Regulatory Developments

The Board has always adopted a consistent and transparent global company policy that a fully regulated company acting within the remit of its online licence should be entitled to accept wagers from consenting adult participants in other jurisdictions. This, the Board believes, is the very essence of the internet. Unfortunately, during 2006, the Board has seen the fragmentation of this belief with governments around the world seeking to compromise this policy for various motives, be they fiscal protectionism or political gain.

As we move into a new financial year, there is little sign that governments are ready to embrace the urgent need to harmonise internet trading across geographic borders, nor regrettably are international entities such as the EU and the WTO seemingly able at this time to provide clarity.

As part of the Board’s ongoing operational risk assessment process, it continues to monitor legal and regulatory developments, and their potential impact on the Group’s business, and continues to take appropriate advice in respect of these developments.

US
In September 2006, US Senate Majority Leader First attached a rider to the Safe Port Bill that has become the Unlawful Internet Gambling Enforcement Act. The Act makes it a crime for anyone involved in the business of betting and wagering (for instance the actual operator) to knowingly accept payments, wire transfers or any other bank instrument in connection with unlawful internet gambling. It will also, via yet-to-be-published regulations, require banks, credit card companies and other ‘financial transaction providers’ to put in place procedures to block these payments.

The Act defines ‘unlawful internet gambling’, being that which is ‘unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received or otherwise made’. The Board believes that such definitions are somewhat ambiguous, that elements of the Act are contrary to the 2005 ruling of the WTO in Antigua and Barbuda’s action against the US and, most importantly, the Act will serve only to drive the industry underground and compromise the ‘social responsibility’ objective that is stated as the driving force behind the legislation.

Having taken extensive legal advice, the Board concluded that it had no option but to stop offering its services to US citizens prior to the Act becoming law.

Europe
In the UK, the Gambling Act moves nearer to full implementation (scheduled for September 2007).
Accordingly, the Gambling Commission continues to consult with the industry on the content of
the numerous regulations that will supplement the Gambling Act. The Board has been actively involved in the consultation process. The tax rates that will be imposed on UK-licensed operators under the Gambling Act remain undecided and, as a result, there will not necessarily be an influx of operators into the UK on its implementation. Indeed, the reverse may well be the case as UK operators seek lower taxes offshore.

Elsewhere in Europe, positive developments appear to have outweighed, if not necessarily made the same headlines as, the negative. The current investigation of seven member states for alleged restrictive practice by the European Commission, with the possibility of similar action against eight more, has demonstrated that the European Commission is taking positive action. While the industry was surprised by the arrests of the bwin co-chief executives, the action provoked criticism of France and its apparently unlawful and over-restrictive practices in light of EU law rather than any support for its clampdown on the gambling industry. The European Commission has made it clear that it is watching events closely.

Australia
There have been no significant developments in the Australian gambling market following the completion in the middle of 2004 of the government’s review of the Interactive Gambling Act 2001.