Antigua And Barbuda To Claim Compensation From US

by Leroy Baker, Tax-News.com, New York

24 May 2007

The government of Antigua and Barbuda is reportedly preparing to file a claim for compensation against the United States, stemming from the latter's ban on internet gaming - a move which has caused a major loss of earnings for the tiny Caribbean jurisdiction.

Mark Mendel, Antigua's legal counsel in its long-running trade dispute with the United States concerning access to that country's e-gaming market, told Bloomberg News in an interview that filing a claim for compensation would be "one route" that Antigua would consider, but with no precedent for such a claim, he conceded that the value of any claim would be a "massive unknown".

John Ashe, Antigua & Barbuda's Ambassador to the United Nations, was more forthright, telling the WTO's dispute settlement body on Tuesday that claims for compensatory adjustments were "a matter of economic self-interest".

"But we also believe it is important that the process is made as difficult as possible for the United States," Ashe added, according to an Associated Press report.

The United States decision to withdraw from one of its WTO commitments after it finally lost its battle with Antigua and Barbuda over online gaming has provoked a storm of outrage and concern. Earlier this month, it emerged that the United States had decided to sidestep a ruling by a WTO dispute resolution panel in favour of Antigua by simply rescinding one of its services agreements. "We did not intend and do not intend to have gambling as part of our services agreement," stated Deputy US Trade Representative John K. Veroneau, in an announcement that shocked many observers. "What we are doing is just clarifying our commitments."

The WTO treaty allows a country to withdraw commitments to open its services market to foreign investors. However, the US could potentially have to renegotiate with any of the other 149 member countries if they raise to objections to its decision. Member countries affected by the US ban on offshore online gaming firms may also have a case to claim compensation from the US government.

In the case of Antigua and Barbuda, compensation may be calculated based on loss of income for its 32 registered online casinos. According to the government, income has fallen to $130 million a year from $1 billion among the jurisdiction's online casinos in 2000, when earlier US restrictions on online gaming were imposed.

As far as Washington is concerned however, its legal manoeuvre effectively ends the case, and it declined to challenge Tuesday's official adoption of the internet gambling ruling by the WTO dispute panel. The US also argues that it is exempt from negotiating compensation to governments because internet gambling was never explicitly mentioned in the negotiations of the early 1990s.

But according to Mendel, rules allowing US-based companies to continue to offer online services in the country while offshore firms are barred amounts to nothing more than "blatant trade protectionism".

"The American defense was predicated on their theory that internet gambling was worse than gambling in bricks and mortar shops," he told AP. "If they believed that, they would eliminate all remote gambling in America. They have not done that."

While the tiny Caribbean country is within its rights to apply for trade sanctions against the US, the relatively minute flows of trade between the two means that such an action would be likely to have very little bearing on Washington's stance on the issue. Nonethless, Mendel said that Antigua may target telecoms and intellectual property rights. "That's a way we can possibly fight back," he surmised.

In its recent ruling against the US over Antigua's complaint that the US was unlawfully banning payments to offshore gaming websites, the WTO panel noted that legislation signed by President Bush in 2006 (which post-dated both Antigua's original complaint and the first WTO ruling in its favour) confirmed the lack of conformity of US law with its obligations under the GATS.

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

The US passed the Unlawful Internet Gambling Enforcement Act in 2006, which while expanding domestic opportunities for legal gaming, effectively banned all international and inter-state online gaming, by making it illegal for banks and credit card firms to make payments to such internet operations.

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