EU and US Reach Deal Regarding Internet Gambling Dispute

European online gaming companies were dealt a blow on Monday as the European Union agreed to a US offer to open some other services markets as compensation for closing its online gambling market to foreign operators.

Shares in UK-listed PartyGaming fell by 4.1 per cent and Bwin, the Austrian operator, dropped 2.1 per cent as hopes for a tougher line from the EU in support of online gambling operators shut out of the US appeared to have been dashed.

“We continue to believe that it is better to regulate than to prohibit, because the reality shows that the prohibition only drives out the transparent, listed operators,” he said. “We trust the commission will continue to push further for this.”

The EU said the bilateral deal with the US, signed in Geneva, would provide European companies with new trade opportunities in the US postal and courier, research and development, storage and warehouse sectors. The US had also made concessions in the testing and analysis services sector.

EU officials said they could not immediately say what the deal was worth. Peter Mandelson, EU trade commissioner, said last month that he would be pressing for “substantial” compensation. European gaming companies have claimed losses of an estimated $4bn a year from the US move.

The compensation accord arises from a US decision last May to cancel its market-opening commitments for the gambling sector made in the 1986-94 Uruguay Round that established the World Trade Organisation.

The decision, which under WTO rules requires Washington to negotiate compensation with affected trading partners, followed a successful dispute case brought by the tiny Caribbean state of Antigua and Barbuda.

The WTO ruled in that case that the US was entitled to ban all forms of internet gambling in the public interest but that it unfairly discriminated against foreign gaming companies because it allowed US operators to offer remote betting on horse and dog racing.

Washington, which says it never meant to open up its gambling sector in the first place, has been negotiating with Canada, India, Macao, Costa Rica, as well as the EU and Antigua. Japan has already settled.

Brussels said the EU would continue to press for non-discriminatory treatment in US internet gaming legislation. “While the US is free to decide how to best respond to legitimate public policy concerns relating to internet gambling, discrimination against EU or other foreign companies should be avoided,” said Peter Power, EU trade spokesman.

Separately, a WTO arbitrator is due to rule in the next few weeks on a request by Antigua to impose $3.4bn in trade sanctions against the US for its failure to comply with the WTO’s dispute ruling against the foreign online gaming ban. Antigua has threatened to break US copyrights and trademarks.

Clive Hawkswood, of the Remote Gambling Association, said he was “disappointed but not surprised” at the EU settlement. The sector’s best hope was for the EU to take its claim against the US to arbitration, given the number of European-based online gambling companies affected by the US clampdown.

“Our goal became to try to keep the pressure on the US. The case has raised the profile of the industry in the US, it has brought the issue to a wider constituency than those people morally opposed to gambling in general,” Mr Hawkswood said.

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Frances Williams in Geneva and Roger Blitz in London, Financial Times of London

Originally published to Gambling911.com December 17, 2007 8:38 am EST