Update on relevant 2007 case law
In this article, we provide an overview of European case law that is relevant for private gaming operators. We discuss case law from Germany, Denmark, Sweden, the Netherlands, Malta, Belgium, France and Norway. We also discuss the major regulatory and political developments.
Germany:
2007 has been marked by mostly “favorable” case-law for private gaming operators and by seven references for a preliminary ruling on the interpretation of national betting and gaming provisions with article 49 EC Treaty, currently still pending.
Moreover, following the entry into force in January 2008 of the new interstate treaty (“Glücksspielstaatsvertrag”), the European Commission has opened an infringement proceeding against Germany. The European Commission questions whether the treaty is consistent with article 43 and 49 of the EC Treaty. It also has doubts on the consistency of the treaty with article 56 of the EC Treaty (free movement of capital).
Here are a few lines on the recent relevant national decisions:
– In January 2007, the Higher Administrative Court of Bavaria decided that the Bavarian ministry for research and sciences was not entitled to order the Bavarian agency for new medias to prohibit the advertising of sports betting.
– In May 2007, the Higher Administrative Court of Bavaria ruled that a national measure prohibiting internet gaming was not justified since current technologies do not permit the enforcement of such a prohibition.
– In July 2007, the administrative court of Stuttgart made a reference for a preliminary ruling to the ECJ concerning the consistency of the sports betting monopoly and of national gaming licences with articles 43 and 49 of the EC Treaty.
– A Stuttgart court also held that the local football club (VFB Stuttgart) could not be prevented from advertising for Austrian bookmaker Bwin.
– On 6 November 2007, the administrative court of Hesse cancelled the regional authorities decision to prohibit Bwin from offering its services in the state of Hesse on the ground that it was technically impossible to prohibit the provision of online gaming in one state only.
– The administrative court of Dresden cancelled in October 2006 a decision by the German authorities ordering Bwin and other sports betting operators to stop their activities in Germany. The court considered that the situation was not clear in view of national and European Community law. It also referred to the March 2006 Federal Constitutional Court decision ordering the German state to reexamine the national sports betting monopoly in the light of European Community law.
– The Federal Court of Justice confirmed in August 2007 a regional decision cancelling prosecutions against a bookmaker accused of having operated illegal sports betting in the state of Saarland in 2003 and 2004.
– In December 2007, the Higher Administrative Court of Saxony decided that the licence granted to Bwin by the ex RDA in 1990 entitles it to offer online sports betting only in the 5 ex-DDR states. This decision contradicts previous regional court decisions (Hesse and Bavaria).
– The administrative court Frankfurt/Main decided in January 2008 in interim proceedings in favor of a suspending effect for a private sport betting provider against a cease and desist order.
– In January 2008, the administrative court of Schleswig seized the ECJ of a request for a preliminary ruling in the context of the new sports betting monopoly. The hearing in Schleswig pertained to the law suit filed by an online provider of sports bets based in Gibraltar who is looking for the acknowledgement of his European licence for the German Federal State of Schleswig-Holstein as well, on the basis of the principle of the freedom to provide services. The court asked the ECJ whether consistent and systematic restrictions of the sports betting market were possible, when areas (i.e., slot machines) which are relevant with regard to addiction are not included in the scope of application of the interstate treaty.
– The administrative court of Regensburg suspended in January 2008 a defended claim against a cease and desist order with regard to the preliminary rulings at the ECJ.
– In February 2008, German Federal Court of Justice dismissed competition law actions filed by state-run gambling providers (among others Westlotto) against private sports betting providers holding ex-DDR and EU licences (among others bwin).
– In March 2008, the Federal Court of Justice dismissed Bwin’s claim to delay the application of a Cologne court decision dating September 2007 which was rendered following an action brought by Westlotto and granting the latter the right to claim damages for unlawful competition; this decision was rendered whilst Bwin’s appeal of the Cologne court decision is still pending.
– In March 2008, the Higher Administrative Court of Baden-Württemberg allowed an appeal against a dismissive judgment by the Administrative Court of Karlsruhe, due to substantial doubts as to whether politics regulating games of chance in Germany are implemented in a consistent way. The case concerns a claim by a plaintiff that its UK licence is also valid in the state of Baden-Württemberg and is to be regarded as a licence under German law. The court will most probably suspend the proceedings until the ECJ has replied to the requests for preliminary rulings of which it had been seized.
– In April 2008 the administrative court Berlin explained in detail why in interim proceedings the private interests of the sports betting provider outweigh the public interest. The court especially elaborates on the guidelines set by the Federal Constitutional Court in 2006 and gives examples why most probably these guidelines have not been realized in Berlin.
– For the first time a German court decided in principal proceedings in favor of private sports betting broker. In April 2008 the administrative court in Freiburg focused on the legal situation in Baden-Wuerttemberg and how the state monopoly is realized. The court came to the conclusion that the marketing concept of the state provider is contradictory to the goals of the interstate treaty.
Denmark
Case law
Danish case-law in 2007 includes two judgments that are noteworthy to the gaming industry. Although the first one was favorable for specific private gaming operators, the second overturned the first judgment. These judgments were rendered in a case revolving around the legal regime applicable to poker. In July, a District Court in Lyngby acquitted the president of the Danish Poker Association of charges of organizing illegal gaming. The District Court considered tournament poker (Texas Hold ‘em style) to be skill game and not a game of chance. However, this landmark judgment was overturned by the High Court on 19 December 2007, ruling that poker was in fact a game of chance. It is reported that an appeal at the Supreme Court can be awaited.
Political developments
Developments outside the courts are also noteworthy. On 21 March 2007, the European Commission sent Reasoned Opinions to several Member States: Hungary, Finland and Denmark. The European Commission stated that the regulations on sports betting of these countries are in breach of the freedom to provide services, as laid down in article 49 of the EC-Treaty. The Commission considers these regulations to be incompatible with EU law, and have not been shown to be necessary, proportionate and non-discriminatory.
The pressure from the European Commission may have been effective. In April 2008, the Minister of Tax Kristian Jensen stated that the Danish government is considering a reform of the gaming market which includes licensing opportunities for online gaming and skill games (including sports betting). The Minister emphasized that the licensing requirements for online gaming and skill games will be strict.
Sweden
Case law
A judgment by the Supreme Court ordered the Court of Appeal to assess the compatibility of Swedish gaming law with the EC-Treaty. This decision obliged the Court of Appeal to assess the compatibility of Swedish gambling legislation with EC law in light of the Reasoned Opinion sent by the European Commission and the case-law in Placanica (C-338/04). Following this judgment, the prosecution of media that carried gaming ads was halted by the Prosecutor-General.
Infringement proceedings
The European Commission has criticized both the Swedish legal regime on sports betting and the Swedish legal regime on poker. Regarding sports betting, the Swedish government received a Reasoned Opinion on 27 June 2007, together with France and Greece. A Reasoned Opinion constitutes the second stage in an infringement procedure. The third and final stage is a legal procedure with the European Court of Justice, in which Sweden can be ordered to alter its regulations.
The Netherlands
Case law
Several private gaming operators have tried to obtain gaming licenses in the Netherlands. The Minister refused all of these applications. Two remarkable judgments on refusals for gaming licenses were rendered by the Council of State in 2007. These judgments paved the way for a third judgment by that same judiciary in which the Council referred to the European Court of Justice for an answer on preliminary questions regarding the application for gaming licenses. In the first case, a District Court had rendered a positive ruling for private gaming operators, but the Council of State overturned that ruling. In the second case, the Council itself gave a ruling that can be considered positive for the private gaming industry.
– The first judgment revolved around the refusal of a casino license to CFR, a subsidiary of French casino operator Tranchant. The District Court of Breda had ruled that the State had not proven that the monopoly is a justified infringement of EU-law, while referring to the Gambelli judgment. The Council of State overturned this decision, stating that the Dutch regulations are coherent and systematic and fall within the criteria formulated by the European Court of Justice in Gambelli and Placanica.
– In the second judgment, the Council’s ruling was more positive to the private gaming industry. The well-known lottery intermediary Schindler had applied for a license to operate its own charity lottery. Three of such licenses are already issued at a semi-permanent basis and there is no law that restricts the number of operators. This is a remarkable difference with the CFR decision, because the monopoly for the operation of casinos is laid down in the 1964 Gaming Act.
– On 14 May 2008, the Council of State rendered its referral judgment in the case Betfair. It asked questions on the subjects of mutual recognition of gaming licenses, equal treatment of potential candidates for licenses and the transparency of the allocation procedure. Further more, it asked under which conditions the exclusion of third parties in the allocation of gaming licenses is justifiable.
– In the proceedings on the merits, the De Lotto vs. Ladbrokes case is pending before the highest civil judiciary; the Supreme Court. The opinion of Advocate-General mr. Keus is noteworthy. He opposes a referral to the European Court of Justice, because he considers the pending infringement procedure by the EC on the very same subject to be more suitable to assess the compatibility of the Dutch policy on sports betting with European law. Despite his reluctance to refer to the ECJ, his opinion does contain well thought proposals for preliminary questions.
Political developments
Besides the developments in case-law, their have also been regulatory issues that are noteworthy to the private gaming industry. At the moment, all offering of online gaming to Dutch residents is prohibited. To counteract private gaming operators, the authorities intended to create a state monopoly for online gaming by introducing a new piece of legislation, the Online Gaming Act. The exclusive license would have been issued to state owned casino monopolist ‘Holland Casino’. The Senate rejected the proposed Online Gaming Act in the narrowest vote possible.
– Another method for the Dutch authorities to counteract private gaming operators is the blocking of financial transactions with online gaming operators. This only relates to banks with Dutch licenses that process direct transactions between Dutch residents with Dutch bank accounts and a specific black list of online gaming operators.
– Because the payment blocking can be easily circumvented, the Minister also intends to address Internet Service Providers. The Minister considers these service providers to be facilitating an illegal act. The Ministry will ask these service providers to block the access to the websites of online gaming operators. It is likely that this will also include a blocking of the gaming servers.
Infringement proceedings
In 2006, the European Commission sent a Letter of Formal Notice and a Supplementary Letter of Formal Notice to the Dutch authorities, regarding the regulations on sports betting who seem to be violating the freedom to provide services. On 28 February 2008, the European Commission also sent a Reasoned Opinion, which is the second stage of an infringement proceeding. It is reported that in this Reasoned Opinion, the European Commission asked the Netherlands to alter its regulations on sports betting. The third and final stage is a legal procedure before the European Court of Justice, which may order the Netherlands to alter its regulations.
Malta
Case law
On 9 January 2007, the Court of Appeal delivered a favorable judgment to the private gaming industry. In this landmark judgment, the Court prevented the enforcement in Malta of a French judgment in a case between French horse betting operator PMU and the Maltese company Zeturf. It is noteworthy that under Council Regulation 44/2001, only judgments in civil and commercial matters in the Member States of the EU can be enforced. The Court of Appeal decided that the French judgment consisted of a public law nature, concerning the protection of state monopolies.
Belgium
– The sponsoring of cycling teams by private gaming operators led to the decision of race organizer ASO to refuse a ProTour cycling team to participate in two ProTour Belgian cycling events. In a judgment of 27 June 2007, the president of a Belgian commercial court ordered the ASO to allow the participation of a cycling team sponsored by the private gaming operator Unibet.
– The Liège first instance court dismissed an action filed by the French tennis Federation against three private online betting operators (Ladbrokes, Bwin and Betfair) on 28 April 2008. The action was aimed at preventing Belgians from betting on the results of the Roland Garros tournament and the French Master Series. The judges concluded that these private operators had behaved in a prudent and diligent manner, and secondly, considered that the use of a sports event name for online betting cannot be considered an act of parasitism. The use of the name of a sports event is necessary to identify the game on which the participant can place a wager. It is noteworthy that in France, a similar action of the FFT against private online betting operators Unibet and Expekt was allowed by the District Court (Tribunal de Grande Instance) on 30 May 2008. In contradiction to the Belgian court, the French court did consider the use of a sports event name by online betting operators to be an act of parasitism.
France
Case law
2007 has especially been marked by the landmark decision rendered by the Cour de cassation in July 2007. Furthermore, two decisions rendered in 2008 highlight the forthcoming liberalization of the gambling sector in France.
– On 25 March 2007, the District Court of Nanterre condemned two persons for having made accessible an online gambling website from the French soil, in spite of the prohibition. The judges considered that the French criminal law was to be applied because the website was accessible to the French public.
– On 10 July 2007, France’s Supreme Court, the Cour de Cassation, endorsed the ECJ teaching of the Gambelli and Placanica cases by deciding that where French gaming laws restrict free movement of services, lower courts must verify whether these restrictions comply with the requirements set by article 49 of the Rome Treaty. The Supreme Court also required from lower courts that they check whether general interest is guaranteed in the Member State where private operators are established.
– In January 2008, the Court of Appeal of Versailles decided to assess whether the French gambling legislation is compatible with community law and the criteria established by the European Court of Justice case law.
– On 9 May 2008, the highest French administrative court, the Conseil d’Etat, as requested by the Maltese operator Zeturf Ltd., decided to suspend its decisions until the European Court of Justice rules on two preliminary questions regarding the consistency of PMU’s monopoly with the EC treaty and how the infringement to the free provision of services should be considered: from the sole perspective of the provision of online betting services or more widely from the perspective of the whole gambling sector.
– On 30 May, the Paris District Court decided to block Roland Garros betting by the private operators Unibet and Expekt. The judges found that the betting operators were guilty of commercial free-riding, by unduly profiting from the investment made by the French Tennis Federation.
Regulatory developments
The law on the prevention of delinquency has encapsulated criticism, especially the application decree regarding the obligation for financial institutions to block the transfer of funds from unauthorized websites.
– The law on the prevention of delinquency, adopted on 5 March 2007, provides a set of legal sanctions (including criminal convictions) for online gambling operators.
– On 30 November 2007, France notified the European Commission of the draft decree, requiring financial institutions to block the transfer of funds from unauthorized websites. The European commission announced its opposition to this legislation on February 29, 2008 in an opinion which prolongs the standstill period of this act to March 31, 2008. France has still not submitted a report explaining its reaction to the opinion.
EFTA
The gaming regulation of the Kingdom of Norway and its compatibility with the freedom to provide services and the freedom of establishment were the subject of two EFTA-Court cases. Norway is not a Member State of the European Union, but it is a Member State of the European Economic Area (EEA). The EEA is based on the same “four freedoms” as the European Community. Compliance with these four freedoms in the EEA is examined by the court of the European Free Trade Association (EFTA).
Case law
– On 14 March 2007, the EFTA-Court ruled that the implementation of an exclusive rights system for gaming machines in Norway is compatible with the freedom of establishment and the freedom to provide services. This case was lodged by the Surveillance Authority of the EEA.
. On 30 May 2007, Norway’s gaming regulations were again discussed by the EFTA-Court in a proceeding on preliminary questions. These preliminary questions were referred by the Oslo District Court in a case between British bookmaker Ladbrokes and two Norwegian Ministries. The EFTA-Court emphasized that requirements fulfilled in the Home State must be taken into account.
