Replacing slingshots with swords: implications of the Antigua-Gambling 22.6 panel report for developing countries and the world trading system.

• Author: Hamann, Georgia

ABSTRACT

In December 2007, the WTO awarded Antigua the right to suspend TRIPS obligations at a value of $21 million. This decision represents the WTO's continuing evolution into a body capable of addressing the concerns of developed countries while balancing the legitimate interests of developed nations. For the second time, the WTO has authorized suspension of intellectual property protection under the TRIPS agreement. Such a remedy, if widely adopted, has the capacity to address concerns surrounding effective retaliation by small economies versus large economies, which traditionally have discouraged developing countries from participating in WTO dispute resolution. Additionally, the remedy seems likely to increase compliance because it constitutes a significant threat to developed nations. Because the recent decision seems to increase both participation and compliance in the dispute resolution system, this Note argues that the decision represents an important and effective step in WTO jurisprudence.

TABLE OF CONTENTS I. INTRODUCTION AND STATEMENT OF THE ISSUES II. HISTORY OF THE ANTIGUA-U.S. DISPUTE A. Brief Overview of the History of the Dispute B. Detailed Analysis of the Initial Arguments and Rationale of the WTO Prior to the 22. 6 Arbitration 1. Key Arguments by Both Countries Before the Dispute Resolution Panel 2. Appellate Body Findings 3. Compliance Issues: 21.5 Compliance Panel and 22.6 Arbitration 4. Broad Context of the 22.6 Arbitration III. ANTIGUA-GAMBLING EXTENDS AND VALIDATES THE INTELLECTUAL PROPERTY VIOLATION REMEDY SET OUT IN ECUADOR BANANAS A. Brief Overview of the TRIPS Treaty and the Implications of Suspension B. Broad Impact of EC-Bananas III and Antigua-Gambling on TRIPS Suspension Remedy C. Antigua-Gambling Expands the Flexible Standard of Review and Burden of Proof of EC-Bananas III 1. "Margin of Appreciation" and "Reasonableness" Guide the Standard of Review for 22.3 Actions 2. "Practical" and "Effective" Provide Flexibility for the Suspending Country IV. EXTENSION OF THE TRIPS SUSPENSION REMEDY IS NET POSITIVE FOR THE TRADING SYSTEM A. TRIPS Suspension Represents a Real Threat to Developed Countries, Yet Has Minimal Effects on Developing Economies B. TRIPS Suspension Creates Pressure to Settle C. EC-Bananas III Offers Strategies to Minimize Unfettered Piracy V CONCLUSION I. INTRODUCTION AND STATEMENT OF THE ISSUES

On December 27, 2007, a special arbitration panel of the World Trade Organization (WTO) announced its decision regarding the amount of damages that the United States owed to Antigua-Barbuda (Antigua) as a result of the U.S.'s failure to comply with a previous Appellate Body decision that ordered the U.S. to cease its disparate treatment of offshore gambling providers. (1) The Arbitrator also decided the question of remedy (2) and, consequently, addressed the question of meaningful retaliation by a developing country against a fully developed economy. (3) Although the burgeoning problem of effective retaliation is far from unique to Antigua, (4) the Antigua-Gambling case presented to the world a uniquely dramatic tableau-a country of minute resources and insignificant economic impact (5) seeking to punish the world's foremost economic hegemon. (6)

Certainly, Antigua has amplified the drama of the situation, characterizing itself as the "David" pitted against the U.S. as "Goliath," and encouraging the world to see it as a tiny force of justice and righteousness whose struggle against the bloated behemoth ought to be rewarded with victory. (7) Of course, the U.S. has offered its own characterization of events, presenting the struggle as one of national morality holding firm against international crime. (8) Both sides, perhaps as a result of these competing moral narratives, made outrageous demands of the WTO Arbitrators: (9) Antigua demanded more than $3 billion, (10) while the U.S. would only concede that its laws had affected Antigua's economy to the tune of $500,000. (11)

Despite the two countries' dramatic portrayals of the conflict, the issues presented by the case are vitally important. Developing countries are in a state of flux as they attempt to break into a trading system that, if not intentionally designed to exclude them, has only recently begun to make certain concessions and allowances to help promote their advancement. (12) Currently, countries like Antigua, upon winning victories from the WTO arbitrators, face the problem of enforcement. For such countries, Antigua's travails signal the trading system's readiness to consider the significant challenges faced by developing countries that attempt to enforce judgments against developed economies. (13) On the other hand, more developed countries have reason to be concerned about asymmetrical remedies. (14) The situation epitomizes the complexity of the WTO's task: balancing the desires of national economies and the best interests of the global economy. (15)

Like the proverbial "mills of God" which "grind slowly, yet ... exceedingly small," (16) the WTO, by its very nature, opposes affecting large-scale change through its decisions. (17) As a result of this decision making approach, the Antigua-Gambling decision has already created dissatisfaction and seems likely to create more from those who seek a definitive answer to the questions raised by the dispute. (18)

The decision is not a decisive win for developing countries; the amount authorized, at $21 million, is a mere fraction of the amount requested (19) and, by some calculations, a fraction of the amount that Antigua deserves. (20) Yet, this Note argues that the decision should be viewed as a significant step towards the availability of fair retaliation by developing countries and a significant step away from the view of the WTO as a "kangaroo court" for powerful developed countries. (21) For Antigua and similarly situated countries, suspension of obligations under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) should represent a remedy which carries heft and meaning.

While no sudden change ought to be expected, the decision represents a significant step toward full evolution of a remedy developing countries can use to gain leverage sufficient to force developed economies to honor commitments. Antigua-Gambling adds significantly to a remedy previously authorized in only one case (and never implemented)--TRIPS suspension. (22) Suspension of obligations under TRIPS offers a potential solution to the main problems facing developing countries that attempt to retaliate against developed economies. It constitutes a grave threat to developed economies while imposing minimal unpleasant effects on the inflicting country, (23) effectively exerting pressure on developed economies to either honor obligations or pay fair settlement prices. (24)

This Note recognizes the WTO decision as an important step towards the authorization of a practical remedy for developing nations against violations by developed countries. Part II summarizes the proceedings between Antigua and the U.S. prior to the December 27, 2007 arbitration report. Part III details the specific ways in which the 22.6 Arbitrator's decision extended the TRIPS suspension remedy as an option for developing nations and includes a discussion of the reasons for broadening access of to remedies for developing nations. Part IV focuses on the implications of the TRIPS suspension remedy itself, tackling the arguments against using intellectual property rights as a means of retaliation and affirming the potential efficacy of this kind of asymmetrical remedy in the context of drastically imbalanced economies.

2. HISTORY OF THE ANTIGUA-U.S. DISPUTE

   1. Brief Overview of the History of the Dispute

      Antigua brought a complaint against the U.S. before the WTO in 2003, (25) alleging that the laws recently passed by the U.S., which restricted credit card company involvement in payments related to Internet gambling, (26) violated U.S. services commitments under the General Agreement in Trade and Services (GATS) Article XIV. (27) The U.S. law had significant implications for Antigua's developing economy. Antigua is a tiny nation whose economy depends largely on Internet gambling, (28) and U.S. citizens constitute a significant percentage of those gamblers. (29) The U.S. passed a series of laws (30) that, according to Antigua, "made the supply of cross-border gambling and betting services from Antigua to the U.S. 'illegal in all instances under [U.S.] Law.'" (31) The new laws were allegedly discriminatory in their impact on Antigua's economy because "the proposed U.S. ban on the use of credit cards and other financial instruments for Internet gambling effectively bans the supply of any offshore gambling and betting services to the [U.S.]," while gambling institutions located within the U.S. remained unaffected. (32) Thus, Antigua took the position that the law was "an internal regulation that acts primarily as an external trade barrier, closing off the U.S. gambling and betting services market from foreign providers." (33)

      The WTO Dispute Resolution Panel ruled in favor of Antigua. (34) In its argument, the U.S. had attempted to justify the laws that explicitly addressed Internet gambling as necessary to protect public morals, indicating that the laws fell within the GATS Article XIV exemptions. (35) The Panel rejected this finding, primarily because it found that the U.S. had failed to negotiate with Antigua to find a neutral solution that balanced national interests with trade obligations. (36) The Panel also found that other U.S. legislation regulating Internet horse betting was applied in a discriminatory way, by arbitrarily distinguishing between domestic and international gambling organizations. (37)

      The Appellate Body reversed a significant number of the findings of the Panel. (38) The Appellate Body rejected the concept of "theoretical better alternatives" for trade found through negotiation...