Antigua wins big in online gambling case

By Steven Downes, Times Online
April 07, 2005

A landmark ruling from the World Trade Organisation today may yet open the way for Americans to gamble online legally, paving the way for potentially massive growth among off-shore "virtual" casinos around the globe.

The WTO today issued its long-awaited ruling in the trade dispute between Antigua, one of its smallest members, and the United States, its largest member, over cross-border online gambling and had both sides claiming victory.

The WTO appeal body ruling marks the end of a near-eight-year battle by the tiny Caribbean island for the right to host online gambling.

The United States had contended that internet gambling should be prohibited because it violates some state laws.

Last year, a WTO report confirmed a preliminary ruling, saying the US ban represented an unfair trade barrier. Washington appealed the ruling and said it would "vigorously" contest the ruling before the WTO's seven-member appeals body.

The WTO ruling could pave the way for new media opportunities for gaming operators in Antigua and many other smaller counties. Previously, US companies such as Citibank, Chase Manhattan, Bank of America, Clear Channel Communication, Discovery TV, Yahoo and MSN were discouraged from accepting media buys from online gaming products. The WTO determination is expected to end threats of prosecution from the US Justice Department to American companies who choose to do business with Antigua offshore gaming companies.

"This is a country-specific ruling, but it may have far-reaching implications," Mark Mendel, the lead counsel for Antigua, said.

The Americans maintained the opposite view. "This win confirms what we knew from the start - WTO members are entitled to maintain restrictions on internet gambling," Peter Allgeier, the acting US trade representative, said.

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

In a classic David and Goliath story, the mighty US was pitted against Antigua, with a population of only 68,000 and which cannot even afford to keep a representative at the WTO's headquarters in Geneva.

But Antigua managed to hold its own against the world's largest economy, which is also the world's largest gambling market.

Antigua filed the case before the WTO in 2003, contending that US restrictions on internet gambling violated trade commitments the United States made as a member of the 148-nation WTO.

According to a 1991 list of industries that must be open to free trade, the recreation and entertainment sectors are fair game, the island state claimed. Moreover, Sir Ronald Sanders, Antigua's chief foreign affairs representative, and others have argued that it was no less than the Washington-based World Bank that advised Antigua to move into internet industries to diversify its fragile, tourism-based economy. Antiguan officials estimate that online casinos employ some 3,000.

"The impartial dispute resolution machinery of the WTO has functioned as expected," Mr Mendel said today.

"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 favourable to fair and responsible international commerce."

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 General Accounting Office has estimated there are 1,800 internet gambling operations. Virtually all of them are based outside of the United States.

The US Trade Representative office in Washington tonight claimed it would only need to clarify one narrow issue concerning internet gambling on horse racing, but that it would not be seeking law changes that might weaken US restrictions on internet gambling.

"US law stands. Internet gambling is not legal in the United States," a source in Washington said.

"The WTO said that we can use public order and public morals clauses to exclude this."

Antigua, however, maintains that aspects of US practice that discriminate against offshore operators will no longer be possible.

"Under no circumstances can it be said to be the case that US law will not have to change," said Mr Mendel.

"The US had to show that what they are doing is not discriminatory, and they failed to do that.

"We now 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."