US anti-online gambling measures impact EU operators

Malta's Independent newspaper makes good weekend reading this week with an article by David Lindsay on the impact of US discriminatory laws against online gambling operators in licensing jurisdictions like Malta, Gibraltar and the UK, and to a lesser extent Ireland, Sweden, Cyprus and Austria.

European online gambling and betting companies left the US market in 2006, but still suffer legal proceedings by US authorities based on their past activities in the US market. The report comes to the conclusion that these proceedings are legally unjustified as well as discriminatory, because the activities of EU companies took place under the cover of US World Trade Organisation commitments.

The European Commission, spurred by complaints from European operators on the selective enforcement of anti-online gambling laws the US despite its World Trade Organisation agreements, investigated the issue and recently published a damning report on the the US actions, classifying them as obstacles to trade and in conflict with WTO rules and principles. WTO proceedings against the US would be justified, the Commission opined, although it suggested that the issue should be addressed to the US Administration, with a view to finding a negotiated solution.

Lindsay writes that in its detailed and substantiated report, the EC highlighted the example of Malta as demonstrating the ‘adverse trade effects’, within the syntax of the Trade Barriers Regulation, the situation is having on the Maltese economy.

The Mediterraean island has suffered a unquantified but significant negative impact on its economic activity and employment, according to data provided by Malta’s government to the Commission services during the investigation.

The contribution of the gaming industry to Malta’s GDP in 2007 was 5.4 percent, and 6.3 percent of the total gross value added of the Maltese economy. Moreover, the sector in Malta had a 12 percent market share of the industry in 2007, and employed a total of 1 882 staff as of June 2008.

The report concludes that the US measures constitute an obstacle to trade that is inconsistent with WTO rules.

The European online gambling sector is economically significant, the Commission's report noted, estimating that at least 10 000 employees are EU nation residents. The sector also has a significant indirect economic impact on other sectors of the economy which are involved in providing the infrastructure that an Internet business requires, such as financial services, information technology and professional services.

The study offers some useful insights into the remote gambling market, including the position of EU companies and the impact on employment. For example, it remarks that in Malta, “Gambling GGR as a percentage of GDP in 2003 was 7.3 percent compared to the EU average of 0.7 percent”, and concludes that EU companies enjoy a leading position in the world-wide remote gambling and betting market.

In its report, the Commission noted that the EU has developed the world’s leading remote gaming businesess and that many of the world’s largest companies are licensed in and operate from Malta, the UK, Gibraltar, Ireland and Austria. Moreover, the report observed that there are significant back office operations providing technology, marketing and customer service support in those and in other members.

According to professional estimates furnished to the Commisson investigators, over 15 000 workers are employed by the Internet gaming industry in the EU, with a current average annual growth rate of 10 percent. There are eight thousand employees in the UK; 2 000 in Malta; 2 000 in Gibraltar; 1 500 in Ireland; 500 in Sweden; 500 in Cyprus; 500 in Austria; and 500 in the rest of the EU.

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