EU mulls legal challenge to US internet gaming clampdown

Laws that prevent Amer-icans gambling online on European-run websites may be challenged, the EU said yesterday, raising the prospect of a fresh trans-atlantic trade rift.

Charlie McCreevy, the European Internal Market Commissioner, issued the threat against the background of rising US pressure on the gambling industry.

At the heart of the dispute is the Unlawful Internet Gambling Enforcement Act of 2006 under which US financial institutions are in effect barred from making payments with US credit cards to online gambling sites. The law, which technically prohibits payments involving "inter-state or foreign commerce", wiped billions off the market values of British online gaming companies when it was passed last year.

Washington has long regarded online gambling as illegal and cracked down on US firms. Because of that, foreign - particularly British - companies have suffered most from the legislation.

Critics accuse the US government of seeking to enforce their own laws on businesses based outside the country.

Mr McCreevy told the European Parliament: "In my view it is probably a restrictive practice and we might take it up in another fora." He argued that the US is protecting its own gambling industry by stopping foreign companies from building up an online betting sector. Mr McCreevy said: "It's not my intention to bring forward a harmonised piece of legislation on gambling in the European Union."

US pressure on the industry continues and last week the US Justice Department demanded information from some of the world's biggest investment banks as part of the investigation into online gambling companies such as Britain's PartyGaming.

Mr McCreevy, who takes a well-known interest in horseracing, said that the US online gambling rules were a "prima facie" case of protectionism and that the World Trade Organisation was a possible venue for tackling them.

Officials said that he was in consultation with the EU Trade Commissioner, Peter Mandelson, who has responsibility for pursuing such disputes.

European officials are watching two cases already before the WTO in which Antigua and Barbuda challenged American gaming rules. An adjudication on the implementation of an earlier ruling against the US is expected in the coming months and, if it goes against the US, online gambling firms in the UK are likely to put pressure on the EU to press their case against the US.

A spokesman for Mr Mandelson said: "We recognise the right of a country to regulate gambling and we are following the Antigua case closely because if there is discrimination that would clearly affect Europe."