Should Antigua Sue China?

#135 © Copyright 2007, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I Nelson Rose, www.GamblingAndTheLaw.com

Gambling has almost always been a local issue. Decisions on how to regulate, or even whether gaming should be permitted at all, are usually left to states to decide. Sometimes state governments will give what is known as a local option to their cities and counties. But federal law rarely gets involved. And International law is almost never a factor.

Until now.

The introduction of internet gaming into interstate and international commerce has turned the control of gambling on its head. The most dramatic examples are the positions of the U.S. Department of Justice, declaring that federal laws prohibit even state-licensed interstate online betting, and the recent declaration by the World Trade Organization (“WTO”) that American state anti-gambling laws are discriminating against Antigua’s online operators.

Which brings us to the interesting question of whether Antigua should file a formal claim against China in the WTO. Here’s why:

The law is primarily created by two forces.

First, someone or something in authority may issue a decree. These include everything from a king’s proclamation, through acts of elected legislatures to regulations from agencies with delegated power. This fount of law includes duly signed and adopted treaties, such as the General Agreement on Trade in Services (“GATS”), which is at the heart of the internet gaming controversy in the WTO.

The second foundation of law is the doctrine of the precedent. Whether it is binding – called stare decisis in the U.S. – or merely considered persuasive, judges and other deciders cannot ignore rulings made by their predecessors and superiors. Governments, as well as individuals, need to know what is expected of them. So, a declaration by the WTO that says a nation is violating the GATS because its states allow remote wagering affects all other nations that signed the GATS.

And that is exactly what the WTO declared.

When Antigua filed a formal complaint against the U.S., it alleged that both American federal and state laws were discriminating against the island nation’s online gaming sites. The first WTO panel agreed with Antigua. But the WTO’s Appellate Body declared that Antigua had made a technical error in presenting its claims about U.S. state laws, and that the WTO would base its decision only on U.S. federal law.

That decision was, first, that the U.S. had agreed to let in all forms of gambling from other countries under the GATS treaty. Second, that the U.S. had shown that it had enough real concerns about remote wagering to justify its prohibiting all internet gambling, despite its treaty commitment. But, third, that the U.S. could not complain about cross-border bets on horseraces, because Congress had expressly allowed U.S. state-licensed race books to take bets from Americans across state lines by phone and computer.

The Bush Administration responded with its usual incompetence. It argued that the federal Interstate Horseracing Act (“IHA”) did not actually authorize interstate horseracing, despite its express language. Naturally, the WTO rejected this nonsensical argument.

The Bush Administration then compounded its foolishness with arrogance by doing nothing for a year; then declaring that it was in complete compliance with the WTO’s rulings – because the U.S. deserved to win the first time!

Making the exact same, losing arguments in the same court, to the same judge, is asking the judge to look over the record and find more reasons why you deserve to lose. So the WTO issued another ruling, declaring that state laws in the U.S. also discriminate against Antigua, because 18 states allow residents to make remote wagers on horseraces, and even on sports events.

This declaration is technically non-binding, but it is consistent with international law decisions from the European Union. If even one state in a country permits, say, Internet gambling, then that entire nation must open its borders to outside operators.

When I was teaching International Gaming Law at the University of Macau this summer, it struck me that China could now be in the same mess as the U.S. If the WTO decides China agreed under GATS to let in gambling, the next step is to see if any remote wagering is allowed in the country.

China says it has no gambling (it does not count its three little lotteries). But, the Special Administrative Regions of Hong Kong and Macau do allow residents to bet by phone and computer on horseraces, Hong Kong has online sports wagers, and Macau is considering licensing Internet casinos.

This puts China in a bind. It has always taken the position that Hong Kong and Macau (and Taiwan) have always been part of China, regardless of what the rest of the world thinks. Macau was merely a conquered “Chinese territory under [temporary] Portuguese administration.” China even refuses to recognize the 1987 treaty giving it back Macau as a treaty; calling it the “Sino-Portuguese Declaration.” Is China now going to say that Macau and Hong Kong are not part of China just to avoid opening the mainland to internet gambling?

This could have great significance for the U.S. China is not the only country with a policy supposedly against gambling, but with one or a few political subdivisions that allow remote wagering. Australia, Italy, Spain… in fact, most nations contain at least one state which permits remote betting on horseraces or lotteries or sports events.

In the U.S., for example, Nevada allows residents to make sports bets by phone. Does that mean that Utah has to open its doors to sports books?

Maybe it does. But maybe that’s not such a bad thing.

Maybe the U.S. should switch, rather than continue to fight the WTO.

After all, why should Antigua get all those billions of new internet gambling customers in China and elsewhere?

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© Copyright 2007. Professor I Nelson Rose is recognized as one of the world’s leading experts on gambling law. His latest books, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.