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1. Introduction

The World Trade Organisation (WTO) is an international body that was established for the control of international trade relations. According to the WTO itself, the organisation deals with the ‘rules of trade between nations at a global or near-global level’.² The WTO acts as a forum for trade negotiations and liberalisation on a rule based system. It has the power to assess the trade policies of member nations in terms of commitments under the WTO, as well as to examine the developments in world trade and address the challenges of an evolving world economy. The WTO was created by the ‘Agreement Establishing the World Trade Organisation’ (also known as the WTO Agreement), which also includes the Agreement on Trade – Related Aspects of Intellectual Property Rights (‘TRIPs’ Agreement), as its Annex 1C.³ The latter agreement defines the minimum standards that member countries need to implement as part of their local laws for the protection of intellectual property⁴ , and obliges them to ensure that specified enforcement procedures are available under local laws so as to permit effective action against any act of infringement of intellectual property rights.⁵ Conversely, it also allows for nations to suspend any such rights by way of authorised legal sanctions as a trade remedy under Part V. The suspension of obligations under the TRIPs Agreement has been thought to be of particular interest to developing countries in disputes against developed countries, since it is viewed as a great leveraging power for bringing members to the consultation table and pressurising them into compliance with adverse rulings.⁶

At the time of its creation, the WTO was envisioned as having two major functions: legislative and judicial. The legislative function refers to the role of the WTO as a common platform for encouraging trade between its members via legal instruments such as trade agreements, as well as to maintain the body of rules followed by its members. The judicial function is performed by the dispute settlement system that is governed by the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). According to Keisuke Iida, the areas in which the WTO dispute settlement system has been the most active can be divided between the following five areas: adjudicatory resolution of disputes, fending off unilateralism, creation of a level playing field in international commerce, reconciliation of trade and nontrade concerns, and balancing its various other functions.⁷ This judicial function of the WTO is instrumental in resolving various trade related disputes between its members and its procedural aspects as well as practical efficacy have been thoroughly analysed.

This article examines the actions of Antigua and Barbuda (hereinafter Antigua), a small island nation in the Caribbean and one of the smallest WTO members; which recently gained international attention following it being granted approval to suspend obligations under TRIPs to the United States of America as a result of a Dispute Settlement Body (DSB) authorization. The case of US – Gambling has assumed great importance for the allegations of piracy of intellectual property that were levelled against Antigua when it attempted to follow up on its authorised suspension of obligations under TRIPs. Equating a WTO approved remedy with the piracy of intellectual property by the US cast aspersions of illegality upon the entire proceedings and created a fallacious image for other nations as to the intellectual property regime in Antigua. It is thought that the final outcome of this case will set the standard for the efficacy of the WTO DSU and its usefulness to developing countries.

This article also focuses on the non conventional remedy of cross retaliation under the TRIPs Agreement that can be given against errant states in cases of non compliance with the WTO rulings. This remedy is usually pursued after conventional methods for ensuring compliance fail due to a multitude of factors. For example, the complainant would be unable to impose trade sanctions upon the defaulting member, due to a wide disparity in economic strength or due to the harm it would suffer by imposition of such trade tariffs. In this situation, the complainant may choose to retaliate under Article 22 of the DSU, which allows retaliation under a different trade agreement. This unique remedy was first requested, and obtained, by Ecuador in EC – Bananas III (Ecuador)8 (hereinafter EC – Bananas III) and has been similarly requested by Antigua in US – Gambling and Brazil in US – Upland Cotton⁹ , with the former being authorised to proceed under it.¹⁰ Such an extreme option may only be requested by a nation approaching the WTO for dispute settlement when the biggest problem faced by it is that of making an errant state comply with the rulings or take effective measures for retaliation without jeopardizing its own economic interests. This was summed up concisely by Robert Hudec, when he noted that "enforcement is a more complex process than mere retaliation".¹¹

2. Brief Exposition of the Stages of Dispute Resolution Mechanism followed by the WTO

The WTO DSU is the mechanism provided in the WTO Agreement for Members to resolve disputes with respect to international trade. It is invoked when a WTO signatory nation has a complaint against the trade practices of a fellow WTO member and feels that it is not compliant with the rules set by any regional trade agreements or with the WTO guidelines. The system followed for settlement of disputes can be classified into 2 distinct categories: the pre-litigation and the adjudication phase.

In the pre-litigation phase, also known as Consultation¹² , the parties are given an opportunity to work out their differences in a mutually acceptable manner via good offices, conciliation and mediation, which are non-judicial or diplomatic forms of voluntary alternative dispute settlement as provided under Article 5.¹³ A large majority of disputes brought to the WTO do not proceed beyond this stage. This is mostly attributed to the parties reaching a satisfactory settlement, or because the complainant withdrew the complaint or did not to pursue the matter further.¹⁴ Consultations provide the parties an opportunity to resolve any misunderstandings as to the facts and nature of the issue in contention and thereby lay the foundation for a settlement or for further proceedings under the DSU.¹⁵

In the Uruguay Round Agreement, it was decided that in the absence of a mutually agreed solution, the first objective of the dispute settlement mechanism is to secure the withdrawal of the measures concerned if these are found to be inconsistent with the provisions of any of the covered agreements. Secondly, the provision of compensation should be resorted to only if the immediate withdrawal of the measure is impracticable and as a temporary measure pending the withdrawal of the measure which is inconsistent with a covered agreement. An option provided by the DSU to its Members invoking the dispute settlement procedures is the possibility of suspending the application of concessions or other obligations under the covered agreements on a discriminatory basis vis-à-vis the other Member, subject to authorization by the DSB of such measures.¹⁶ Getting approval for use of such actions is preceded by lengthy legal procedures that the complaining nation may not palatable, given that it entails high costs and is subject to inevitable delays. While the legal burden is mitigated to some extent by the presence of the ‘Advisory Centre on WTO Law’ which provides legal aid to developing and least developed nations, the economic costs in the form of delays is a major deterrent to any nation opting to proceed under this mechanism.

A WTO Member may request the establishment of a Panel for dispute resolution under Article 6 of the DSU, the findings of which are compiled into a final report that is issued to the disputing parties and later circulated to all WTO Members. This report by the Panel must be adopted at a meeting of the DSB within 60 days of the distribution of the report to WTO members. The scope of appeal against the ruling is limited by Article 17.6 of the DSU to “issues of law covered in the panel report and legal interpretations developed by the panel.” During appeal, the report is considered by a 7 member ‘Appellate Body’ of the WTO, which issues its recommendations within 60 days of the notification of appeal by the disputing party, which then has to be adopted by the DSB by consensus and unconditionally accepted by the disputing parties.¹⁷

The effectiveness of any judicial process can only be seen by the results of its implementation. Under Article 21 of the DSU, if the report adopted by the DSB finds the defending Member in violation of an obligation under a WTO agreement, then that Member has to modify its policies and bring it in line with the guidelines, as well as inform the DSB of its implementation plans within 30 days of the panel report or any Appellate Body report being adopted. While the DSB is tasked with monitoring the implementation of adopted recommendations or rulings,¹⁸ the task of ensuring compliance usually falls upon the member that gained the favourable ruling from the DSB. However, ensuring compliance from countries in breach of international trade rules can be difficult, especially if the victorious country is a developing or least developed nation. It has been seen in many instances that such nations are ill equipped to effectively enforce compliance with the DSB ruling since their own domestic markets do not possess sufficient economic clout for imposing trade sanctions that might significantly affect the commercial interests of the defaulting nation. In these circumstances, it is unlikely that any restrictions imposed by such countries will have a substantial impact on the economy of a developed nation. Further, a large number of nations have resisted from proceeding against defaulting developed nations fearing international political pressure and a degeneration of diplomatic relations which usually accompanies any attempts at forcing compliance with adverse rulings.

Article 22 of the DSU deals with the Compensation and the Suspension of Concessions in case of members in violation of international trade rules. It states that compensation and suspension of concessions or other obligations are temporary measures available in the event that the recommendations and rulings are not implemented within a reasonable period of time. It further adds that neither compensation nor the suspension of concessions or other obligations is preferred to full implementation of a recommendation to bring a measure into conformity with the covered agreements. This shows that the option of compensation and suspension of concession is a secondary measure for enforcing compliance instead of standard practice in dispute settlement.

Article 22.3 of the DSU lists the procedures that must be followed before suspension of obligations or concessions by the complaining party. According to it, the general principle is that the complaining party should first seek to suspend concessions or other obligations with respect to the same sector(s) as that in which the panel or Appellate Body has found a violation or other nullification or impairment. If the general principle is impracticable or ineffective, then the complaining party can suspend concessions or other obligations with respect to other sectors under the same agreement, or if the circumstances are serious enough, it may seek to suspend concessions or other obligations under another covered agreement.¹⁹ The latter remedy provided in the WTO DSU is commonly known as “cross-retaliation”. Abbott defines it as the suspension of concessions in a sector of trade different than the sector in which the trade injury is suffered, including under a different WTO covered agreement. He further adds that the rationale behind suspending concessions under GATT, GATS or TRIPs is that, affected entities in the country against which trade barriers are imposed will exercise their influence on the government to bring trade measures into conformity in order to avoid bringing harm to themselves.²⁰

3. Cross – Retaliation under TRIPs Agreement

The rise of global trade in recent years has culminated in a greater transfer of goods, services and intellectual property between nations. While there has been almost equal bilateral trade in goods and services, the transfer of intellectual property has usually been from the developed nations to the developing and least developed countries. Protection of intellectual property (or the lack thereof) at the international level has therefore been a source of frustration in inter-country economic relations. Before the TRIPs Agreement came into effect, there was no effective mechanism for enforcement or provisions for the imposition of sanctions if the obligations were not met. The then prevailing system of treaties maintained by the World Intellectual Property Organisation (WIPO) which regulated protection of international intellectual property did not provide, in the view of proponents of TRIPs negotiations, sufficient regulations or adequate mechanisms to enforce intellectual property rights internationally. At the end of negotiations in the Uruguay Round in 1993, the TRIPs Agreement was included as a basic component of the Agreement that established the WTO, and brought into effect in 1995.²¹ All TRIPs signatories are required to implement basic standards and minimum enforcement obligations in their respective intellectual property regimes, which accord sufficient protection to private holders of intellectual property.

A particularly important element of the TRIPs Agreement is the system of dispute settlement established under the WTO Agreement. The TRIPs Agreement itself invokes the provisions of Article XXII and XXIII of the WTO Agreement as elaborated by the WTO DSU, which applies to consultations and settlement of disputes under the TRIPs Agreement.²² However, in certain circumstances, the WTO may allow retaliation under Part V of the TRIPs Agreement itself. This remedy is given to the complaining party when imposition of trade tariffs or sanctions will have an adverse impact on its own economy. Such an action permits a country to suspend certain intellectual property rights of the country that has violated the rules related to any Agreement under WTO. Since the retaliation is not under the same agreement which is the subject matter of the dispute, such an action is known as “Cross Retaliation”.²³ The provision for Cross Retaliation under the WTO DSU was included at the behest of several developed nations that believed that such a mechanism would be an effective tool to curb violation of the TRIPs agreement by developing countries, since cross retaliation against goods or services from such nations would be more effective than retaliating against the intellectual property of developing countries.²⁴

Cross Retaliation under the TRIPs Agreement is a remedy rarely sought and even more rarely authorized. Some of the factors that come into question are whether the circumstances are sufficiently serious to justify cross-retaliation among covered agreements; According to Abbott, in the case of US – Gambling, the arbitrators did not have any difficulty accepting Antigua’s position based on factors such as (i) serious disparity in national economic circumstances; (ii) dependency on services trade leading to vulnerability to external factors; and (iii) the need for Antigua to diversify its economy.²⁵

The procedure for authorisation to suspend obligations under TRIPs was clearly laid out by the ruling in EC – Bananas III, and that was the precedent followed by the DSB in US – Gambling as well. In the former case, the US, as a complaining party, retaliated by raising tariffs on EC goods. However, Ecuador sought to retaliate under the TRIPs Agreement citing that retaliation against EC exports of goods or services was not “practicable or effective” under Article 22.3. The argument put forward by Ecuador was that retaliation in the form of trade tariffs would harm its economy and was, in any case too small to inflict any meaningful pain on the defendant nations.²⁶ Even after being authorized to impose sanctions and suspend obligations, Ecuador never made use of the opportunity against the European Communities on the basis that the harm to the Ecuadorian economy would outweigh the possible benefit of persuading the European Communities²⁷ to comply with its commitments.²⁸ A most interesting aspect about this case, apart from it being the first decision concerning cross retaliation under the TRIPs Agreement, is the complete lack of allegations of piracy of intellectual property which have been levelled against Antigua, which have been discussed below. While it is difficult to pinpoint an exact reason for this, possible explanations include the settlement of the dispute and the omission of any action towards active suspension of intellectual property.

One of the major impediments to practically utilizing cross – retaliation is the problem of equivalence. The quantum of revenue that can be collected by the country by the suspension of obligations under the TRIPs Agreement is determined by the Panel based on their findings. For example, in the case of US – Gambling, Antigua claimed that it had suffered losses of approximately $3.4 billion. This was based on an assessment of the annual trade that it considered it had lost, as a result of the maintenance of the WTO inconsistent measures by the US, beyond the end of the reasonable period of time for implementation.²⁹ The US challenged this position and claimed that the losses amounted only to $500,000. The panel disagreed with both parties and found that the losses amounted only to $ 21 million and therefore Antigua could retaliate only up-to this amount.³⁰ ,³¹ This difference in valuation of damages also stretches to the valuation of intellectual property which is sought to be suspended. For example, in US – Gambling, if Antigua does suspend American copyrights or patents, then the price at which it sells the intellectual property is entirely dependent on what it determines to be the appropriate level. So, instead of selling it at its marked price, it may choose to sell it just above cost. This would create an immediate incentive for consumers to move away from American sellers who are forced to sell the same product at the marked price that is inclusive of royalties and taxes. This creates an imbalance in the trading structure, since one seller can massively undercut every other competitor and still eke out a profit. So, apart from the “illegal” gains being made by Antigua³² , there are substantial losses being suffered by the American holders of intellectual property on account of loss of royalties in addition to production costs. This is exacerbated by the fact that there is no equivalence between the gains made and losses suffered. These losses and the general American view of intellectual property infringement are the main reasons why allegations of ‘theft’ and ‘piracy’ have come into being in this case.

4. Case Study of US – Gambling (Antigua) DS285

The case of US – Gambling has become the acid test for those member states of the WTO seeking to determine whether the DSU can deliver practical and timely benefits for small and vulnerable economies. Antigua and Barbuda, a small, twin-island nation in the Caribbean Sea, is one of the smallest WTO members. The roots of the case can be traced back to the actions of the Antiguan government in the early 1990s, when, in an attempt to diversify the country’s economy, it poured significant resources to create a closely regulated and supervised cross-border gaming industry. Aided by a number of foreign investors, the sophisticated gambling infrastructure that was created helped supplement a significant decline in tourist revenues, which was the largest source of income for the island. In the following decade, online gambling became the second most revenue generating activity on the island and had become its second largest employer, with close to 5% of the country’s population working in that sector.³³

According to Antigua, the effect of measures imposed by the United States was to prevent the cross-border supply of gambling and betting services and therefore threatened the livelihood of its thriving online betting services industry. Antigua alleged that the policies of the United States were inconsistent with its obligations under the General Agreement on Trade in Services (GATS). However, in its defence, the US claimed its right to determine its own domestic policies and cited the need to protect “public morals and public order,” which is an allowable exception to the WTO rules.³⁴ The WTO found that the measures imposed by the US regarding horseracing were applied in a discriminatory manner to foreign services suppliers as compared to domestic ones.³⁵ The effect of this US policy on the Antiguan economy was enunciated by Antigua’s Finance Minister Harold Lovell, when he said that “[T]he economy of Antigua and Barbuda has been devastated by the United States’ government’s long campaign to prevent American consumers from gambling on-line with offshore gaming operations…result[ing] in the loss of thousands of good paying jobs and seizure by the Americans of billions of dollars belonging to gaming operators and their customers in financial institutions across the world.”³⁶ It was with such sentiments that Antigua approached the WTO DSB.

On 21 July 2003, the WTO DSB established a panel at the request of Antigua to resolve the dispute. Both the panel and the Appellate Body found certain measures of the United States to be inconsistent with some obligations of the United States under the GATS. On 20 April 2005, the DSB adopted the report of the panel, as modified by the report of the Appellate Body. The resulting DSB recommendations include, inter alia, that the United States bring the measures found to be inconsistent with the GATS into conformity with its obligations under that agreement. In April 2006, the United States informed the DSB that it had implemented the recommendations, while Antigua disputed the claim. After the consultations between the two nations failed, Antigua took recourse to Article 21.5 of the DSU and requested for the establishment of a Panel,³⁷ which concluded in its report that the United States had failed to comply with the recommendations and rulings of the DSB. This report was subsequently adopted by the DSB in May 2007.

In June 2007, Antigua requested authorization from the DSB to suspend the application to the United States of concessions and related obligations of Antigua under the GATS and the TRIPs Agreement. This was opposed by the US stating that it (i) objected to the level of suspension of concessions and obligations proposed by Antigua and Barbuda and (ii) claimed that Antigua and Barbuda’s proposal did not follow the principles and procedures set forth in Article 22.3 of the DSU.³⁸ In December 2007, it was determined that the annual level of nullification or impairments of benefits accruing to Antigua should be US$ 21 million per annum and that Antigua may request authorization from the DSB to suspend obligations under the TRIPs Agreement at a level not exceeding US$ 21 million annually.³⁹

The grant of the Award to Antigua was seen as a great victory for the people of the island nation. This was evident from the statement of Dr. John W. Ashe, Antigua’s Ambassador to the WTO, when he said that, “This is a smashing success for Antigua in every possible way. The report will sweep away any lingering doubt that Antigua has obtained a clear and convincing win over the United States in this matter. It is now time for the United States to meet its international trade obligations to Antigua and work with us in a constructive manner to resolve this dispute.”⁴⁰ However, even after the release of the Award, the United States failed to comply with the rulings and denied all Antiguan efforts for a fair negotiated settlement.

On the basis of conclusions and determinations of the Arbitrators in the Award and in accordance with Article 22.7 of the DSU, at the DSB meeting on 28 January 2013, Antigua requested authorization from the DSB to suspend concessions and other obligations to the United States in respect of intellectual property rights under Sections 1, 2, 4, 5 and 7 of Part II of the TRIPs Agreement.⁴¹

The most recent development in the case took place on 25 April 2013, when Antigua, in its communication to the DSB said that it has so far not any seen substantial progress on compliance by the United States with the DSB’s decision or in achieving a settlement with Antigua and Barbuda.⁴²

Justifying its complaints, Antigua bemoaned to the DSB that “[T]his matter is now ten years old, and the lack of progress in the case is a very disappointing reality for Antigua and Barbuda. The long campaign conducted by the United States authorities to shut down the online gaming industry in Antigua and Barbuda has borne bitter fruit. An industry that was once the second largest employer in Antigua and Barbuda, employing over 5% of the population, now lies in ruin. Thousands have been made jobless, and many thriving companies have collapsed, due to actions that this body has ruled to be contrary to world trade rules.”

It further went on to add that “After more than five years of patient negotiation, Antigua and Barbuda has come reluctantly to the view that only utilization of the authorization for cross-retaliation received from the DSB on 28th January will move this matter forward. As a party to all the major international conventions that protect the rights of IP stakeholders, Antigua and Barbuda sees this trade remedy as having far-reaching effects that may not necessarily be able to be contained.” After making such an obvious threat, Antigua concluded by stating, very allegorically that “In fact, we suspect that once that Rubicon has been crossed, all the King’s horses and all the King’s men may not be able to put Humpty-Dumpty back together again. So, before we set our foot to that path, we appeal to the United States to make one last effort at bringing its complex bureaucratic structure to a decision that will avoid unpredictable consequences.”⁴³

As of June 2013, Antigua had not initiated any proceedings aimed at profiting from suspension of the intellectual property obligations owed to the US. However, many reports seem to suggest that it may soon set up a website for the sale of American intellectual property, if the negotiations deadlock is not broken.⁴⁴

In the decade that has passed since the initiation of this case, there has not been any significant shift in the American position regarding its obligations under the GATS. Antigua is still engaged in the use of pressure tactics in the hope of getting the US to comply with the rulings. However, whenever Antigua has shown signs of putting its ruling into action, the Americans have responded with threats, claiming intellectual property piracy and violation of international trade laws. The Antiguan action has been authorised by the DSB after all the procedures laid down in the DSU were followed to the letter without any breach in its legality. Further, the way in which Antigua has proceeded against the US has conformed to all the standards expected of a country using an international trade dispute redressal forum. Yet there have been aspersions on Antiguan conduct by American authorities. Notwithstanding extant jurisprudence, the levelling of such allegations constitutes a severe breach of trust in WTO procedures. Irrespective of its non compliance with the WTO rulings and disregard of the threat of cross retaliation, the despicable way in which the US has besmirched Antiguan reputation to cast it as a promulgator of intellectual property piracy has also raised questions on the legality of cross retaliation under TRIPs.

5. Is Antiguan Cross – Retaliation under TRIPs Sanctioned Piracy of Intellectual Property?

When a member is allowed to suspend obligations under TRIPs Agreement, a question that arises is whether such suspension would also impact the nation’s obligations under WIPO treaties. According to Article 2.2 of TRIPs, "Nothing in Parts I to IV of this Agreement shall derogate from existing obligations that Members have to each other under the Paris Convention, the Berne Convention, the Rome Convention and the Treaty on Intellectual Property in Respect of Integrated Circuits."

The TRIPs Agreement is built on the principles embodied in the Paris Convention for the Protection of Industrial Property and the Berne Convention for the Protection of Literary and Artistic Works. A large number of substantive provisions of these two conventions are incorporated by reference directly into the TRIPS Agreement.⁴⁵ Therefore, any TRIPs obligations incorporated by reference provisions under WIPO Conventions can be suspended under the DSU. However, the effect of the suspension of TRIPs obligations on WTO members’ obligations under corresponding WIPO Conventions remains uncertain. This was demonstrated most clearly by the DSB ruling in EC – Bananas III⁴⁶ , where it said:

In this case, the arbitrators did not expound upon the impact of suspension of obligations on WIPO Conventions, leaving the matter to be dealt by courts of judicature which could decide upon the merits by following the rules of international law.⁴⁷ Further, though Ecuador was allowed to suspend the obligations under TRIPs for the European Communities, it did not do so since the EC is thought to have capitulated under the threat of having its intellectual property rights suspended and offered Ecuador a much better settlement than what was originally offered.

A common phenomenon that has been seen in cases where there is a threat of suspension of obligations under TRIPs is that the defending country usually comes up with rhetoric to portray the complainant as indulging in piracy of intellectual property. Piracy has always been a subject of great importance in all intellectual property regimes worldwide, with several having harsh punishment for such violation of intellectual property. Piracy in this sense has been defined as practice of unauthorized reproduction or use of a copyrighted book, recording, television program, patented invention, trademarked product, etc.⁴⁸ It has also been generally used to describe the deliberate infringement of copyright on a commercial scale.⁴⁹ The TRIPs Agreement doesn’t have a definition for piracy, and mentions it just once under Article 61.⁵⁰ Traditionally, piracy was equated with the counterfeiting of goods, as both forms of copying shared similar modes of production and distribution.⁵¹ However, the digital age has diluted piracy to include almost any kind of copying and distribution of intellectual property.

The American legal position on the copyright infringement as theft debate is tilted towards the offence being classified as theft, despite the case of Dowling v. United States⁵² , where the US Supreme Court held that infringed copyright was not covered under the National Stolen Property Act, and hence could not be called theft as it is understood therein. However, its critics cite the more recent case of MGM Studios Inc. v. Grokster Ltd.⁵³ , where the Supreme Court observed that ‘deliberate unlawful copying is no less an unlawful taking of property than garden-variety theft.’

As respect to the views of the US Government, Vice President Joe Biden made it very clear that “Piracy is theft, clean and simple, it is smash and grab”.⁵⁴ Interestingly, even their official initiatives do not differentiate between copyright infringement and theft of intellectual property, as evidenced by the original title of their ‘Joint Strategic Plan to Combat Intellectual Property Theft’ in 2010. That has however been amended to ‘Joint Strategic Plan to Combat Intellectual Property Enforcement’ in its latest iteration. In his speech, the Vice President also “declared war on ‘pirate’ websites, both foreign and domestic, arguing that piracy is theft and a potential threat to national security.”⁵⁵ This was also seen in this brief by the U.S. Intellectual Property Enforcement Coordinator where she said that “...we will take a close look at the unique problems posed by foreign-based websites and other entities that provide access to counterfeit or pirated products, and develop a coordinated and comprehensive plan to address them. We will make sure our law enforcement has the authority it needs to secure the supply chain and also encourage industry to work collaboratively to address unlawful activity on the internet”.⁵⁶

In the ruling for US – Gambling, Antigua has the right to suspend its obligations to the US under TRIPs and gain monetary reparation to the tune of US $21 million per annum by sale of American intellectual property. Immediately following the ruling, the US made several statements against Antigua, threatening dire consequences if it decided to proceed under the legally sanctioned remedy. This was seen clearly in the statement by Office of the United States Trade Representative, which warned that “it would establish a harmful precedent for a WTO Member to affirmatively authorize what would otherwise be considered acts of piracy, counterfeiting, or other forms of IPR infringement.”⁵⁷

In its statement to the DSB on the 28 January 2013, the US accused Antigua of being averse to accepting compensatory service concessions and maintaining unrealistic demands that the United States forego the modification of its schedule under the GATS. It further noted that Antigua was seeking authorization to suspend concessions with respect to intellectual property rights, which would amount to piracy and that if Antigua did proceed with a plan for its government to authorize the theft of intellectual property, it would only serve to hurt Antigua’s own interests. Government-authorized piracy would undermine chances for a settlement that would provide real benefits to Antigua. It also would serve as a major impediment to foreign investment in the Antiguan economy, particularly in high-tech industries. This statement was also made by Nkenge Harmon, spokesperson for the United States Trade Representative to various news and media outlets as if to emphasise the threat.⁵⁸ Harmon also added rather ominously that “To be clear, the United States will not tolerate theft of intellectual property and will take whatever steps are most efficient and effective to prevent this from happening.” The US statement concluded by saying that “implementing suspension of intellectual property rights is counter to Antigua’s own interests, and Antigua should reconsider before taking this extraordinary and unprecedented step.”⁵⁹

Many American intellectual property holders and promoters also made statements that seem to cast an aspersion of theft upon the island nation. Steve Metalitz, counsel to the International Intellectual Property Alliance, encapsulated this feeling when he said that “... suspending intellectual property rights is not the right solution, and that state sanctioned theft is an affront to any society.”⁶⁰ Even the New York Times in its Editorial has referred to any action by Antigua to suspend intellectual property as legally approved piracy since it would violate intellectual property protections on American movies, books, pharmaceuticals and other goods as compensation.⁶¹

The US, as the world’s largest economy has significant clout in global trade and there are several, economically significant areas where Antigua may be severely hit if the US chooses to retaliate through trade tariffs or sanctions. Further, Antigua is also a recipient of preferential economic access to the United States through the Caribbean Basin Initiative (CBI), and is therefore obliged to protect the intellectual property rights of U.S. companies in order to receive the preference. The United States created the Initiative as a unilateral program and is thereby free to change the conditions of the preferences, or indeed to suspend the program to any country, at its will and without multilateral consequences.⁶² The Sixth Report to Congress on the CBI says that “the President is also authorized to give discretionary weight, in designating CBI beneficiaries, to the extent to which a country provides adequate and effective legal means for foreign nationals to secure, exercise, and enforce intellectual property rights and the extent to which a country prohibits its nationals from broadcasting U.S. copyrighted materials without permission.”⁶³

In its defence, Antigua’s legal representative Mark Mendel expressed shock at the derogatory accusations made by the US against Antigua and said that, “For the US to resort to this untrue, unhelpful and irresponsible rhetoric and dissembling when one of the smallest countries in the world has used, to the letter, the processes of the WTO to get a remedy endorsed by international law to enforce a clear and unambiguous violation of international law by the US... In essence, they are saying that the US will punish or retaliate against a small country for pursuing its legal rights.”⁶⁴

The Trade Ambassador for Antigua, Colin Murdoch further argued that the suspension was only sought by Antigua as a means to compel treaty compliance by the United States. In a statement released after the ruling, he said that the step was taken “After countless proposals from our government have been more or less ignored by the Office of the USTR - numerous decisions by the WTO declaring the United States Government’s position illegal - and failure of the United States Government to provide meaningful proposals to end the dispute, the WTO provides this remedy not to encourage illicit behaviour by nations; but rather to provide them with a way to secure their legal rights as sovereign nations,” He further added that “the intellectual property remedy is incorporated in the WTO agreements and approved by all members, including the United States.”⁶⁵

Though the government of Antigua has remained above board regarding the suspension of obligation under TRIPs and has not made any initiative to implement it, an Antiguan company called Zookz launched a website offering unlimited entertainment downloads for a small monthly fee. The company’s operators claimed to be working under the 2007 WTO decision.⁶⁶ On its part, the Antiguan government issued a statement denying such claims and stated that “the operators of Zookz.com have not played any role in the Antiguan gaming industry or in our country’s case pending before the WTO,” and that “Antigua and Barbuda has not authorized any person or entity to implement sanctions.”⁶⁷ Though this act was done by a private entity in violation of the laws, as seen by it being taken down soon after, possibly by the government, it is eerily similar to the rumours that have been heard regarding the creation of a website by Antigua for selling items having American intellectual property.⁶⁸

Even if Antigua does embark upon selling US protected intellectual property, it faces the unique challenge of a monetary quantification of the property. This conundrum was best highlighted by the comment of Brendan McGivern, a trade lawyer in Geneva, “Even if Antigua goes ahead with an act of piracy or the refusal to allow the registration of a trademark, the question still remains of how much that act is worth. The Antiguans could say that’s worth USD 50,000, and then the US might say, that’s worth USD 5 million—and I can tell you that the US is going to dog them on every step of the way.”⁶⁹ This statement is better viewed in the perspective given by Mavroidis, according to whom the level of countermeasures being taken must be limited to the damage done to the complainant's economic interests. However, the flip side of such limitations is that countries will have no incentive to cease illegal practices and comply with the WTO rulings, unless they might suffer greater harm by such practices.⁷⁰

The concept of infringement of intellectual property as theft in its traditional sense has raised many issues of semantics and ethics. According to Larsson, the legal concept of theft is closely related to the conception of “copyright as property”. Hence “piracy” relates to “theft” in the same manner that it builds on the conception that copyrighted content is an object that can be removed and taken.⁷¹ He adds that the theft-metaphor is problematic in the sense that a key element of stealing is that the one stolen from loses the object, which is not the case in file sharing since it is copied.⁷² This is in stark contrast to the US National Crime Prevention Council, funded by the US Department of Justice, which views the effects of infringement thus: “Intellectual property theft can cost people their jobs, damage the reputation of the original maker of the counterfeited product, cause sickness and bodily harm, deprive governments of desperately needed tax revenue, and even result in the spread of organized crime and gangs—which in turn can damage more lives and destroy neighborhoods.” Propagation of such dire consequences for infringement shows that even any legally sanctioned action that prejudices the owners of intellectual property would have little chance of succeeding in the US.

The legally valid sale of intellectual property by Antigua will certainly deprive the property holders of their extensive royalties and fees. Considering that, it is possible that the US Government may decide to retaliate against Antigua claiming that it is directly harming the American populace. Even if Antigua went ahead with its plans to launch a website selling intellectual property, the US can block payments to it, akin to what happened in the case of WikiLeaks.⁷³ While the US Government did not make a direct communication to the companies, the action was certainly triggered by the US State Department declaring WikiLeaks to be illegal.⁷⁴ While this scenario is still hypothetical, it is possible that this course of action may be pursued even against another country. If it indeed does happen, then the options open to Antigua would become limited to approaching the UN or the International Courts. Also in light of the official US position on foreign websites enabling piracy of intellectual property, the proposed website will certainly fall in the category of “pirate indulging in theft of intellectual property”. That would certainly allow the US a loophole to use force for keeping the website offline.

The question of semantics and nomenclature in this case gains immense importance, as the expressions used to characterise the equations between the US and Antigua end up determining the approach taken to resolve their dispute. If the fallacious allegations of piracy are continually hurled by the US at Antigua, then some of them, even if ill founded, are bound to create a feeling of hostility and distrust among the members of the international community. If it is felt that Antigua would not honour its commitments to international conventions and treaties, it risks becoming a pariah among the comity of trading nations. That would lead to a direct consequence on the economy, with a cessation of foreign funds and investments into the country. If allegations of piracy are believed, then the transfer of technology that accompanies trade in intellectual property ceases completely, since no holder would willingly give his property to a known pirate. This is a scenario where the international reputation of a country is being tarnished with wild accusations. A person has the right to reparation if his reputation is unfairly sullied. However, a country has no recourse available if it is defamed internationally.⁷⁵ This conundrum of monikers was eloquently summarised in an op-ed by Professor Stuart P. Green, where he says that “The label we apply to criminal acts matters crucially in terms of how we conceive of and stigmatize them. What we choose to call a given type of crime ultimately determines how it’s formulated and classified and, perhaps most important, how it will be punished.”⁷⁶

Antigua, as a nation has a rich cultural heritage but very little intellectual property. The threat of certain retaliation from the US would act as an effective deterrent for most nations. However, Antigua appears confident in making such a gamble, possibly hoping that the return of the gambling industry will have a greater positive impact on its stuttering economy than anything negative that Washington will mete out against it. This is a risk that most nations would be unwilling or unable to take.⁷⁷

Cross retaliation under TRIPs is a legally sanctioned remedy aimed at forcing compliance, failing which the complainant becomes eligible for monetary compensation as decreed by the DSB. To equate it to piracy of intellectual property is almost equivalent to declaiming an accidental death as cold blooded murder. However, most of the allegations behind the piracy rhetoric against Antigua have been spewed by the American holders of intellectual property. Such behaviour is completely unjustified since the pursuance of a valid legal action is being characterised as an illegal activity. Such unsubstantiated and patently false allegations however ensure that the local populace of the errant nation does not demand for its own government to take any affirmative action. The illicit portrayal of valid international sanctions is shown to affect people at a personal level, which in turn drums up more antagonism against any such action. This guarantees errant nations a leeway to not take any steps to bring themselves in compliance with their international obligations. The brunt of this is borne by the economically weaker nation, which becomes a target of international apprehension as to its suitability as a trading partner.

6. Conclusion

The remedy of cross-retaliation is rarely given and has never been put into effect until now. The two nations that were authorised to use it, namely Ecuador and Antigua, did not do so. In the case of the former, the mere leveraging power it provided was sufficient to wrangle a substantially better compensation settlement from the EC, while the latter is still holding out in the hope of compliance from the US. Traditional trade retaliation has always suffered from various problems with effectiveness of the actions against errant nations. However, suspension of intellectual property obligations under the TRIPs Agreement is relatively free of such constrains. The value of intellectual property is significant for vast corporations and conglomerates, which are based mostly in highly industrialised countries and hold considerable economic and political sway. Many developing countries have undertaken serious commitments on the TRIPs Agreement from which large, multinational corporations stand to benefit enormously. For this reason, even the threat or minimal retaliation by developing countries in the area of intellectual property rights is seen as likely to generate a significant lobbying response placing industrialised governments under considerable political pressure to comply.⁷⁸

One of the major drawbacks of the entire WTO Dispute Settlement is the lack of authority to impose punitive sanctions such as those possessed by the UN Security Council. In this regard, the WTO Dispute Settlement Understanding is more diplomatic in its approach than judicial. While mutually acceptable solutions are always preferable to adjudicatory procedures, the lack of punitive options in the latter renders the point moot. Without the threat of sanctions being imposed on a global scale, most errant countries tend to simply ignore its recommendations or make facile changes, especially when they are developed economies. Most cases that come to the WTO take a long time to be resolved through its arbitrative approach and by the time the resolution comes about, severe harm might have already been committed to the economy of the complaining nations, especially if it is a developing or a least – developed nation. The question of effective enforcement of DSB rulings is a definite lacuna in the otherwise well functioning dispute settlement mechanism. It is therefore suggested that in cases where the defendant does not comply with the recommendations of the DSB, and the complainant does not have the economic muscle to impose traditional trade sanctions without harming its own interests, then the WTO should create a system which would allow the imposition of sanctions on behalf of the complainant at a global or near – global level.

The Cross-Retaliation Model under Article 22 has induced a greater degree of compliance, especially when the retaliation is sought under the TRIPs Agreement. However, this remedy is not foolproof and has its own peculiar predicaments. The length of the dispute and its resolution are formidable obstacles that a complaining country must contend with. While the extended delay might assure a large payout at the time of resolution, the economic harm being caused in the meanwhile still has to be suffered by the complainant. The DSU procedures do not have any provisional measures (interim relief) for successful complainants. This is a serious drawback that can be best addressed by the creation of a consolidated fund where the non compliant nation must deposit the amount due. Considering past precedent, it is highly probable that many countries would settle with the complainants than have to pay the amount and go through more legal costs.

Secondly, the non tangible costs that a complainant has to bear for fighting such disputes should be added to the compensation due to them. Especially in cases such as US – Gambling, where Antigua has to put up with the slander of being called pirates, there should be some kind of relief provided to them by the WTO. This would ensure better standards of decorum from the disputing parties and prevent a media circus of unsubstantiated allegations. While it seems that the view of infringement as theft is largely concentrated in the US, the application of labels such as pirates is a vicious offensive by any defaulting nation. It is therefore, in the interest of all WTO Members that such acts have the harshest penalties and sanctions imposed upon the nation falsely insinuating such charges.

As of today, cross retaliation under TRIPs is the best remedy available to small economies against developed nations, especially given that many such countries are highly dependent on the upholding of their intellectual property rights for revenue purposes. The denigration of this remedy as piracy of intellectual property is an affront to the entire system of DSU and should be punished with international trade sanctions. However, suspension of obligations under TRIPs is a last resort solution, with wide ramifications, and care should be taken to use it as sparingly as possible. The rights of the lesser developed nations have to be respected if the WTO intends to remain relevant as a “forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all, thus contributing to economic growth and development.”⁷⁹ This will only be achieved if the WTO disproves the conventional wisdom that the dispute settlement mechanism is “a waste of time and money for developing countries to invoke the WTO’s dispute settlement procedures against industrialised countries.”⁸⁰