of
the U.S. withdrawal of its commitment on
cross-border gambling services. The new arbitration
requests could potentially derail the settlement
for compensation agreed to late last year by the
U.S. and the E.U. The arbitration
filing makes it possible for the E.U. to reconsider
its settlement with the U.S. and join the
arbitration proceeding, opening up a new phase in
the Internet gambling trade dispute. "The decision by
Antigua and Costa Rica to take the United States to
arbitration will test the limits of the WTO process
and squarely challenge the U.S. resolve to withdraw
its GATS commitments," said Nao Matsukata, formerly
Director of Policy Planning for USTR Robert
Zoellick and now a Senior Advisor for Alston and
Bird LLP. "If the U.S. finds the decision of the
WTO arbitrator unacceptable, under procedures
outlined in the GATS, it could unilaterally
withdraw, creating an unprecedented crisis of
confidence in the global trading system. The best
solution remains for Congress to pass legislation
that would create a legal and regulated framework
for online gaming in the United States and for the
United States to remain in the GATs schedule to
provide all providers legal protection under the
WTO." U.S. withdrawal
from GATS following this new arbitration carries
the risk of expensive new sanctions levied against
U.S. exports and intellectual property. "If the
U.S. withdraws following another adverse arbitral
decision, the country would face potential
retaliation from all WTO Members affected by the
arbitration, a pool of countries including the EU,
Canada, and Japan," added Matsukata. "Inviting
sanctions at a time when both the U.S.
Administration and Congress are both striving to
stimulate an economy on the edge of recession seems
foolhardy at best, especially when draft domestic
legislation already exists that would create a
renewed flow of both business and tax revenues
throughout the nation's gaming sectors." Lode Van Den
Hende, a W.T.O. expert and trade attorney with
Herbert Smith in Brussels said, "There is a real
possibility that the arbitration body will find
that unless the U.S. provides commercially
meaningful compensation to Costa Rica and Antigua,
it cannot withdraw its commitment on gambling,
without risking trade sanctions from the affected
parties." Costa Rica's
action raises questions about what India and Macao
might do as the other nations that have yet to come
to terms with the U.S. over the withdrawal of the
Article XXI commitment related to cross-border
gambling services. Under the WTO's
GATS Article XXI rules, any country withdrawing its
market access must provide compensation to affected
countries that maintains a general level of
mutually advantageous commitments not less
favorable to trade than that provided for in
schedules of specific commitments prior to the
negotiations. The U.S. negotiated settlements with
four of the eight nations seeking compensation -
the E.U., Japan, Canada, and Australia, providing
compensation, in the form of markets access to U.S.
domestic postal services, warehousing, R & D,
and technical testing sectors. Costa Rica,
Macao, India and Antigua did not reach an agreement
with the U.S. over the withdrawal of its gambling
commitment, as the above market sectors offered by
the U.S. were of no commercial interest to those
countries. After the WTO
ruled that the U.S. had violated trade rules in
barring Antiguan online gaming operators from the
U.S. market, the U.S. withdrew its WTO obligations
with regard to free trade in the gambling area. The
U.S. decision to withdraw its market commitments,
in order to comply with the WTO, is the first
instance of such an action by a WTO member. The
action by the U.S. sets a precedent that other WTO
members could copy in order to back out of their
own commitments once they consider them
inconvenient. In turn, the Costa Rican and Antiguan
arbitration requests are the first ever in response
to a withdrawal of commitments. It is possible
that these arbitration requests will impact the way
in which Antigua decides to implement the $21
million per year in trade sanctions it received as
compensation for U.S. noncompliance with WTO
rulings in the gambling dispute. An option
available is for the country to take the
compensation in the form of intellectual property
waivers. "It is time for
the U.S. to end its hypocritical practices that
discriminate against foreign online gambling
operators, while allowing U.S. gambling operators
to accept bets for certain forms of gambling," said
Jeffrey Sandman, spokesperson for the Safe and
Secure Internet Gambling Initiative. "Regulation of
Internet gambling should be supported as a means to
resolve this trade dispute." |
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