USA - illegal sanctions against Internet gambling

WTO issues arbitration report on gambling dispute

Scope of GATS commitments: The Appellate Body upheld, based on modified reasoning, the Panel's finding that the US GATS Schedule included specific commitments on gambling and betting services. Resorting to "document W/120" and the "1993 Scheduling Guidelines"3 as "supplementary means of interpretation" under Art. 32 of the VCLT, rather than context (Art. 31), the Appellate Body concluded that the entry, "other recreational services (except sporting)", in the US Schedule must be interpreted as including "gambling and betting services" within its scope.

GATS Art. XVI:1 and 2 (market access commitment): The Appellate Body upheld the Panel's finding that the United States acted inconsistently with Art. XVI:1 and 2, as the US federal laws at issue, by prohibiting the crossborder supply of gambling and betting services where specific commitments had been undertaken, amounted to a "zero quota" that fell within the scope of, and was prohibited by, Art. XVI:2(a) and (c). However, it reversed a similar finding by the Panel on state laws because it considered that Antigua and Barbuda ("Antigua") had failed to make a prima facie case with respect to these state laws.

GATS Art. XIV(a) (public morals defence): The Appellate Body upheld the Panel's finding that the US measures were designed "to protect public morals or to maintain public order" within the meaning of Article XIV(a), but reversed the Panel's finding that the United States had not shown that its measures were "necessary" to do so because the Panel had erred in considering consultations with Antigua to constitute a "reasonably available" alternative measure. The Appellate Body found that the measures were "necessary": The United States had made a prima facie case showing of "necessity" and Antigua had failed to identify any other alternative measures that might be "reasonably available". With respect to the Article XIV(c) defence, the Appellate Body reversed the Panel due to its erroneous "necessity" analysis and declined to make its own findings on the issue.

The Appellate Body modified the Panel's finding with respect to the chapeau of Article XIV. The Appellate Body reversed the Panel's finding that the measures did not meet the requirements of the chapeau because the United States had discriminated in the enforcement of those measures. However, the Appellate Body upheld the second ground upon which the Panel based its finding, namely that in the light of the Interstate Horseracing Act (which appeared to authorize domestic operators to engage in the remote supply of certain betting services), the United States had not demonstrated that its prohibitions on remote gambling applied to both foreign and domestic service suppliers, i.e. in a manner that did not constitute "arbitrary and unjustifiable discrimination" within the meaning of the chapeau.