Pirates of the Caribbean

United Kingdom

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

After years of dispute at the World Trade Organisation (WTO), Antigua has finally been awarded a settlement against the United States as a result of the latter's discriminatory internet gambling laws. However, those hoping for a powerful trigger for change in the US legislative approach to gambling will be disappointed. In the absence of other available compensation, the WTO has permitted Antigua to infringe US intellectual property rights, allowing it to produce counterfeit materials including music, films, software and pharmaceuticals - but only up to a value of $21 million per year.

The decision of the WTO arbitration panel on 21 December 2007 was the formal conclusion to a series of successive victories for the Caribbean island against its powerful neighbour. However, it is the United States which has most to celebrate in the decision. Although the compensation awarded is above the $500,000 proposed by the US, it is a long way short of the $3.4 billion per annum claimed by Antigua. In particular, Antigua's lead counsel in the matter Mark Mendel has expressed his astonishment at the WTO arbitration panel's decision to adopt its own method of calculating compensation, borrowing significantly from the US' proposed approach of basing the figures on lost horseracing betting revenues.

It is by no means certain that Antigua will directly exploit the suspension of US intellectual property rights. The US has predictably and rather ominously warned that doing so might cause unease amongst the international business community and discourage potential investors in the Antiguan economy. In addition, calculation of the value of intellectual property exploitation by Antigua is likely to be contested by the US. Mendel indicated as much by stating "I hope that the United States government will now see the wisdom in reaching some accommodation with Antigua over this dispute". Indeed, the US has already reached agreements to compensate other countries and international bodies (notably the EU) which have echoed Antigua's complaints. Nevertheless, the antipathy between the US and Antigua which appears to exist after this protracted dispute may leave the US disinclined to offer Antigua any alternative – thereby pushing Antigua into extracting compensation by the only method available to it.

What does appear to be certain, though, is that this WTO dispute, which many had hoped might act as a catalyst for change in the United States' prohibitionist approach to gambling, is unlikely to have any significant impact in the immediate future.

Slightly brighter news for the gambling industry is that the EU is reported to be considering a new case against the USA at the WTO. Despite the compensation agreement with the EU mentioned above, the EU has expressed concern that the US authorities are still seeking to prosecute European companies for their actions prior to the withdrawal of the US from its WTO commitments in relation to gambling. Whilst even a successful resolution to any such case would not lead to the US market being reopened to EU gambling operators, it would give such companies and their executives certainty that they will not be pursued.