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India
The Group purchases
business process outsourcing (“BPO”) services from
its subsidiary, IVY Comptech, in Hyderabad. As part of these
services, IVY Comptech develops software on behalf of the Company.
Indian state law prohibits gaming and maintaining gaming houses
in India. There is, however, no statutory prohibition to the
provision of BPO services (i) for gaming conducted outside India
or (ii) to a gaming house located outside India that does not
offer gaming services to residents of India. Although the law
regarding gaming in India does not reference or specifically
prohibit online gaming, due to the controversial nature of these
activities, there is a risk that allegations could be made that
the Group’s BPO services violate Indian law, including
the Public Gambling Act, the Andhra Pradesh Gaming Act and a
number of other Andhra Pradesh state and central Indian laws
and regulations.
PartyGaming employs technology that identifies the geographic
location of customers who attempt to access its websites in
order to ensure that its online gaming services are not accessible
to any person from India. The Directors have been advised that,
as a result, PartyGaming’s operations in India are in accordance
with local law. However, there can be no assurance that regulators
will not regard PartyGaming’s BPO operation as breaching
Indian gaming law.
Any attempt, whether successful or not, by the Indian authorities
to bring an action against IVY Comptech for breach of its gaming
laws would be likely to require it to take defensive action,
resulting in legal and other costs. Any requirement to relocate
PartyGaming’s BPO operation from India as a result of any
such action could have a material adverse effect on the Group’s
operations and financial position.
Reprinted
with Permission From: ©
2006 PartyGaming. All Rights Reserved
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