USA Decision to Remove Online Poker Online Gambling Slights WTO

The United States' decision to modify its original World Trade Organization (WTO) commitments to remove online gambling from its services agreement is a slight to the WTO and has "evoked a storm of outrage and concern," according to Tuesday's article from respected daily worldwide tax news service Tax-News.com.

The critique comes after the US announced it decided to withdraw from one of its WTO commitments after it lost its final appeal in the drawn-out battle with Antigua and Barbuda over US discriminatory practices towards foreign online gaming firms (click here to read related article on appeal loss).

In their announcement, US Trade Representative John Veroneau said, "We did not intend and do not intend to have gambling as part of our services agreement. What we are doing is just clarifying our commitments" (click here to read related article).

Jeremy Hetherington-Gore of Tax-News.com explains that the WTO treaty allows a country to withdraw commitments to open its services market to foreign investors, but because the original GATS treaty was negotiated multilaterally (as with all WTO treaties) the US will now have to negotiate with any of the other 149 member countries that raises objection to the move and wants to renegotiate any of their own commitments in return.

Heatherington-Gore said. "To call this opening Pandora's box must surely be an understatement."

He went on to describe reactions saying, "Adjectives used by commentators over the weekend to describe the US action included 'absurd' and 'disingenuous'. Said one anonymous spokesman: "This action is more surprising to me than had President Bush announced he was coming out of the closet today regarding his sexual preference.""

James Jochum, a former Bush administration official and partner at the law firm of Mayer, Brown, Rowe & Maw LLP in Washington who represents the Antigua Online Gaming Association, was quoted in the article as saying, "I am disappointed to see our country lead a degradation of the system. The implications are so serious because of the precedent it sets."

Senior officials in Antigua and Barbuda were taken aback by the decision.

"While we had of course been aware of the possibility of the United States taking such an action, we frankly considered it extremely unlikely," Dr Errol Cort, Antigua's Minister for Finance and the Economy was quoted by Tax-News. "It is almost incomprehensible that the United States would take such an action in the face of an adverse dispute resolution ruling. This is going to have very severe consequences for the global free trade movement."

According to Mark Mendel, Antigua's lead counsel in the WTO proceedings, the US was wrong to say that it didn't intend to include gaming in its services commitments. "There is simply no basis for such a statement. When the schedules were drawn up over ten years ago, there was extensive debate, proposal and counterproposal from all WTO members in determining what commitments would be made."

Mendel added, "More than a dozen countries were able to expressly exclude gambling from their commitments, and many dozens more excluded the commitment in other ways. For the United States to say this was a mistake is just not true."

Tax-News expressed that for the US to take this option is nothing short of tragic at such a crucial moment in the ongoing WTO Doha Round negotiations.

"What does the USTR think will now be in the minds of its negotiating partners among the dozens of economically weak developing countries who rely on the rule of law to hold their own in the trading ring against such Titans as the United States and China?" Tax-News asks.

The European Commission's views on the US approach to online gambling is expressed in the article through recent statements made by Charlie McCreevy, European Commissioner for Internal Market and Services.

McCreevy, referring to the Unlawful Internet Gambling Enforcement Act (UIGEA) passed last October, said, "that the US rules against processing of international on-line gaming transactions were a prima facie case of protectionism and that the World Trade Organization was a possible venue for tackling them."

"But he said that while negotiations were continuing over the WTO's Doha Round, he would not rush to file a complaint."

You may recall that the UIGEA, which included carve outs to expand certain domestic online gambling such as horse betting, fantasy sports and lotteries, also makes it illegal for financial institutions to handle transactions between presently illegal forms of online gambling and US residents.

By doing so, and because of their extrapolated interpretation of the 1961 Wire Act to apply to more than sports betting over telephone lines, the US effectively bans all international and inter-state gaming on the Internet.

McCreevy told the European Parliament, "In order to protect, I'd say, their own business, their industry there, they [the United States] have de facto prevented foreigners from online betting into the United States. In my view it is probably a restrictive practice and we might take it up in another forum."

But McCreevy said he had not discussed the issue in any depth with Peter Mandelson, the EU trade commissioner, who would front any EU attempt to challenge the US legislation.

In its March ruling against the US over Antigua's complaint that the US was unlawfully banning payments to offshore gaming web-sites, the World Trade Organisation Dispute Resolution Panel noted that the 2006 UIGEA legislation (which post-dated both Antigua's original complaint and the first WTO ruling in Antigua's favor) confirmed the lack of conformity of US law with its obligations under the GATS.

The panel called out the prime example how the US allows domestic online horse betting but blocks it from online firms outside the US.

The WTO Panel also comprehensively dismissed all attempts by the US to wriggle out of the need to bring its laws into conformity with the GATS treaty, either by banning equivalent domestic betting transactions, or by allowing parity for overseas transactions.

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