U.S. VIOLATES WTO RULES SAYS E.U.

12 June 2009

Powerful European political and trading bloc may challenge online gambling ban at the World Trade Organisation
 

The executive arm of the 27-nation European Union, the European Commission has concluded its investigation into US action against online gambling, finding that American laws prohibiting gambling over the Internet violate international trade rules. The Commission's report raises the possibility of the EU challenging the ban at the World Trade Organisation, reports Dow Jones news service.

The Commission found that the U.S. online gambling ban is being enforced mainly against non-U.S. companies, a violation of WTO rules. While a WTO dispute against the United States would be justified, the Commission's report expresses the hope that the two countries can negotiate a solution.

"Internet gambling is a complex and delicate area, and we do not want to dictate how the US should regulate its market," said E.U. Trade Commissioner Catherine Ashton. "However, the US must respect its WTO obligations. I hope that we will be able to reach an amicable solution to this issue."

The report claims that the U.S. continues to allow remote betting on horse and greyhound races through U.S. companies, while cracking down on Internet poker gambling companies in the E.U., which are mainly based in the U.K., Ireland, Austria, Malta and Gibraltar.

The Commission noted that U.S. authorities may wish to make online gambling a purely domestic issue by opting out of international trade rule commitments, but that the U.S. must honour those rules in the meantime.

U.S. laws restricting Internet gambling, and the way they have been applied to prosecute operators, are discriminatory and break World Trade Organisation (WTO) rules, the European Commission said.

In 2006, the U.S. clamped down on foreign gambling operators by passing the Unlawful Internet Gambling Enforcement Act (UIGEA) which attacks financial transactions with ill-defined 'illegal' online gambling sites. The U.S. Department of Justice is still investigating the activities of European listed companies that were active in the U.S. before the UIGEA came into effect, even though all of them pulled out of the U.S. market after the UIGEA became law.

At the end of 2007, the U.S. signed an agreement with the E.U. to compensate European companies affected by the UIGEA. However, the U.S. continued to pursue European gambling firms, and then unilaterally decided to withdraw from its WTO commitments and obligations on international gambling in a hitherto unprecedented move.

Once this withdrawal occurs, the U.S. would no longer be obliged to guarantee future access to its gambling and betting market, the Commission said, but emphasised that such a withdrawal affects only future access to the market, and does not allow the U.S. to disregard its obligations regarding past commitments.

The Commission's investigation started following a complaint from the Remote Gambling Association, a trade body in the UK, which claimed that while prosecuting foreign gambling Web sites, the U.S. continued to allow their U.S.-based competitors to operate. A particularly sore point is the discriminatory nature of US online gambling policies, which allow US horseracing, state lotteries and fantasy sports to accept wagers over the Internet but exclude others.

UPDATE:

The European Commission report elicited an immediate positive reaction from the chairman of the House Financial Services Committee, Congressman Barney Frank, who issued the following statement:

"This report particularly shows the inconsistency of the Bush Administration, which frequently argued we had to abide by the WTO even when it cost American jobs, but ignored the WTO when it didn’t fit the conservatives’ ideological beliefs.

“This is further argument for repealing the law which currently restricts the personal freedom of American adults to gamble online."

Congressman Frank has introduced new legislation seeking to licence and regulate non-sportsbetting online gambling in the United States.  

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