The islands would be allowed, for instance, to disregard intellectual property rules under TRIPS in order to sell US-generated content such as films and music on the open market. But Antigua had asked for US$3.4bn in damages.

Mark Mendel, Antigua's lawyer, said in a conference call: “I am pleased that the panel approved our ability to cross-retaliate by suspension of intellectual property rights of United States business interests. That has only been done once before and is, I believe, a very potent weapon.”

Antigua's Minister of Finance and the Economy, Dr Errol Cort, said: "Although we are pleased that the extraordinary sanction of the suspension of intellectual property right protection for US interests has been given to us - only the second such authorisation in WTO history - we are disappointed by the portion of the decision limiting our annual compensation to such a mere fraction of our industry's lost revenues."

But he said that it was not Antigua's immediate intention to apply the sanctions; it remained preferable for Antigua to reach a compromise solution with the US, although it's not clear what that might be.

The office of the United States Trade Representative, never a good loser, said sourly with a split infinitive that: "it would establish a harmful precedent for a WTO Member to affirmatively authorize what would otherwise be considered acts of piracy, counterfeiting, or other forms of IPR infringement."

The ruling by the WTO's Dispute Settlement Body remains in place until the US comes into conformity with the WTO's previous ruling, which the US rejected, or until there is a mutually agreed settlement.

The compensation for Antigua followed hard on the heels of an agreed settlement between the USA and other countries which had demanded compensation, when the European Commission accepted a US offer of openings in other sectors as compensation. "A bilateral agreement was signed in Geneva, which provides EU service suppliers with new trade opportunities in the US postal and courier, research and development, storage and warehouse sectors," said the Commission. "The US also made concessions in the testing and analysis services sector.

Canada and Japan have apparently also accepted similar US offers, and the office of the USTR said it hoped that India, Costa Rica and Macau would fall in line as well.

The deal between the EU and the US was probably cut in November when EU Trade Commissioner Peter Mandelson visited Washington for meetings on "Transatlantic Economic Cooperation."

Mandelson met US Trade Representative Susan Schwab and Representative Barney Frank (D-MA), who has been leading so far abortive efforts in the Congress to modify the Unlawful Internet Gambling Enforcement Act, passed in 2006, which prohibits the use of payment instruments by financial institutions to handle the processing of any form of internet gambling that is illegal under US federal or state law. It was this law which led to the collapse of many global gaming operations.

Barney Frank introduced legislation into the House of Representatives in April that would create an exemption to the ban on online gambling for properly licensed operators, allowing Americans to lawfully bet online. The Internet Gambling Regulation and Enforcement Act of 2007 would establish a federal regulatory and enforcement framework to license companies to accept bets and wagers online from individuals in the US, to the extent permitted by individual states, Indian tribes and sport leagues. All such licenses would include protections against underage gambling, compulsive gambling, money laundering and fraud.

“The existing legislation is an inappropriate interference on the personal freedom of Americans and this interference should be undone,” said. Rep. Frank, who is Chairman of the House Financial Services Committee.

"I think Representative Frank takes a fair-minded, common sense approach to this and we look forward to that being effective legislation," said Mandelson. But the bill has floundered so far.