Press Release, Brussels, September 26, 2007
From CyberOne Wiki
For immediate release / 26 September 2007
Media Contacts:
Brussels: Michael Thaidigsmann + 32 485 869584 michael.thaidigsmann@stern.be London: Roger Carroll + 44 20 7861 3232 rcarroll@bell-pottinger.co.uk New York: Jonathan Cohen + 1 646 254 6000, x12 jcohen@weisergroup.com
'EU Industries Could Garner $100 Billion In Trade Concessions Due To US Flouting of WTO'
'Trade Clash between EU and US Is One Result of Antigua’s Unprecedented Internet Gaming Victory'
'US Withdrawal of WTO Gambling Obligations Puts 151-member World Trade Body At Risk'
London and Brussels – A groundbreaking WTO Internet gaming case decided in favour of the Caribbean nation of Antigua over the US after a four-year legal battle now threatens to cause a major trade clash between Europe and the Bush Administration, with nearly $100 billion in trade concessions available to European industry and the credibility of the WTO being questioned.
In Antigua’s victory earlier this year – the first WTO case dealing with Internet commerce – the WTO ruled that the US violated its treaty obligations by excluding online Antiguan gaming operators while allowing domestic operators to offer various forms of online gaming. Instead of complying with the ruling, the Bush Administration withdrew its enormous gambling industry from its free trade commitments, claiming to have made a mistake by including gambling in its GATS schedule.
As a result of the Bush Administration decision – which represents the first time a WTO member nation has withdrawn any of its WTO commitments – the enormous impact of Antigua’s victory is beginning to reverberate across the globe. Under WTO rules, all 151 WTO members are allowed to seek compensation for the withdrawal equal to the size of the entire US land-based and online gambling market, estimated at nearly $100 billion.
“This is by far the most significant WTO case ever and its implications for both the US and the EU are enormous,” said Nao Matsukata, a former Bush Administration trade official. “Given the size of the US gaming market, both the potential benefit for European industry and the corresponding potential damage to US companies is unprecedented.”
“This is also a watershed moment for the WTO because a major world power is thumbing its nose at the institution it helped to create, and is disregarding rules it had helped to put in place,” Matsukata added.
Already, several publicly listed online EU gaming operators, such as PartyGaming and 888 Holdings, have lost billions of dollars in revenues and market value because of the US laws excluding overseas operators. Meanwhile, US giants such as Yahoo! and the Las Vegas-based Sands Corporation are beginning to market online gaming services in Europe.
The size of the dispute is astounding, experts say. The potential trade concessions are roughly twenty times larger than what had been the biggest previous WTO case, a $4.3 billion tax issue between Europe and the US that was resolved by the US adjusting its tax code. Most WTO claims involve far lower sums, such as Ecuador’s $191 million claim against Europe over banana tariffs.
The EU has developed the world’s leading Internet gaming businesses and is considered to have a strong lead over the US in this sector, with operations in the UK, Gibraltar, Malta, Austria, Bulgaria, Ireland, Estonia, and Sweden, employing an estimated 15,000 workers.
Other than the EU, several other nations – including India, Japan, Brazil, Australia, Canada, and Macao – have responded to the opportunity created by the US withdrawal by filing claims with the WTO seeking compensatory concessions. The US is now under pressure to settle with each country, with the processes entering arbitration if agreements are not reached. The EU and the US reportedly have been in settlement discussions. Unless the matter is settled, the size and nature of the trade concessions will be determined by WTO arbitration.
“One major question is how strong the EU will be in pushing the US for all of the concessions available to it,” said Craig Pouncey, a Brussels-based trade lawyer with Herbert Smith.
The size of the entire US gaming market – which includes both online and traditional “bricks and mortar” casino operators – is in play because the US withdrawal applies to all of its gaming commitments globally. Some form of gaming (casinos, lotteries, horse betting) in the US is legal in 48 out of the 50 states while the industry employs more than 350,000 people and generates billions of dollars of tax revenues.
Prior to the US decision to renege on its WTO commitments, the case had been confined to online gaming operators in Antigua, whose case is moving toward a separate arbitration. Antigua separately has sought concessions from the US of $3.4 billion annually, by itself the second largest WTO claim. Dozens of online gaming operators in Antigua once controlled about half of the US online gaming market before the US government began criminal prosecutions, severely damaging a sector that is the second-highest employer on the island.
Mark Mendel, the American lawyer representing Antigua before the WTO, lobbied other WTO member nations to file claims after the US withdrawal.
The Antigua case also has implications for Internet Commerce. It is the first WTO case supporting a small country’s right and ability to create a globally important business sector on the Internet, as Antigua claims it was doing with online gaming. The WTO will most likely deal with other Internet cases soon, as US search giant Google has suggested it will press a claim against China for violating the WTO by barring Chinese users from certain Internet sites using the Google search function.
- end - Contacts for follow-up interviews:
Mark Mendel, lawyer for Antigua: + 1 915-587-7878 (mmen@acaciapark.com)
Lode Van Den Hende, Herbert Smith: + 322 5117450 (lode.vandenhende@herbertsmith.com)
Craig Pouncey, Herbert Smith: + 322 5181829 (craig.pouncey@herbertsmith.com)
Nao Matsukata, Alston & Bird: + 1 202 2997681 (nao.matsukata@alston.com)
Charles Nesson, Harvard Law professor: + 1 617 547 9469 (nesson@gmail.com)
Clive Hawkswood, Remote Gambling Association: + 44 (0) 207 479 4040 (chawkswood@rga.eu.com)
Raul Herrera, Arnold & Porter: + 1 202 651 0812 (raul.herrera@aporter.com)
