[A2k] IQsensato: US-Antigua Gambling Dispute Highlights Defect in the WTO Dispute Settlement System

[Thiru Balasubramaniam]

http://www.iqsensato.org/?p=3D43

US-Antigua Gambling Dispute Highlights Defect in the WTO Dispute
Settlement System

The dispute between the United States (US) and Antigua and Barbuda has
already made GATT/WTO history. Antigua challenged various US measures
relating to gambling and betting services arguing that they were
inconsistent with the US obligations under the General Agreement on
Trade in Services (GATS). This was the first dispute arising under the
GATS to reach the Appellate Body. It was also the first time that the
GATT/WTO has adjudicated on the public morals defence, namely, whether
a member can justify imposition of trade restrictions on the basis of
the protection of public morals in its territory. Additionally, the
case has resulted in a rare withdrawal of commitments under the GATS
as the US decided to modify its GATS Schedule to exclude gambling and
betting from its market access commitments.

This is a classic David versus Goliath case in terms of the huge
difference in the economic, population and geographic size of the two
countries. Antigua=92s action highlighted the importance of compulsory
jurisdiction in international dispute resolution. The US would not
have accepted to litigate its gambling laws and regulations if it were
not for the compulsory jurisdiction of the WTO dispute settlement
system. It most probably would have blocked the establishment of a
dispute settlement panel if the dispute had arisen, for example, under
NAFTA =96 as it did in the dispute with Mexico over sugar. Thus one of
the main strengths of WTO dispute settlement is that membership of the
WTO ipso facto denotes full acceptance of the jurisdiction of the WTO
dispute settlement organs over any disputes arising under the relevant
WTO agreements.

Suspension of Concessions and Obligations under TRIPS

The US failed to comply with the ruling and the parties=92 attempts to
reach a compensation agreement were unsuccessful. Consequently, the
WTO Dispute Settlement Body (DSB) authorized Antigua to suspend
concessions and obligations (to retaliate) with respect to the US
under the Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS Agreement). Ordinarily, Antigua should have suspended
concessions and obligations in the services sector in which the
dispute arose, failing that, under other sectors of the GATS. But
Antigua is not capable of retaliating effectively against the US under
the GATS, and under the GATT for that matter. Since almost 50% of its
imports come from US-based suppliers, additional duties or
restrictions on imports of goods and services from the US would have a
much greater negative impact on Antigua than it would on the US.
According to Antigua, ceasing all trade with the US would have no
impact on the US economy.

The authorization to retaliate under the TRIPS Agreement has brought
significant attention to the dispute. Speaking in his personal
capacity, an official from the World Intellectual Property
Organization (WIPO) posited that Antigua would violate other
international agreements if it proceeded to suspend protection of
intellectual property rights =96 regardless of the express authorization
from the WTO. His views have rightly, and correctly, been countered
already by others. In addition to this, Antigua is being touted as a
=93Pirate of the Caribbean=94 by some sections of the media. This, of
course, completely overlooks the fact that all members of the WTO,
including the US, agreed to a dispute settlement system with the power
to authorize suspension of protection of trade-related intellectual
property rights in exceptional circumstances like this.

Structural Problems with the Remedies System

Instead of accusing Antigua of piracy and violation of international
intellectual property agreements like the Berne Convention for the
Protection of Literary and Artistic Works, it would be more
constructive to address minds to the root of the problem, namely, the
ineffectiveness of present remedies in WTO dispute settlement.

WTO remedies fall short of what one might ask of an effective legal
system. First, there is no compensation for past harm or loss. Second,
compensation in the form of enhanced market access depends on the
consent of the party that violated the rules; and, in any event, some
WTO members do not have the capacity to use the compensatory enhanced
market access. Third, retaliation is not optimal: WTO arbitrators have
previously recognized that a member may find itself in a situation
where it is neither realistic nor possible for it to retaliate for the
full amount of the level of nullification and impairment in all of the
sectors and/or under all agreements. Furthermore, as noted in Brendan
McGivern=92s commentary on the dispute, retaliation under the TRIPs
Agreement is especially difficult for a number of reasons. One,
regardless of the legality of the authorization from the WTO,
violation of intellectual property rights might be frowned upon by
other WTO members and the international community generally. Two, for
some products, it might not be easy to act against the TRIPs rights of
US rights holders without affecting the TRIPs rights of nationals of
other WTO members. Three, given the absence of rules on valuation of
suspension of intellectual property rights, it would be difficult to
ensure that the retaliation does not exceed the authorized amount.

Review and Reform

In light of these problems, the on-going WTO negotiations on
clarification and improvement of the provisions of the Dispute
Settlement Understanding should be used to remedy the flawed remedies
system. Several developing country submissions have noted the problems
with the current remedies; and some have suggested that lack of
developing country participation in WTO dispute settlement is linked
to the =93inadequacies and structural rigidities=94 of the available
remedies.

They have proposed various means of improving remedies; with some of
the proposals building on the current remedies and others seeking to
introduce new remedies drawn from international and national legal
systems. These proposals should be considered seriously and adopted as
appropriate or necessary. The Antigua dispute is a timely reminder of
the need to improve WTO remedies. If the remedies remain as they are,
it will be hard to argue against the view that =93it is a waste of time
and money for developing countries to invoke the WTO=92s dispute
settlement procedures against industrial countries.=94

------------------------------------------------------------


Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
thiru@keionline.org


Tel: +41 22 791 6727
Mobile: +41 76 508 0997