WT/DS285/13
Page 1

World Trade
Organization
WT/DS285/13
19 August 2005
(05-3683)
Original: English

United states – MEASURES AFFECTING THE
CROSS-BORDER SUPPLY OF
GAMBLING AND BETTING SERVICES

arb-2005-2/19

Arbitration

under Article 21.3(c) of the

Understanding on Rules and Procedures

Governing the Settlement of Disputes

Award of the Arbitrator

Claus-Dieter Ehlermann

WT/DS285/13
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I.Introduction

II.Arguments of the Parties

A.United States

B.Antigua

III.Reasonable Period of Time

A.Preliminary Matters

1.Mandate

2.The Measures to be Brought into Conformity

B.Factors Affecting the Determination of the Reasonable Period of Time under Article21.3(c)

1.Burden of Proof

2.Choice of Method of Implementation

3.Particular Circumstances

4.Article 21.2 of the DSU

5.Summary

IV.The Award

TABLE OF CASES CITED IN THIS AWARD

Short Title / Full Title and Citation
Australia – Salmon / Award of the Arbitrator, Australia – Measures Affecting Importation of Salmon – Arbitration under Article21.3(c) of the DSU ("Australia – Salmon"), WT/DS18/9, 23February1999, DSR1999:I,267.
Canada – Patent Term / Award of the Arbitrator, Canada – Term of Patent Protection – Arbitration under Article21.3(c) of the DSU, WT/DS170/10, 28February2001, DSR2001:V, 2031
Canada – Pharmaceutical Patents / Award of the Arbitrator, Canada – Patent Protection of Pharmaceutical Products – Arbitration under Article21.3(c) of the DSU ("Canada – Pharmaceutical Patents"), WT/DS114/13, 18August2000, DSR 2002:I, 3.
Chile – Price Band System / Award of the Arbitrator, Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products – Arbitration under Article21.3(c) of the DSU ("Chile – Price Band System"), WT/DS207/13, 17March2003.
EC – Bananas III / Award of the Arbitrator, European Communities – Regime for the Importation, Sale and Distribution of Bananas – Arbitration under Article21.3(c) of the DSU, WT/DS27/15, 7January1998, DSR1998:I,3.
EC – Hormones / Award of the Arbitrator, EC Measures Concerning Meat and Meat Products(Hormones) – Arbitration under Article21.3(c) of the DSU, WT/DS26/15, WT/DS48/13, 29May1998, DSR1998:V,1833
EC – Tariff Preferences / Award of the Arbitrator, European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries– Arbitration under Article21.3(c) of the DSU("EC – Tariff Preferences"), WT/DS246/14, 20 September 2004.
Guatemala – Cement I / Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding Portland Cement from Mexico ("Guatemala – CementI"), WT/DS60/AB/R, adopted 25November1998, DSR1998:IX,3767.
Japan – Alcoholic BeveragesII / Award of the Arbitrator, Japan – Taxes on Alcoholic Beverages – Arbitration under Article21.3(c) of the DSU, WT/DS8/15, WT/DS10/15, WT/DS11/13, 14February1997, DSR1997:I,3
Korea – Alcoholic Beverages / Award of the Arbitrator, Korea – Taxes on Alcoholic Beverages – Arbitration under Article21.3(c) of the DSU ("Korea – Alcoholic Beverages"), WT/DS75/16, WT/DS84/14, 4June1999, DSR1999:II,937.
US – 1916 Act / Award of the Arbitrator, United States – Anti-Dumping Act of 1916 – Arbitration under Article21.3(c) of the DSU ("US – 1916 Act"), WT/DS136/11, WT/DS162/14, 28February2001, DSR2001:V, 2017.
US – Gambling / Appellate Body Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services ("US – Gambling"), WT/DS285/AB/R, adopted 20 April 2005.
US – Gambling / Panel Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services ("US – Gambling"), WT/DS285/R, adopted 20 April 2005, as modified by Appellate Body Report, WT/DS285/AB/R.
US – Hot-Rolled Steel / Award of the Arbitrator, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan – Arbitration under Article21.3(c) of the DSU, WT/DS184/13, 19February2002
US – Hot-Rolled Steel / Appellate Body Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan ("US – Hot-Rolled Steel"), WT/DS184/AB/R, adopted 23 August 2001, DSR 2001:X, 4697.
US – Offset Act (Byrd Amendment) / Award of the Arbitrator, United States – Continued Dumping and Subsidy Offset Act of 2000 – Arbitration under Article21.3(c) of the DSU, WT/DS217/14, WT/DS234/22, 13June2003.
US – Oil Country Tubular Goods Sunset Reviews / Award of the Arbitrator, United States – Sunset Reviews of Anti-Dumping Measures on Oil Country Tubular Goods from Argentina– Arbitration under Article21.3(c) of the DSU, WT/DS268/12, 7June 2005.
US – Section 110(5) Copyright Act / Award of the Arbitrator, United States – Section 110(5) of the US Copyright Act – Arbitration under Article21.3(c) of the DSU WT/DS160/12, 15January2001, DSR2001:II, 657.

WT/DS285/13
Page 1

World Trade Organization

Award of the Arbitrator

United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services
Parties:
Antigua and Barbuda
United States / ARB-2005-2/19
Arbitrator:
Claus-Dieter Ehlermann

I.Introduction

  1. On 20 April 2005, the Dispute Settlement Body (the "DSB") adopted the Appellate Body Report[1] and the Panel Report[2], as modified by the Appellate Body Report, in United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services.[3] At the DSB meeting of 19 May 2005, the United States indicated its intention to implement the recommendations and rulings of the DSB in this dispute and stated that it would require a reasonable period of time in which to do so.[4]
  2. On 6 June 2005, Antigua and Barbuda ("Antigua") informed the DSB that consultations with the United States had not resulted in an agreement on the reasonable period of time for implementation. Antigua therefore requested that such period be determined by binding arbitration, pursuant to Article21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU").[5]
  3. Antigua and the United States were unable to agree on an arbitrator within 10 days of the matter being referred to arbitration. Therefore, by letter dated17 June 2005[6], Antigua requested that the Director-General appoint an arbitrator pursuant to footnote 12 to Article 21.3(c) of the DSU. The Director-General appointed me as arbitrator on 30 June 2005, after consulting the parties.[7] I informed the parties of my acceptance of the appointment by letter dated 30 June 2005.
  4. Antigua and the United States have agreed that this award will be deemed to be an arbitration award under Article 21.3(c) of the DSU, notwithstanding the expiry of the 90 day period stipulated in Article 21.3(c).[8]
  5. Antigua and the United States provided their written submissions to me on 12 July 2005. On 20 July 2005 I requested the United States, by letter, to provide me with a copy of the 2006 schedules for the House of Representatives and the Senate. An oral hearing was held on 21 July 2005. At the outset of that hearing, the United States informed me that the 2006 schedules for the United States Congress are not yet available, but that the recess periods in 2006 were likely to be similar to those in the 2005 schedules.[9] On 22 July 2005, in response to a question posed at the oral hearing, the United States informed me by letter that there is currently one billunder consideration by the United States Congress related to the subject of internet gambling.[10]

II.Arguments of the Parties

A.United States

  1. The United States requests that I determine the "reasonable period of time" for implementation of the recommendations and rulings of the DSB in this dispute to be 15 months from the date of adoption by the DSB of the Panel and Appellate Body Reports, until the end of July2006.[11]
  2. The United States asserts that in the particular circumstances of this case, the legal form of implementation and the technical complexity of the measures require a reasonable period of time of at least 15 months. Such a period is consistent with the periods that have been determined in previous arbitrations under Article 21.3(c) of the DSU for implementation by legislative means, which is how the United States intends to implement the recommendations and rulings of the DSB in this case. The United States also explains that, since the date of adoption of the Panel and Appellate Body Reports in this dispute, the executive branch has been consulting internally with Congress and with domestic stakeholders on possible legislative action.
  3. The United States contests Antigua's argument that, with respect to "non-sports" betting and gambling, the United States could implement through issuance of a presidentialexecutive order. According to the United States, the issue of executive orders is not relevant to my determination of the reasonable period of time because Antigua accepts that implementation must, in any case, include some form of legislative action (if only with respect to "sports-related" betting and gambling). The text of Article 21.3(c) refers to "a reasonable period of time" (emphasis added). It follows that an arbitrator is to determine a single reasonable period of time, which in this case must be the reasonable period of time necessary for legislation. That there is no basis in the DSU for an arbitrator to assign multiple reasonable periods of time for different forms of implementation is confirmed, argues the United States, by the previous arbitral awards that have considered multiple proposed forms of implementation, namely the awards in US – Hot-Rolled Steel and US – Oil Country Tubular Goods Sunset Reviews.
  4. The United States does not, in any event, accept Antigua's proposed distinction between "sports" and "non-sports" gambling and betting. The United States contends that no such distinction exists under any of the three federal statutes at issue in this dispute, namely the Wire Act, the Travel Act and the Illegal Gambling Business Act (the "IGBA"). For the same reason, the United States disputes that an executive order could be used in the manner suggested by Antigua, because an executive order may not contradict an existing statute. In addition, in this specific case, it is extremely unlikely that an executive order could achieve the necessary clarification of the relationship between the Interstate Horseracing Act ("IHA"), on the one hand, and the Wire Act, Travel Act and the IGBA, on the other hand. The United States points, in this regard, to the presidentialstatement on signing accompanying the bill enacting the December 2000 amendments to the IHA, which expressed the view that nothing in the IHA overrode previously enacted criminal laws. The Panel in this dispute found that this statement was not sufficient to resolve the ambiguity in the relationship, and the Appellate Body did not depart from this view.[12] The United States submits that if a presidentialstatement accompanying signature of a bill could not achieve the requisite clarity in the relationship between the relevant statutes, then a presidentialexecutive order could not do so either.
  5. The United Statesemphasizes that it will use legislative means to clarify the relationship between the IHA andthe three pre-existing federal criminal statutes. Referring to the Appellate Body Report in this dispute, the United States observes that it must demonstrate "that—in the light of the existence of the Interstate Horseracing Act—the Wire Act, the Travel Act, and the Illegal Gambling Business Act are applied consistently with the requirements of the chapeau"[13] to Article XIV of the GATS. Thus, "a reasonable legislative option would have the effect of clarifying that relevant U.S. federal laws entail no discrimination between foreign and domestic service suppliers in the application of measures prohibiting remote supply of gambling and betting services".[14] Taking account of this objective, and in the light of the "multifaceted nature of the obligation in the chapeau of Article XIV", there "will be ample room for reasonable and principled disagreements among legislators as to precisely how to achieve such a clarification in the context of Internet gambling".[15] The United States contrasts the complexities involved in implementation in this dispute with the simple legislative change—to the length of patent term—that was required in Canada – Patent Term, where the arbitrator determined the reasonable period of time for implementation to be 10 months.[16]
  6. The United States adds that the legislative exercise will be further complicated by the fact that since 1997, the United States Congress has considered a wide range of legislative proposals aimed at internet gambling, none of which has been adopted. The existence of this complex, and as-yet unresolved legislative debate means that the task of adopting compliance legislation will take longer due to the need to assess the potential impact of each option on a variety of other proposed legislative changes.
  7. The United States argues that a 15 month implementation period is consistent with previous arbitration awards under Article 21.3(c) of the DSU that have involved legislative change and refers, in particular, to the awards of the Arbitrators in Japan – Alcoholic Beverages II, EC – Bananas III, and EC – Hormones. Consistent with the approach taken in those arbitrations, the United States underlines that it is not for Antigua to determine what type of legislative option the United States should choose, or that a less complex option could be enacted in less than 15 months.
  8. In support of its argument that a 15 month period is necessary in order to implement the recommendations and rulings of the DSB in this dispute, the United States explains the process by which the United States Congress passes legislation. Proposed legislation can only become law after it has been approved in identical form by both chambers of Congress—the House of Representatives and the Senate—and approved by the President of the United States. A bill passes through at least ten steps between the time that it is introduced and the time that it is approved by both chambers. The first step is introduction of the bill in Congress. Generally, bills are referred to a committee, and possibly also to subcommittees, where public hearings will be conducted. Then the bill goes through a "mark-up" process where changes and amendments are made before the subcommittee "reports" the bill to the full committee. The committee may conduct further study and hearings, and another mark-up process follows before the relevant committee votes on whether to "report" the bill to the full House. If so, a detailed, section-by-section committee report is prepared and the bill is "reported back" to the House. The bill is debated and amendments may be offered before the House votes on the bill. The bill may be returned to the committee or, if passed by the House, must be referred to the Senate. The Senate may approve the bill as received, reject it, ignore it or change it. Most bills passed by the Senate are not precisely the same as the bill referred by the House and, in such circumstances, a conference committee is organized to reconcile differences between the House and Senate versions. If the conference committee is able to reach agreement on a single bill, a conference report is prepared, and this must be approved by both chambers, in identical form, before it can be sent to the President for approval.
  9. The United States stresses that the executive branch has no control over the procedures and timetable followed by Congress. The United States declined, at the oral hearing, to estimate on a disaggregated basis the length of time that would be necessary in this case for each one of the steps in its legislative process, noting that such time periods vary widely and are, in many cases, determined on an ad hoc basis by the House of Representatives and/or the Senate. The United States also explained, in response to questioning at the oral hearing, that although the above procedure reflects, in practice, how Congress operates, the only two steps that are explicitly required under the United States Constitution are the approval of a bill by both chambers of Congress and the signature of the President.
  10. The United States adds that an important determinant of when a bill becomes law is the Congressional schedule. Each Congress consists of two sessions of one year each, and the United States is currently in the first session of the 109th Congress. Sessions of Congress typically begin in January and end in October, November or December of the calendar year. At present, the first session of the 109th Congress is scheduled to end on 30 September 2005. The United States explains that most bills that become law are acted on only in the last weeks or months of the legislative session, and that a bill introduced in the first session of a Congress may be carried over to the second session. According to the United States, these reasons explain why I should not attach any significance to the 15 measures already passed by Congress in the 109th session, which Antigua cites as illustrative of how quickly the United States Congress can act. These 15 measures will represent only a tiny fraction of all the laws that will be passed in the 109th session. Moreover, of these 15 measures, four dealt with disaster relief or emergencies, three were legislative packages that had been thoroughly considered in a previous Congress or Congresses, four dealt with the renewal of measures previously enacted but due to expire, and four involved the naming of buildings and museum regents.[17] Thus, explains the United States, the rapidity with which these measures were passed in the first half of the 109th session of Congress is not at all representative of the ordinary workings of the United States legislative process.
  11. The United States argues that, given the complexity of the legislative task required in this case, the need to consider implementing legislation in a deliberate manner, and the other matters that will be under consideration during the remainder of the first session of the 109th Congress, the legislation implementing the recommendations and rulings of the DSB will not be completed in the first session of the current Congress, but will instead need to be carried over into the second session, in 2006. The United States suggests that, in the same way that Congress is often spurred to pass legislation prior to the end of a legislative session, so too is it prompted to pass legislation prior to a recess.