The UK, the World Trade Organization, and the USAAmerica Stands Oceans Apart on the Online Gaming Issue |
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At the same time the U.S. government is trying to thwart online gaming, movement in other countries is embracing the concept of regulating it.
The United Kingdom recently hosted a conference to discuss ways to stop criminals from defrauding online gamblers, prevent children access to gaming Web sites, and prevent money laundering.
Officials from 32 nations met at Ascot Racecourse outside London to discuss ways to implement the regulatory guidelines set forth by Britain in its efforts to regulate online gambling. The U.S. chose not to participate.
Culture Secretary Tessa Jowell said Britain opposed the U.S. ban because it risks driving the industry into criminal hands, just like Prohibition. Britain was sympathetic to a complaint made by Antigua to the World Trade Organization, accusing the U.S. of protectionism of its gambling industry.
In the meantime, the World Trade Organization is moving forward with hearings to determine whether the U.S. is in compliance with its ruling last year. (Of course, we all know the U.S. is not in compliance, but still, the U.S. is entitled to a hearing.)
As you may remember, last year the WTO ruled in favor of Antigua and Barbuda against the U.S. regarding the online gaming issue. Antigua asserted that the U.S. was discriminating against Internet casinos based in its jurisdiction. Antigua's position was that the U.S. government's interference with a multibillion-dollar industry violated international trade rules and was simply a ploy to keep tax revenues within the borders of the U.S. The WTO agreed.
Then in May of 2005, the U.S. stated its intention to comply with the WTO's recommendations and indicated the need for a reasonable period of time to do so. The Bush administration was granted one year to implement appropriate changes. May of 2006 came and went, and the U.S. did nothing to comply. Instead, it passed the Unlawful Internet Gaming Enforcement Act, making it more cumbersome to put money into an offshore online site.
This morning, I had a long conversation with a representative from the WTO in Geneva. First, he explained that WTO workers are not permitted to be directly quoted. Only their official spokesman can be quoted. He then proceeded to explain to me how the WTO process works and at what stage we're at with the Antigua ruling.
Since the inception of the WTO, there have been about 350 cases brought before the WTO court. The process begins with a complaint, and then a panel of three individuals from three different countries analyzes the issue and takes input from all sides. This is the panel that made the ruling that the U.S. was violating fair trade rules.
Usually it is the same three panelists who rule on compliance or lack thereof. However, in this case, only one of the original panelists could be present for the next phase, so two of the original panelists were replaced. The new panel consists of individuals from Sweden, Chile, and Thailand; they are Lars Anell, Mathias Francke, and Virachai Plasai, respectively.
These three gentlemen meet in Geneva over a period of three months. Their meetings are secret and the WTO doesn't even know the exact date the panel meets. Sometimes information is submitted by way of paperwork and sometimes the parties to the action make oral presentations.
What is interesting about the process is that interested third parties are permitted to meet with the panel and provide input.
Since everything the panel does is confidential, the WTO cannot confirm who the interested third parties are in the Antigua case or when precisely they meet. However, it has been widely reported that China, Japan, and the EC have rallied against the U.S. on the gaming issue.
The WTO representative explained to me that although the hearings are confidential, there is no rule forbidding the parties from making statements.
So, for example, Antigua's legal advisor Mark Mendel publicly commented, "I've already read the submissions of the EU and of Japan, and they weigh in on the important legal issues in our favor."
The WTO expects a ruling from the panel sometime around the beginning of next year. The issue is whether the U.S. is in compliance with the ruling that it cannot interfere with Antigua's right to fair trade.
The WTO's rules can be broken down simplistically. No country can hamper another country's right to fair trade. This has a societal underpinning. It is good for all nations to have the benefit of the intelligence from other nations. That's how societies advance. So, if one country has an excellent product or service, it is allowed to offer that product or service to the world. The exception is that every country has the right to outlaw anything it so chooses. For example, if Prohibition were still in effect, other countries would not be allowed to sell liquor in the U.S.
Now, let's revisit the Antiguan case. When the WTO first ruled that the U.S. was violating the fair trade rule with Antigua, the U.S. said it needed time to comply. The U.S. was given a year and did nothing. It will go to Geneva to defend itself. The only position it can take, which, by the way, it has previously taken and abandoned, is that it is illegal to play poker online in the U.S., so Antigua has no right to offer that service to U.S. citizens.
What is wrong with that position is that it is not illegal to play poker online in all jurisdictions of the U.S. Furthermore, the U.S. position crumbles when we take a look at the newly passed Unlawful Internet Gambling Enforcement Act. That Act specifically permits a state to house an online gaming site; it permits other forms of online gaming (horse racing); and by its terms, the Act recognizes that appropriate regulation is possible in order to achieve the goal of protecting citizens. Therefore, since it's not illegal to have an online gaming site within the jurisdiction of the U.S., our government cannot assert illegality as a defense to the WTO ruling.
I predict the WTO will rule in Antigua's favor. Various disputes have come to this point, and if there is no compliance, the complaining party is granted permission for sanctions. The complaining country figures out the level of trade lost and asks for that level of sanctions.
Then there is another examination to justify the level of sanctions. The winning country then imposes sanctions upon the offending country. Monetary sanctions are common. For example, the winning country can raise tariffs on products up to a level of the amount lost. If it doesn't want to impose tariffs, it can fashion other remedies. For example, under the intellectual copyright rules, where it would usually enforce copyright rules, it may not enforce an American copyright.
Many countries have taken a position against the U.S. antigaming legislation as well as the WTO controversy.
Our U.S. senators seem to have shot themselves in the foot with their new antigaming legislation. Not only are the Republicans losing votes, but they have lost support and respect because of the un-American way in which the law was passed; they have weakened the U.S. position in the WTO case; and in one fell swoop, they inspired and compelled Britain, along with 32 other nations, to unveil plans to regulate Internet gambling. Our senators are certainly not on top of their game this term!
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