UNITED STATES – MEASURES AFFECTING THE CROSS-BORDER SUPPLY OF GAMBLING AND BETTING SERVICES
Document: Recourse to Article 21.5 of the DSU by Antigua and Barbuda Request for the Establishment of a Panel
Date: 7 July 2006
Document codes: WT/DS285/18
Complainant: Antigua and Barbuda
Respondent: U.S.
Third parties: Canada, Taiwan, EU, Japan, Mexico, China
Dispute stage: Implementation & Compliance
Agreements cited: Art. VI, VIII, XVI, XVII, XI  Services (GATS)

UNITED STATES – MEASURES AFFECTING THE CROSS-BORDER SUPPLY
OF GAMBLING AND BETTING SERVICES

Recourse to Article 21.5 of the DSU by Antigua and Barbuda

Request for the Establishment of a Panel

 The following communication, dated 6 July 2006, from the delegation of Antigua and
Barbuda to the Chairman of the Dispute Settlement Bo dy, is circulated pursuant to Article 21.5 of the
DSU.

 Antigua and Barbuda is pleased to submit this request for the establishment of a panel to the
Chairman of the Dispute Settlement Body and to the United States of America pursuant to
Article 21.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes of
the WorId Trade Organisation with respect to the dispute known as (WT/DS285).

Background

 On 21 July 2003, the Dispute Settlement Body (the "DSB") of the WorId Trade Organization
(the "WTO") established a panel at the request of Antigua and Barbuda in this dispute ("DS285").
Both the panel and the Appellate Body in DS285 found certain measures of the United States to be
inconsistent with certain of the obligations of the United States under the WTO's General Agreement
on Trade in Services (the "GATS"). On 20 April 2005, the DSB adopted the report of the panel, as
modified by the report of the Appellate Body. The resulting DSB recommendations and rulings
include, inter alia, the recommendation that the United States bring the measures found to be
inconsistent with the GATS into conformity with its obligations under that agreement.
1

 On 6 June 2005, Antigua and Barbuda communicated a request to the DSB that the
determination of a reasonable period of time for compliance by the United States with the
recommendations and rulings of the DSB be the subj ect of binding arbitration, in accordance with
Article 21.3(c) of the WTO's Understanding on Rules and Procedures Governing the Settlement of
Disputes (the "DSU"). On 30 June 2005, an arbitrator was appointed by the Director-General of the
WTO.

 During the course of the proceedings before the arbitrator, the United States argued that "both
the legal form of implementation and the technical complexity of the contemplated measures require a

1 WT/DS285/AB/R, para. 374.

reasonable period of time of no less than 15 months".
2 The United States took the position during the
arbitration that it intended to seek compliance w ith the DSB recommendations and rulings through
legislation.3

 On 19 August 2005, the award of the arbitrator determined that the reasonable period of time
for the United States to implement the recommend ations and rulings of the DSB in DS285 was
11 months and two weeks from 20 April 2005. This period of time expired on 3 April 2006 without
any measure being adopted by the United States.

 On 10 April 2006 the United States submitted a status report to the DSB regarding
implementation of the DSB recommendations and rulings.
4 The United States informed the DSB that,
in its opinion, it was in compliance with the recommendations and rulings of the DSB based on the
following statement (the "DOJ Statement") made by a representative of the United States Department
of Justice to a subcommittee of the United States House of Representatives on 5 April 2006:

"The Department of Justice views the existing criminal statutes as prohibiting the
interstate transmission of bets or wa gers, including wagers on horse races. The
Department is currently undertaking a ci vil investigation relating to a potential
violation of law regarding this activity. We have previously stated that we do not
believe that the Interstate Horse Racing Act, 15 U.S.C. §§ 3001-3007, amended the
existing criminal statutes.
In view of these circumstances, the Un ited States is in compliance with the
recommendations and rulings of the DSB in this dispute."
 At a meeting of the DSB on 21 April 2006, th e United States informed the DSB that in light
of the DOJ Statement, it was in compliance with the recommendations and rulings of the DSB. At the
same meeting, Antigua and Barbuda expressed its disagreement with the United States' assertion of
compliance, noting that the DOJ Statement was in fact a restatement of one of the arguments made by
the United States to the panel and the Appellate Body during the course of the proceedings.

 On 23 May 2006, Antigua and Barbuda a nd the United States concluded an "Agreed
Procedures under Articles 21 and 22 of the Dispute Settlement Understanding Applicable to the WTO
Dispute United States –
 Measures Affecting the Cross-Bo rder Supply of Gambling and Betting
Services (WT/DS285)" (the "Agreed Procedures").

 On 8 June 2006, Antigua and Barbuda initiate d proceedings under Article 21.5 of the DSU,
requesting consultations with the United States. Th ese consultations were held in Washington, D.C.
on 26 June 2006, but did not result in a settlement of the dispute. Consequently, there is a
disagreement between the parties as to the existe nce or consistency with a covered agreement of
measures taken to comply with the recommendations and rulings of the DSB in DS285, within the
meaning of Article 21.5 of the DSU.

The United States Has Failed to Comply with the Recommendations and Rulings of the DSB

 Antigua and Barbuda disagrees that th e United States has complied with the
recommendations and rulings of the DSB in DS285 a nd believes that the United States remains out of
compliance with the United States' obligations un der the GATS with respect to the provision of

2 US – Gambling , Arbitration under Article 21.3(c) of the DSU, Submission of the United States of
America, para. 9.
3 Id.
4 WT/DS285/15/Add.1.

cross-border gambling and betting services from Antigua and Barbuda to consumers in the
United States.

 No Federal Legislation

 First, Antigua and Barbuda considers that the United States has taken no measures to comply
with the recommendations and rulings of the DSB. In DS285, Antigua and Barbuda established the
existence of three federal statutes which serve to prohibit companies from Antigua and Barbuda from
providing cross-border gambling and betting services to consumers located in the United States in
violation of the United States' obligations under the GATS. These three federal statutes are (i) the
Wire Act of 1961,18 US.C. §1084 (the "Wire Act"); (ii) the Travel Act, 18 US.C. §1952 (the "Travel
Act"); and (iii) the Illegal Gaming Business Act, 18 US.C. §1955 (the "IGBA"). The DSB
recommended that the United States bring these three measures in conformity with its obligations
under the GATS.

 Neither during the reasonable period of time nor to date has the United States introduced,
much less passed, any legislation that would amend or effect the Wire Act, the Travel Act or the
IGBA in such a manner as to make those statutes WTO-consistent. Furthermore, two bills which have
been introduced in the current United States ' Congress – H.R. 4777 and H.R. 4411 – are expressly
contrary to the recommendations and rulings of the DSB in DS285, as each would further
institutionalise the discriminatory effect of the th ree United States statutes. The United States has
therefore failed to bring these federal statutes into conformity with its obligations to Antigua and
Barbuda under the GATS and each statute remains contrary to Article XVI of the GATS without
meeting the requirements of Article XIV of the GATS.

 DOJ Statement not a "Measure" for Purposes of the DSU

 Second, despite having insisted to the Article 21.3( c) arbitrator that the United States would
pursue a legislative remedy to bring itself into conf ormity with the recommendations and rulings of
the DSB in DS285, the United States asserted it wa s in compliance on 10 April 2006 by reference to
the DOJ Statement. However, the DOJ Statement does not constitute a "measure" for purposes of the
DSU. The DOJ Statement is nothing but an utterance of a government official without any
independent legal effect under United States law or under the GATS, the DSU or any other WTO
agreement.

 Not a "Measure Taken to Comply"

 Third, the DOJ Statement is nothing more that a restatement of the position taken by the
United States during the course ofDS285 that was ultimately found unpersuasive by both the panel
and the Appellate Body. Assuming, arguendo, that an utterance by a government employee can
constitute a "measure" for purposes of the DSU, Anti gua and Barbuda does not believe that a simple
restatement of a legal position taken by a party to a dispute during its regular course can be considered
a "measure taken to comply with the recommendations and rulings" of the DSB within the meaning of
Article 21.5 of the DSU

 The United States Remains Out of Compliance with its GATS Obligations

 Fourth, regardless of whether the DOJ Statement constitutes a "measure" for purposes of the
DSU or whether it can be considered a "measure ta ken to comply" within the meaning of Article 21.5
of the DSU, the DOJ Statement does not bri ng the United States into compliance with the
recommendations and rulings of the DSB in DS285. In this regard Antigua and Barbuda notes that,
inter alia:

 (1) As Antigua and Barbuda had observed to both the panel and the Appellate Body,
there are a number of reasonable alternative measures available to the United States other
than prohibition to address the concerns of the United States with respect to the provision of
remote gambling and betting services. Since the adoption of the panel and Appellate Body
reports by the DSB, even more alternatives have become available. Ironically, as further
discussed below each of the two bills pendi ng in the United States Congress explicitly
recognise that it is possible to address risks of remote gambling with extant technology,
fundamentally undermining the United States' defence under Article XIV of the GATS.

 (2) Since the adoption of the recommendati ons and rulings of the DSB in DS285, not
only have there been no prosecutions of or enforcement actions brought against domestic
remote gambling and betting service providers operating pursuant to the Interstate Horse
Racing Act (the "IHA"), but in fact there has been significant growth in and expansion of
domestic remote gambling and betting services generally in the United States.

 (3) The position of the United States as reflect ed in the DOJ Statement is not supported
by the bulk of United States legal authority.

 (4) Assuming the accuracy of the portion of the DOJ Statement in which it is said that
"[t]he Department is currently undertaking a civil investigation relating to a potential
violation of law regarding this activity" the reference to a civil investigation is evidence of the
discriminatory application of its laws by the United States, as licensed, regulated providers of
cross-border gambling and betting services from Antigua and Barbuda to the United States
remain subject to criminal prosecution by United States authorities
5, contrary to the
obligations of the United States under the GATS.

 Pending Legislation in the United States Congress Would Violate the GATS

 As noted above, two bills are currently pending in the United States Congress which
expressly address the provision of remote gambling and betting services. One bill was introduced into
the United States Congress on 16 February 2006 as H.R. 4777 and is entitled the "Internet Gambling
Prohibition Act" (the "Goodlatte Bill"), and another was introduced on 18 November 2005 as
H.R. 4411 and is cited as the "Unlawful Internet Gambling Enforcement Act of2005" (the "Leach
Bill" and, collectively with the Goodlatte Bill, th e "Bills"). Each of the Bills is in key respects
expressly contrary to the recommendations and rulings of the DSB.

 Each Bill is not only non-responsive to the r ecommendations and rulings of the DSB, rather
each is in fact directly contrary to the recomme ndations and rulings in several key respects. The
Goodlatte Bill is cast as an amendment to the Wire Act, designed to expand th e coverage of the Wire
Act to most types of gambling services offered ove r the Internet, whereas the Leach Bill does not
expressly purport to prohibit any class of remote ga mbling and betting or further criminalise remote
betting per se. Rather, the Leach Bill seeks to criminalise facilitation of or participation in certain
financial transactions associated with what the legi slation defines as "unlawful Internet gambling".
The Goodlatte Bill also includes prohibitions on certain financial transactions similar to those
contained in the Leach Bill in its proposed amendments to the Wire Act.

 Although addressed in slightly different ways, both the Goodlatte Bill and the Leach Bill
contain three significant exceptions from their coverage. First, both of the Bills exclude from their

5 On 17 May 2006, an indictment was unsealed in which the United States Department of Justice
indicted a number of companies and individuals, including the former holder of a gambling and betting license
issued by Antigua and Barbuda, for various alleged violations of United States laws, including the Wire Act,
simply by the provision of those services to consumers in the United States.

coverage transactions made in accordance with the IHA, effectively removing remote betting and
gambling in accordance with the IHA from the scope of the legislation. Second, both of the Bills
specifically exclude from their coverage transactions that the Leach Bill calls "intrastate transactions",
effectively sanctioning remote gambling that occurs wholly within the borders of an American state.
Third, both of the Bills exclude from their coverage remote gambling conducted by Native American
tribes in accordance with existing federal legislation applicable to Native American gaming. Neither
of the Bills provide gambling and betting service oper ators located in Antigua and Barbuda with any
access to consumers in the United States or are in any way responsive to the recommendations and
rulings of the DSB in DS285.

 The defence of the United States in DS285 unde r Article XIV of the GATS was predicated on
the notion that "remote" gambling-which the United States defined as gambling in which the bettor
and the gambling service provider or an agent are not physically in the presence of each other when a
wager is made-presents certain "risks" that are either not present or not present to a similar extent than
when gambling is not "remote". Although gambling over the Internet can be remote it is not the
exclusive mode of remote gambling. None of th e federal laws that Anti gua and Barbuda challenged
prohibit remote gambling. What they prohibit are certain forms of cross-border gambling. It was
never alleged by the United States nor was it fo und by the panel or the Appellate Body that
cross-border gambling presents any special "risks" that c ould come within the scope of Article XIV
of the GATS. Thus, while "cross-border" gambling may in most cases be "remote" it does not
however hold true that all "remote" gambling is "cross-border". Although the Appellate Body
decided that the United States had established the th ree federal statutes in question as "necessary" to
protect against "risks" associated with remote gambli ng, the failure of the United States to meet its
burden of proof under the chapeau of Article XIV resulted in the overall failure of the Article XIV
defence. The three exceptions to the coverage of the Goodlatte Bill and the Leach Bill mentioned
above only serve to highlight the chapeau failure and the discriminatory and trade restrictive
application of the three federal laws by the United States government.

Request for Establishment of a Panel

 Because there is a disagreement between the par ties as to the existence or consistency with a
covered agreement of measures taken to comply w ith the recommendations and rulings of the DSB in
DS285, within the meaning of Article 21.5 of the DSU, Antigua and Barbuda requests the
establishment of a panel under Article 21.5 of the DSU, and further requests that this matter be
referred to the original panel in DS285 with the standard terms of reference under Article 7 of the
DSU.

 Antigua and Barbuda additionally respectfully requests that the panel:

 (1) find that the United States has not taken measures to comply with the
recommendations and rulings of the DSB in DS285;

 (2) find that the Wire Act, the Travel Act and the IGBA remain in violation of the
United States' obligations to Antigua and Barbuda under, inter alia, Article XVI of the GATS
without meeting the requirements of Article XIV of the GATS; and

 (3) recommend that the DSB request the United States to bring the Wire Act, the Travel
Act and the IGBA into conformity with the obligations of the United States under the GATS.

 Pursuant to the Agreed Procedures, the Un ited States has agreed to accept the establishment
of a panel at the first meeting at which this re quest for the establishment of a panel appears on the
agenda.