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’s 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 – 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’ 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 – 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 “Pirate of the Caribbean” 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’s 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 “inadequacies and structural rigidities” 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 “it is a waste of time and money for developing countries to invoke the WTO’s dispute settlement procedures against industrial countries.”

United States – Measures Affecting the Cross-border Supply of Gambling and Betting Services - Recourse by Antigua and Barbuda to Article 22.2 of the DSU (WT/DS285/22) (21 June 2007)

EC—Regime for the Importation, Sale and Distribution of Bananas—Recourse to Arbitration by the EC under Article 22.6 DSU, WT/DS27/ARB/ECU, 24 March 2000, para. 177. In a previous arbitration in the same case, the arbitrators also said that the suspension of concessions was not in the economic interest of the parties: EC—Regime for the Importation, Sale and Distribution of Bananas—Recourse to Arbitration by the EC under Article 22.6 DSU, WT/DS27/ARB, 9 April 1999, para. 2.13. Ecuador was authorized to retaliate under the TRIPs Agreement but failed to do so partly because of the significant difficulties involved in such retaliation.