EU Opens Investigation Into US Internet Gambling Laws

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

11 March 2008

The European Commission announced on Monday that it has decided to launch an investigation into legislation in force in the United States affecting foreign suppliers of internet gambling services, within the framework of its Trade Barriers Regulation (TBR).

The decision follows a complaint lodged by the Remote Gambling Association (RGA) in December 2007. The European industry claims that the US should not be allowed to enforce gambling laws selectively against foreign suppliers with respect to services offered at a time when the US had WTO commitments permitting online gambling.

The Commission will now examine whether these actions are in breach of international trade rules, and will discuss the matter with the United States.

Commenting on the decision, EU Trade Commissioner Peter Mandelson stated that: "The US has the right to address legitimate public policy concerns relating to internet gambling, but discrimination against EU companies cannot be part of the policy mix. We are interested in a constructive and mutually satisfactory solution to this issue."

The challenge made by the RGA concerns the fact that laws and regulations that ban the supply of internet gambling into the United States market were already in place at a time when the US had WTO commitments allowing such services.

They also claim that the US is now selectively enforcing these laws against foreign suppliers, over online gambling services which they offered in the past.

The European e-gaming industry argues that the United States measures violate Articles XVI (market access) and XVII (national treatment) of the GATS (General Agreement on Trade in Services).

All EU suppliers of remote gambling services have now withdrawn from the US market further to the adoption of the Unlawful internet Gambling Enforcement Act (UIGEA) in 2006.

The United States Department of Justice is currently investigating the activities of EU companies that took place prior to the ongoing withdrawal of US GATS commitments on gambling.

The lack of clarity of the relevant US domestic legislation, together with the existence of United States WTO commitments on gambling and betting services, and the presence of US suppliers on the market, had led foreign companies to also offer their services in the US. The RGA argues that the US should not prosecute foreign nationals or companies for those activities that took place prior to the withdrawal of WTO commitments by the US.

The Commission announced that it will now engage in a detailed examination of the factual and legal issues raised by industry in the next five to seven months, as well as seeking dialogue with interested parties and the relevant authorities. The EC will present its findings in an investigation report which could lead to the launch of WTO proceedings, should this be warranted.

The complaint and investigation are separate from the compensation package that the EU and US agreed upon in December 2007, following the loss of trade opportunities in the US gambling sector as a result of the US intention to withdraw its GATS commitments on gambling.

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