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The Remote Gambling Association (RGA), an association speaking for some of the largest British and European internet gambling operators, today blasted US authorities in light of the $300M settlement reached yesterday with PartyGaming’s largest shareholder Anurag Dikshit.  Dikshit pleaded guilty to charges under the Wire Act stemming from PartyGaming’s operations in the US prior to passage of the Unlawful Internet Gambling Enforcement Act (UIGEA).  The RGA urged the European Commission to protect EU interests from what it calls, “WTO-violating retroactive and discriminatory enforcement by US authorities.”

“These events show that the outgoing US administration and the Department of Justice have shown a total disrespect for the legal rights of European online gaming companies and those associated with them and a complete disregard for US international commitments under GATS,” said Clive Hawkswood, Chief Executive of the RGA.

EU Commissioner Peter Mandelson wrote to the Bush Administration’s United States Trade Representative (USTR) in June 2008 requesting a freeze on all enforcement actions by the US authorities against European online gaming companies on the grounds that they violated international trade rules set by the World Trade Organization. Mandelson suggested that the prosecutions stop until a proper dialog could take place so as to avoid unnecessary escalation of the dispute at a time when the EU had already launched an inquiry into US actions following an RGA complaint made under EU Trade Barrier Regulations.

“Not only has that request remained unanswered, but now the US authorities, it seems, have succeeded in pressuring a major shareholder into making a deal. A major line has been crossed and it could set a very worrying precedent,” said Hawkswood.

“It’s amazing really that a company which has just been voted by the leading industry publication as ‘responsible operator of the year’ is the one that has been most targeted for this sort of enforcement activity,” Hawkswood continued. PartyGaming Plc never offered sports-betting to avoid violating US law and ceased accepting US customers for its poker and casino games when the still-controversial Unlawful Internet Gambling Enforcement Act 2006 was passed. “Other businesses that are still active in the US market, including notably US operators, do not appear to be targeted in the same way. That this happens while the US Internet gambling market, the biggest in the world, continues to grow and while US companies are free to develop their businesses in Europe, is quite astonishing. In the circumstances it is not unreasonable for us once again to seek the support and protection of the European Commission. We hope and believe that these continuing breaches of international law by the US will serve to strengthen the Commission’s resolve.”

The EU Commission started an investigation of the RGA’s complaint in March 2008. “The US has been given ample opportunity to respond to the legal and factual arguments presented in our complaint,” said Lode Van Den Hende of Herbert Smith, the RGA’s law firm in Brussels. “However, we understand the US’ defense has been flimsy and that the Commission will, therefore, have to confirm the RGA’s assessment of WTO unlawful, retroactive and discriminatory enforcement. The next question is what will be done about it, given the acceleration of events causing this dispute.”

Commenting on Dikshit’s guilty plea, Lode Van Den Hende explained, “What people need to understand here is that pleading guilty does not necessarily mean guilty. It is more than possible for the plea-bargaining system to act as an asymmetrical weapon in the hands of the prosecutors and one has to question whether that is happening here. If one looks at the fact that no court has yet applied the Wire Act to Internet gambling beyond sports-betting and that the activity ceased when UIGEA was passed, one has to wonder whether this is the right way for the US to go about making law – that will have wide repercussions, with regard to EU interests. According to opinion surveys among European companies from all sectors, one of the principal risks of doing business in the US is that politically motivated prosecutors can use criminal investigations as a form of regulation. These events demonstrate that this risk may be a very real one.”

Professor Joseph Weiler, who directs the Jean Monnet Centre for International and European Economic Law and Justice at NYU School of Law, also commented, “In this area, the US has lost all its cases and appeals before the WTO’s highest judicial authorities. And yet in what can only be described as puzzling and haughty contempt for the rule of law, it is acting as if it won those cases. The US is pursuing European nationals and corporations and threatening them with lengthy jail time and punitive fines based on US laws which have already been unequivocally held to be in violation of American WTO obligations. This is without precedent. It deals a blow to the multilateral trade system at the worst possible moment for the world economy and to Western economies which rely increasingly on services for our prosperity. It serves no discernible American national interest. This is a bad day for the reputation of the US in the area of international law.”