Internet gaming dispute heats up

The twin island of Antigua and Barbuda, has attracted legitimate international business, licensed to conduct Internet gaming. However, just as the jurisdiction was becoming one of the world’s most reputable remote gaming centers, it was disenfranchised when the US Congress passed the Leach Act 2001, criminalizing remote gaming operations of US citizens. Since this ruling, over 50% of the Antigua market, which consisted of United States customers have been stifled by the prospects of indictments and possible civil forfeiture actions in U. S. courts.

Antigua gaming operators, formerly numbering approximately 120 were reduced to about 25. Consequently employment declined from around 3,000 to 500. The damages to Antigua of such a ruling and of the various US laws implemented over the past several years are enormous and have far-reaching economic and financial implications for the government and people.

Antigua and Barbuda is part of the World Trade Organization (WTO), a 149-member body encouraging trade and to which the U.S. is also a party. For countries like Antigua and Barbuda, a small developing nation lacking military prowess or any significant world economic clout, the rule of law, especially international law, forms the premise of their diplomacy. Within the WTO system countries like the United States are seen as leaders, however, the precedent that the United States is setting by going against the General Agreements on Trade in Services (GATS), a treaty that encourages the WTO members to trade other than tangible products, such as services, like Internet gaming. Essentially, the General Agreement on Trade in Services (GATS) heralded a new age in terms of creating multilateral disciplines in a new territory. Unfortunately this is being put to question by the U.S. ban on Internet gaming. Simply, the United States is in violation of its GATS policy. Such a position has made Antigua and Barbuda fearful that other Member States of the WTO will follow suit leading to the deterioration of the system of rules that have been painstakingly built. Further, it is not possible for developing countries like Antigua and Barbuda to survive in such an anarchic system in the international trade arena. Antigua and Barbuda felt that this bullying by the United States, one of the greatest beneficiaries of the WTO system was unsustainable and as a result requested the WTO to settle the dispute. The general opinion in Antigua and Barbuda is that America has to be fair in complying with the WTO.

The Honorable Dr. Errol Cort, Minister of Finance and Economy
"We are seeking to further expand our presence in Internet gaming. This falls under the financial services umbrella and under the direct control of the Financial Services Regulatory Commission. We have been involved in the Internet gaming business since 1994. We have seen that industry grow rapidly and provide significant avenues of employment for young people here in Antigua and Barbuda. The wage rate is substantial and people are using this sector to further themselves, whether in terms of education or homes. There are also tremendous spin offs to the economy in the Internet gaming sector. People and companies set up in Antigua and Barbuda and rent or buy homes, rent office space, and live on the island. The banking sector also does well since it facilitates a significant level of financial transactions which form an essential part of the gaming sector. In recognition of these financial transactions we are very strong on the regulatory side. We are committed to strictly regulating the Internet gaming industry."

Leroy King, CEO of the Financial Services Regulatory Commission
"We have robustly regulated the Internet gaming sector. We are not a fly-by-night jurisdiction. We have done well; we have gone through a series of compliance-type inspections by the FATF (Financial Action Task Force on Money Laundering) to the CFATF (Caribbean Financial Action Task Force). Not to mention that we have been reviewed by the IMF and the World Bank. When you consider all the typologies established that small developing countries have to implement and adhere to, Antigua and Barbuda has done well. Our most recent Detailed Assessment Report (DAR) conducted by the International Monetary Fund (IMF) rated Antigua and Barbuda just as good as Switzerland and in some cases better that the United Kingdom with respect to our banking platform, in addition to how well we were regulating our banks, insurance companies and trust companies. They did not find any reasons to believe that we lacked understanding of the anti-money laundering typologies, and the terrorists financing typologies. We have had training programs from the US Treasury Department, Office of Technical Assistance (OTA) and the Federal Reserve to ensure that we are first rate in our supervisory and regulatory efforts. We have exchanged training and development ideas as we were one of the first to ever look at gaming as an industry because it meant employment for our young dynamic people and offered tremendous spin-offs to our economy, so why would you not let us ply our trade fairly, safely, squarely? We have offered and submitted to the US government a consolidated supervision framework that would facilitate collaboration and allow our operators to have access to a highly regulated international financial system, like all banks do, and allow us to do our business in the interest of self preservation and economic liberation."

Kaye McDonald, Director of Gaming
"Taken into consideration that Antigua and Barbuda has such a small economy, we need to consider other areas to fuel the economy. We identified Internet gaming as a niche sector to expand the economy. Regulations and legislations were developed and implemented to protect the consumers and to ensure that our licencees operated within best known practices. The United States of America and Antigua and Barbuda are not at cross purposes, we have the same objective that is to ensure that our systems are not being compromised with illegality, i.e. money laundering and terrorist financing; therefore it would behoove us to work together from a regulatory and supervisory perspective. It is my belief that the prohibition is an exercise in futility, as the Internet gaming industry continues to show growth and consumption by US citizens. It stands to reason that both governments need to join efforts as statistics indicate there are approximately 4 million US online gaming consumers, we are aware that there are social and pathological risks that are associated with gaming. We take this very seriously and believe that now is the time for us, the United States and Antigua and Barbuda to work together to protect the consumers, we have the power to do so. Our efforts would be maximized as our operators are very keen in adopting the highest standards and policy to effectively promote responsible gaming and maintain transparent and accountable operations.

The world is looking at this as an Internet gaming issue but it is really a trade issue. Our online gaming sector became under siege when the "Unlawful Internet Gaming Enforcement Act, 2006" (UIGE, Act 2006) was signed into law on October 13, 2006. The parameters of the global Internet gaming industry has now been radically redefined. This new law appended to the "The Port Safety Act, 2006" the purpose of which is to increase protection of American ports from threats of terrorism, is a measure to further crack down gaming on the Internet. However, the Law in its legal context actually expands the availability of U.S. domestic remote gaming opportunities, while at the same time impeding the ability of these services to be provided from foreign jurisdictions such as Antigua and Barbuda. The effects of the United States stamping out Internet gaming is particularly hurting single mothers in Antigua and Barbuda.

A single mother of one child employed at a gaming company earning US $6.50 per hour, working 40 hours per week regular time and 50 hours overtime would earn approximately U$1500.00 per month. As a result of a job loss, she would most likely remain unemployed or be reemployed at a lower wage. However, this simple analysis can be extrapolated to a macroeconomic level whereby overall economic growth can be negatively affected on an annual basis. This sector provides significant employment on the island and no other sector overnight would be able to readily absorb or cushion the fall out. The sector remains a good example of how a developing nation can create a niche that provides significant socio-economic opportunities. Therefore, we are behooved to continue our Gaming Dispute at the World Trade Organization, as the Appellate Body of the WTO has ruled that the United States is in violation of its obligations under the GATS: vis-à-vis United States-Measures Affecting the Cross Border Supply of Gambling and Betting Services. The US remains non-compliant with the WTO rulings and the final report when released later this month will unequivocally be in our favour.

In the meantime, how do we cope with such an action that seeks to destroy our Internet gaming sector and impoverish the young dynamic people of this nation? The adverse social and economic ramifications from the recent US actions do not afford us the luxury to debate the answers. The answers are recognizably not glib nor can they be derived within the short term as the landscape of the online gaming market has been altered. Does the change in United States Congress from the midterm elections indicate a beginning of the end and provide an opportunity for amicable solutions to our current impasse? Certainly this would be an opportunity to vindicate the prevailing reputation of "American Exceptionalism". The answer swings with the political pendulum.

I would like to think of something Martin Luther King said, "You can not regulate morals but you can regulate behaviour."