number of PartyGamings customers, generating six per
cent of PartyGamings revenue in 2005, reside in Canada.
PartyGaming advertises its play money gaming site in Canada
and receives funds from, and pays out winnings to, its Canadian
based customers. In addition, PartyGaming contracts with
a third party that operates its real money poker gaming
servers located in the Mohawk Territory of Kahnawake. In
addition to its Gibraltar gaming licence, PartyGaming holds
a secondary gaming licence issued by the Kahnawake Gaming
The Kahnawake Gaming Law was enacted in 1996 by the Kahnawake
Mohawk Council to permit online gaming operators to be licensed
in the Kahnawake Mohawk Territory, an Indian reserve. Although
residual tensions exist between the government of the province
of Quebec and Kahnawake as to the validity of the sovereignty
of the Mohawk Indians and the sovereign powers of Indian
societies have not been upheld by Canadian case law in the
past, the Directors do not anticipate an imminent challenge
to the regulatory regime in the territory.
If the prosecuting authorities in Canada regarded the computers
of PartyGamings customers in Kahnawake as being both
in Canada and a device for gambling or betting,
prosecutions could be brought in Canada against such customers.
In addition, the Canadian criminal code prohibits the offering
or advertising of gaming services to customers resident
in Canada. This prohibition has been applied in case law
to an online company with a physical presence and assets
in Canada. As a result, criminal or civil action could be
taken in Canada against the Group or the Directors.
Canadian authorities may seek to disrupt operation of the
servers used for the Groups poker business in Kahnawake,
either through political pressure on the Mohawk tribe or
by seizure of the equipment hosting the Groups poker
site, which would have a material adverse impact on the
Groups financial position. Any attempt, whether successful
or not, by the Canadian authorities to bring an action against
any Group company or its directors would be likely to require
the Group to take defensive action, resulting in legal and
other costs and in the diversion of management time and
resources. Any such action against the Group, the Directors
or customers could have a material adverse effect on the
Groups financial position.
Notwithstanding that its activities may be deemed illegal
under Canadian federal and provincial law, there are jurisdictional
issues regarding the imposition, adjudication and enforcement
of Canadian law against PartyGaming and its Directors, as
the Groups relevant operating subsidiaries are not
incorporated in Canada and do not have a physical presence
or own any assets there other than the Groups real
money poker gaming servers in Kahnawake.
The Directors have also been advised that, for jurisdictional
reasons, it would be difficult for any company to be prosecuted
on a criminal charge in Canada or for a director to be prosecuted
on a criminal charge on his own behalf or on behalf of the
company of which he was a director if he were not physically
present in Canada.
In any case, there can be no guarantee that any renewal
of the secondary licence from Kahnawake will not be on terms
that are less favourable to the Group or that new, renewed
or subsequent licences or approvals that may be required
of the Group in the future will be granted. Partly as a
result of these risks, the Group is in the process of seeking
to reduce its reliance on the Mohawk Territory.
In addition and in accordance with its Gibraltar gaming
licence, PartyGaming has moved its casino and bingo servers
from the Mohawk Territory to Gibraltar and will relocate
its poker servers to Gibraltar within six months of sufficient
telecommunication infrastructure becoming available.
with Permission From: ©
2007 PartyGaming. All Rights Reserved