The European Commission is pursuing a case against the United States for WTO-inconsistent enforcement of US laws against European companies and individuals who had been involved in the multi-billion dollar Internet gambling market in the United States – a market that the US had committed to make open as part of its commitments under the GATS (General Agreement on Trade in Services).
The Commission recently completed a lengthy and detailed investigation into allegations made by European industry interests and has just released their long-awaited report which is clear in its conclusions – the US actions are legally not justified and discriminatory. It is now to be seen whether Lady Ashton’s previous invitation for an amicable but speedy resolution to this dispute will be accepted by the US Trade Representative and his colleagues in the Department of Justice or whether the EU will have to take further action to defend European interests.
While important in respect of the damage done to EU commercial and personal interests by the US actions, this case is also important for the wider issues at stake. Such clear violation of international commitments combined with the use of criminal enforcement action to pursue a WTO-violating policy has never been seen before. At a time when the US and the EU (and their other trading partners) are trying to tackle very serious issues that require international cooperation and to be able to rely on commitments that are made, the failure to resolve this issue quickly will be a blow to the wider trade agenda.
This case follows a series of WTO-decisions against the United States in the area of cross-border Internet gambling dating from 2003 to the present.
WTO Background: In March 2003, the Caribbean nation of Antigua and Barbuda initiated dispute proceedings in the World Trade Organization (WTO) against US laws that prohibit foreign access to US Internet gambling markets. A WTO dispute panel ruled in November 2004 that US criminal laws constituted a violation of commitments made by the United States in the WTO General Agreement on Trade in Services (GATS). The WTO’s Appellate Body subsequently upheld this decision in an April 2005 ruling. After further WTO panels confirmed the US violation, the US in May 2007 unilaterally indicated that it intended to rely on a technical rule in the WTO to withdraw its GATS commitments on gambling services (including Internet-based services), rather than seeking a legislative solution, triggering a series of compensation negotiations with affected countries (including the EU). The United States withdrawal frustrated trading partners who had assumed the United States would uphold the rules of the trade system, even in the event of an adverse ruling in dispute settlement and not use a technical right to withdraw in such circumstances as these.
Retroactive and Discriminatory Enforcement: Alarmingly, and not content with the withdrawal of its GATS commitments to this multi-billion dollar market, the United States Department of Justice continues to enforce and threaten indictments in ongoing violation of the WTO. This prompted a complaint led by the Remote Gambling Association representing the European industry. Further detail on the EU Commission’s case is available here.
The Commission seeks an end to the WTO-violating enforcement activity and to the ongoing damage that this causes to EU corporate and individual’s interests. Such a resolution would need to be based on a clear, reliable and irrevocable commitment by the US government that there will be no further enforcement action taken with respect to any activities in relation to the provision of cross-border Internet gambling services – provision that was, after all, WTO-compliant; or to pursue any related activities that only occurred as a result of the various restrictions and enforcement applied by the US authorities, as a kind of proxy for pursuing the activities it should have allowed under WTO rules.
- Press Release by Erika Mann and Rep. Steve Cohen and Rep. Shelley Berkley, "US and EU Representatives Unite over need to maintain integrity in Trade and Justice Relationship", 28 April 2009
- Background Note, "EU investigation under the Trade Barriers Regulation - WTO unlawful enforcement of US gambling law", 5 June 2009
- Press Release, "EU Commission publishes report
internet gambling laws EU´s fact sheet", European Commission, 10 June 2009
- Fact Sheet: "Trade Barriers Regulation report on US Internet gambling laws", European Commission, 10 June 2009
- Background Information:
"What is the TBR (Trade Barriers Regulation)?", European Commission
- "EU Commission concludes investigation on US internet gambling laws", European Commission, 26 March 2009