A YEAR ago, in the immediate aftermath of Kate Moss’s exposure for allegedly using drugs, the model was claimed to have lost contracts, lost her reputation and lost her career. Now, of course, she is doing better than ever.

Much the same, it is reckoned by some lawyers, will happen to the gaming industry once the dust settles over the Bill passed by the American Senate ten days ago to clamp down on online gambling. Of course, there has been an immediate impact on the share prices and operations of businesses such as 888 Holdings and PartyGaming — but just wait to see what happens next.

In any case, according to Hilary Stewart-Jones, of Berwin Leighton Paisner, too much is being made of the Senate’s Bill. “We are reeling at the amount of misinformation that has been circulating in the past few days,” Stewart-Jones says. “It’s just a runt of a Bill which, contrary to reports, does not make it a criminal offence for the banks to handle these transactions. There are clear lacunae in the proposed legislation, which means that internet gambling may still be legal. The impact of the Bill is psychological more than anything else.”

The problem is that following the arrests this summer in the United States of British gaming industry executives, the sector is feeling fragile and vulnerable. As Stewart-Jones points out, the move in the Senate is largely protectionist in motivation from a country which, in gambling terms, is “like Sodom and Gomorrah”. “They are making loud noises and using a kind of guerrilla enforcement to get their way,” she says. “Yet in many respects it suits them that this remains a grey area of the law.”

So while the attempt to scare off the British has worked temporarily, the voracious appetite of American gamblers will bubble up elsewhere. And there continue to be ways, legally, for UK companies to continue to do business with their American customers.

“It’s a case of unjustified panic,” Julian Harris, of Harris Hagan, says. “For example, the Bill does not affect payments by cheque and customers will still be able to use overseas payment systems. So if you want to gamble you can use an intermediary as your method of payment. Now, of course, it may take some time for customers to adjust but it does mean that the operators will be able to regroup and find ways of dealing with the new position.”

What undermines the American position even further, according to Craig Pouncey, of Herbert Smith, is that in April last year the Appellate Body of the World Trade Organisation (WTO) found (in the context of a dispute settlement case with Antigua) that the United States had made “specific commitments to allow market access for gambling and betting services supplied from outside its borders”. Additionally, Pouncey says, the Appellate Body found that the US had “violated the resulting obligations of international law by prohibiting non-US internet gambling, inter alia via the Wire Act of 1961. The new law exacerbates the US violation of WTO law. It is openly discriminatory and constitutes a clear violation of the US’s international obligations.”

The chances are then that this temporary setback will simply serve as a trigger for the industry to extend its horizons. “The operators are going to develop their markets outside the US especially in Asia and Europe,” Harris says.

According to Paddy Whur, of Walker Morris, a number of companies had already started to shift their strategic planning away from America towards other markets where the legislation was more straightforward. In fact, the impact of the latest moves in America may actually help to strengthen the European-based industry as operators in territories such as the Caribbean shift to this continent to be based in more reputable jurisdictions.

Unsurprisingly there is an increasing number of countries that want to get into the game. For example, Whur has recently been working extensively with the Government of Cyprus to frame new legislation to enable the gaming industry to establish there.

“Most countries interested in entering the market are looking to the UK’s Gambling Act as a benchmark and that’s what we’ve been doing in Cyprus,” he says. “What we have also done, though, is to build in nuances to reflect the local culture. We talked extensively to all the interested parties from the Church to the tourist industry to ensure that what we are proposing is going to be acceptable locally.”

Whether you like it or loathe it there is a strong instinct for gambling and betting and the firm conviction among lawyers in this field is that it is far better that it should be established legally, regulated properly and taxed effectively rather than fall into the hands of professional criminals.

The irony is that America now stands alongside China as one of the two principal countries trying to fend off international internet gaming despite the fact that the addiction to gambling is deep in both their cultural psyches. Will they be successful in the long term? I wouldn’t bet on it.

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