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Antigua Likely To Spurn US Gaming Compensation Offer

by Jeremy Hetherington-Gore, Tax-News.com, London

26 September 2007


In the long-running spat between the USA and Antigua and Barbuda over the latter's exclusion from America's gaming market, the USA has now made an offer to Antigua and seven other countries, including the EU, which joined with it in protesting the USA's abrogation of its WTO treaty commitment.

The dispute between the two countries began when the US took legal action against the owners of Antiguan gaming businesses and Antigua opened a case against it at the WTO. After a three-year process, the WTO ruled against the USA, which promptly decided to sidestep the ruling by the 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."

In parallel, the USA passed a law last October blocking banks and credit card companies from processing payments made by US residents to online gaming companies based offshore, citing both moral and security justifications. According to the Antiguan 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.

The WTO treaty allows a country to withdraw commitments to open its services market to foreign investors. However, a country that does this has to renegotiate with any of the other 149 member countries if they raise objections to its decision. The eight which have done so are said to have demanded many billions of dollars in restitution. The dispute resolution process which will consider those claims opened in July, but in the face of US opposition is currently adjourned pending negotiation.

A unnamed spokesperson in the office of the United States Trade Representative (USTR) said earlier in September: “We are trying to clarify, by using Article 21 of the GATS agreement (General Agreement on Trade in Services) that our obligations should not extend to gambling.”

“We’ve been quite pleased, to date, that the members who have made claims seem to be approaching this issue with a sense of seriousness and realism and that they generally seem determined to reach a solution; and we continue to believe that this Article 21 process is really the path that is most likely to lead to a resolution of this issue.”

The deadline for the conclusion of the current negotiation phase was supposed to be 22 September, but a month-long extension has been agreed. The USA's proposal is said to involve giving the protesting countries trading opportunities in the storage, warehouse services and technical testing sectors. But Antigua alone has demanded US$3.4bn compensation through the WTO and seems very unlikely to accept such amorphous proposals.

Meanwhile, the USA legislation passed last year, the Unlawful Internet Gambling Enforcement Act, which is set to go into effect next month, is being challenged, somewhat paradoxically, by the Interactive Media Entertainment and Gaming Association, which filed a suit in June challenging the law's constitutionality. The Justice Department has asked the New Jersey court hearing the suit to dismiss it. The judge is expected rule on the suit this week. The administration has yet to issue regulations to implement the law.


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