ONLINE GAMBLING FIRMS DISAPPOINTED IN EU - US DEAL

21 December 2007

Concessions accepted in return for the US changing its trade obligations are unlikely to assist online gambling firms


European Union negotiators, probably in one of the strongest positions yet in the World Trade Organisation conflict with the United States, have accepted a disappointingly milk-and-water package that does little to compensate online gambling companies for the damage done by unilateral American trade decisions.

In early reaction to news of the deal, signed in Geneva, The Guardian newspaper described it as "....a savage blow to the EU online gambling industry."

Shares in companies such as Party Gaming and Bwin fell sharply after it emerged that they and their peers had failed to persuade the EU to challenge the US despite an intense lobbying campaign highlighting the contradictions in the American position.

EU spokesmen released a statement which said: "A bilateral agreement was signed in Geneva, which provides EU service suppliers with new trade opportunities in the US postal and courier, research and development, storage and warehouse sectors. The US also made concessions in the testing and analysis services sector."

The Commission said it would still press the United States for "a non-discriminatory policy towards Internet gambling".

The Reuters news agency reports that the case dates to April 2005 when the World Trade Organisation ruled that a US law allowing only domestic companies to provide online horse-race, state lottery and fantasy sports gambling services discriminated against foreign companies.

Last year, the US Congress tightened restrictions on Internet gambling by making it illegal for banks and credit card companies to make payments to online gambling sites.

And in May, Washington announced it was retroactively excluding gambling services from market-opening commitments it made as part of a 1994 world trade deal, kicking off compensation talks with the EU and other countries including Japan and India.

A spokesman for Austria’s Bwin online gambling group said the company had not expected the EU-US talks to yield more at this point but was confident the EU Commission would continue to push for a regulated opening of the US Internet gambling market.

"We continue to believe that it is better to regulate than to prohibit, because the reality shows that the prohibition only drives out the transparent, listed operators," he said. "We trust the Commission will continue to push further for this. It certainly is going to be a long way still," he added.

Bwin shut down its US poker site and wrote off 500 million euros ($717 million) of investments last year after the United States effectively outlawed Internet gambling. Other major European gambling companies suffered similarly extensive damage.

Associated Press reported that the postal and courier concessions will affect how Germany's DHL, the express and logistics division of Deutsche Post World Net AG, competes with U.S.-based companies FedEx Corp. and United Parcel Service Inc., EU officials said.

The overall trade valuation of the package is believed to fall far short of the $100 billion European online gambling sites had claimed the United States owed. EU officials could not immediately say how much the deal was worth.

"This compensation cannot be quantified up to the euro," the EU mission to the WTO said in an e-mailed statement. "Nonetheless, it is clear that new trade opportunities are created for EU service suppliers in important sectors in the U.S."

The office of the U.S. Trade Representative in Washington declined immediate comment.

"While the U.S. is free to decide how to best respond to legitimate public policy concerns relating to Internet gambling, discrimination against EU or other foreign companies should be avoided," said Peter Power, spokesman for EU Trade Commissioner Peter Mandelson.

The WTO is expected to rule in the coming weeks on a request by Antigua and Barbuda to impose $3.4 billion in commercial sanctions against the U.S. for its failure to comply with the ruling. The tiny Caribbean nation, the smallest ever to win a WTO dispute, has threatened to target U.S. patents and trademarks.

After losing the case, Washington sought to fix the problem by rewriting its obligations under the WTO's treaty on trade in services. That allowed Canada, Costa Rica, India, Macau, Japan and the EU to file compensation claims.

EU officials said their deal creates new U.S. market opportunities for European companies seeking to expand investment and trade in the international mail business.

The U.S. and Canada are also believed to be close to a deal.

The head of the Remote Gaming Association, which counts many of Europe's major online gambling firms among its membership, said he was disappointed with the deal the EU had accepted.

CEO Clive Hawkswood said his organisation will continue lobbying for a regulated system in the US. He added that though the news was not unexpected he had hoped the negotiations would “go on for a while to put some pressure on the US”.

Hawkswood hailed the efforts made by EU trade commissioner Peter Mandelson in taking the case to the US. “He has done a lot for us,” he said. “When was the last time we had a senior politician go to the US to press the case for the gambling industry?”

Hawkswood said the agreement between the EU and the US was likely to “be a factor” in the ongoing negotiations between the US and China, India, Canada and other countries over the WTO issue. This includes the dispute with Antigua which started the process where a decision regarding the level of compensation due to the tiny Caribbean island has been delayed.

Online Casino News courtesy of InfoPowa