Antigua case - An illogical ruling?

I have blogged about the US Online Gambling case here.

Stewart and Stewart, while making a detailed analysis of the dispute here, argue that the measure of cross-retaliation in this case is an illogical step and could harm the WTO system.

"As explained above, this case presents a unique situation in which a WTO member has responded to an adverse WTO ruling by seeking to amend its WTO commitments to make clear that its obligations do not apply to the domestic policy which had been found problematic. To obtain this amendment, the U.S. was required to provide compensation to all affected WTO members, not only those who would have been entitled to retaliate if they had brought the original dispute. As noted above, the U.S. was able to reach agreements with each of the countries that requested compensation except for Antigua. If agreement had been reached with Antigua, or if arbitration under Article XXI of the GATS had settled the amount of compensation to be provided, the U.S. would now be in compliance with its amended WTO obligations even with its domestic gambling policies still in place, and Antigua (along with other countries) would be compensated for the withdrawn concession.

Instead, because WTO rules permit Antigua to withdraw benefits for the on-going violation under the DSU even as arbitration under the GATS remains suspended, the U.S. is now faced with the prospect of open-ended retaliation for on-going violations it is unable to address through a renegotiation of its commitments. In short, the U.S. may have to pay two times to resolve one problem – once to amend its obligations to reflect what it thought it had originally agreed to when it negotiated the GATS, and once as a result of retaliation authorized in the course of a dispute launched before that amendment was made."

The above submission raises the important point of domestic policy space to amend past commitments in the context of a dispute.This piece however seems to support Antigua. Interesting...

Antigua, the U.S and a rule based system of dispute settlement

The proceedings of the WTO Dispute Settlement Body in a recent meeting throws light on the Online Gambling case (DS 285). While WTO watchers are keenly awaiting Antigua's proposed moves in relation to the cross-retaliation in this case, the use of cross-retaliatory measure in the field of IP has evoked strong reactions.

Some excerpts from the meeting indicate the strong, divergent viewpoints held as well as possible outcomes:

"Dominica, speaking on behalf of Antigua and Barbuda, said that Antigua and Barbuda was disappointed at the lack of compliance by the US and its failure to identify a single measure designed to implement the DSB’s recommendations and rulings.  Furthermore, Antigua and Barbuda was concerned that, at the January 2013 DSB meeting, the US had used terms such as “theft of intellectual property” and “government-authorised piracy” in relation to the lawful and expressly authorised use of trade remedies provided for in the WTO agreements. 

In Antigua and Barbuda’s view, the use of such intemperate and dismissive language by the US was a fundamental challenge to the WTO and a reputational assault both on the DSB that had given the approval for intellectual property (IP) suspensions and on Antigua and Barbuda that had sought its right to exercise it.  Antigua and Barbuda called on members to defend the WTO’s fundamental principles and to ensure that its rulings are applied equally by all countries despite their size. 

...

The United States noted that Antigua and Barbuda had assured the DSB that it would notify and provide specific details about how it would implement the suspension of concessions and that Antigua and Barbuda would not encourage or allow itself to become a haven for IP piracy. With regard to the status of the dispute, the US did not agree with Antigua and Barbuda’s view that the US had been unwilling to negotiate in good faith.  The US had been following the established, multilateral WTO process for responding to the DSB’s findings and had, in 2007, begun the process of modifying its Schedule of Specific Commitments under the General Agreement on Trade in Services (GATS).  The US had offered substantial compensatory adjustments in other service areas and every member had agreed to the compensation package except Antigua and Barbuda.  The US had also sought to offer Antigua and Barbuda elements other than new services concessions.  The US remained open and ready to engage with Antigua and Barbuda to find a solution."

What will the result be n this case:

1. A negotiated, amicable settement or a compensatory package?

2. Protracted dispute settlement proceedings on what constitutes compliance and claims of compliance and non-compliance?

3. A strong cross-retaliatory move by Antigua suspending rights of US IP holders?

4. Proceedings disputing the validity of the measures undertaken to cross-retaliate?

5. No action by Antigua and letting the dispute seeing no end?

Will it also be a case where the "rule-based" nature of the dispute settlement will be established? Or will it go the way that political economy of relations often force it to? The dispute in many ways is the test of the multilateral institutions rule based dispute settlement system - in terms of its efficacy, remedies and compliance.

Cross retaliation and dispute settlement

International economic law experts watch with keen anxiety the next steps Antigua would take to effectuate the cross-retaliation sanction it has received from the WTO in the  US- Online Gambling case at the WTO. 

This NYT opinion preferred a negotiated deal rather than the execution of cross-retaliation. Simon Lester suggests in this blogpost that Antigua should adopt a non-abusive, reasonable way of retaliation by putting works that have received excessive protection in the public domain. Scott Lincicome highlights the strong impact the threat of cross retaliation can have in the context of non-complied WTO disputes in this view.

While many conjecture on how Antigua would implement the cross-retaliation option (many also feel that it would ultimately lead to a negotiated settlement) Shamnad Basheer in this piece offers a tiered approach to cross retaliation essentially contending that cross-retaliation should be considered a mainstream retaliatory technique rather than a secondary one. Calling it the "Tiered IP suspension model" he proposes:

"Whilst the notion of IP “cross-retaliation” has been doing the rounds for a while, there is considerable uncertainty regarding how this concept will be operationalized and implemented. Developing countries urgently need to work out an optimal model that helps assess losses to the foreign IP owner in a reasonably objective way—this way there is no time lost between the procuring of a favorable order from the WTO sanctioning cross-retaliation and the actual cross- retaliation itself. The lack of a credible domestic model has no doubt caused Antigua’s threat of cross retaliation to be taken less seriously by the US. 

This paper seeks to fill this lacuna by proposing a tiered suspension mechanism as a viable option. That the model lacks technical precision in terms of computing losses to IP owners accurately is not fatal since the current WTO framework only requires a broadly objective model that does not reek of arbitrariness. Further, the aim of this paper is to evolve a model that will help in securing compliance or a settlement. Given that the IP lobbies in countries such as the US and the EU are powerful, the likelihood of a settlement or compliance is very strong. Particularly, since the model advocates an automatic compulsory license after the offending measures have been removed. In other words, the likelihood of a country having to operationalize the IP suspension model is very remote. Any infirmities in the model ought to be evaluated, bearing this over- arching assumption in the model. Further, the current WTO framework only requires that broad equivalence be achieved and not that the retaliating state compute the losses to suspended IP owners in a technically accurate manner."

While one would have to wait to see how Antigua takes it forward, it is clear that cross-retaliation has brought back into focus the issue of compliance under the dispute settlement process. Will it lead to enhanced compliance or more complex negotiated settlements?