EU out of U.S. online gambling market

The European Commission dealt a blow to European online gaming companies Monday when it accepted a U.S. offer of openings in other sectors as compensation for closing the U.S. gambling market to foreign firms.

European firms such as PartyGaming and Bwin Interactive Entertainment had hoped that the European Union executive body might shun a settlement and push to restore their ability to operate in the world’s biggest market.

“A bilateral agreement was signed in Geneva, which provides EU service suppliers with new trade opportunities in the U.S. postal and courier, research and development, storage and warehouse sectors,” the European Commission said in a statement.

“The U.S. also made concessions in the testing and analysis services sector,” the commission said, adding that it would still try to dissuade the United States from discriminating against foreign operators.

Gretchen Hamel, a spokeswoman for the U.S. trade representative’s office in Washington, said the United States had reached a compensation deal with the EU, Canada and Japan.

Hamel declined to estimate how much the U.S. market openings in warehousing, technical testing, research and development and outbound international letter delivery would be worth to the three trading partners.

The United States hopes to persuade India, Costa Rica and Macao to accept similar deals, but those countries have the option over the next 45 days to ask for World Trade Organization arbitration, Hamel said.

A representative of Europe’s online gaming sector, which saw billions of euros of market value wiped out by the U.S. restrictions, said the announcement was a disappointment.

“The commission can still press for an opening up of the market but the leverage of the outstanding [compensation] negotiations has been taken away,” said Clive Hawkswood, chief executive of the Remote Gambling Assn.

The case dates to April 2005 when the WTO ruled that a U.S. law allowing only domestic companies to provide online horse-race gambling services was discriminatory.

That case was brought by Antigua, which has asked the WTO for permission to retaliate against the United States by suspending copyright protections on about $3.4 billion of American movies and music each year.

Mark Mendel, an attorney representing Antigua, said he still hoped for a ruling on that issue before the WTO closes down next week for the holidays.

“Nobody in Antigua really wanted our claim to be overshadowed by the EU,” he said.

Last year, Congress tightened restrictions on Internet gambling by making it illegal for banks and credit card companies to make payments to online gambling sites.

In May, Washington said it was retroactively excluding gambling services from market-opening commitments it made as part of a 1994 WTO deal, kicking off compensation talks with the EU and other countries including Japan and India.

A spokesman for Austria’s Bwin said that the company had not expected the talks to yield more at this point and that it hoped the commission would still press for an end to the restrictions.

“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.

Bwin shut down its U.S. poker site and wrote off $717 million of investments last year after the United States in effect outlawed Internet gambling.