Stalled compensation talks could hasten end to US online gaming
David Gow in
The US ban on British online gaming companies such as PartyGaming and
Sportingbet could be overturned as negotiations between Washington and Brussels
over compensation stalled.
Lawyers for the EU are seeking compensation
for the severe losses suffered by the British and European companies banned
from operating in their biggest market last year, after the Bush administration
cracked down on what it sees as an immoral activity.
which saw billions wiped off their share prices after the ban, would not
receive any cash and instead Brussels wants Washington to open up other areas
of its services industry to European firms, such as insurance or reinsurance.
But such a deal could cost the US billions of dollars and it might opt to allow
overseas operators back into its market under licence.
A bill to regulate and tax online gambling offered
by all operators has been drafted by the liberal Democrat congressman Barney
An EU trade official said: "The UK operators and others who have
lost out would get nothing. But the Frank bill would go a long way to meeting
European and US lawyers warned yesterday that the dispute
posed a "systemic risk" to the credibility of the World Trade Organisation
after it ruled earlier this year that America acted illegally by excluding
online gaming operators from the tiny Caribbean island of Antigua.
the same time, the White House allowed domestic operators to offer gambling
over the internet and withdrew its entire $100bn gambling industry from its
free trade commitments.
Raul Herrera, a Washington-based trade
attorney, said the compensation merited by the EU would be a multiple of 20 or
30 times the $3.4bn of sanctions prepared by Antigua, a country with a GDP of
only $1bn but home to dozens of online gaming operators that once controlled
half the American market. That would imply compensation of up to
But the EU official said this was exaggerated. "If there's
compensation it will not be cash but in the form of the US opening up its
services industry or part of it, say insurance or re-insurance, to others and
not just the Europeans under WTO rules. "
The EU online gaming
industry, mainly based in the UK, employs 15,000 but faces a growing challenge
from US operators such as Yahoo!, Google and Sands.
The US banned the
Antiguans to protect "public morals", saying internet gambling posed
uncontrollable risks to young people and encouraged fraud and money laundering.
The same arguments have been used by some EU countries to protect their
domestic operators, but the US defence at the WTO foundered because America
allows internet betting on horse races and some lotteries.
Cohen, a New York-based public affairs consultant acting for EU operators, said
the US legal regime was "wildly inconsistent" as it allowed online fantasy
sports leagues and racecourse betting but specifically banned other services
provided by European firms.
Clive Hawkswood, chief executive of the
Remote Gambling Association, said the European industry suffered from
outrightly protectionist measures from the US. "It is using unjustified trade
barriers to stop EU operators and a proper licensing system would attract many