EU Concludes Investigation Into US Gambling Laws

by Ulrika Lomas, for LawAndTax-News.com, Brussels

30 March 2009

An investigation by the European Commission has found that United States laws on remote gambling and their enforcement against EU companies constitute an obstacle to trade that is inconsistent with World Trade Organization rules.

The provisional conclusions of the report imply that WTO proceedings against US measures would be justified, although it also recommends that a negotiated solution to the dispute between Brussels and Washington should be sought in parallel.

The report was completed in the framework of the EU Trade Barriers Regulation and has been released to EU member states for possible comments on the findings, and will be made public once finalised.

EU Trade Commissioner Catherine Ashton said: "It is for the US to decide how best to regulate internet gambling in its market, but this must be done in a way that fully respects WTO obligations. I am hopeful that we can find a swift, negotiated solution to this issue."

The report is the result of a formal examination procedure initiated on March 11, 2008, following a complaint lodged by the Remote Gambling Association (RGA), which represents the world's largest remote gambling companies. The report concludes that US laws deny access and discriminate against foreign suppliers of gambling and betting services inconsistently with US WTO obligations.

In November 2008, the United States Treasury Department and the Federal Reserve Board announced the release of a joint final rule to implement the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006, which effectively blocks access to the lucrative US internet gambling market for offshore operators. The Act prohibits gambling businesses from knowingly accepting payments in connection with unlawful internet gambling, including payments made through credit cards, electronic funds transfers, and checks.

The controversial legislation has effectively closed the door to the lucrative US gambling market to companies registered in foreign territories and offshore jurisdictions, such as Costa Rica, Gibraltar and Antigua and Barbuda, one of the largest offshore gaming domiciles with an estimated 537 gambling websites based there in 2007.

In December 2007, the EU and US agreed upon a compensation package following the loss of trade opportunities in the US gambling sector as a result of the US's intention to withdraw its GATS (General Agreement on Trade in Services) commitments on gambling. Under this package the World Trade Organisation allowed Antigua and Barbuda to impose USD21m worth of retaliatory measures against the US, although this was considered to be a drop in the ocean compared to the billions in revenue the island may lose as a result of the US legislation. Antigua had initially asked for USD3.4bn in damages.

According to the EU report, European companies remain subject to legal proceedings by US authorities based on their past activities, despite the withdrawal of these companies from the American online gaming and betting market in 2006. The report concludes that these proceedings are "legally not justified and discriminatory."

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