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Cross-Border Gambling and Betting Services Under WTO Disciplines

Published online by Cambridge University Press:  16 April 2015

Mitsuo Matsushita  and
Aya Iino
Mitsuo Matsushita
Affiliation:
Tokyo University, Japan
Aya Iino
Affiliation:
Mitsubishi UFJ Research and Consulting Co., Ltd.
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Abstract

Under GATS, Mode I involves the supply of a service from the territory of one Member into the territory of any other Member. Few negotiators of the Uruguay Round would have imagined the significance that this mode has come to acquire, or that on-line gambling service would flourish so much as to raise a dispute between Members of the WTO. As the first precedent on Mode I of GATS, “US-Measures Affecting the Cross-Border Supply of Gambling and Betting Services” contains important suggestive interpretations of Members' Schedules as well as general exceptions of the GATS, including burden of proof. The authors review the reports of the Panel and Appellate Body, and explore the implications of the case beyond GATS.

Type
Research Article
Information
Asian Journal of Comparative Law , Volume 1 , 2006 , pp. 1 - 19
Copyright
Copyright © Faculty of Law, National University of Singapore 2006

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References

1 “Mode 1” is defined in Art. I:2(a) in GATS as follows: “the supply of a service… from the territory of one Member into the territory of any other Member.” “Mode 2”, “mode 3” and “mode 4” are also respectively defined in Art. I:2(b) to (d) as the supply of a service “in the territory of one Member to the service consumer of any other Member”, “by a service supplier of one Member, through commercial presence in the territory of any other Member”, and “by a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member”.

2 Art. XVI, titled “Market Access”, consists of two provisions. Art. XVI:1 states: “With respect to market access through the modes of supply identified in Article I, each Member shall accord services and service suppliers of any other Member treatment no less favourable than that provided for under the terms, limitations and conditions agreed and specified in its Schedule” [footnote omitted]. Art. XVI:2 provides as follows: “In sectors where market-access commitments are undertaken, the measures which a Member shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory, unless otherwise specified in its Schedule, are defined as: (a) limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test; … (c) limitations on the total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test.” [footnote omitted].

3 Canada, Chinese Taipei, the European Communities, Japan and Mexico were third parties to this case, and were referred to as “participants” in the A.B. proceedings.

4 United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services (Complaint by Antigua and Barbuda) (2004), WTO Doc. WT/DS285/R at paras. 6.175 and 6.185 (Panel Report), online: WTO <http://docsonline.wto.org/gen_search.asp?searchmode=simple> (hereinafter “U.S.-Gambling (Panel Report)”).

5 Ibid. at para. 7.5.

6 The federal laws in question were the Transmission of Wagering Information Act, 18 U.S.C. § 1084 (hereinafter “the Wire Act”), the Interstate or Foreign Travel or Transportation in Aid of Racketeering Enterprises Act, 18 U.S.C. § 1952, and the Prohibition of Illegal Gambling Business Act, 18 U.S.C. § 1955 (ibid. at para. 6.223), while the state laws were those of Colorado, Louisiana, Massachusetts, Minnesota, New Jersey, New York, South Dakota and Utah (ibid. at paras. 6.226, 6.229, 6.232, 6.235, 6.239, 6.242, 6.245 and 6.248).

7 Ibid, at para. 6.223.

8 United States—Measures Affecting the Cross-Border Supply of Gambling and Betting Services from Antigua and Barbuda (Complaint by Antigua and Barbuda) (2005), WTO Doc. WT/DS285/AB/R at paras. 125 and 126 (Appellate Body Report) (hereinafter “U.S.-Gambling (A.B. Report)”).

9 Ibid. at para. 154.

10 Art. 6.2 of the DSU states: “The request for the establishment of a panel shall be made in writing. It shall indicate whether consultations were held, identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly. In case the applicant requests the establishment of a panel with other than standard terms of reference, the written request shall include the proposed text of special terms of reference.”

11 United States-Sunset Reviews of Anti-Dumping Measures on Oil Country Tubular Goods from Argentina (Complaint by Argentina) (2004), WTO Doc. WT/DS268/R at para. 162 (Panel Report); WTO Doc. WT/DS285/AB/R at para. 141 (Appellate Body Report) (hereinafter U.S.—Oil Country Tubular Goods Sunset Reviews).

12 U.S.—Oil Country Tubular Goods Sunset Reviews (A.B. Report), ibid. at para. 141.

13 US.—Gambling (Panel Report), supra note 4 at para. 6.61.

14 Ibid. at paras. 6.55-6.59.

15 Ibid. at paras. 6.59 and 6.60.

16 Ibid. at paras. 6.63-6.67.

17 (1991), WTO Doc. MTN.GNS/W/120.

18 (1993), WTO Doc. MTN.GNS/W/164.

19 US.–Gambling (Panel Report), supra note 4 at para. 6.82.

20 Ibid. at para. 6.93.

21 Ibid, at paras. 6.97-6.133. The Vienna Convention, 23 May 1969, 1155 U.N.T.S. 331, 8 I.L.M. 679 (entered into force 27 January 1980), sets out the general rule of interpretation which is considered to form part of the “customary rules of interpretation of public international law” in Art. 3.2 of the DSU for clarification of the WTO Agreements: United States-Standards for Reformulated and Conventional Gasoline (Complaint by Brazil et al.) (1996), WTO Doc. WT/DS2/AB/R at 17 (Appellate Body Report); Japan–Taxes on Alcoholic Beverages (Complaint by Canada et al.) (1996), WTO Docs. WT/DS 8, 10, 11/AB/R at 10-12 (Appellate Body Report) (hereinafter Japan-Alcoholic Beverages 11). Arts. 31(1), 31(2)(a) and (b), 31(3)(b) and 32 of the Vienna Convention provide as follows:

Article 31: General rule of interpretation

(1) A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

(2) The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including this preamble and annexes:

(a) any agreement relating to the treaty which was made between all the parties in connextion with the conclusion of the treaty;

(b) any instrument which was made by one or more parties in connexion with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.

(3) There shall be taken into account, together with the context:

(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation; Article 32: Supplementary means of interpretation Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:

(a) leaves the meaning ambiguous or obscure; or

(b) leads to a result which is manifestly absurd or unreasonable. [Emphasis added]

23 US.-Gambling (A.B. Report), supra note 8 at para. 161.

24 Ibid. at para 163.

24 Ibid. at para 164.

25 Ibid. at para 166.

26 Ibid. at para 167.

27 Ibid. at paras. 172-177. Other contexts examined by the A.B. were: (a) the remainder of the U.S.'s Schedule of specific commitments, (b) the substantive provisions of the GATS, (c) the provisions of covered agreements other than the GATS, and (d) the GATS Schedules of other Members: ibid. at para. 178. From its review of the matter mentioned in paragraph (b) the A.B. held that “the sectors and subsectors in a Member's Schedule must be mutually exclusive”. This necessarily means that gambling and betting services fall within only one category among “recreational services”, “sporting” and “entertainment services” in the context of the U.S. Schedule: ibid. at para. 180.

28 Ibid. at paras. 179-186.

29 Ibid. at paras. 188 and 189.

30 (2001), WTO Doc. S/L/92.

31 In this regard, the A.B. referred to precedents in this regard such as Japan— Alcoholic Beverages II, supra note 21, and Chile—Price Band System and Safeguard Measures Relating to Certain Agricultural Products (Complaint of Argentina et al.) (2002), WTO Doc. WT/DS207/R (Panel Report): U.S.-Gambling (A.B. Report), ibid. at para. 192.

32 United Nations, Statistical Papers, Series M, No. 77, Provisional Central Product Classification, 1991.

33 The relevant part of W/120 (supra note 17) states as follows:

C.P.C. Group 964 states as follows:

“964 Sporting and other recreational services

9641 Sporting services

96411 Sports event promotion services

96412 Sports event organization services

96413 Sports facility operation services

…

96419 Other sporting services

9649 Other recreational services

96491 Recreation park and beach services

…

96492 Gambling and betting services

96493 Other recreational services”

34 U.S.—Gambling (A.B. Report), supra note 8 at paras. 198-201.

35 Ibid. at paras. 203-208, 212 and 213.

36 Ibid. at para. 214.

37 The panel made findings on other elements such as limitations on market access in respect of part of a committed sector, and limitations on one or more means of cross-border delivery for a committed service, which were not appealed. It also made findings regarding the various activities that are prohibited under these statutes: ibid. at para. 239; U.S.—Gambling (Panel Report), supra note 4, paras. 6.335 and 6.338.

38 U.S.—Gambling (A.B. Report), ibid. at paras. 222 and 264.

39 Ibid. at paras. 225-236.

40 Ibid. at paras. 238 and 239.

41 Ibid. at paras. 245-247.

42 Ibid. at paras. 248-250.

43 Ibid. at paras. 251 and 252.

44 The relevant provision, Art. XIV(a), states: “Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, or a disguised restriction on trade in services, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any Member of measures: (a) necessary to protect public morals or to maintain public order” [footnote omitted].

45 U.S.—Gambling (Panel Report), supra note 4 at para. 6.487.

46 Ibid. at para. 6.535.

47 Ibid. at para. 6.566.

48 Ibid. at para. 6.608.

49 Ibid. at para. 6.465.

50 Ibid. at para. 6.467.

51 Ibid. at paras. 6.477-6.533; U.S.—Gambling (A.B. Report), supra note 8 at para. 301.

52 U.S.—Gambling (Panel Report), ibid. at para. 6.492.

53 Ibid. at para. 6.494.

54 Ibid. at para. 6.495.

55 Ibid. at para. 6.531.

56 Ibid. at para. 6.534.

57 Korea—Measures Affecting Imports of Fresh, Chilled and Frozen Beef (Complaint by Australia et al.) (2000), WTO Docs. WT/DS 161, 169/R (Panel Report).

58 European Communities—Measures Affecting Asbestos and Asbestos-Containing Products (Complaint by Brazil et al.) (2000), WTO Doc. WT/DS135/R (Panel Report). See the U.S.-Gambling (Panel Report), supra note 4 at para. 6.477.

59 U.S.—Gambling (A.B. Report), supra note 8 at paras. 312, 316 and 319.

60 Korea—Various Measures on Beef, supra note 57; E.C.-Asbestos, supra note 58.

61 Korea-Various Measures on Beef, ibid. at para. 164; US-Gambling (A.B. Report), supra note 58 at para. 305.

62 U.S.–Gambling, ibid. at para. 306.

63 Ibid. at para. 307.

64 Ibid. at para. 309 [emphasis in original].

65 Ibid. at para. 310.

66 Ibid. at para 311.

67 Ibid. at para 317 and 318.

68 Ibid. at para 313.

69 Ibid. at para. 320.

70 Ibid. at paras. 323-325.

71 Ibid. at paras 326 and 327.

72 Ibid. at para. 342.

73 Ibid. at paras. 343 and 345.

74 U.S.—Gambling (Panel Report), supra note 4 at para. 6.607.

75 U.S.-Gambling (A.B. Report), supra note 8 at paras. 348-351.

76 United States v. Jay Cohen, where one Antigua-based operator was prosecuted and ultimately convicted under the Wire Act: U.S.-Gambling (Panel Report), supra note 4 at para. 6.585.

77 The prosecution proceeding against Youbet.com, a U.S.-based operator: ibid. at paras. 6.587-6.588.

78 Three U.S.-based operators supplying remote gambling and betting services, namely, TVG, Capital OTB and Xpressbet.com: ibid. at para. 6.588.

79 Ibid, at para. 6.589.

80 U.S.-Gambling (A.B. Report), supra note 8 at paras. 352-357.

81 Art. 11 of the DSU, titled “Function of the Panels”, states as follows: “The function of panels is to assist the DSB in discharging its responsibilities under this Understanding and the covered agreements. Accordingly, a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements. Panels should consult regularly with the parties to the dispute and give them adequate opportunity to develop a mutually satisfactory solution.”

82 U.S.-Gambling (A.B. Report), supra note 8 at para. 363.

83 Regulation of Interstate Off-Track Wagering, 15 U.S.C. §§ 3001-3007.

84 Ibid. at para 361; US.–Gambling (Panel Report), supra note 4 at para. 6.595.

85 U.S.—Gambling (A.B. Report), ibid. at para. 362; U.S.—Gambling (Panel Report), ibid. at para. 6.597.

86 U.S.—Gambling (Panel Report), ibid. at para. 6.607.

87 U.S.—Gambling (A.B. Report), supra note 8 at para. 364.

88 Ibid, at para. 372.

89 These are defined by the DSU, Art. 1(1), as the agreements listed in Appendix 1 of the DSU.

90 Art. XVII:1 of the GATS sets down the national treatment obligation thus: “In the sectors inscribed in its Schedule, and subject to any conditions and qualifications set out therein, each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers” [footnote omitted].

91 In one well-known GATS precedent, Mexico-Measures Affecting Telecommunications Services (Complaint by Australia et al.) (2004), WTO Doc. WT/DS204/R (Panel Report) (hereinafter Mexico- Telecoms), the panel also made an effort to set the scope of Mexico's commitment by closely examining its Schedule: U.S.-Gambling (Panel Report), supra note 4 at paras. 7.46-7.91.

92 Ibid. at paras. 6.136 and 6.137.

93 Ibid. at para. 6.59.

94 Ibid. at paras. 6.268-6.279.

95 U.S.-Gambling (A.B. Report), supra note 8 at para. 25.

96 Ibid. at note 351.

97 Art. XX(a) of the GATT sets out the general exception relevant to this case as follows: “Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: (a) necessary to protect public morals…”

98 U.S.—Gambling (A.B. Report), supra note 8 at paras. 291 and 292.

99 Although Art. XIV:2(c) was also at issue in this case, the A.B. ultimately did not make findings as to whether the measures were justified under this provision in light of its previous findings that the three federal laws fell under Art. XIV:2(a): ibid. at para. 337.

100 Ibid. at para. 296; U.S.-Gambling (Panel Report), supra note 4 at para. 6.465.

101 U.S.-Gambling (A.B. Report), ibid.; U.S.-Gambling (Panel Report), ibid. at para. 6.467.

102 U.S.-Gambling (Panel Report), ibid. at para. 6.534.

103 Ibid. at paras. 6.528, 6.534 and 6.535.

104 US-Gambling (A.B. Report), supra note 8 at para. 317.

105 US.-Gambling (A.B. Report), supra note 8 at para. 310.

106 Ibid, at para. 311.

107 Ibid, at para. 354.

108 Ibid, at para. 356.

109 Ibid, at para. 357.

110 E.C.-Asbestos, supra note 58 at para. 100.

111 Art. 21.3(c) of the DSU states: “[The reasonable period of time for implementation shall be] a period of time determined through binding arbitration within 90 days after the date of adoption of the recommendations and rulings. In such arbitration, a guideline for the arbitrator should be that the reasonable period of time to implement panel or Appellate Body recommendations should not exceed 15 months from the date of adoption of a panel or Appellate Body report. However, that time may be shorter or longer, depending upon the particular circumstances” [footnote omitted].

112 United States-Measures Affecting the Cross-Border Supply of Gambling and Betting Services- ARB-2005-2/19-Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes (Complaint by Antigua and Barbuda) (2005), WTO Doc. WT/DS285/13 (Arbitrator's Award) (hereinafter “U.S.-Gambling (Arbitrator's Award)”).

113 Art. 21.2 of the DSU states: “Particular attention should be paid to matters affecting the interests of developing country Members with respect to measures which have been subject to dispute settlement.”

114 U.S.-Gambling (Arbitrator's Award), supra note 112 at paras. 56-60.

115 Ibid. at paras. 56-63.

116 Art. 21.1 of the DSU states: “Prompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members.”

117 Mexico-Telecoms (supra note 91) is the only prior case in which consistency with the GATS was an upfront issue.

118 To be more precise, this approach is also taken for Art. XVIII in Part III of the GATS, together with Art. XVI.

119 In the Ministerial Declaration adopted in Hong Kong in December 2005, the request-offer negotiation on plurilateral basis was agreed by Members in addition to the bilateral negotiations.