With Antigua preparing to launch a “pirate iTunes” where they will sell U.S. movies, music, games and other media without compensation to the rights holders with the blessing of the World Trade Organization, how exactly did the United States’s decade long battle with the Rasta Mouse That Roared get to this point and will the powerful content lobby permit domestic gambling operators to, in essence, tax them for their own protectionism?
Below is the twisted and winding road that might actually lead to the launch of iPirate.
Antigua gains independence from Great Britain.
US stock trader Jay Cohen moves to Antigua and sets up World Sports Exchange.
Cohen indicted under The Wire Wager Act which prohibits the “use of a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest.”
“We thought we set it up totally legally. We checked with lawyers. We were a foreign company licensed to do what we were doing,” says Cohen. “I thought by being totally offshore, we were out of the jurisdiction of the U.S.”
. . . . “The Department of Justice in Washington, their spokesperson was widely quoted as saying, ‘It doesn’t take place on US soil. It’s out of our jurisdiction. International offshore wagering – there’s nothing we can do about.’ So it definitely represented a change in the Department of Justice’s position on the matter,” says Cohen.
The World Sports partners, who’d broken no laws in Antigua, were now accused criminals in the United States. So Cohen decided to test the American law and announced he was coming home. His two partners remained behind. They are considered fugitives from American justice, subject to arrest if they return.
“Antigua doesn’t see us as criminals. We’re licensed and regulated by them to do what we do, and we follow their regulations,” says Ware. “So in Antigua, I’m not a criminal. I’m not a criminal to my family. I’m not a criminal to my peers. I’m only a criminal to a handful of fat cats in Washington.”
Schillinger said Cohen went back to prove a point, but “we were not going to close up shop on something we really believed in with all our hearts. So we stayed to keep it running.”
Any Given Sunday, 60 Minutes (Feb. 11, 2009)
US State Department describes Antigua as “one of the most attractive centres in the Caribbean for money launderers”.
Antigua’s online gambling industry reaches its peak.
The online gambling industry is the second-largest employer in Antigua after tourism; in 2001, there were 93 licensed gambling organizations in Antigua employing 1,900 persons
(Antiguan Directorate of Gaming n.d.). Antigua’s annual online gambling revenue peaked at $90 million in 1999 (Hansen 2006). There are conflicting
estimates of how much of this revenue came from gamblers in the United States, but Bear Stearns estimated that 60 percent of worldwide online gambling revenues came from U.S. customers in 2003.
The Antigua-United States Online Gambling Dispute, Journal of International Commerce and Economics (July 2009). (“Antigua-US JICE”)
Cohen becomes first United States citizen to be convicted for operating an online gambling company from a jurisdiction where it was legal and regulated.
In 1978 Congress passed the Interstate Horseracing Act, 15 U.S.C. § 1978 (IHA), which allows the electronic transmission of interstate wagers on state-licensed horse races, so long as the relevant racing commissions and associations approve the transaction. Over the objections of the DOJ, Congress amended this Act in 2000 specifically to allow wagers
placed over the internet (Rodefer 2005). The availability of online betting on horse races has helped the horseracing industry; in 2005, off-track and online betting on horse races generated $3 billion in revenue, and online betting has been described as the source of “the only growth in the horseracing industry today”.
Second Circuit affirms Cohen’s conviction. Cohen prison in 2002 after Supreme Court refuses to hear appeal.
Cohen’s case leads Texas attorney Mark Mendel to write memo to the government of Antigua urging them to challenge the U.S. gambling laws as a violation of the General Agreement on Trade in Services (GATS). In March 2003, Antigua initiated he dispute resolution process of the WTO to challenge the United States’ prohibition on the cross-border supply of online gambling services.
Cohen released from prison in March 2004 after serving 21-month sentence, returns to Antigua.
In November, the WTO ruled in Antigua’s favor finding that three U.S. federal laws, including the Wire Act, the Travel Act, 18 U.S.C. § 1952, and the Illegal Gambling Business Act (IGBA), 18 U.S.C. § 1955) and state laws in Louisiana, Massachusetts, South Dakota, and Utah obstructed free trade in online gambling services. The Panel determined that the cumulative effect of these laws was inconsistent with the United States’ commitments under GATS. United States appeals finding.
WTO Appellate panel rules in favor of Antigua, rejecting us defense that laws were necessary to promote moral goals. Sets deadline of 2006 for United States to modify laws to comply.
Congress passes Unlawful Internet Gambling Enforcement Act of 2006 shutting down US market to online gambling.
United States amends its GATS commitments to exclude online gambling.
This is the first time a WTO member has withdrawn a commitment in response to a WTO ruling. A condition of withdrawing from a GATS commitment is that the withdrawing country must compensate any affected WTO members, and after the United States’ announcement, Australia, Canada, Costa Rica, the European Union (EU), India, Japan and Macao all filed claims for compensation, arguing that they would be negatively impacted by the modification (Associated Press 2007). The United States negotiated settlements with Australia, Canada, the EU, and Japan, making commitments to maintain liberalized markets in the following U.S. industries: postal services, research and development services, technical testing services, and warehousing
In December, a WTO arbitration panel authorized Antigua to recoup its damages by ignoring its obligations under IP trade agreements up to $21 million annually.
the Arbitrator determines that the annual level of nullification or impairment of benefits accuing to Antigua in this case is US$21 million and that Antigua has followed the principles and procedures of Article 22.3 of the DSU in determining that it is not practicable or effective to suspend concessions or other obligations under the GATS and that the circumstances were serious enough. Accordingly, the Arbitrator determines that Antigua may request authorization from the DSB, to suspend the obligations under the TRIPS Agreement [dealing with protection of intellectual property rights], at a level not exceeding US$21 million annually.
U.S. warns Antigua not to implement the remedy but negotiations go nowhere and the issue seems to disappear.
On January 28, Antigua requested authorization from the WTO to begin suspension of observance of its obligations under the TRIPS Agreement.
Since the release of Award, Antigua and Barbuda has been working in good faith to obtain a fair negotiated settlement to DS285 with the United States, but all efforts have proven
fruitless. Article 22.7 of the DSU provides that “the DSB shall be informed promptly of the decision of the arbitrator and shall upon request, grant authorization to suspend concessions or other obligations where the request is consistent with the decision of the arbitrator, unless the DSB decides by consensus to reject the request”. Accordingly, on the basis of and consistent with the conclusions and determinations of the Arbitrators in the Award and in accordance with Article 22.7 of the DSU, Antigua and Barbuda requests authorisation from the DSB to suspend concessions or other obligations under the TRIPS, and in particular Sections 1 (Copyright and
Related Rights), 2 (Trademarks), 4 (Industrial Designs), 5 (Patents) and 7 (Protection of Undisclosed Information) of Part II thereof at a level not exceeding US $21.0 million annually.
Until such time as the United States brings its measures into compliance with the rulings and recommendations of the DSB in DS285, every year Antigua and Barbuda will notify the DSB of the suspension of concessions or obligations it intends to adopt and actions it intends to take with respect thereto prior to bringing those suspensions into force or taking those actions. The notice will also specify how Antigua and Barbuda proposes to ensure that, in applying the suspension of concessions and obligations, they will not exceed US $21.0 million per annum.
Antigua also issued the following press release after getting approval from the WTO:
ST. JOHNS, Antigua, Jan. 28, 2013 /PRNewswire via COMTEX/ — Today in Geneva, the Caribbean nation of Antigua and Barbuda was granted authorization by the World Trade Organization (WTO) to suspend certain concessions and obligations it has under international law to the United States in respect of intellectual property rights. Having initially received preliminary authorization to do so from the WTO in 2007 and negotiating in good faith with the United States Government for a settlement of the case over the course of the last five years, Antigua is seeking final WTO approval of its sanctions in order to compel the United States to either comply with the rulings in Antigua’s favor in the gambling dispute or to negotiate a fair and reasonable solution with the Antiguan Government. The remedy is expressly provided for under WTO law and, contrary to what the United States has publicly stated, will not constitute “piracy” or theft of intellectual property rights. Rather, it will be a lawful suspension of intellectual property rights, conforming to the judgment of the relevant WTO tribunal.
For nearly a decade, Antigua has sought to resolve the dispute with the United States Government over the US failure to abide by American treaty obligations with regard to remote gaming.
The economy of Antigua and Barbuda has been devastated by the United States Government’s long campaign to prevent American consumers from gambling on-line with offshore gaming operators. These aggressive efforts to shut down the remote gaming industry in Antigua has resulted in the loss of thousands of good paying jobs and seizure by the Americans of billions of dollars belonging to gaming operators and their customers in financial institutions across the world. If the same type of actions, by another nation, caused the people and the economy of the United States to be so significantly impacted, Antigua would without hesitation support their pursuit of justice. We once again ask our fellow sovereign nation and WTO member, the United States of America, to act in accordance with the WTO’s decisions in this matter, before we move forward with the implementation of the sanctions authorized this day by the WTO,” said Harold Lovell, Antigua’s Finance Minister.
At its height, the remote gaming industry in Antigua was the country’s second largest employer, and leading international gaming economists estimated that the industry was worth over US $3.4 billion to the Antiguan economy. Having once employed over 4,000 people, today less than five hundred persons are employed in the gaming sector. This economic devastation has been caused by the direct actions of the United States. Fees paid by the gaming industry helped fund public education, healthcare and the country’s infrastructure, and the income boosted consumer spending and other economic activity associated with a vibrant, high-tech industry.
“Antigua has decided to utilize its right under international law to compel treaty compliance by the United States. This decision did not come easily. After countless proposals from our government have been more or less ignored by the Office of the USTR – numerous decisions by the WTO declaring the United States Government’s position illegal – and failure of the United States Government to provide meaningful proposals to end the dispute, the WTO provides this remedy not to encourage illicit behavior by nations; but rather to provide them with a way to secure their legal rights as sovereign nations,” said Colin Murdoch, Trade Ambassador for Antigua. “It is important to note that the intellectual property remedy is incorporated in the WTO agreements and approved by all members, including the United States.”
Getting the authorization from the WTO to suspend intellectual property rights does not require Antigua to ultimately resort to that suspension, and the Government remains hopeful that the United States will use the intervening period to engage the Antiguan Government in more productive discussions. If and when Antigua does take action against American intellectual property holders, it will be done in accordance with international law and under strict supervision and direction of the Antiguan Government.
“As a result of the US failure to comply with international law, the Antiguan economy and our citizens have suffered. In previous statements, the United States has indicated there could be possible adverse consequences for Antigua and its citizens for resorting to this WTO-sponsored remedy. We assume this is just rhetoric for public consumption, and we look forward to the United States putting aside these tactics and focusing their future efforts on thoughtful negotiation rather than on hyperbole and intimidation,” said Dr. McChesney Emanuel, Chairman of the Antigua and Barbuda Investment Authority.
The United States has responded that:
Government-authorized piracy would undermine chances for a settlement. It also would serve as a major impediment to foreign investment in the Antiguan economy, particularly in high-tech industries
I spent Christmas 2003 at the Hawksbill resort which is one of the best on the island.