EUROPEAN COMMISSION INVESTIGATION INTO WTO DISPUTE UNDERWAY

6 June 2008

Investigators want answers from the US on a range of questions


Despite its controversially secret compensation deal with the European Union over its unilateral withdrawal of gambling from its World Trade Organisation obligations, the United States is still the subject of a European Commission investigation, and this week the publication Inside Trade gave the latest progress on the enquiry.

According to the London-based pressure group Safe and Secure Internet Gaming Initiative, the report reveals that the Commission has submitted a list of questions to leading US officials concerning a possible US trade violation for discriminatory trade practices against European online gambling companies.

It is known that several major online gambling companies in Europe, backed by the Remote Gaming Association, pushed for the EC enquiry, having gained little if any direct benefit from the compensation deal, details of which have been withheld by the US government.

The European Commission investigation was launched in March this (2008) year (see previous InfoPowa report). At the time, the EU Trade Commissioner Peter Mandelson said: "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 Commissioner had previously remarked that the United States should consider opening its market to overseas operators as a solution to the WTO trade dispute over Internet gambling, commenting: "I think [Representative Frank) takes a fair-minded commonsense approach."

The SSIGI quotes Naotaka Matsukata, formerly director of policy planning for US Trade Representative Robert Zoellick and now a senior adviser to Alston and Bird, LLP as opining: "The cumulative effect of US-WTO related actions over the past year has forced the EU to take this dramatic step. The line of enquiry opened by the questionnaire could reveal that the US is engaging in unfair, discriminatory, and selective prosecution of European online gaming operators."

"If the EU takes the nuclear option and brings the US to the WTO, serious damage could be inflicted on the bilateral relationship at a delicate time in trasatlantic relations," added Matsukata. "Rather than taking this risk, the USTR should work with Congress, as the United States Constitution instructs, to resolve the dispute by adopting Congressman Frank's Internet Gambling Regulation and Enforcement Act to bring the US into WTO compliance."

Congressman Barney Frank's bill, HR 2046, would resolve the trade dispute by regulating Internet gambling and creating a level playing field among domestic and foreign Internet gambling operators.

"The European Commission investigation further highlights the reckless manner in which the USTR has sought a protectionist trade policy, setting a precedent that threatens to expand beyong online gambling into other areas of trade," said Jeffrey Sandman, spokesperson for the Safe and Secure Internet Gambling Initiative.

"Congress should not sit on the sidelines as the USTR unilaterally grants trade concessions and hypocritically discriminates against foreign online gambling operators. Congress needs to become part of the decision making process and create a non-discriminatory market for Internet gambling in the US as the way to restore integrity to the international trading system."

The investigation by the European Commission is the result of a Trade Barrier Regulation complaint filed by the Remote Gaming Association (RGA), which represents the largest remote gambling companies in Europe. The RGA claims the US violates international trade law by threatening and pursueing criminal prosecutions, forfeitures and other enforcement actions against foreign Internet gambling operators, while allowing domestic US online gambling operators primarily horsebetting, to flourish.

After the investigation, the European Commission could pursue discussions with the US to find an appropriate solution to end the dicrimination. If the parties cannot themselves settle the matter, the Commission could bring a case against the US to the WTO.

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