EU OFFICIALS TO INTERVIEW U.S. POLITICIANS (Update)

13 June 2008

UIGEA probe moves another step forward


European Union officials involved in the probe into the protectionist policies in online gambling of the United States are to interview senior members of the Bush Administration in July. The European Commission had previously sent questionnaires to several House and Senate committees and U.S. agencies (see previous InfoPowa reports) seeking information on the Unlawful Internet Gambling Enforcement Act, which is at the centre of the enquiry and prohibits financial transactions with Internet gambling companies.

Despite an earlier World Trade Organisation dispute compensation deal with the 27 nation European Union, the issue remains a contentious one, with the Remote Gaming Association, which represents most of the big names in the UK online gambling business, pressing for more EU action on the controversial UIGEA law, which has severely damaged many Internet gambling firms.

The Washington publication, The Hill covered the issue extensively this week in an article reporting the meeting of US Administration and European Union officials next month, reporting that the talks could herald a trade challenge to US policy by the European trading bloc.

The Association explained that the UIGEA has cost its members hundreds of millions of dollars in lost stock value and business.

For example, The Hill reports, the Gibraltar-based Internet gambling company Party Gaming had a market capitalisation value of $10 billion in January 2006 and saw it reduced to $2.4 billion after the new U.S. law was implemented. Using current conversion rates, that would amount to around a $7.6 billion reduction in stock value.

“For the publicly listed companies, the immediate effect [of the law] was to wipe hundreds of millions of dollars off their share values,” RGA CEO Clive Hawkswood told The Hill. The RGA executive added that his members have been additionally harmed by the ongoing threat of enforcement actions by the U.S. Department of Justice, quoting the example of the still detained David Carruthers of the now defunct BetonSports.

The RGA position is that it is unjust for American authorities to go after its members for services their companies may have offered in the U.S. before the UIGEA was signed into law in October 2006. They argue that it was not clear that offering online betting services in the U.S. was illegal before the law was approved, as evidenced by the fact that several companies offered such services there.

From the Department of Justice's perspective, however, the response to that is that online gambling was always illegal in terms of the outdated Wire Act of 1960, and that the 2006 law was only an enforcement measure to prevent financial institutions from making payments.

The Hill goes on to quote Dr. Joseph Kelly, a well known US legal academic on the subject, who refers to recent talks by leading Internet gambling companies to negotiate their way out of US prosecutions for pre-UIGEA activities. Corporate spokesmen at Party Gaming, one of these companies, have recently declined to comment on a report that a settlement on these terms is close.

Hawkswood told The Hill that these reports were premature at best, and predicted it would not affect the EU investigation.

The result of the EU questionnaires and the meeting with Bush Administration officials could lead to renewed World Trade Organisation action, The Hill surmises. U.S. trade officials have however emphasised that the EU effort is still only an investigation.

Hawkswood was confident that the EU investigation would find sufficient evidence to launch an action, but suggested that this may not be the preferred route. “We would be very surprised if they did not conclude that there was still a case to answer,” said Hawkswood, who added it would be the EU’s preference to reach a negotiated settlement.

The protectionist nature of the UIGEA is illustrated by the freedom of Americans to indulge in Internet betting on horse racing, fantasy sports and lotteries - all the subject of legislative carve-outs, and the RGA points out that this means its members are suffering from selective enforcement by the US authorities.

“The fact that the Department of Justice continues to threaten enforcement action against EU companies while apparently taking no action against U.S. companies, such as those offering horserace betting, is an additional concern because the EU has identified that as discriminatory action which constitutes an unfair trade barrier,” Hawkswood told The Hill.

Online Casino News courtesy of InfoPowa