U.S. Faces Penalty in GATS Gambling Dispute

published 13 February 2008 updated 13 February 2008

A WTO panel has given Antigua and Barbuda the right to impose $21 million in annual trade sanctions against the United States for its restrictions on cross-border Internet gambling.

The award falls far short of the $3.4 billion in damages sought by Antigua and Barbuda. The U.S. had said it was prepared to pay $500,000.

The decision follows an earlier WTO ruling that found the U.S. violated its GATS commitments by banning internet gambling. Despite U.S. claims that it never intended to open the market for offshore gambling companies, the WTO agreed with Antigua and Barbuda which argued that U.S. GATS commitments on recreational services included gambling.

In response, the U.S. sought to modify its GATS commitments to explicitly prohibit cross-border gambling. In doing so, however, the U.S. was forced to negotiate compensation with WTO Members claiming losses from the change.

In its decision, the WTO panel allowed Antigua and Barbuda to restrict U.S. firms’ access to their services market as well as suspending intellectual property rights for American rights holders. Trade officials for Antigua and Barbuda Mendel wouldn’t speculate on what intellectual property rights might be suspended.

The ruling follows an earlier negotiated settlement between the United States and the European Union. Although the precise value of the deal is unknown, the U.S. agreed to offer EU firms more opportunities in postal and courier services, and storage and warehouse sectors as compensation. In addition, the United States will provide new market access opportunities in the testing and analysis services sector and research and development services on natural sciences, social sciences and humanities and interdisciplinary issues, with an exception for U.S. government-funded R&D.