GPWA Times Magazine - Issue 2 - October 2007

33 “ This is the world’s biggest consumer and exporter of gambling services trying to prohibit a small country from developing its economy by offering these same services. And we find that deeply hypocritical. — Mark Mendel ’’ One reason for all the interest is the David-and-Goliath aspect of the case. Another is that the dispute, as the WTO’s first to deal with the Internet, is likely to serve as a major precedent in establishing rules of commerce in an online age and dealing with such prickly issues as China’s attempts to block online content it finds offensive. Yet another reason the fraternity of trade lawyers and experts is so closely watching the case, said Lode Van Den Hende, an international trade lawyer with the firm of Herbert Smith in Brussels, is “that the U.S. is not behaving as one would expect.” “One day they’re out there saying how scandalous it is that China doesn’t respect WTO decisions,” Van Den Hende said. “But then the next day there’s a dispute that doesn’t go their way and their attitude is: The decision is completely wrong, these judges don’t know what they’re doing, why should we comply?” It is not clear that Mendel knew just how much of a hornet’s nest he would stir up with this case. But he certainly seems to be enjoying the attention. In 2002, Mendel - who does not gamble and knew little about international trade - was little more than an ordinary corporate lawyer in El Paso specializing in securities law. His law partner, though, was friends with Jay Cohen, the operator of an offshore sports book in Antigua, who had been sentenced to 21 months in prison for taking bets over the Internet from Americans. Mr. Cohen asked his old friend to see if there was anything his firm could do. “I had not done any trade law whatsoever but for whatever reason this issue really struck my curiosity,” Mendel said. Beyond the intellectual challenge, the case also offered the prospect of a set of deep-pocketed clients in the online casinos doing business out of Antigua. So Mendel, who recently moved his family and his practice to Ireland to be closer to Geneva, jumped in enthusiastically. Washington responded to Antigua’s complaint by claiming it was within its rights to seek to block online gambling on moral grounds, just as any Muslim country would be within its rights under international trade agreements to ban the import of alcoholic beverages. The WTO rejected this argument as inconsistent with U.S. policy. The general rule in the world of international trade agreements is that a country must treat foreign goods and services in the same manner as it treats domestic ones. The United States, the trade body found, permits online wagering through sites like Youbet. com, a publicly-traded company that allows visitors to place bets at horse racing tracks around the globe. And of course some form of casino gambling is legal in more than 30 states and even local governments advertise gambling services when states run ads encouraging people to buy a lottery ticket. “This isn’t a case of forcing gambling on a population that has decided they don’t like it,” Mendel said. “This is the world’s biggest consumer and exporter of gambling services trying to prohibit a small country from developing its economy by offering these same services. And we find that deeply hypocritical.” Indeed, despite all the obstacles Washington has imposed, including making it a crime for banks and credit card companies to handle Internet gambling payments, millions of Americans still manage to play poker and place sports bets online. Many more would certainly do so if the obstacles were removed. The United States has exhausted its appeals, so now Mendel and trade lawyers for the United States are arguing over the extent of damages that Antigua has suffered. Antigua presents a particu- larly thorny challenge. To balance the scales, a country that wins a WTO case typi- cally demands trade penalties equal to its losses as com- pensation. But Antigua is so small that any ordinary trade sanctions would barely regis- ter in the United States. “Compensation is not a check in the mail,” said Jackson, the Georgetown professor. “It’s the right to raise trade barriers against the country in violation.” Whatever trade barriers Antigua constructed, he said, “would feel like a pin prick.” Antigua is seeking the right under international law to violate American intellectual property laws. Only once has the trade organization done so, with Ecuador, though it never actually took advantage of that power. It was used instead as a cudgel to force its opponent to back down. “This is all new territory,” said Simon Lester, who worked in the appeals division of theWTObefore co-founding WorldTradeLaw.net, which provides legal analysis of trade law disputes. Lester said he expected Hollywood, the music industry and software mak- ers like Microsoft to press Washing- ton to work things out with Antigua. “But the question,” he said, “is whether that would be enough tomake Congress do something.” Online gambling case pits Antigua against U.S. and challenges WTO | GPWA TIMES