The European Commission’s Detailed Opinion on the Draft Belgian Gaming Law

On June 29th, 2009, the European Commission (hereinafter referred to as the “Commission”) has requested from Belgium further explanation in connection with the Draft Belgian Gaming Law. The Commission’s attention is particularly focused on two features of the Draft Belgian Gaming Law and requests that, if appropriate, the features in question be amended so as to be compatible with EU law. Accordingly, the standstill period has been extended during an additional month in accordance with Directive 98/34/EC of the European Parliament and of the Council laying down a procedure for the provision of information in the field of technical standards and regulations and of rules on information society services (hereinafter referred to as the “Directive”).

The story so far

On March 27th as part of the process aimed at removing technical barriers at European level, the Belgian Government notified to the Commission the Draft Belgian Gaming Law that had been approved by the Council of Ministers.

The above-mentioned notification triggers a standstill period of three months during which the Commission and the competent authorities of other Member States can review the Draft Belgian Gaming Law and study it. During this standstill period, the Commission may make objections on the Draft Belgian Gaming Law in accordance with the Directive. In this respect, the Commission sent a detailed opinion, on June 29th, 2009, to Belgium whereby the latter is asked to provide further information on two features of the Draft Belgian Gaming Law and, if appropriate, to amend the features in question so as to be compatible with EU law.

The Commission’s contention is briefly presented below.

First, the Commission emphasizes the need to take into account the conditions which had already to be met in the home Member State, when it comes to assessing the conditions that must be met to obtain a license to operate games on the Internet in Belgium. According to the Commission, the intention is not to automatically grant a license to the licensees who operate legally in another Member State but to avoid “the duplication of safeguards that have already been met in the home Member State”.

Second, the Commission criticizes the requirement that the licensee must first have an offline license and the server must be located in Belgium in order to obtain a license to operate games on the Internet in Belgium.

Belgian authorities are expected to discuss the Draft Belgian Gaming Law with the Commission in the upcoming weeks in order to reach a compromise and adopt the aforementioned Draft Law at the Parliament.

Analysis from an EC law perspective

It is our understanding that the Commission’s detailed opinion relies on sound EC law principles and settled case law of the ECJ1 in the field of both the freedom of establishment and the freedom to provide services with respect to gambling activities in the EU

As regards the requirement that the licensee must first have an offline license and the server must be located in Belgium in order to obtain a license to operate games on the Internet in Belgium, it seems clear that this requirement of the Draft Belgian Gaming Law is incompatible with both the freedom of establishment and the freedom to provide services enshrined in Articles 43 and 49 of the EC Treaty.

First, the aforementioned feature of the Draft Belgian Gaming Law imposes an unnecessary burden on foreign gaming operators willing to penetrate the Belgian market in terms of costly investments (e.g., setting up a legal entity incorporated under Belgian law, costs related to the re-location of the server facilities in Belgium) in comparison with the incumbents. Accordingly, the Belgian market will be less attractive for new entrants thereby constituting an impediment to both the freedom of establishment and the freedom to provide services as interpreted by a settled case law of the ECJ.

Second, it is our understanding that such a requirement could not be justified on the basis of either treaty-based justifications (enshrined in Article 46 of the EC Treaty) or mandatory requirements in accordance with the ECJ’s case law. In this regard, it seems to us plausible to argue that fight against money laundering and players’ addiction (see Gambelli and Placanica rulings referred to above) can be achieved by less stringent measures, such as an appropriate monitoring system, which would not go beyond what is necessary to attain the legitimate aim pursued.

As regards the Commission’s opinion concerning the need to take into account the conditions fulfilled in the home Member State, when it comes to assessing the conditions that must be met to obtain a license to operate games on the Internet in Belgium, it is undeniable that such an approach is consistent with both the freedom to provide services (Article 49 of the EC Treaty) and the so-called “conditional recognition principle”.

The wording of Article 49 of the EC Treaty is quite straightforward and needs not to be addressed here.

With regard to the “conditional recognition principle”, it is worth recalling that it is settled case law of the ECJ that a host Member State needs to take account of the conditions fulfilled in a home Member State when the former assesses whether to grant a license to exercise a regulated activity in its jurisdiction. In this connection, it is undisputed that Belgium should be entitled to elaborate its own gaming legislation (with a national licensing regime) but must nevertheless take into account the licenses and requirements set out by other Member States. Thus, any EU-based operator should be eligible for a license in Belgium, without being required to establish (e.g., set up a legal entity incorporated under Belgian law) in Belgium. The best way to achieve this is to generalize the cooperation agreements between the EU gaming regulators so that a licensee in Member State A would obtain more easily (simplified procedure) its license in Member State B. The same system of cooperation agreements should be advocated with respect to “proper jurisdictions” outside the EU (e.g., Alderney, Isle of Man).

To conclude, the above-mentioned principle is the only viable regime, a compromise between (i) pure protectionist systems (e.g. the Netherlands), which deny any value as regards other EU licenses and (ii) pure liberal systems (e.g., the United Kingdom), which apply without restrictions the mutual recognition principle.

1ECJ, Schindler, 24 March 1994, C-275/92; ECJ, Läärä, 21 September 1999, C-124/97; ECJ, Zenatti, 21 October 1999, C-67/98; ECJ, Gambelli, 6 November 2003, C-243/01 ; ECJ, Lindman, 13 November 2003, C-42/02; ECJ, Placanica, 6 March 2007, C 338-04.