U.S. Response to I-Gaming Probe Stings EU Operators

The European Commission, as part of its investigation into whether United States policy on Internet gambling violates international trade rules, sent a questionnaire to various government offices and agencies in the United States. The document poses 32 questions, but Susan C. Schwab, the United States trade representative, answered it in less than three pages.

The questionnaire is part of a formal European Union process, known as Trade Barriers Regulation, that the commission has initiated in response to a complaint by the Remote Gambling Association.

The process normally begins in response to a complaint by individual member states, but the commission will consider an issue if a complainant represents a sufficient part of an industry, as does the R.G.A.

The association's complaint is based on alleged discrimination under World Trade Organization rules.

According to the R.G.A., a London trade association, "The U.S. Department of Justice is in violation of international trade law by threatening and pressing criminal prosecutions, forfeitures and other enforcement actions against foreign online gambling operators while allowing domestic U.S. online gaming operators, primarily horse betting, to flourish."

Readers are no doubt aware that the United States suffered a loss to the Caribbean nation of Antigua and Barbuda at the W.T.O. last December.

Consequently, it has begun making settlement agreements with various countries so that it can remove gambling products and services from its list of commitments to the General Agreement on Trade in Services, or GATS, as the agreement is often referred to.

The European Union is one claimant among several others, including Costa Rica, Canada and Japan, with whom the United States has settled.

The European Commission, however, is seeking to resolve issues that originated prior to the United States' withdrawal of gambling as a commitment.

"While business was being taken from the U.S. during those years, those companies should be protected from the GATS obligations that were in effect at that time," Clive Hawkswood, chief executive of the R.G.A., told Interactive Gaming News in a telephone interview Tuesday.

Mr. Hawkswood's association is upset that its members, which include operators PartyGaming and 888 Holdings, feel they must reach settlement agreements with the United States Department of Justice for having offered Internet gambling services in the past.

The R.G.A. argues it was not clear that online gambling was illegal during that time, and that the W.T.O. ruling on the Antiguan dispute should protect its members from retrospective action.

As it now stands, R.G.A. operators fear that their owners and officers cannot travel safely to the United States unless settlement deals are reached with the Justice Department. Operators are also concerned that they would be unable to compete in the American market if it ever were to open.

According to a prepared statement from the association, "Over and above the substantial monetary losses suffered by their withdrawal from the U.S. market, non-U.S. companies have had to contend with actual or threatened prosecutions, forfeitures and other enforcement actions from U.S. prosecutorial authorities under pre-UIGEA penal laws."

In terms of the European Commission's formal investigative procedure, the R.G.A. submitted a complaint to the commission in December 2007 and learned in March that it would initiate the investigation process.

The first step for the commission was to obtain a wide range of information on the matter. In attempt to do so, it sent questionnaires to various affected parties.

Mr. Hawkswood has not seen a complete list of recipients, but said they fall into four general categories: remote gambling operators, service suppliers (including banks, payment processors and solicitors), European Union member states, and various United States authorities at both the state and federal level.

It does not appear that responses from United States agencies will be very helpful.

"The U.S.T.R.'s response is a cover letter and two pages," Mr. Hawkswood said. "Basically, the U.S.T.R. said they are replying on behalf of all U.S. authorities and agencies, and they just don't believe there is a case to answer.

"In our view the U.S. has not even tried to answer most of the questions posed, and the tone is, frankly, very dismissive," he continued. "It is clear from the length of the questionnaire (32 questions) that the European Commission has put a lot of work into it, and if I was in their shoes I would be offended by the U.S. response."

Another part of the commission's attempt to gain information entails sending a delegation, composed of Peter Mandelson, the European trade commissioner, and representatives from the European Union Directorate General for Trade, to the United States in late July. The exact dates of the visit and whom exactly the delegation will see is not yet clear.

The delegation intends to hold a press conference while it is in the United States.

Looking ahead, there are three possible outcomes to the European Commission's investigation.

The first is that the commission declares the United States is not in breach of anything. In this case the matter would then be dropped.

A second possible outcome is that the commission decides that the United States has violated trade obligations to the European Union, and then it tries to negotiate a settlement.

The third possible outcome is that the commission finds the United States in error but is unable to reach a settlement with the federal government. In this case, the European Union's only recourse is to file a formal complaint with the W.T.O., following the same legal protocols as Antigua.

The trade representative's office did not immediately respond to IGN's invitation to comment on the matter.