The European Commission has published its report on US remote gambling laws and their enforcement against EU companies.
The report is the outcome of an investigation into United States measures affecting foreign suppliers of internet gambling services. It concludes that the US measures constitute an obstacle to trade that is inconsistent with World Trade Organization (WTO) rules.
According to the Commission, the report’s findings mean that WTO proceedings would be justified. However, the report suggests that the issue should be addressed with the US Administration, with a view to finding a negotiated solution.
EU Trade Commissioner Catherine Ashton said: "Internet gambling is a complex and delicate area, and we do not want to dictate how the US should regulate its market. However, the US must respect its WTO obligations. I hope that we will be able to reach an amicable solution to this issue."
The published report is the result of a formal examination procedure initiated on March 11, 2008, following a complaint by the Remote Gambling Association (RGA). The report states that US laws deny access and discriminate against foreign suppliers of gambling and betting services inconsistently with US WTO obligations.
The RGA says that the US Department of Justice has repeatedly stated that all forms of online gambling are illegal, yet continues to enforce this view only in connection with non-US businesses.
In October 2006, the US Congress passed a new law (the Unlawful Internet Gambling Enforcement Act, or UIGEA) which effectively criminalized online gaming provided by foreign operators. The UIGEA forced many leading EU online gambling companies out of the lucrative US market, despite a US commitment under the WTO treaties offering access to its domestic gambling market. The stock market-listed EU companies collectively lost billions in market value overnight when the UIGEA took effect, whilst US online gaming companies continued to operate unperturbed.
European online gambling and betting companies left the US market in 2006, but suffer legal proceedings by US authorities based on their past activities on the US market.
“The publication of the full report will now enable others to see what a comprehensive and objective investigation was undertaken by the European Commission before it reached such a clear conclusion and found in our favour,” stated Clive Hawkswood, Chief Executive of the RGA. “This is another step forward in the process and we hope that negotiations between the US and EU on this issue will now progress to a satisfactory outcome without delay.”
The report takes account of the intention of the US to withdraw its WTO commitments on gambling and betting services. Once this withdrawal occurs, the US would no longer be obliged to guarantee future access to its gambling and betting market. However, the report finds that a withdrawal only affects future access to the market, but does not allow the US to disregard its obligations in respect of past activities.
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 prohibits gambling businesses from knowingly accepting payments in connection with unlawful internet gambling, including payments made through credit cards and electronic funds transfers.
The controversial legislation has had a detrimental effect on the economies of several small offshore territories with specialized remote gaming legislation, 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.
A comprehensive report in our Intelligence Report series examining the new possibilities that offshore e-commerce open up for business, and analysing the offshore jurisdictions that have led the way in offering professional e-commerce regimes for international business, with a particular focus on e-gaming, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report6.asp
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