EU threatens US with new WTO action over online gambling

The Commission will look into industry claims that the US is selectively prosecuting EU and not US online gambling operators. It will also probe whether the US ban itself violated the General Agreement on Trade in Services (GATS).

In 2006 the US passed the Unlawful Internet Gambling Enforcement Act, which outlawed online gambling with exceptions for state lotteries and horseracing. No EU company now operates online gambling services in the US.

Trade body the Remote Gambling Association filed a complaint with the European Commission in December, saying that the law and prosecutions resulting from it unfairly targeted EU firms while allowing US firms to operate.

"Such actions violate World Trade Organisation rules, enshrined in an international treaty signed by 150 nations, including the US, which prohibit its signatories from engaging in protectionism," said an RGA statement at the time.

“We have been left with no choice but to pursue all legal avenues available to challenge the US Department of Justice for its discriminatory enforcement activities against European online gaming operators,” RGA chief executive Clive Hawkswood said.

The Commission has now agreed to take up that complaint and launch a full investigation into the issue.

At the time of the law's passing and prosecutions against EU companies and executives, the US had made commitments through the WTO to allow international competition in its gambling market.

It is seeking to withdraw from those commitments and the Commission agreed a compensation package in December for the lost trading opportunities resulting from its withdrawal.

The RGA, though, claims that that deal did not cover the period prior to its agreement, and it says that EU companies are being prosecuted for their behaviour while there was a WTO agreement in place to open up the gambling market.

"Although this is a very serious violation of the WTO rules, it is not a difficult issue to resolve," said Hawkswood. "The US simply needs to end its discriminatory prosecution of EU companies,  and their shareholders, who have after all been out of the US market for almost two years now."

"The US should have every interest in sensibly resolving the issue in a constructive way that draws a line in the sand and clarifies the situation," he said.

The Commission said that EU companies are still under investigation. "The United States Department of Justice is currently investigating the activities of EU companies that took place prior to the ongoing withdrawal of US GATS commitments on gambling," it said in a statement. "The lack of clarity of the relevant US domestic legislation, together with the existence of United States WTO commitments on gambling and betting services, and the presence of US suppliers on the market, had led foreign companies to also offer their services in the US."

"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," said EU Trade Commissioner Peter Mandelson. "We are interested in a constructive and mutually satisfactory solution to this issue".

The Commission said that it would examine the factual and legal issues involved and, if necessary, would launch a new case against the US at the WTO.

The US already faces a WTO case regarding its GATS commitments on gambling. Antigua and Barbuda is pursuing a case in which it and many other countries are seeking compensation over the lost trading opportunities resulting from US online gambling bans.

The RGA's Hawkswood expressed the frustration of operators in December when his organisation's complaint to the Commission was lodged.

“How would US investors and businessmen feel if they invested in a business in the United Kingdom based on international law commitments, and then suddenly the UK not only passed new laws forcing them to shut down their business, but then tried to throw them in jail for past activities while still allowing their domestic competitors to continue on doing the same thing?” he asked. “That’s what is happening to our industry in the US."