United States Measures Affecting the
Cross-Border Supply of Gambling
and Betting Services
Recourse to Article 21.5 of the DSU by Antigua and Barbuda
Report of the Panel
Table of contents
Page
I. procedural background 1
II. Findings requested by the parties 3
III. aRGUMENTS OF THE pARTIES 3
IV. arguments of the third parties 4
V. Interim Review 4
VI. findings 9
A. Order of Analysis 9
B. Disagreement as to the Existence of Measures Taken to Comply 10
1. Recommendation of the DSB in the original proceeding 10
(a) Main arguments of the parties 10
(b) Main arguments of third parties 10
(c) Assessment by the Panel 11
2. Specific findings and conclusions in the original proceeding 16
(a) Main arguments of the parties 16
(b) Main arguments of third parties 17
(c) Assessment by the Panel 17
3. Statements made during the arbitration pursuant to Article 21.3(c) of the DSU 27
C. Disagreement as to the Consistency with a Covered Agreement of Measures Taken to Comply 28
1. Nature of the Panel's assessment 28
(a) Main arguments of the parties 28
(b) Assessment by the Panel 29
2. United States' submissions 30
(a) Interstate Horseracing Act, as amended 30
3. Antigua's submissions 34
(a) Interstate Horseracing Act, as amended 34
(b) Intrastate commerce 36
4. Developments since the original proceeding 38
(a) April 2006 DOJ Statement and prosecutions 38
(b) Unlawful Internet Gambling Enforcement Act 39
VII. Conclusion 41
LIST OF ANNEXES
ANNEX A
FIRST WRITTEN SUBMISSIONS FROM THE PARTIES
Contents Page
Annex A-1 First Written Submission by Antigua and Barbuda (25 September 2006) Executive Summary A-2
Annex A-2 First Written Submission by the United States (16 October 2006) Executive Summary A-9
ANNEX B
THIRD PARTY WRITTEN SUBMISSIONS
Contents Page
Annex B-1 Third Party Submission by the European Communities (23 October 2006) Executive Summary B-2
Annex B-2 Third Party Submission by Japan (23 October 2006)
Executive Summary B-8
ANNEX C
REBUTTALS FROM THE PARTIES
Contents Page
Annex C-1 Rebuttal by Antigua and Barbuda (30 October 2006)
Executive Summary C-2
Annex C-2 Rebuttal by the United States (13 November 2006)
Executive Summary C-9
ANNEX D
ORAL STATEMENTS OF THE PARTIES AT THE
SUBSTANTIVE MEETING OF THE PANEL
Contents Page
Annex D-1 Opening Statement by Antigua and Barbuda (27 November 2006) Executive Summary D-2
Annex D-2 Opening Statement by the United States (27 November 2006) Executive Summary D-6
Annex D-3 Closing Statement by Antigua and Barbuda (28 November 2006) D-10
ANNEX E
ORAL STATEMENTS OF THIRD PARTIES AT THE
SUBSTANTIVE MEETING OF THE PANEL
Contents Page
Annex E-1 Oral Statement by China (28 November 2006) E-2
Annex E-2 Oral Statement by the European Communities (28 November 2006) Executive Summary E-4
Annex E-3 Oral Statement by Japan (28 November 2006)
Executive Summary E-7
ANNEX F
REPLIES BY THE PARTIES AND THIRD PARTIES
TO QUESTIONS POSED BY THE PANEL
Contents Page
Annex F-1 Replies by Antigua and Barbuda to questions posed by the Panel (8 December 2006) F-2
Annex F-2 Replies by the United States to questions posed by the Panel (8 December 2006) F-15
Annex F-3 Replies by China to questions posed by the Panel (8 December 2006) F-38
Annex F-4 Replies by the European Communities to questions posed by the Panel (8 December 2006) F-42
Annex F-5 Replies by Japan to questions posed by the Panel (8 December 2006) F-55
ANNEX G
COMMENTS BY THE PARTIES ON REPLIES
TO QUESTIONS POSED BY THE PANEL
Contents Page
Annex G-1 Comments by Antigua and Barbuda on replies to questions posed by the Panel (14 December 2006) G-2
Annex G-2 Comments by the United States on replies to questions posed by the Panel (14 December 2006) G-31
ANNEX H
REQUEST FOR THE ESTABLISHMENT OF A PANEL
ANNEX I
WORKING PROCEDURES OF THE PANEL
ANNEX J
LISTS OF EXHIBITS SUBMITTED BY THE PARTIES
Contents Page
Annex J-1 List of Schedules and Exhibits submitted by Antigua and Barbuda J-2
Annex J-2 List of Exhibits submitted by the United States J-7
ABBREVIATIONS USED FOR DISPUTE SETTLEMENT CASES
REFERRED TO IN THIS REPORT
Short Title Full Case Title and Citations
Brazil Aircraft Appellate Body Report, Brazil Export Financing Programme for Aircraft, WT/DS46/AB/R, adopted 20 August 1999, DSR 1999:III, 1161.
Brazil Aircraft (Article 21.5 Canada) Appellate Body Report, Brazil Export Financing Programme for Aircraft Recourse by Canada to Article 21.5 of the DSU, WT/DS46/AB/RW, adopted 4 August 2000, DSR 2000:VIII, 4067.
Canada Aircraft (Article 21.5 Brazil) Appellate Body Report, Canada Measures Affecting the Export of Civilian Aircraft Recourse by Brazil to Article 21.5 of the DSU, WT/DS70/AB/RW, adopted 4 August 2000, DSR 2000:IX, 4299
Canada Autos Appellate Body Report, Canada Certain Measures Affecting the Automotive Industry, WT/DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000, DSR 2000:VI, 2985.
Canada Dairy (Article 21.5 New Zealand and US) Appellate Body Report, Canada Measures Affecting the Importation of Milk and the Exportation of Dairy Products Recourse to Article 21.5 of the DSU by New Zealand and the United States, WT/DS103/AB/RW, WT/DS113/AB/RW, adopted 18 December 2001, DSR 2001:XIII, 6829.
Canada Dairy (Article 21.5 New Zealand and US II) Appellate Body Report, Canada Measures Affecting the Importation of Milk and the Exportation of Dairy Products Second Recourse to Article 21.5 of the DSU by New Zealand and the United States, WT/DS103/AB/RW2, WT/DS113/AB/RW2, adopted 17 January 2003, DSR 2003:I, 213.
Canada Patent Term Appellate Body Report, Canada Term of Patent Protection, WT/DS170/AB/R, adopted 12 October 2000, DSR 2000:X, 5093.
Dominican Republic Import and Sale of Cigarettes Panel Report, Dominican Republic Measures Affecting the Importation and Internal Sale of Cigarettes, WT/DS302/R, adopted 19 May 2005, modified by Appellate Body Report, WT/DS302/AB/R.
EC Tariff Preferences Appellate Body Report, European Communities Conditions for the Granting of Tariff Preferences to Developing Countries, WT/DS246/AB/R, adopted 20 April 2004, DSR 2004:III, 925.
EC Tariff Preferences Panel Report, European Communities Conditions for the Granting of Tariff Preferences to Developing Countries, WT/DS246/R, adopted 20 April 2004, modified by Appellate Body Report, WT/DS/246/AB/R, DSR 2004:III, 1009
EC Trademarks and Geographical Indications (Australia) Panel Report, European Communities Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs, Complaint by Australia, WT/DS290/R, adopted 20 April 2005.
EC Trademarks and Geographical Indications (US) Panel Report, European Communities Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs, Complaint by the United States, WT/DS174/R, adopted 20 April 2005.
EC Bed Linen (Article 21.5 India ) Appellate Body Report, European Communities Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India Recourse to Article 21.5 of the DSU by India, WT/DS141/AB/RW, adopted 24 April 2003, DSR 2003:III, 965.
India Patents (US) Appellate Body Report, India Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, adopted 16 January 1998, DSR 1998:I, 9.
Turkey Textiles Appellate Body Report, Turkey Restrictions on Imports of Textile and Clothing Products, WT/DS34/AB/R, adopted 19 November 1999, DSR 1999:VI, 2345.
US FSC Appellate Body Report, United States Tax Treatment for "Foreign Sales Corporations", WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III, 1619.
US FSC (Article 21.5 EC II) Appellate Body Report, United States Tax Treatment for "Foreign Sales Corporations" Second Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/AB/RW2, adopted 14 March 2006.
US Section 211 Appropriations Act Appellate Body Report, United States Section 211 Omnibus Appropriations Act of 1998, WT/DS176/AB/R, adopted 1 February 2002, DSR 2002:II, 589.
US Shrimp Appellate Body Report, United States Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, 2755.
US Shrimp (Article 21.5 Malaysia) Appellate Body Report, United States Import Prohibition of Certain Shrimp and Shrimp Products Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6481.
US Shrimp (Article 21.5 Malaysia) Panel Report, United States Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/RW, adopted 21 November 2001, upheld by Appellate Body Report, WT/DS58/AB/RW, DSR 2001:XIII, 6529.
US Softwood Lumber IV (Article 21.5 Canada) Appellate Body Report, United States Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada Recourse by Canada to Article 21.5 of the DSU, WT/DS257/AB/RW, adopted 20 December 2005.
US Softwood Lumber V Appellate Body Report, United States Final Dumping Determination on Softwood Lumber from Canada, WT/DS264/AB/R, adopted 31 August 2004, DSR 2004:V, 1875.
list of abbreviations
DOJ United States Department of Justice
DSB Dispute Settlement Body
DSU Dispute Settlement Understanding
GATS General Agreement on Trade in Services
GATT 1994 General Agreement on Tariffs and Trade 1994
H.R. 4411 H.R. 4411, 109th Cong 2nd Sess., "The Internet Gambling Prohibition and Enforcement Act" (12 July 2006)
IGBA Illegal Gambling Business Act, 18 U.S.C. § 1955
IHA Interstate Horseracing Act, 15 U.S.C. §§ 3001 to 3007
RICO Racketeer Influenced and Corrupt Organizations Statute, 18 U.S.C. §§ 1961-1968
Travel Act Travel Act, 18 U.S.C. § 1952
UIGEA Unlawful Internet Gambling Enforcement Act of 2006, Pub. L. No. 109-347, 120 Stat. 1884, 1952- 1962 (2006) (to be codified at 31 U.S.C. §§ 5361 to 5367)
USTR United States Trade Representative
Wire Act Wire Act, 18 U.S.C. § 1084
WTO Agreement Marrakesh Agreement Establishing the World Trade Organization
I. procedural background
1.1 On 20 April 2005, the Dispute Settlement Body ("DSB") adopted the Appellate Body Report (WT/DS285/AB/R) and the Panel Report (WT/DS285/R) as modified by the Appellate Body Report in the dispute on United States Measures Affecting the Cross-Border Supply of Gambling and Betting Services. In its recommendations and rulings, the DSB requested the United States to bring its measures, that were found, in the Appellate Body Report and in the Panel Report as modified by that Report, to be inconsistent with its obligations under the General Agreement on Trade in Services (GATS), into conformity with its obligations under that Agreement.
1.2 On 19 May 2005, the United States informed the DSB that it intended to implement the DSB's recommendations and rulings in this dispute in a manner that respected the United States' WTO obligations, and that it had begun to evaluate options for doing so. The United States indicated that it would need a reasonable period of time in which to do this and that it stood ready to discuss this matter with the Government of Antigua and Barbuda ("Antigua"), in accordance with Article 21.3(b) of the DSU.
1.3 On 6 June 2005, Antigua informed the DSB that Antigua and the United States had been unable to agree on a reasonable period of time. Consequently, Antigua requested that the reasonable period of time be determined through binding arbitration pursuant to Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"). On 30 June 2005, the Director-General appointed Dr. Claus-Dieter Ehlermann to act as Arbitrator under Article 21.3(c).
1.4 In the Arbitration Award, which was circulated on 19 August 2005, the Arbitrator determined that the "reasonable period of time" for the United States to implement the recommendations and rulings of the DSB was 11 months and 2 weeks from 20 April 2005, which was the date on which the DSB adopted the Panel and Appellate Body Reports. The reasonable period of time was therefore to expire on 3 April 2006.
1.5 In a first Status Report dated 6 March 2006, the United States informed the DSB that the "US Administration, in consultation with the US Congress, has been working on appropriate steps to resolve this matter". In its second Status Report, dated 10 April 2006, the United States informed the DSB that:
"On 5 April 2006, the US Department of Justice confirmed the position of the US Government regarding remote gambling on horse racing in testimony before a subcommittee of the US House of Representatives. The Department of Justice stated that:
The Department of Justice views the existing criminal statutes as prohibiting the interstate transmission of bets or wagers, including wagers on horse races. The Department is currently undertaking a civil investigation relating to a potential violation of law regarding this activity. We have previously stated that we do not believe that the Interstate Horse Racing Act, 15 U.S.C. §§ 3001-3007, amended the existing criminal statutes.
In view of these circumstances, the United States is in compliance with the recommendations and rulings of the DSB in this dispute."
1.6 At the DSB meeting of 21 April 2006, the United States, referring, inter alia, to the aforementioned DOJ statement, informed Members that it "was now able to show that relevant US law did not discriminate against foreign suppliers of remote gambling on horse racing" and concluded that it "was in compliance with the recommendations and rulings of the DSB in this dispute". At the same meeting, Antigua disagreed with that interpretation.
1.7 On 24 May 2006, Antigua and the United States notified an Agreement Regarding Procedures under Articles 21 and 22 of the DSU (the "Agreed Procedures") to the DSB. In a communication dated 8 June 2006, Antigua requested consultations with the United States pursuant to paragraph 1 of the Agreed Procedures. Consultations between the parties were held on 26 June 2006 in Washington D.C., but did not result in a settlement of the dispute. In a communication dated 6 July 2006, Antigua requested the DSB to establish a panel pursuant to Article 21.5 of the DSU.
1.8 At its meeting on 19 July 2006, following the request made by Antigua, the DSB agreed to refer to the original Panel, if possible, the matter raised by Antigua in document WT/DS285/18 and decided that the Panel would have standard terms of reference. The terms of reference are, therefore, the following:
"To examine, in the light of the relevant provisions of the covered agreements cited by Antigua and Barbuda in document WT/DS285/18, the matter referred to the DSB by Antigua and Barbuda in that document, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."
1.9 Article 21.5 of the DSU provides that a dispute under that provision shall be decided through recourse to the DSU, including, "wherever possible, resort to the original panel". In this case, the Chairperson of the original panel and one of the panellists were unavailable to serve. The parties agreed on their replacements, and as a result the Panel was composed as follows:
Chairperson: Mr Lars Anell
Members: Mr Mathias Francke
Mr Virachai Plasai
1.10 The representatives of China, the European Communities and Japan reserved their third-party rights to participate in the Panel's proceedings.
1.11 The Panel established its Working Procedures and Timetable on, respectively, 4 and 14 September 2006, and communicated these to the parties and third parties.
1.12 After receiving the parties' written submissions, the Panel noted that there appeared to be disagreement as to what had been submitted to the Arbitrator appointed pursuant to Article 21.3(c) of the DSU, and was hence of the view that the record of the Arbitrator might assist the Panel in carrying out its work. After consulting with the parties, the Panel requested access, in a letter dated 21 November 2006 addressed to the Director of the Appellate Body Secretariat, to the Arbitrator's record in the Article 21.3(c) proceeding. This record was transmitted to the Panel the same day. It contained the parties' respective submissions and oral statements, as well as a transcript of the Arbitrator's oral hearing. The third parties received copies of the parties' submissions and oral statements directly from the parties.
1.13 The Panel met with the parties on 27 and 28 November 2006. It met with the third parties on 28 November 2006.
II. Findings requested by the parties
1.1 Antigua requests that the Panel:
(a) find that the United States has not taken measures to comply with the DSB rulings;
(b) find that the Wire Act, the Travel Act and the IGBA remain in violation of the United States' obligations to Antigua under, inter alia, Article XVI of the GATS without meeting the requirements of Article XIV of the GATS; and
(c) recommend that the DSB request the United States to bring the Wire Act, the Travel Act and the IGBA into conformity with the obligations of the United States under the GATS.
1.2 The United States requests that the Panel reject Antigua's claims in their entirety, and find that the US measures taken to comply are not inconsistent with the GATS.
II. aRGUMENTS OF THE pARTIES
1.1 The arguments of the Parties are set out in their respective submissions to the Panel. Executive summaries from the parties, including the first written submissions, rebuttals and written versions of their oral statements, as well as replies to questions and comments on replies to questions, are attached as annexes to this report.
II. arguments of the third parties
1.1 Arguments of the third parties that presented written submissions to the Panel, i.e. the European Communities and Japan, are attached as annexes to this report in the form of executive summaries from those third parties. Likewise, the oral statement by China, executive summaries of the oral statements presented by the European Communities and Japan, as well as third parties' replies to the Panel's questions, are attached as annexes to this report.
II. Interim Review
2.2 On 25 January 2007, the Panel submitted its interim report to the parties. On 1 February 2007, the parties submitted written requests for review of precise aspects of the interim report. On 8 February 2007, the parties submitted written comments on each other's requests for interim review. In accordance with Article 15.3 of the DSU, this section of the Panel's report sets out a discussion of the arguments made at the interim review stage.
(i) Public comment on the confidential interim report
2.3 When transmitting the interim report to the parties, the Panel explicitly indicated that the interim report was strictly confidential. The Panel also explicitly emphasized at its meeting with the parties that the Panel's proceedings were confidential, as provided for in Article 18 of the DSU. This was accepted by the parties, as well as reflected in the Panel's Working Procedures and in all relevant correspondence with the parties.
2.4 Therefore, the Panel notes with concern that the confidentiality requirement was breached on the occasion of the transmission of the interim report to the parties. The Panel is all the more concerned given that breaches of confidentiality had occurred in the original proceeding and were deplored by the original Panel.
2.5 Within hours of the transmission of the interim report to the parties, the press reported on the result of the "confidential" interim report. Press reports referred in particular by name to a spokesperson from the USTR "confirm[ing] reports that the ruling went against the United States" and commenting on the content of the interim report.
2.6 On 26 January 2007, Antigua referred the Panel to the press report and noted, in particular, that Antigua had "strictly observed the confidentiality obligation".
2.7 On 29 January 2007, the Panel communicated to the parties as follows:
"The Panel notes with concern that the confidentiality of the Interim Report has been breached, in spite of the fact that the confidentiality requirement was accepted by the Parties (as reflected in the Working Procedures). The Panel wishes to remind the Parties that the Interim Report is strictly confidential, and that breaches of the confidentiality requirement are unacceptable because they affect the credibility and integrity of the WTO dispute settlement process."
2.8 Antigua, in its comments on interim review, expressed its deep disappointment with the decision of the United States to publicly comment on the interim report despite its express agreement not to do so. Antigua informed the Panel that it had scrupulously maintained the confidentiality of the interim report, and commented that the statements of the USTR were not only contrary to the agreements and obligations of the United States but materially misleading.
2.9 The United States informed the Panel, when submitting its comments on the interim review, that it shared the Panel's concerns regarding the breach of confidentiality of the interim report and assured the Panel that "the United States was not the source of the leaked results". The United States asserted that it had "received several press inquiries regarding these results that indicated that the source was in Geneva. The U.S. comments came only in response to the reports of the leak."
2.10 First, the Panel notes that the insinuations by the United States are serious since they may imply that the Panel or the WTO Secretariat breached the confidentiality requirement with respect to the interim report. The Panel wishes to assert forcefully that neither the Panel nor the Secretariat has done so. Third parties cannot be blamed since they do not receive a copy of the interim report. Second, with respect to the United States' assertion that its comments came "only in response to the reports of the leak", the Panel notes that, even in such circumstances, the comments would still be inappropriate in light of the confidentiality requirement concerning the interim report.
2.11 The Panel wishes to reiterate its concerns and stress again that disregard for the confidentiality requirement affects the credibility and integrity of the WTO dispute settlement process, of the WTO and of WTO Members and is, therefore, unacceptable.
(ii) Timing of the measure taken to comply
2.12 The United States requested a footnote to one sentence in paragraph 6.22, clarifying that compliance need not necessarily occur subsequent to the DSB recommendation and rulings, as a WTO Member might modify or remove measures at issue after establishment of a panel but prior to adoption of the panel or Appellate Body report.
2.13 Antigua had no objection to the proposed clarification but considers that, in such an unusual circumstance, the implementing party should announce its compliance no later than the time of adoption of the DSB recommendation to avoid the situation that arose in this dispute.
2.14 The Panel referred throughout its report to matters occurring "since the original proceeding" for the reason given by the United States and has modified the sentence to which the United States referred.
(iii) Article 17.14 of the DSU
2.15 The United States noted that the discussion of Article 17.14 of the DSU did not appear to be necessary to the result reached by the Panel but only confirmed the Panel's earlier conclusion. The United States raised three concerns with the systemic implications of the discussion of Article 17.14 of the DSU: (i) in its view, Article 17.14, on its face, was not limited to a compliance proceeding and applied to the "parties to the dispute" in any context. The Panel's interpretation would foreclose a disputing party from re-arguing a legal or factual issue addressed by an Appellate Body report in any future proceeding under the DSU or perhaps even outside the DSU. This was a result that no Member intended. The United States understood that Article 17.14 was simply meant to indicate that no further appeals were available from Appellate Body reports, unlike final panel reports; (ii) the Panel's interpretation would create a major distinction between adopted panel reports and adopted Appellate Body reports because Article 17.14 of the DSU only applies to adopted Appellate Body reports; and (iii) the interim report resorts to the undefined concept of a "claim" to distinguish the Canada Dairy dispute. In Canada Dairy, the complainants' claim effectively failed for lack of a prima facie case, although the Appellate Body did not use that term. The Panel's interpretation would require future panels to struggle with what is, and what is not, the same "claim" for the purposes of Article 17.14, to distinguish between Canada Dairy and US Gambling.
2.16 Antigua replied that the United States had taken the potential effect of the interim report much farther than warranted. The discussion of the effect of Article 17.14 of the DSU is very helpful in the context of this dispute, particularly given the primary argument of the United States that it was entitled to a second chance to meet its burden of proof. As regards the United States' concerns: (i) the interim report sets out certain limitations applicable to a determination of unconditional acceptance under Article 17.14. The reasoning in the interim report does not prevent Members introducing new evidence or arguments but excludes an attempt to meet a failed burden of proof. Article 17.14 was intended to result in finality and not simply recite a procedural rule; (ii) the problem identified by the United States was resolved in EC Bed Linen (Article 21.5 India); and (iii) it is the proper role for a panel to determine what is the same "claim" rather than for a party to determine unilaterally.
2.17 The Panel recalls that the United States relied heavily in its submissions on the specific findings and conclusions of the Appellate Body in this dispute. Therefore, the Panel considers it important to review those specific findings and conclusions and Article 17.14 of the DSU as an applicable provision in the covered agreements. As regards the United States' specific concerns: (i) the Panel has clarified paragraphs 6.51 to 6.53 so that its findings should not be taken to imply a view on whether Article 17.14 applies to the "parties to the dispute" in any and every context; (ii) the Panel has not created a distinction regarding adopted panel reports. The Appellate Body in its report on EC Bed Linen (Article 21.5 India) (at paragraph 93) considered that, even though Article 17.14 did not refer to panel reports, a finding in an adopted panel report must be accepted by the parties as a final resolution to the dispute between them "in the same way and with the same finality" as a finding included in an adopted Appellate Body report; and (iii) the Panel has not created a new distinction regarding the outcome of claims, as compliance panels must already distinguish between a claim which led to a conclusion of no "prima facie case", as in the Panel report on EC Bed Linen, and an issue on which there was no ruling, as in the Appellate Body report on the first recourse to Article 21.5 in Canada Dairy. The present dispute can further be distinguished from Canada Dairy (Article 21.5 New Zealand and US) because in that proceeding the Panel record did not include the data necessary for the Appellate Body to complete the analysis of the claims, whereas in the present dispute, as explained in paragraphs 6.70 to 6.83 of this report, the United States' defence failed due to the underlying facts.
(iv) Antigua's submissions
2.18 Antigua considered that the Panel should expand its factual assessment beyond the issue of the relationship between the IHA and the three federal statutes, particularly in the context of "permissible remote gambling in the United States in general". Antigua clarified in its interim review comments one argument concerning State laws and regulations as well as its response to a question from the Panel concerning the activities of suppliers in the United States.
2.19 The United States disagreed with Antigua's request. The issue of compliance was determined by the specific recommendation and rulings of the DSB, which made clear that the issue to be considered was whether the United States had shown "in the light of the [IHA], that the prohibitions in [the three federal gambling statutes] are applied to both foreign and domestic service suppliers of remote betting services for horse racing". The United States did not consider that any change was required to the interim report in light of Antigua's clarifications.
2.20 The Panel confirms that it limited Section VI:C.3(a) to the IHA but notes that its factual assessment in Section VI:C.3(b) also included intrastate commerce. These were the two issues in relation to which Antigua presented evidence of remote gambling in the United States. As Antigua did not clearly formulate a separate argument as to how the measures at issue were applied in a way that allowed remote gambling in general in the United States, the Panel did not address this evidence further. However, in light of Antigua's clarifications, the Panel has revised paragraph 6.97 and paragraphs 6.111 to 6.116.
(v) Intrastate commerce
2.21 Antigua confirmed its view that the Appellate Body findings referenced in footnote 184 are clearly erroneous. Antigua recalled that, in the original proceeding, it made clear its belief that the measures at issue including in particular the Wire Act were facially discriminatory by allowing States to do whatever they wanted in the context of remote gambling while effectively prohibiting the cross-border supply of these services from Antigua. Antigua argued at interim review in this compliance proceeding that, because the federal statutes are facially discriminatory, the United States could not possibly justify them under the chapeau of Article XIV of the GATS, regardless of how they are actually applied. The same holds true for the IHA because, in Antigua's view, it was undisputed that intrastate wagering under the IHA was permissible.
2.22 The United States replied that even if it were true that, in the original proceeding, Antigua made clear its belief that the federal laws were facially discriminatory (which the United States did not accept), this only reinforced the point that Antigua was requesting a second chance to re-argue an issue, while opposing any attempt by the United States to obtain a so-called second chance to meet its burden on the IHA/Wire Act issue. Further, the IHA simply does not address what is or is not "permissible" with respect to intrastate wagers.
2.23 The Panel noted in its interim report that Antigua raised the issue of intrastate commerce in the original proceeding. The Panel assesses Antigua's arguments on that issue on the same proviso as that on which it re-assesses the United States' arguments on the IHA.
2.24 The United States suggested that the Panel not include the section on intrastate commerce in its final report as this aspect of the interim report was not within the scope of this proceeding. In its view, the DSB recommendation and rulings in this dispute relate only to the issue of discrimination under the GATS Article XIV chapeau with respect to remote gambling on horse racing, due to the Appellate Body's conclusion on the chapeau of Article XIV in its entirety. Given that the measures at issue in this dispute are unchanged, the United States was not obliged by the DSB recommendation and rulings to bring into compliance any aspect of the measure that was not addressed by the DSB recommendation and rulings. In accordance with EC Bed Linen (Article 21.5 India), Antigua may not re-argue a failed claim in a compliance proceeding. The United States argues that the discussion of intrastate commerce is dicta that does not belong in the final report.
2.25 Antigua disagreed in the strongest possible terms with the United States' request. The scope of review under Article 21.5 is broad in order to assess compliance with DSB recommendations and rulings and in light of the overriding objective of the DSU to achieve the "prompt settlement" of disputes. In the original proceeding, the United States bore the burden of proof of its defence under Article XIV of the GATS. As its defence under the chapeau was constructed around the assertion that it prohibited all remote gambling, that assertion should be the benchmark for assessing its compliance. The discussion of intrastate commerce provides important context for the extensive domestic remote gambling industry operating in the United States today.
2.26 The Panel observes that the primary issue in this proceeding is whether any "measures taken to comply" exist. The Panel has found that none exist. Accordingly, the assessment of the conformity of the measures at issue with US obligations under the GATS is included only for the reasons set out in Section VI:C.1 of this report. This applies not only to the assessment of intrastate commerce, but also to the assessment of the other matters in Section VI:C, which the United States does not request the Panel to remove.
2.27 The Panel recalls that at the outset of this compliance proceeding, the United States presented the issue before the Panel as follows:
"That issue is whether the United States can show that three facially non-discriminatory U.S. federal criminal statutes, as a matter of statutory interpretation, do not constitute a means of arbitrary or unjustifiable discrimination between countries, within the meaning of the chapeau to Article XIV of the [GATS], as the result of interaction with a civil statute, the [IHA]." (emphasis added)
2.28 The fact that the Wire Act (and the Travel Act) discriminate on their face between services supplied within the United States and those supplied from outside the United States, insofar as they do not apply to services not supplied in interstate or foreign commerce, is relevant to the first premise of the issue before the Panel, as initially presented by the United States itself.
2.29 Subsequently, in its comments on interim review, the United States described the issue before the Panel more concisely, as follows:
"Thus, any aspect of alleged discrimination under the existing measure involving matters other than horse racing are not covered within the DSB recommendations and rulings." (emphasis in original)
2.30 Intrastate remote wagering, to the extent that it is permitted, covers wagering on horse racing. Therefore, intrastate commerce is relevant to the issue before the Panel, even as subsequently presented by the United States itself. The Panel had already noted that relevant State laws applied to remote wagering on horse racing, but has noted this in paragraphs 6.121 and 6.122 as well.
2.31 Further, Antigua's arguments on intrastate commerce are not a "failed claim". The original Panel did not rule on these arguments. It is equally appropriate to assess Antigua's arguments than it is to re-assess the United States' argument in support of this defence, on which the original Panel and the Appellate Body have already ruled.
2.32 The Panel is aware that the United States' description of the measures at issue as "three facially non-discriminatory U.S. federal criminal statutes" was consistent with the Appellate Body findings referenced at footnote 184 of this report and the United States' arguments in the original proceeding referenced at footnote 133. However, there was no finding on this point in the original Panel report and the issue was contested by Antigua, as referenced at footnote 176.
2.33 Lastly, the United States considered that the discussion of intrastate commerce was confusing and misleading, as it might imply that the Panel was definitively finding an inconsistency with the Article XIV chapeau with respect to this issue. The United States also recalled that a finding of discrimination is not in itself definitive under the Article XIV chapeau, which refers to "arbitrary or unjustifiable" discrimination between countries where "the same conditions prevail", and that these matters were not before the Panel. Antigua replied that the lack of assessment of these issues was by choice of the United States itself. The Panel has clarified its findings in the section on intrastate commerce further to address these particular concerns of the United States. The Panel had already referred to the second of these concerns in paragraph 6.100.
(vi) Developments since the original proceeding
2.34 Antigua saw no reason for the Panel to limit its enquiry in Section VI:C of the report to an assessment as to whether the measures at issue satisfied the requirements of the chapeau of Article XIV of the GATS, particularly in the context of completely new evidence such as the UIGEA. Although Antigua had chosen not to contest the UIGEA as a measure, the UIGEA should be taken further into account in any assessment of the United States' compliance with the recommendation and rulings of the DSB. In particular, Antigua argued that (i) the UIGEA made it impossible for the United States to discharge its burden of proof under the chapeau of Article XIV of the GATS with respect to the IHA; (ii) the intrastate exemption in the UIGEA provided the Panel with a sound basis on which to reassess the discrimination inherent in the Wire Act vis-ΰ-vis intrastate commerce, notwithstanding the Appellate Body's conclusions; and (iii) the UIGEA confirms that there is no prohibition of all remote gambling in the United States and that therefore the measures at issue are not "necessary" within the meaning of Article XIV(a) of the GATS. Further, the UIGEA expressly accepts the concept of state regulation of remote gambling which demonstrates that the United States does not consider prohibition "necessary".
2.35 The United States replied that the scope of this proceeding is determined by Article 21.5 and the DSB recommendation and rulings and not by what evidence is, or is not, available. The United States also disagreed with Antigua's assertions regarding the meaning and relevance of the UIGEA. The "intrastate" provisions in the UIGEA apply only under that Act and only affect the new enforcement mechanisms set out in it. For the same reason, they do not mean that US prohibitions on remote gambling are not "necessary". Rather, by creating more effective enforcement tools to address illegal remote gambling, the UIGEA confirms that the United States believes that remote gambling creates serious problems that must be addressed.
2.36 The Panel referred to the UIGEA in Section VI:C.4(b) of its report to the extent that it considered that the UIGEA had evidentiary value to the assessment of the matter before it. The Panel does not consider it appropriate to expand the references to the UIGEA as (i) it remains possible for the United States to address the ambiguity relating to the IHA through "measures taken to comply"; (ii) whilst the definition of "unlawful Internet gambling" in general in the UIGEA refers to applicable Federal or State law, the definition of "intrastate transactions" in the UIGEA applies only under the UIGEA. As such, this intrastate exemption does not provide a basis to assess the conformity of the Wire Act with US obligations under the GATS in this proceeding; and (iii) the Panel already noted in footnote 195 that the UIGEA represents a change since the United States' submissions to the original Panel on the availability of regulation as an alternative to prohibition. However, the Appellate Body considered in its report that the measures at issue were "necessary" within the meaning of Article XIV(a) of the GATS and the Appellate Body report, having been adopted by the DSB, must be unconditionally accepted by the parties to the dispute in accordance with Article 17.14 of the DSU.
2.37 The Panel has also made certain editing changes to its interim report.
III. findings
A. Order of Analysis
3.38 The DSB referred to this Panel, pursuant to Article 21.5 of the DSU, the matter raised by Antigua in document WT/DS285/18, with standard terms of reference. Article 21.5 of the DSU applies "[w]here there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings [of the DSB]".
3.39 The matter raised by Antigua in document WT/DS285/18 comprises two disagreements. Firstly, there is a disagreement as to the existence of measures taken to comply. Secondly, there is a disagreement as to the consistency of the measures at issue with the United States' obligations under the GATS which, depending on the resolution of the first disagreement, may be a disagreement as to the consistency with a covered agreement of "measures taken to comply" with the recommendations and rulings of the DSB. The Panel will consider these two disagreements in the above order.
B. Disagreement as to the Existence of Measures Taken to Comply
1. Recommendation of the DSB in the original proceeding
(a) Main arguments of the parties
3.40 Antigua submits that the United States has not taken measures to comply with the recommendations and rulings of the DSB in this dispute. Antigua argues that the United States has taken no action towards compliance because the measures at issue in the original proceeding have not been amended, supplemented or otherwise changed.
3.41 The United States submits that the "measures taken to comply" in this dispute are the same measures that were at issue in the original proceeding because those measures are consistent with its WTO obligations, only the United States did not meet its burden of showing that they satisfied the requirements of an affirmative defence in the original proceeding. The United States submits that it has complied with the DSB recommendations and rulings by presenting new evidence and arguments during this compliance proceeding that do meet the burden of showing that the measures at issue satisfy the criteria of the chapeau of Article XIV of the GATS.
(b) Main arguments of third parties
3.42 China argues that, according to the plain language of Article 21.5 of the DSU, there should be a time sequence between the "measures taken to comply" and the recommendations and rulings of the DSB.
3.43 The European Communities has major difficulties with the notion that a party to a dispute that needs to bring inconsistent measures into conformity could simply present the same "old" measures again in a compliance proceeding, without showing any relevant change in these measures or any modification of any aspect of these measures. In its view, an implementing party that is not bringing any new measures before a compliance panel must provide cogent reasons consistent with the dispute settlement system to support such a move.
3.44 Japan argues that the ordinary meaning and structure of Article 21.5 of the DSU indicate that the "measures taken to comply" cannot be the same measures that were the subject of the original dispute.
(c) Assessment by the Panel
1.8 The parties agree that the United States has not taken any new measures. Nevertheless, the parties disagree as to the existence of "measures taken to comply" with the recommendations and rulings of the DSB in this dispute. Antigua submits that there are no measures taken to comply because the United States has done nothing. The United States responds that there are "measures taken to comply" because the same measures that were at issue in the original proceeding can also be "measures taken to comply".
1.9 The Panel will examine whether the same measures at issue in the original proceeding can be "measures taken to comply" for the purpose of this compliance proceeding under Article 21.5 of the DSU.
1.10 The text of Article 21.5 provides that the "measures taken to comply" within the scope of this compliance Panel's jurisdiction are those taken to comply "with the recommendations and rulings" [of the DSB]. The recommendation adopted by the DSB in this dispute was as follows:
"The Appellate Body recommends that the Dispute Settlement Body request the United States to bring its measures, found in this Report and in the Panel Report as modified by this Report to be inconsistent with the General Agreement on Trade in Services, into conformity with its obligations under that Agreement."
1.11 This recommendation, made in accordance with Article 19.1 of the DSU, applies to the measures at issue in the original proceeding that were "found ... to be inconsistent" with the GATS. It appears to follow that, where those measures are unchanged (and where the United States' obligations under the GATS are unchanged) the measures remain inconsistent with that agreement.
1.12 The operative part of the recommendation is that the United States "bring its measures ... into conformity with its obligations" under the GATS. The ordinary meaning of the word "conformity" may be defined as:
"1. Correspondence in form or manner (to, with); agreement in character; likeness; congruity. 2. Action in accordance with some standard; compliance (with, to); acquiescence; an instance of this."
1.13 On the other hand, at the risk of stating the obvious, the ordinary meaning of "inconsistent" may be defined as "[n]ot in keeping, discordant, at variance. Foll. by with." In other words, a measure "inconsistent with" a covered agreement is not in "conformity with" that agreement. The same is true of the terms used in the French and Spanish versions of the DSU, that are equally authentic, and that use the terms "conforme" and "incompatible", and "en conformidad" and "incompatible", respectively.
1.14 These two terms, in context, indicate that, in order to bring a measure that has been found "inconsistent" with an agreement into "conformity with" the same agreement, some change must come about.
1.15 The original Panel has already made an objective assessment of the matter before it, including the measures at issue and the facts of the case as at the time of the original proceeding. It has also made an assessment of the applicability of the GATS and the conformity of the measures at issue with the United States' obligations under that agreement. The recommendation of the DSB was that the United States bring its measures into conformity, not to bring the assessment of the conformity of those measures into conformity. Therefore, the recommendation requires a change that eliminates the inconsistency of those measures with the covered agreements.
1.16 The context within Article 21 of the DSU confirms this interpretation. As part of Article 21, a proceeding under Article 21.5 is a procedure for surveillance of the implementation of recommendations and rulings. It is not an opportunity to reassess claims and defences that led to those recommendations and rulings. Article 21 as a whole deals with events subsequent to the DSB's adoption of recommendations and rulings in a particular dispute. The Panel considers this is true not just of the timing of the proceeding under Article 21, but also of the matter that an Article 21.5 panel is mandated to assess.
1.17 The wider context in the DSU confirms this interpretation. Article 3.7 of the DSU provides that if measures are found to be inconsistent with the provisions of any of the covered agreements, in the absence of a mutually agreed solution, the first objective of the dispute settlement mechanism is usually to secure "the withdrawal of the measures" concerned. In a similar vein, Article 22.8 of the DSU provides that the suspension of concessions or other obligations shall be temporary and shall only be applied until such time as the measure found to be inconsistent with a covered agreement "has been removed". Both of these provisions contemplate that compliance with the standard recommendation applicable in a so-called "violation" case will require a change regarding the measure found inconsistent with a covered agreement.
1.18 This reading is also consistent with the object and purpose of the DSU insofar as it includes the "prompt settlement" of disputes, as set out in Article 3.3 of the DSU. The DSU expressly provides an opportunity for review of a panel report at the appellate review stage under Article 17, prior to the recommendations and rulings of the DSB. Thereafter, Article 21.1 requires prompt compliance with those recommendations or rulings. A reassessment of the same claims or defences with respect to a measure that had already been found inconsistent in the original proceeding, without a change relevant to that measure in the intervening period, would run counter to the prompt settlement of disputes.
1.19 Turning to the form of "measures taken to comply", the Panel recalls the view of the Appellate Body in Canada Aircraft (Article 21.5 Brazil) where it envisaged that "measures taken to comply" would, in principle, be new measures:
"In our view, the phrase 'measures taken to comply' refers to measures which have been, or which should be, adopted by a Member to bring about compliance with the recommendations and rulings of the DSB. In principle, a measure which has been 'taken to comply with the recommendations and rulings' of the DSB will not be the same measure as the measure which was the subject of the original dispute, so that, in principle, there would be two separate and distinct measures34: the original measure which gave rise to the recommendations and rulings of the DSB, and the 'measures taken to comply' which are or should be adopted to implement those recommendations and rulings.
"Original footnote: 34 We recognize that, where it is alleged that there exist no 'measures taken to comply', a panel may find that there is no new measure."
1.20 New measures, including amended measures, are certainly the most common form of measures taken to comply with a recommendation of the DSB. Nevertheless, in accordance with Article 19.1 of the DSU, the recommendation made in this dispute was not to adopt "new" legislation, nor was it to "amend" the existing legislation, although those are both possible means of implementation. Rather, the recommendation was to "bring [the] measures into conformity".
1.21 The possible form of measures taken to comply with a recommendation under Article 19.1 of the DSU will depend on the rulings of the DSB in a particular dispute. For example, if a measure has been found inconsistent with a covered agreement, or unjustified under an otherwise available exception, due to the way in which the measure is applied, compliance with the recommendation could presumably be achieved by a change in the application of the measure, without necessarily a change to the text of the measure itself or that of any written implementing measures. The present dispute illustrates this point.
1.22 Moreover, compliance with a recommendation under Article 19.1 of the DSU could conceivably be achieved through changes to the factual or legal background to a measure at issue, without a change to the text of the measure itself. For example, a measure may lapse, or satisfy a requirement in a covered agreement, due to the subsequent occurrence of a relevant circumstance. If changes to the measure's factual or legal background modified the effects of that measure sufficiently to bring about a situation in which it complied with the relevant covered agreement, there seems to be no reason why this should not fulfil the aim of the recommendation of the DSB, which is to achieve a satisfactory settlement of the matter in accordance with the rights and obligations under the DSU and the covered agreements, as provided in Article 3.4 of the DSU. The essential point is that there needs to be compliance. However, even in these cases, compliance would entail a change relevant to the measure since the original proceeding. This dispute does not present any such changes.
1.23 In view of the circumstances of this case, it is not necessary for this Panel to determine what exactly would constitute the "measures taken to comply" in such a situation and whether they could be the same measures at issue in the original proceeding. The Panel only emphasizes that it does not exclude any potential "measures taken to comply" due to their form.
1.24 Nor does the Panel exclude any potential "measures taken to comply" due to the purpose for which they may have been taken. In this regard, the Panel recalls the following view of the Appellate Body in US Softwood Lumber IV (Article 21.5 Canada):
"The fact that Article 21.5 mandates a panel to assess 'existence' and 'consistency' tends to weigh against an interpretation of Article 21.5 that would confine the scope of a panel's jurisdiction to measures that move in the direction of, or have the objective of achieving, compliance." (emphasis in original)
1.25 Turning to the facts at hand, the United States alleges that the "measures taken to comply" are three US federal criminal statutes, known as the Wire Act, the Travel Act and the Illegal Gambling Business Act. The first two were enacted in 1961 and the third in 1970. All three were measures at issue in the original proceeding and were the subject of the recommendations and rulings of the DSB in this dispute.
1.26 The original Panel found that, by maintaining these three measures, the United States was acting inconsistently with its obligations under Article XVI:1 and sub-paragraphs (a) and (c) of Article XVI:2 of the GATS. The Appellate Body upheld this finding. Neither the original Panel nor the Appellate Body found that the United States was entitled to maintain these measures under Article XIV of the GATS or any other article in the covered agreements.
1.27 There has been no change to any of these three measures since the original proceeding. There has been no change in the application of these three measures, or even their interpretation, since the original proceeding. There is no evidence of any changes in the factual or legal background bearing on these measures or their effects since the original proceeding that might have brought them into compliance. This indicates that they remain inconsistent with the United States' obligations under the GATS.
1.28 The novel element on which the United States seeks to rely to demonstrate its compliance are its submissions to this compliance Panel. The United States' position depends on the view that all along, both during and since the original proceeding, its measures have been consistent with its obligations under the GATS by virtue of the general exception provision in Article XIV, and that it is entitled to another opportunity to demonstrate before this compliance Panel that the measures in fact do meet the requirements of the chapeau of Article XIV. However, there was no finding in the original proceeding that the measures at issue in this dispute were consistent with the United States' obligations under the GATS, notwithstanding an invocation of Article XIV. Instead, there was a finding that maintaining these measures was inconsistent with the United States' obligations, which was the basis for the recommendation of the DSB.
1.29 It is true that the Appellate Body found that the United States had demonstrated that the measures at issue were "justified" under paragraph (a) of Article XIV of the GATS. However, this was not a finding on Article XIV in its entirety. The Appellate Body expressly confirmed that Article XIV contemplates a "two-tier analysis" first, under one of the paragraphs of Article XIV, and then under the chapeau. There was no finding that the measures were consistent with the chapeau or with Article XIV in its entirety nor, hence, with the United States' obligations under the GATS, and there is no concept recognized under the DSU of provisional or transitional consistency with a recommendation of the DSB.
1.30 Therefore, the Panel rejects the United States' submission that the same measures at issue in the original proceeding in this dispute constitute "measures taken to comply".
1.31 The United States' position in this compliance proceeding is also at odds with its earlier decision to seek a reasonable period of time in which to comply with the recommendations and rulings of the DSB. Article 21.3 of the DSU provides that a Member shall have a reasonable period of time in which to comply "[i]f it is impracticable to comply immediately with the recommendations and rulings". Had the measures the subject of the recommendations and rulings of the DSB already been in compliance, it would not have been impracticable to comply immediately.
1.32 The Panel notes that the parties have referred to facts that have arisen, and a new statute that has been enacted, since the original proceeding, but neither party alleges that these bring the measures at issue into conformity with the GATS or are otherwise "measures taken to comply".
1.33 First, the United States referred in its April 2006 status report regarding implementation of the DSB recommendations and rulings in this dispute to testimony before a subcommittee of the US House of Representatives by a Department of Justice official (the "April 2006 DOJ Statement"). The United States does not assert that the April 2006 DOJ Statement is a separate measure, nor does it rely solely on the April 2006 DOJ Statement to demonstrate compliance with the DSB recommendation and rulings.
1.34 The United States explained in its status report to the DSB that the April 2006 DOJ Statement "confirmed" the position of the US Government regarding remote gambling on horse racing. The United States does not assert that the April 2006 DOJ Statement implies any change to the application or interpretation of the measures at issue, in fact, quite the opposite. Indeed, the Panel observes that, by its own terms, the April 2006 DOJ Statement reiterates the view that the Department of Justice had previously stated, which was included in a Presidential signing statement and considered by the original Panel. In view of these considerations, the Panel does not consider this statement a measure taken to comply. However, the Panel may refer to the statement, to the extent that the statement has evidentiary value, in the course of assessment of the matter before it.
1.35 Second, the United States enacted the Unlawful Internet Gambling Enforcement Act ("UIGEA") in October 2006. Antigua does not ask the Panel to address this Act within its terms of reference as a measure taken to comply, but considers that the Act is perhaps best suited to demonstrate certain other matters allegedly at issue in this proceeding.
1.36 The United States submits that the UIGEA is not within the Panel's terms of reference because it was enacted after the date of referral of this matter to the Panel under Article 21.5 and is not mentioned in Antigua's request for establishment of a panel. The United States does not contest that the Panel may consider evidence that comes into existence after the initiation of panel proceedings but it does not consider that the UIGEA sheds light on the issues in this dispute.
1.37 The Panel notes that neither party asks it to treat the UIGEA as a measure taken to comply. Further, the UIGEA does not amend or alter any statutes at issue nor affect which activities are unlawful under those statutes. Accordingly, there is no reason to consider the UIGEA as a measure taken to comply. However, the Panel may refer to the UIGEA, to the extent that the UIGEA has evidentiary value, in the course of its assessment of the matter before it.
1.38 For the reasons set out above, the Panel's preliminary conclusion is that there are no measures taken to comply with the recommendations and rulings of the DSB in this dispute and, accordingly, that the United States has failed to comply with those recommendations and rulings. The Panel will now consider the specific findings and conclusions in the original proceeding in order to determine whether, as the United States argues, they compel or allow a different conclusion.
2. Specific findings and conclusions in the original proceeding
(a) Main arguments of the parties
1.39 Antigua submits that panel and Appellate Body findings adopted by the DSB constitute a final resolution of the dispute between the parties. This is true whether a party failed to make a prima facie case or whether it did manage to make a prima facie case but its argument failed on substantive grounds. According to the Appellate Body report on EC Bed Linen (Article 21.5 India) a party should not be given a "second chance" in an Article 21.5 proceeding. There is no distinction between the burden of proof on a complainant to establish its claim and the burden of proof on a responding party to establish an affirmative defence. The United States failed to meet its burden to prove the affirmative defence in the original proceeding. Its defence therefore failed and it is not entitled to a "second chance" to re-argue the same defence in the compliance proceeding. To do so would run counter to the language and the structure of the DSU.
1.40 The United States emphasizes that compliance with the DSB recommendations and rulings must depend on the specific findings of the Appellate Body in this dispute. It recalls that, in the original dispute, there was no explicit finding that its measures did not satisfy the requirements of Article XIV of the GATS. Rather, it was found that the United States had "not shown", had "not demonstrated" or "did not establish" that its measures were entitled to this affirmative defence. This case involves an affirmative defence and is therefore entirely different from EC Bed Linen (Article 21.5 India) where a complaining party failed to make its case on a particular issue. Furthermore, the Appellate Body made an explicit finding that neither the Panel nor the Appellate Body itself had found that the affirmative defence did not apply, and repeatedly made use of language indicating that compliance with the recommendations and rulings could be achieved by showing or demonstrating that the affirmative defence applied. The Appellate Body also emphasized that there was no finding of fact by the original Panel or itself as to whether the prohibition embodied in the measures at issue was applied to both foreign and domestic service suppliers of remote betting services for horse racing. Therefore, the only substantive issue in the compliance proceeding is whether the United States can demonstrate that point now. The United States argues that it is not asking the Panel to revisit the findings of the Panel and the Appellate Body in this case, but that it is requesting the Panel to examine the issues under the chapeau of Article XIV based on new evidence and arguments not previously available to the Panel or the Appellate Body.
(b) Main arguments of third parties
1.41 China does not consider that Article 17.14 of the DSU permits either party to the dispute a second chance to re-argue a claim or a defence that has already been settled by the Appellate Body. The Appellate Body report on EC Bed Linen (Article 21.5 India) confirms this view.
1.42 The European Communities recalls the findings in the original proceeding that the United States had not demonstrated that its measures were applied consistently with the chapeau of Article XIV of the GATS and that ambiguity existed in the relationship between the various legislative measures. Neither party should be entitled to reopen in Article 21.5 proceedings issues settled by final adjudication in view of Article 17.14 of the DSU and the principle of res judicata as interpreted by the Appellate Body.
1.43 Japan argues that the Appellate Body's legal ruling with respect to the chapeau of Article XIV of the GATS is unambiguous and final and cannot be reopened under Article 17.14 of the DSU. The Appellate Body found that the US statutory scheme is inconsistent with the GATS and, therefore, the United States needs to take some type of measure to implement the specific recommendations and rulings of the DSB.
(c) Assessment by the Panel
1.44 The Panel has examined the specific findings and conclusions in the original Panel Report and Appellate Body Report on this dispute that related to the United States' affirmative defence under Article XIV of the GATS. The Appellate Body found and concluded, as regards the chapeau of Article XIV:
"that the United States has not demonstrated thatin the light of the existence of the Interstate Horseracing Actthe Wire Act, the Travel Act, and the Illegal Gambling Business Act are applied consistently with the requirements of the chapeau";
and, as regards Article XIV in its entirety:
"that the United States has demonstrated that the Wire Act, the Travel Act, and the Illegal Gambling Business Act are measures "necessary to protect public morals or maintain public order", in accordance with paragraph (a) of Article XIV, but that the United States has not shown, in the light of the Interstate Horseracing Act, that the prohibitions embodied in those measures are applied to both foreign and domestic service suppliers of remote betting services for horse racing and, therefore, has not established that these measures satisfy the requirements of the chapeau"
1.45 The parties disagree on the effect of these findings and conclusions. For Antigua, these findings mean that the measures at issue in the original proceeding are not justified by Article XIV of the GATS. For the United States, these findings simply mean that it has not established its defence under Article XIV of the GATS on the basis of the facts and arguments presented in the original proceeding. Therefore, in the United States' view, there is no finding that prevents it from attempting to establish that same defence in the compliance proceeding.
1.46 The Panel recalls that Article 17.14 of the DSU provides as follows:
"An Appellate Body report shall be adopted by the DSB and unconditionally accepted by the parties to the dispute unless the DSB decides by consensus not to adopt the Appellate Body report within 30 days following its circulation to the Members. This adoption procedure is without prejudice to the right of Members to express their views on an Appellate Body report." (footnote omitted)
1.47 Neither party disputes that, in accordance with Article 17.14 of the DSU, the Appellate Body report is final and must be unconditionally accepted by them. However, they disagree on what unconditional acceptance entails.
1.48 The text of Article 17.14 uses the words "be ... accepted" which is the passive form of the verb "accept". There are several ordinary meanings of this verb, including the following:
"1. Take or receive with consenting mind; receive with favour or approval. 2. Receive as adequate or valid; admit; believe; tolerate; submit to."
1.49 Article 17.14 expressly provides that Members retain the right to express their views on an Appellate Body report. "Members" include the parties to the dispute, which indicates that the parties are not required to receive an adopted Appellate Body report with favour or approval but may state that they disagree with it. Therefore, the second of these two meanings is apposite (other than the denotation "believe"), rather than the first, indicating that the parties to the dispute receive the adopted Appellate Body report as adequate or valid, and submit to it. This is confirmed by the French and Spanish versions of the DSU, that are equally authentic, and that use the terms "sera acceptι" and "serαn aceptados", respectively.
1.50 The verb "accept" is used with the modal verb "shall" which indicates that, in this context, acceptance is an obligation. The phrase "shall accept" is used in the same sense in Article 22.7 of the DSU. The phrase "shall be accepted" is also used in Article XII:5(e) of the GATS, as is "shall accept" in Article XV:2 of GATT 1994, in the same sense, although in a different context. This phrase can be contrasted with the words "mutually acceptable" in Articles 3.7 and 22.2 of the DSU, where parties do not have an obligation to accept a particular solution or compensation. This obligation can also be contrasted with the prior GATT practice according to which Members were able to block adoption of panel reports.
1.51 However, unlike all these other provisions, Article 17.14 qualifies the phrase "shall be accepted" with the adverb "unconditionally". This indicates that Members are not simply obliged to receive an Appellate Body report as adequate or valid and submit to it, but that they must do so "unconditionally". The word "unconditionally" is formed from the adjective "unconditional", the ordinary meaning of which may be defined as "[n]ot limited by or subject to conditions; absolute, complete". This is consistent with the French and Spanish versions, that use the terms "sans condition" and "sin condiciones" respectively. The phrase "shall be ... unconditionally accepted" includes the notion of finality but it does not simply indicate that a report is final in the sense that there is no opportunity to appeal further, nor that a report is the final step at the appellate review stage of a proceeding. Rather, it indicates that the parties may not place any conditions on their acceptance of an adopted Appellate Body report.
1.52 There are specific limits on the scope of this obligation. The text of Article 17.14 specifies that the obligation only applies to the "parties to the dispute". Moreover, the parties only owe the obligation with respect to the report, which by its own terms is limited to the measures in dispute and the claims, defences and issues ruled upon therein. The text of Article 17.14 also establishes a procedural limit, in that it makes the parties' unconditional acceptance contingent upon adoption of the Appellate Body report by the DSB and expressly acknowledges that the DSB may decide not to adopt it. Therefore, Appellate Body reports are not final until they are adopted, and an Appellate Body report that the DSB decides by consensus not to adopt is not final, or binding, at all. However, an Appellate Body report that has been adopted by the DSB shall be unconditionally accepted by the parties to the dispute which indicates that, from that point on, the report is a final resolution, within the context of that dispute, of the claims, defences and issues ruled upon therein. Whether or not the report resolves matters in dispute between those parties in any other context is an issue on which the Panel need not, and does not, rule. Article 19.2 of the DSU also confirms a substantive limit on the effect of panel and Appellate Body reports, by confirming that "in their findings and recommendations, the panel and Appellate Body cannot add to or diminish the rights and obligations provided in the covered agreements".
1.53 This reading of Article 17.14 is consistent with the object and purpose of the DSU insofar as it includes the "prompt settlement" of disputes, as set out in Article 3.3 of the DSU. As the Panel noted at paragraph 6.18 above, the DSU expressly provides an opportunity for review of a panel report at the appellate review stage under Article 17, prior to the recommendations and rulings of the DSB. Thereafter, Article 21.1 requires prompt compliance with those recommendations or rulings. A reassessment in a compliance proceeding of an issue that had already been ruled upon in an original proceeding in an adopted report, even with better arguments by the respondent but without a change relevant to the underlying facts in the intervening period, would run counter to the prompt settlement of disputes.
1.54 This reading is also confirmed by the drafting history of the DSU. During the Uruguay Round, consideration of the concept of appellate review generally proceeded on the understanding that the parties to a dispute would agree in advance that they would accept the results of an appellate review unconditionally. All drafting options for the precursor of Article 17.14 provided that appellate decisions would be "the final disposition of the case" or "final and unconditionally accepted". The Chairman of the Negotiating Group on Dispute Settlement, Ambassador Lacarte-Murσ, drafted a single text for the precursor of Article 17.14 based on the latter option but replacing the word "final" with the provision that reports shall be "adopted by the Council" and adding the proviso "unless the Council decides not to adopt the appellate report ..." This was negotiated further and circulated in the so-called "Brussels Draft" substantially in the form of Article 17.14 today.
1.55 This reading is further confirmed by the Appellate Body report on US Shrimp (Article 21.5 Malaysia), followed in EC Bed Linen (Article 21.5 India), which stated as follows:
"Thus, Appellate Body Reports that are adopted by the DSB are, as Article 17.14 provides, '
unconditionally accepted by the parties to the dispute', and, therefore, must be treated by the parties to a particular dispute as a final resolution to that dispute. In this regard, we recall, too, that Article 3.3 of the DSU states that the 'prompt settlement' of disputes 'is essential to the effective functioning of the WTO'." (emphasis added)
1.56 The Panel agrees, subject to a suitable definition of "dispute" that is limited to the claims, defences and issues ruled upon in a report. As a "final resolution" of a dispute, the adopted Appellate Body report entails more than a final ruling on the evidence presented. It entails a final decision on the claims and defences ruled upon with respect to the measures at issue as they existed at the time of the original proceeding. A compliance panel does not make a reassessment of that same matter but rather assesses the consistency with a covered agreement of "measures taken to comply" (unless it assesses only the existence of "measures taken to comply"). This constitutes a separate enquiry and, accordingly, is consistent with the finality of the Appellate Body report adopted at the conclusion of the original proceeding.
1.57 In the present compliance proceeding, the United States seeks an assessment of the consistency of its measures with its obligations under the GATS in relation to an issue on which the Appellate Body ruled in its report on the same dispute in relation to the same measure in the same factual and legal context. The express purpose of such a reassessment would be to reach a new conclusion that the United States has established that these measures satisfy the requirements of the chapeau of Article XIV of the GATS without any "measures taken to comply" but only the presentation of new and allegedly better arguments. Such a conclusion would mean that the original conclusion, quoted at paragraph 6.44 above, was not final. Yet, in the Panel's view, Article 17.14 of the DSU applies to all conclusions in an Appellate Body report. The United States' position can be characterized as an acceptance of the original ruling on condition that it retains the right to seek a more favourable conclusion in a further proceeding. That type of acceptance is not unconditional. Therefore, in the circumstances, in accordance with Article 17.14, the Panel cannot accede to the United States' request to reach a conclusion different from that reached by the original Panel as upheld by the Appellate Body and adopted by the DSB, without any change relevant to the measures at issue.
1.58 The United States agrees that a complainant who fails to discharge its burden of proof may not re-argue a claim in a compliance proceeding, but it does not consider that the same applies to a respondent. It argues that a respondent has a "special status", as complaining and responding parties are in fundamentally different positions under Articles 21 and 22 of the DSU.
1.59 The Panel agrees that the respondent is in a unique position under Article 21 of the DSU because it is the only Member to whom the DSB recommendation is addressed and, as such, it is the only Member that must comply with the recommendation. Nevertheless, the respondent, as a party to the dispute, is obliged by Article 17.14 of the DSU unconditionally to accept an adopted Appellate Body report. For the reasons given above, the Panel considers that that obligation precludes re-argument of the same defence in relation to the same measure without any change relevant to the measure.
1.60 The United States also refers to Canada Dairy (Article 21.5 New Zealand and US II) as an illustration that a Member can present new evidence when it has previously failed to establish a claim due to a lack of evidence. It asserts that there is no general bar in the DSU that prevents a party from meeting its burden of proof in a second proceeding.
1.61 The Panel notes that the example to which the United States refers consisted of two recourses under Article 21.5 of the DSU, both of which assessed the consistency of measures actually adopted by the respondent to comply with a DSB recommendation, unlike the present dispute. In the first recourse, the Appellate Body concluded that the Panel's findings were vitiated by error of law and did not rule on the relevant claim. There was no finding or conclusion that the complainant failed to make a prima facie case. Accordingly, the second recourse by the complainants under Article 21.5 did not imply a rejection or conditional acceptance of the findings or conclusions in the Appellate Body report adopted in the first recourse under Article 21.5.
1.62 The United States argues that the Panel and Appellate Body reports in the present dispute cannot be said to result in a "final settlement" because, as the Appellate Body noted, it was not able to determine whether or not the measures met the requirements of the Article XIV chapeau. The Appellate Body did not state that the measures at issue were inconsistent with the chapeau of Article XIV of the GATS but rather, variously, that the United States "has not demonstrated", "has not shown" and "has not established", essentially, that the measures satisfy the requirements of the chapeau.
1.63 The Panel recalls that, as the party asserting an affirmative defence under Article XIV of the GATS, the United States bore the initial burden of proof that its measures did satisfy the requirements of Article XIV, including the chapeau. A burden of proof is a responsibility to put forward evidence and arguments that show or demonstrate certain matters of fact and law sufficient to establish a particular claim or defence. The Panel notes that it is standard practice for the Appellate Body and panels to use a phrase such as "has not demonstrated" in order to indicate that a party fails to discharge the burden of proof of an affirmative defence. The Panel also notes that the terms "show", "demonstrate" and "establish" are used throughout the Appellate Body report in this dispute, including in contexts that explicitly address the burden of proof.
1.64 The Appellate Body's findings in this dispute, which use the terms "show", "demonstrate" and "establish", indicate that the United States failed to discharge its burden of proof. This was a ruling on the defence in relation to the measures at issue. It was not equivalent to a statement that the Appellate Body "does not rule" or an exercise of judicial economy. Instead, it indicates that the United States' affirmative defence failed. The Appellate Body then made the recommendation required under Article 19.1 of the DSU with respect to the measures found inconsistent with the United States' obligations under the GATS.
1.65 For the same reason, the original Panel used the terms "has not demonstrated", "has not been able to demonstrate" or "has failed to demonstrate" in its conclusions, not only with respect to the US affirmative defence under Article XIV but also with respect to Antigua's claims under Article VI of the GATS. In each instance the term simply indicated that a particular defence or claim failed due to failure to discharge the relevant burden of proof. This is abundantly clear in relation to the findings on the Interstate Horseracing Act ("IHA") in particular, as the original Panel expressly used the word "demonstrate[d]" twice in the final sentence of this section to link the allocation of the burden of proof to its conclusion.
1.66 The Panel can detect no suggestion in the Appellate Body's use of these terms that the United States could bring its measures into compliance simply through further submissions or presentation of additional evidence to show or demonstrate what it did not show or demonstrate in the original proceeding.
1.67 The United States also draws attention to the following clarification in the Appellate Body's overall conclusion on Article XIV:
"In this respect, we wish to clarify that the Panel did not, and we do not, make a finding as to whether the IHA does, in fact, permit domestic suppliers to provide certain remote betting services that would otherwise be prohibited by the Wire Act, the Travel Act, and/or the IGBA."
1.68 The United States interprets this clarification, read in the context of the findings that the United States had "not shown", had "not demonstrated" and "did not establish" certain matters, as amounting to an invitation to the United States to demonstrate to a compliance panel that its measures do in fact meet the requirements of the Article XIV exception of the GATS.
1.69 In the Panel's view, the Appellate Body's clarification was due to the unusual, but not unprecedented, circumstance of the Appellate Body declining to accept a Member's interpretation of its own domestic law. The clarification provided greater certainty that, whilst the original Panel and the Appellate Body had not accepted the US interpretation that the IHA does not permit activities prohibited by the measures at issue, this did not mean that the original Panel and the Appellate Body had found that the IHA did permit such activities. The Panel notes that it is not uncommon for the Appellate Body to clarify what it has not decided in a report. The Panel also notes that none of the third parties in this proceeding, nor Antigua, considered that this clarification was open to the interpretation which the United States places upon it.
1.70 In any case, the Appellate Body did not simply clarify what it had not decided, and find that the United States had "not shown", had "not demonstrated" and "did not establish" certain matters. In reaching its conclusions, the Appellate Body reviewed and upheld a specific finding by the original Panel on the interpretation of the US measures. Specifically, the Appellate Body was not persuaded that the original Panel had failed to make an objective assessment of the facts as regards the relationship between the IHA, on the one hand, and the measures at issue, on the other, and upheld the original Panel's finding. It later summarized that finding in the following terms:
"The second instance found by the Panel was based on "the ambiguity relating to" the scope of application of the IHA and its relationship to the measures at issue. We have upheld this finding." (footnotes omitted)
1.71 Here, the Appellate Body cross-referenced the following finding of the original Panel:
"In summary, on the basis of evidence provided to the Panel relating to the domestic enforcement of the US prohibition on the remote supply of wagering services for horse racing against TVG, Capital OTB and Xpressbet.com and in light of the ambiguity relating to the Interstate Horseracing Act, which pertains to wagering services for horse racing, we believe that the United States has not demonstrated that it applies its prohibition on the remote supply of these services in a consistent manner as between those supplied domestically and those that are supplied from other Members. Accordingly, we believe that the United States has not demonstrated that it does not apply its prohibition on the remote supply of wagering services for horse racing in a manner that does not constitute 'arbitrary and unjustifiable discrimination between countries where like conditions prevail' and/or a 'disguised restriction on trade' in accordance with the requirements of the chapeau of Article XIV." (emphasis added)
1.72 The ambiguity relating to the IHA to which the original Panel referred is discussed in a previous section of the original Panel report. That section includes the following finding:
"In our view, even if the IHA did not repeal the Wire Act, the Travel Act and the Illegal Gambling Business Act as has been submitted by the United States, there is ambiguity as to the relationship between, on the one hand, the amendment to the IHA and, on the other, the Wire Act, the Travel Act and the Illegal Gambling Business Act. We consider this relationship to be critical in determining whether, in fact, the amendment to the IHA permits wagering on horse racing by means of electronic communication." (emphasis added)
1.73 Clearly, this is a finding on the interpretation of US domestic law. However, it is not a finding on the proper interpretation of US law for US citizens. It is an interpretation solely for the purpose of assessing the United States' compliance with its international obligations under the GATS.
1.74 The finding is that the relationship between the IHA and the measures at issue is ambiguous. This was the key to the conclusion that the United States did not establish that the measures at issue satisfied the requirements of the chapeau of Article XIV of the GATS as set out in the original Panel report, upheld in the Appellate Body report, and adopted by the DSB. Therefore, in accordance with Article 17.14 of the DSU, this finding on the relationship between the IHA and the measures at issue "shall be
unconditionally accepted by the parties to the dispute".
1.75 The United States argues that it did not have the opportunity to present complete evidence on the interaction among these statutes in the original proceeding. It asks this compliance Panel to consider evidence allegedly not presented to the original Panel and to reach the conclusion that the IHA does not provide an exemption from the measures at issue. Antigua replies that the failure of the United States to meet its burden of proof in the original proceeding rests squarely on its own shoulders.
1.76 The Panel recalls the Appellate Body's observation that, on this issue, "[t]he [original] Panel had limited evidence before it, as submitted by the parties, on which to base its conclusion." However, this reference to the limitations of the evidence does not alter the effect of the finding. The Appellate Body did not consider the evidence inadequate for the original Panel to reach its finding. On the contrary, the Appellate Body upheld the finding. As the Panel pointed out at paragraph 6.57 above, the United States' position can be characterized as an acceptance of the original finding on condition that it retains the right to seek a more favourable finding in a further proceeding. That type of acceptance is not unconditional. Therefore, in these circumstances, in accordance with Article 17.14, the Panel cannot accede to the United States' request to make a different finding, that the IHA in no way limits the application of federal criminal statutes, without any change relevant to the measures.
1.77 In any event, the record of the original Panel proceeding indicates that the United States indeed had the opportunity to present complete evidence on the interaction among these statutes. Whilst the United States did not raise its affirmative defence under Article XIV of the GATS until its second written submission in the original proceeding, it addressed the effect of the IHA amendment and its relationship with the measures now at issue in its first written submission in that proceeding. It provided the view of the Department of Justice on the specific issue, as expressed in a Presidential statement on signing of the IHA amendment, a view which the Department of Justice had "repeatedly affirmed". Antigua also addressed this issue in its submissions to the original Panel. In response to questions from the original Panel after the first substantive meeting, the United States referred again to the Department of Justice view expressed in the Presidential signing statement, as well as information on the US principle of statutory construction that repeals by implication are not favoured, with a citation to a US Supreme Court opinion of 1939. The United States returned to the issue to reiterate its view in its original second written submission and also addressed the prosecution of illegal wagering on horse racing in its opening oral statement at the original Panel's second substantive meeting. The US evidence showed that the Department of Justice was fully aware from the time of the IHA amendment in 2000 of the state of US domestic law on the precise issue under consideration, and a representative of the Department of Justice was part of the US delegation at both of the original Panel's substantive meetings with the parties. In its detailed comments on the original interim review, the United States simply restated the arguments that it had already made.
1.78 The United States argues that a respondent Member should not be precluded from presenting facts in a compliance proceeding in order to show that WTO-consistent measures are, in fact, WTO-consistent. The United States emphasizes that a finding that means that a measure may or may not fall within Article XIV of the GATS cannot require a Member to abolish or amend a measure, in view of Article 19.2 of the DSU, which reads as follows:
"In accordance with paragraph 2 of Article 3, in their findings and recommendations, the panel and Appellate Body cannot add to or diminish the rights and obligations provided in the covered agreements."
1.79 The Panel notes once again that this argument depends on the view that the measures at issue have been consistent with the United States' obligations under the GATS all along, both during and since the original proceeding (see para. 6.28 above). As a matter of principle, the Panel does not consider that a recommendation that a Member bring its measures into conformity with a covered agreement could possibly add to or diminish the rights or obligations of any Member provided in the covered agreements. The recommendation, by its own terms, does not require the Member concerned to take measures to comply with any obligations beyond those set out in the relevant covered agreement.
1.80 The United States' argument also depends on the view that the finding in the original proceeding was due to poor briefing on its own part as if, in allegedly confused circumstances in the original proceeding, it had failed to gather and present otherwise available information that would have been sufficient for the original Panel or the Appellate Body to conclude that the measures at issue were actually consistent with the United States' obligations. However, the Panel notes that the source of the ambiguity between the IHA, on the one hand, and the Wire Act, on the other, lies in "the text of the revised statute ... on its face" or, in other words, "the plain language of the IHA". Aware of the view of the Department of Justice, included in a Presidential signing statement, and aware of the US principle of statutory construction that repeals by implication are not favoured, the original Panel made an objective assessment that, when interpreting US domestic law, it could not ignore the plain language of a statute enacted by the United States Congress.
1.81 Perhaps the original Panel could have reached a different conclusion had the parties submitted a US Supreme Court opinion or other authoritative judicial opinion on the relationship between the amended IHA and the measures at issue. The Department of Justice would not have been unaware of the existence of any such authoritative opinion. Whilst the United States did submit examples of reported court cases in which the Department of Justice had used federal gambling laws challenged by Antigua to prosecute illegal wagering on horse racing, all those examples pre-dated the amendment of the IHA and all but one pre-dated the IHA itself.
1.82 The absence of US judicial opinion on point was further exacerbated by a lack of prosecutions under the measures at issue of persons who complied only with the provisions of the IHA but not with the measures at issue; this could have indicated how the civil provisions of the IHA were to be construed in cases of conduct considered criminal under the measures at issue. Instead, the United States was only able to assert that its law enforcement officials did not agree with wagering suppliers in the United States who cited the amendment to the IHA as the statutory basis for Internet gambling on horse racing, notwithstanding the fact that such officials had never prosecuted any of these wagering suppliers. The United States did point to a disclosure in the annual report of one supplier that referred to unspecified action by the Department of Justice for unspecified companies that the Department of Justice deemed to be operating without proper licensing and regulatory approval. The United States agreed that this supplier "face[d] the risk" of criminal proceedings and penalties brought by the government. The United States also provided statistics on caseload data extracted from the United States Attorneys' Case Management System that included data on any and all criminal cases/defendants where the Wire Act or the Travel Act was brought as any charge against a defendant for the fiscal years 1992-2003. Yet there was no clear evidence of a single actual criminal prosecution under the Wire Act or the Travel Act of a person who operated in accordance with the IHA, which would have shown whether the application of those measures was affected by the existence of the IHA.
1.83 In sum, the original Panel had "limited evidence" before it on the relationship between the IHA and the Wire Act because the underlying facts that might otherwise have given risen to more substantial factual submissions were limited. The ambiguity of this relationship was not a matter of poor briefing; rather, it was merely a reflection of the ambiguous state of US domestic law. This ambiguity in US domestic law prevented the United States from demonstrating in the original proceeding that its measures satisfy the requirements of the chapeau of Article XIV of the GATS. Whilst there may be a right and a wrong interpretation of this point in US domestic law, it is currently a matter open to disagreement. As long as this ambiguity remains, the measures at issue are not in compliance with the United States' obligations under the GATS.
1.84 Therefore, the Panel concludes that, both as a matter of principle and also in the specific circumstances of this dispute, its interpretation of the recommendation that the United States bring its measures into conformity with its obligations under the GATS does not diminish the United States' rights or increase its obligations inconsistently with Article 19.2 of the DSU.
1.85 For the reasons set out above, the Panel sees nothing in the specific findings and conclusions in the original proceeding that would disturb its preliminary conclusion at paragraph 6.38. Therefore, the Panel concludes that the United States has not complied with the recommendations and rulings of the DSB.
3. Statements made during the arbitration pursuant to Article 21.3(c) of the DSU
1.86 Both parties and the European Communities referred to statements made by the United States on the means of implementation of the DSB recommendation and rulings during the course of the arbitration to determine a reasonable period of time pursuant to Article 21.3(c) of the DSU in this dispute. Essentially, they disagreed as to whether the United States itself had, during the arbitration, submitted that legislation was the only possible means to bring its measures into compliance with the recommendations and rulings of the DSB.
1.87 The Panel considers that parties' statements made in the course of an arbitration pursuant to Article 21.3(c) can be helpful in addressing the existence of measures taken to comply in an Article 21.5 proceeding because, as a practical matter, they will address the specific recommendation and rulings of the DSB in the dispute at hand and also what is required in order for the respondent to comply. In this way, they may confirm a compliance panel's own objective assessment of whether the respondent has complied, based on the specific recommendations and rulings of the DSB in the dispute.
1.88 The Panel notes that the United States, in its written submission and oral statement to the Arbitrator, sought a period of time to adopt legislation without stating that legislation was the only option to ensure compliance. Nevertheless, the Panel observes that the Award of the Arbitrator stated that:
"For this reason, the United States emphasizes that the only means of implementation that will achieve the necessary clarification is legislative means."
1.89 The United States respectfully disagrees with the Arbitrator's characterization of its views, including after its perusal of the unverified transcript of the Arbitrator's oral hearing. Antigua considers the Arbitrator's conclusion to be a correct interpretation of the US argument put before him.
1.90 The Panel can see that the United States submitted to the Arbitrator that it intended to seek legislation and, in this context, stated orally that it needed legislation or that legislation was required. However, the Panel cannot conclude with certainty that the United States emphasized that legislation was the only means of implementation, especially since a question on that point was never posed to the United States. The Panel, for its part, does not consider that legislation is the only possible means of implementation in this dispute. Even though the key finding on the chapeau of Article XIV of the GATS in the original proceeding concerned the relationship between different statutes, the chapeau relates to the application of the measures at issue, which does not simply relate to their wording. The original Panel was not persuaded by the Department of Justice's view of that relationship but that does not exclude other forms of administrative action, or judicial action, to bring the measures into conformity. For this reason, the Panel does not consider that the lack of new legislation amending the measures at issue or amending the IHA is determinative of the existence of any "measures taken to comply" in this dispute.
C. Disagreement as to the Consistency with a Covered Agreement of Measures Taken to Comply
1. Nature of the Panel's assessment
(a) Main arguments of the parties
1.91 Antigua believes that it is not necessary for the Panel to go much further than find that the United States has done nothing to come into compliance but, if the Panel does go further, Antigua submits that the United States has again failed to meet its burden of proof under the chapeau of Article XIV of the GATS.
1.92 The United States argues that the compliance Panel has before it a much more complete factual record concerning the relationship between the IHA and the Wire Act than the original Panel and asks the Panel to find that US "measures taken to comply" are not inconsistent with the GATS.
(b) Assessment by the Panel
1.93 The Panel has already concluded at paragraph 6.85 that the United States has not complied with the recommendations and rulings of the DSB. Having reached that conclusion, the Panel need not continue its assessment of the matter before it. Indeed, the Panel cannot assess a disagreement as to the consistency with a covered agreement of "measures taken to comply" with the recommendations and rulings of the DSB because it has found that no such measures exist.
1.94 Nevertheless, it is quite clear what the United States alleged to be the "measures taken to comply". These are the same measures the subject of the recommendations and rulings of the DSB in this dispute, namely, the Wire Act, the Travel Act and the IGBA. As the sole trier of fact in this compliance proceeding, the Panel considers it appropriate to make certain factual findings beyond those that are strictly necessary to resolve the dispute, which may assist the Appellate Body should it later be called upon to complete the analysis. Indeed, the original Panel made such a decision, which was upheld on appeal.
1.95 The United States submits that it can demonstrate in this compliance proceeding what it failed to demonstrate in the original proceeding. This submission depends on the premise that the facts and arguments that it has presented in this compliance proceeding are different from, and more persuasive than, those it submitted in the original proceeding. Therefore, in the circumstances, and in accordance with the function of panels under Article 11 of the DSU, the Panel considers it useful and appropriate to make a factual assessment of that premise. In so doing, the Panel will also make an assessment of facts and arguments presented by Antigua in this compliance proceeding.
1.96 Further, the original Panel's assessment of the matter before it, as reviewed by the Appellate Body, was based on the facts as they existed at the time of the original proceeding. The Panel will also make a factual assessment of certain new developments that have arisen since the time of the original proceeding.
1.97 The Panel sees no reason to limit its factual assessment to the single issue of the legal interpretation of the relationship between the IHA, on the one hand, and the measures at issue, on the other, on which the original Panel ruled, as upheld by the Appellate Body. The language used by the Appellate Body in its report with respect to that issue did not amount to an invitation to the United States to make a demonstration to a compliance panel of this one specific point, for the reasons given at paragraphs 6.62 to 6.69 above. Instead, to the extent that the Panel revisits the United States' defence that the measures at issue satisfy the requirements of the chapeau of Article XIV of the GATS, the Panel considers it equally appropriate to assess an issue that was raised in the original proceeding but upon which the original Panel did not rule, namely whether the measures at issue are discriminatory "on their face". This was an issue to which both parties referred in their submissions to this Panel. The Panel assesses this issue in terms of the treatment of intrastate commerce. However, the Panel emphasizes that it makes
