Under its Trade Barriers Regulation, the European Commission published a report today concluding that U.S. measures affecting foreign suppliers of Internet gambling services "constitute an obstacle to trade that is inconsistent with WTO rules." The full report is here. The legal analysis is on pages 53-77 and is quite interesting. Here are a few highlights.
Relevance of Withdrawal of GATS Commitments
Even if the US would no longer be bound by its GATS obligations in respect of gambling and betting trade that takes place after the withdrawal of commitments (which are still in the process of being formally changed through the Article XXI procedure), the US would still continue to be bound by its GATS obligations which are derived from its (former) commitments in respect of any gambling and betting trade which took place before the withdrawal of its GATS commitments had taken place. As long as there are US enforcement actions relating to trade that took place when the US still had GATS gambling and betting commitments, there would be a "situation which has not ceased to exist – that is…that arose in the past, but continues to exist…",131 which could also be described as a "continuing measure". This is referring to the enforcement of the US prohibition against EU suppliers in respect of gambling and betting trade that took place while the US GATS commitments were still in place, which could thus be scrutinised by a WTO panel. This scrutiny would have to be based on the GATS commitments in place at the time of the relevant trade flows.
"Likeness across modes"
Still, even this interpretation of US laws could be challenged under Article XVII of the GATS. The claim would based on the fact that US laws permit the supply of off-line, "bricks and mortar" gambling and betting services to US suppliers, but not cross-border services supplied over the Internet. The key argument to be made would be that Internetbased services are "like" off-line gambling and betting services. In fact, Antigua argued along these lines in US-Gambling,164 maintaining that "the fact that services of Antiguan gaming operators are supplied via a different "mode of supply" than services of suppliers of United States origin (cross-border as opposed to commercial presence) does not make these "unlike."165
This is of course true, and in fact WTO jurisprudence has in Canada-Autos indeed accepted166 the possibility of "likeness across modes". The main argument in favour of "likeness across modes" is that the text of GATS Article XVII does not suggest that the mode of supply is relevant for defining likeness. However, this has to be weighed against the logic and structure of the GATS, because of the implication that "[I]n its most extreme form, it would mean that, in a given sector, a Member would not be able to undertake different levels of national treatment commitments for the different modes; or that, by virtue of a commitment under a certain mode (mode 3, for instance), suppliers under other modes could claim national treatment, irrespective of whether there is a relevant commitment. This approach would be hard to reconcile with Members' agreed practice to schedule commitments mode by mode."167 This calls for a cautious, case-bycase approach.
"Practice" of discriminatory enforcement
If US law did not, as such, contain any discrimination against foreign remote suppliers, the possibility would still exist that the DOJ would be enforcing the general ban on remote supply selectively against foreign suppliers, and that this selective enforcement could rise to the level of discrimination in the sense of Article XVII of the GATS. In this respect, the ongoing enforcement actions by the DOJ could theoretically, as indicated in section C.4.1 above, be challenged in and of themselves as a discriminatory "practice".
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There are, however, sufficient reasons not to further develop an Article XVII claim based on a "practice" of discriminatory enforcement in this case:
– First, the Appellate Body has not so far pronounced on the matter of whether a "practice" can be considered as an autonomous measure. Although this does not rule out the possibility that a practice could be challenged as such, it does imply that the threshold required to make a prima facie case would be relatively high.
Less favourable treatment
In the present case, foreign services provided remotely that are the same as domestic services also provided remotely are not allowed into the US market, whereas significant "like" domestic services, provided both instrastate and interstate, are allowed. In line with what the Panel found in Canada-Autos,189 this is bound to have discriminatory effects and is therefore incompatible with Article XVII GATS.
