by Hillary LaClair, Senior Editor
March 2, 2009
Late last year, the European Union sent a high level delegation to investigate claims that the U.S. Department of Justice has been and continues to discriminate against offshore online poker rooms and gambling websites, violating international free trade agreements. Congress and members of the executive branch were visited by a team of E.U. investigators in September, headed by senior E.U. trade official M. Jean-Francois Brakeland, head of the European Commission’s dispute settlement office. The formal investigation has ended, however, and when the Commission’s report is released this month, it allegedly will state that the U.S. did in fact violate global trade agreements.
It is yet uncertain what effect the European Commission’s report will have on the U.S., or whether like Antigua, the EU will file for World Trade Organization arbitration. The Commission reportedly found that the U.S. had targeted EU online poker rooms and gambling websites specifically for legal enforcement, while allowing U.S. counterparts to operate freely in the U.S. market – despite the reintroduction of the Unlawful Internet Gambling Act of 2006 (UIGEA).
A source told Reuters in Brussels last month that the investigation may result in the European Commission taking action against the U.S., but that they first expect the EU will begin negotiations with the Obama administration and newly appointed Trade Representative, Ron Kirk.
“The report next month will back the EU’s position, but the Commission intends to deliver its findings to Washington which it hopes will persuade the U.S. to start bilateral talks to find a solution without going to the WTO,” said the source. “A case would take a very long time tied up at the WTO and in the current spirit of avoiding protectionist moves in line with the G20 [Group of 20 emerging and industrial nations] statement, action should be avoided.
In the past, Antigua had launched litigation against the U.S. with the help of the WTO, who found the U.S. guilty of similar protectionist violations of the international treaties. Although several talks ensued, the U.S. has failed to pay out the $21 million settlement that it had agreed to. Since then, however, the Obama administration was voted into office and Ron Kirk was appointed as the next U.S. Trade Representative.
Kirk succeeds Susan Schwab of the Bush administration, whose course of action in these international trade disputes has essentially been to ignore them. While she has been involved in several negotiations, she has neglected her responsibilities to the European Union.
Kirk is known as a patron for free trade. He has been entrusted with the responsibility to maintain a good standing with foreign markets. John Murphy, Vice President for international affairs at the U.S. Chamber of Commerce praised Kirk’s efforts in keeping free trade alive.
“Trade has been one of the only bright spots for the U.S. economy, and the Obama team is going to need every tool in its tool box,” said Murphy.
Mickey Kantor, former USTR in the Clinton administration commented, “He’s an incredibly impressive guy with a wonderful background, particularly for this job. You’ve got to understand both substance and politics to be successful, and he certainly understands trade being from Texas.”
UK online poker rooms and internet gambling operators hope that the Obama administration will overturn the UIGEA, or ideally reach an agreement with countries where online gambling is legal, regulated and licensed, wherein it will cease to prosecute operators that comply with the UIGEA. Party Poker co-founder, Anurag Dikshit is the latest to face U.S. prosecution. Diskshit, although his company had ceased accepting U.S. wagers with the incorporation of the UIGEA, plead guilty to charges of accepting U.S. bets prior to its inception – and a $300 million settlement.
The European Union may choose to compensate for its losses in U.S. online poker players and gamblers by offering its services to other business demographics.
The UIGEA has criminalized financial transactions involving online gambling, although it does not specifically mention internet gambling as being unlawful. Banking facilities have struggled to determine what actually constitutes as illegal internet gambling, as attempts to have it clarified in U.S. law have been unsuccessful. The rules were first published last year, and the UIGEA was put back into place by Bush Administration as a “midnight drop” law. It is hoped that the Midnight Rule Act, which would allow the current administration to overturn such laws, will be voted on, allowing the U.S. to come to an agreement with the EU before the WTO gets involved.
In the meantime, U.S. Democrat Barney Frank, Chairman of the House Committee on Financial Services, has reintroduced his proposal that would legalize internet gambling, in an effort to establish a licensing and regulatory, as well as tax, framework for the internet gambling industry.
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