The European Union and the United States are heading for a head-on collision over the issue of online gambling.

Last week, the European Commission sent a formal letter to Washington asking the White House to explain its position following an appeal by European online gambling operators that the Bush administration is unfairly targeting non-US firms in order to protect American websites.

However, Susan Schwab stated that there was ‘no basis for any allegation of ‘discriminatory enforcement’ of US gambling laws’. She said that the Commission’s queries were based on mistaken assumptions and that the 2006 legislation did not alter which gambling activities were lawful or unlawful. Enforcing US law and bringing charges was based on a number of factors but nationality was not one of them, the Representative revealed.

The dispute could escalate next month when Peter Mandelson, Trade Commissioner for the European Union, accompanies a delegation to Washington in order to push the issue with US lawmakers and hold a press conference.

Despite an exodus of online providers from the US market following the passage of UIGEA, the US Department of Justice is continuing to pursue UK-listed companies such as PartyGaming, Sportingbet and 888 Holdings for violations of its gambling laws. The White House is seeking settlements and has issued subpoenas against some of the European banks that advised them.

The fear among several large European companies that they may be tracked down by the US Department of Justice for activities in the United States might worsen the issue, leading to ongoing negotiations with the Americans and the possibility of "settlement" agreements.

The US is guilty of “unfair and discriminatory treatment of the EU gambling industry and the continuing threat of prosecutions cannot be allowed to go unchecked,” claims Clive Hawkswood, the Remote Gambling Association's chief executive.