Monday, December 22, 2008

Dikshit deal elicits response from RGA, by Sarah Polson - 18th December 2008

Anurag Dikshit, one of PartyGaming's founders, may have cut a deal with the U.S. government over online gambling, but that doesn't mean the rest of the industry is willing to roll over on the matter.

The Remote Gambling Association issued a press release on Wednesday in response to Dikshit's deal urging the European Commission to take steps to protect European Union interests from the "retroactive and discriminatory" enforcement by U.S. authorities in online gambling.

Dikshit pleaded guilty to illegal online gambling charges on Tuesday and agreed to pay $300 million to the U.S. government for PartyGaming's online poker and gambling business in the United States prior to the passing of the Unlawful Internet Gambling Enforcement Act.

PartyGaming never offered sports betting, and ceased to accept U.S. customers for its poker and casino games when the UIGEA was passed.

"These events show that the outgoing U.S. 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 U.S. international commitments under GATS," said Clive Hawkswood, RGA chief executive.

In June, EU Commissioner Peter Mandelson wrote to the U.S. government requesting a freeze on all enforcement actions by U.S. authorities against European online gambling companies. Mandelson's reasoning was that the actions violate international trade rules set by the World Trade Organization.

Mandelson asked that prosecutions stop until a proper dialogue can take place, thereby avoiding unnecessary escalation of the dispute.

The EU had already launched an enquiry into U.S. actions following an RGA complaint made under EU Trade Barrier Regulations.

"Not only has that request remained unanswered, but now the U.S. 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," Hawkswood said.

PartyGaming Plc., which operates PartyPoker, and its shareholders are not obvious targets for illegal online gambling enforcement action, according to the RGA.

The company is listed on the London Stock Exchange, is fully licensed in an EU jurisdiction, was among the first to cease accepting U.S. customers once the UIGEA was passed, and has never offered sports betting in order to avoid violating the Wire Act. It does offer online poker and online casino games.

"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 while other businesses that are still active in the U.S. market, including notably U.S. operators, do not appear to be targeted in the same way," Hawkswood said.

He points out that while this is going on, the U.S. Internet gambling market continues to grow and is free to develop its businesses in Europe.

"In the circumstances it is not unreasonable for us once again to seek the support and protection of the European Commission," Hawkswood said. "We hope and believe that these continuing breaches of international law by the U.S. will serve to strengthen the Commission's resolve."

The EC started an investigation into the unfair prosecution of EU-based online gambling companies in March after the RGA brought the issue to the EU's attention.

"The U.S. 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 U.S.' 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."

Professor Joseph Weiler, who directs the Jean Monnet Centre for International and European Economic Law and Justice at NYU School of Law, offered his comments as well.

"In this area, the U.S. 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," Weiler said.

"The U.S. is pursuing European nationals and corporations and threatening them with lengthy jail time and punitive fines based on U.S. laws which have already been unequivocally held to be in violation of American WTO obligations. This is without precedent."

Weiler also pointed out that the issue deals a blow to the multilateral trade system at the "worst possible moment" for the world economy and to the Western economies which rely on services for their prosperity.

"It serves no discernable American national interest, and this is a bad day for the reputation of the U.S. in the area of international law," Weiler said.

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