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08 April 2005

Appellate Trade Body Confirms Right To Limit Internet Gambling

Office of U.S. Trade Representative calls WTO ruling "important victory"

The United States won an “important victory” April 7, when the World Trade Organization (WTO) ruled that WTO members are entitled to maintain restrictions on Internet gambling, says the Office of the United States Trade Representative (USTR).

Antigua had alleged before the WTO that U.S. state and federal laws prohibiting the cross-border supply of gambling services are inconsistent with U.S. WTO obligations and violated WTO market-access provisions.

In a reversal of a 2004 WTO panel report, the April 7 WTO Appellate Body ruling upheld the U.S. restrictions on Internet gambling because these laws qualify for WTO exceptions for public morals and public order.

"This win confirms what we knew from the start -- WTO members are entitled to maintain restrictions on Internet gambling," said acting U.S. Trade Representative Peter F. Allgeier.  "We are pleased that the Appellate Body has agreed with our position that the U.S. gambling laws at issue here protect public order and public morals."

Following is the text of the USTR press release, with further details:

(begin text)

OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
Executive Office of the President
Washington, D.C.

FOR IMMEDIATE RELEASE
April 7, 2005

U.S. Internet Gambling Restrictions Can Stand as U.S. Wins Key Issues in WTO Dispute

WASHINGTON -- The United States won an important victory today when the World Trade Organization (WTO) Appellate Body sided with the United States on key issues in a challenge to U.S. laws on Internet gambling.

"This win confirms what we knew from the start -- WTO members are entitled to maintain restrictions on Internet gambling," said Acting U.S. Trade Representative Peter F. Allgeier.  "We are pleased that the Appellate Body has agreed with our position that the U.S. gambling laws at issue here protect public order and public morals.  By reversing key aspects of a deeply flawed panel report, the Appellate Body has affirmed that WTO members can protect the public from organized crime and other dangers associated with Internet gambling.  This is also a victory for the federal and state law enforcement officers and regulators who protect the public from illegal gambling and its associated risks of money laundering and organized crime."

"U.S. restrictions on Internet gambling can be maintained," Allgeier said.  "This report essentially says that if we clarify U.S. Internet gambling restrictions in certain ways, we'll be fine."

The Appellate Body found that the concerns addressed by the three U.S. federal gambling laws at issue in this dispute "fall within the scope of 'public morals' and/or 'public order'" under an exception to WTO rules for trade in services.  It merely found that, for this exception to apply, the United States needs to clarify one narrow issue concerning Internet gambling on horse racing.  USTR will be exploring possible avenues for addressing this finding.  USTR will not ask Congress to weaken U.S. restrictions on Internet gambling.

The next step in the process is for the WTO's Dispute Settlement Body to formally adopt the panel and Appellate Body reports within 30 days.

There is no further appeal.

Background

This dispute concerns Antigua's allegation that U.S. state and federal laws prohibiting the cross-border supply of gambling services (e.g., Internet and telephone gambling) are inconsistent with U.S. obligations and our schedule of specific commitments under the General Agreement on Trade in Services ("GATS").  Antigua argued that the United States violated the market access provisions of the GATS by barring supply of gambling services on a cross-border basis -- such as supply of gambling services by Internet from Antigua-based web sites.

The Panel released a final report to the parties on May 25, 2004.  The parties suspended the panel proceedings for settlement negotiations from June through October 2004.  The final panel report was made public on November 10, 2004.

In today's report, the Appellate Body reversed key aspects of the panel's finding that U.S. federal laws did not meet the requirements for application of WTO exceptions for "public morals" and "public order."  As a result, the Appellate Body found that U.S. laws qualify for these exceptions, except that the United States must clarify a narrow issue relating to Internet gambling on horse racing.  The Appellate Body also found that Antigua failed to prove that any of the state laws at issue were inconsistent with WTO rules.  However, the Appellate Body found that the United States made a GATS market access commitment for gambling services during the Uruguay Round.

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