Academic journal article William and Mary Law Review

Betting on the Wrong Horse: The Detrimental Effect of Noncompliance in the Internet Gambling Dispute on the General Agreement on Trade in Services (GATS)

Academic journal article William and Mary Law Review

Betting on the Wrong Horse: The Detrimental Effect of Noncompliance in the Internet Gambling Dispute on the General Agreement on Trade in Services (GATS)

Article excerpt

INTRODUCTION
I. THE RISE AND FALL OF INTERNET GAMBLING
II. DISPUTE SETTLEMENT UNDER THE GENERAL
    AGREEMENT ON TRADE IN SERVICES (GATS)
    A. Antigua Fights Back
    B. Basic Provisions of GATS
    C. Remedies Available Under the
       Dispute Settlement Framework
    D. Outcome of Antigua's Complaint
III. COMPLIANCE UNDER THE TWO DISPUTE
    SETTLEMENT FRAMEWORK
    A. Benefits of a Strong Agreement for Regulation of
       Trade in Services
    B. Statistics on Compliance with the DSU
    C. Problems with Compliance
    D. Specific Issues with U.S. Compliance
       1. U.S.--Byrd Amendment Dispute
       2. U.S.--Hot-Rolled Steel Dispute
       3. U.S.--Section 211 Dispute
       4. U.S.--Section 110(5)(b) Dispute
    E. Differentiating Between Previous Instances of U.S.
        Noncompliance and the Internet Gambling Dispute
IV. THE EFFECT OF U.S. NONCOMPLIANCE IN THE GAMBLING
    DISPUTE ON THE LEGITIMACY OF GATS
    A. Fragility of GATS as a Mechanism for
       Regulating Trade in Services
    B. U.S. Influence on the Creation of GATS and the
       Current DSU
    C. U.S. Expression of Discontent with the
       Panel's Ruling
    D. Lack of Recourse to the Usual Excuses for
       Noncompliance
    E. Vulnerability of the United States to Further
       Challenges Under GATS
CONCLUSION

INTRODUCTION

Over the past decade, Internet gambling has become a global force. In 2003, the projected industry revenues summed five billion dollars worldwide. (1) With the click of a button, bettors could link up with counterparts in other parts of the globe for a poker tournament or a game of blackjack. As other countries embraced the operators of this new recreational activity, recognizing it as an opportunity to spur economic growth and bring in valuable tax revenue, the United States began to crack down on the industry. (2)

As part of this crackdown, the U.S. federal government and the states started to pass and enforce regulations prohibiting Internet gambling, resulting in the arrest and conviction of executives of foreign gambling operations who dared to set foot on U.S. soil. (3) This onslaught against the foreign gaming industry did not go unnoticed, however, and eventually, one small country, Antigua and Barbuda, attempted to fight back against what it perceived as unfair discrimination against one of its primary sources of income. Antigua brought a complaint against the United States to the World Trade Organization (WTO), alleging violations of U.S. obligations under the General Agreement on Trade in Services (GATS). (4) The WTO found the United States to be in violation of a specific provision of GATS and ordered the United States to bring federal law into conformity with its GATS obligations. (5) Though many scholars consider the violation to be minor and the fix relatively uncomplicated, (6) thus far the United States has failed to comply with the WTO's recommendations. (7)

The Dispute Settlement Understanding (DSU) governs disputes, such as this one, that arise under GATS, as well as disputes under other WTO agreements. (8) The DSU vests adjudicatory power in the WTO for all disputes that arise under WTO agreements. (9) Although WTO member nations have failed to comply on occasion with WTO decisions involving violations under other agreements--such as the General Agreement on Trade in Tariffs (GATT) or Trade-Related Aspects of Intellectual Property Rights (TRIPS)--this lack of compliance has not proved fatal to these agreements. (10) GATS, however, is a fairly young multinational trade agreement, and some scholars argue that GATS has struggled to shape its identity amidst problems with overly flexible provisions and lack of attention from WTO ministers. (11) Although most countries are likely to acknowledge that the agreement has been a relative success thus far, (12) it has yet to weather any serious tests to its legitimacy. Because it was instrumental in the formation of GATS, (13) other countries will likely look to the United States as an example when deciding whether to comply with WTO decisions under GATS. …

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