German Online Casino Looks To Loophole in Internet Gambling Ban

by James Kilsby, GamblingCompliance Ltd., April 8th, 2008

A Casinos Austria-owned online casino will soon begin to offer its games to residents in the German state of Lower Saxony following a court victory last week, despite the general prohibition on internet gambling in Germany under the Interstate Treaty which came into force in January 2008. The Treaty’s draconian provisions may mean the internet casino is short-lived, but its very existence could further undermine the already maligned Treaty, say legal experts.

Rainer Chrubassik, managing director of Casinos Austria’s Spielbanken Niedersachsen GmbH (SNG), says that SNG has begun preparations for the launch of a full suite of online casino games following the decision by the Higher Administrative Court of Luneberg last Thursday. The court rejected an attempt by the state of Lower Saxony to appeal a decision issued in August of last year which upheld SNG’s right to offer internet casino gambling in the state.

SNG was acquired by Casinos Austria International in 2005 and currently holds a licence to operate the 10 land-based casinos in Lower Saxony. The terms of that licence also include the possibility of offering online casino games, but state authorities have refused to grant SNG final permission to proceed.

The court last week agreed with SNG that the law applicable at the time of SNG’s application did not impose any prohibition on internet gambling services in Germany, and that Lower Saxony therefore had no right to deny SNG authorization to develop an online casino. However, the ruling did not take into account the Interstate Gambling Treaty which came into force on January 1, 2008.

The Interstate Treaty establishes a general prohibition on the use of the internet for all forms of gambling in Germany (except horserace betting) but was not at issue in the SNG hearings as the Luneberg court received Lower Saxony’s reasoning before the treaty came into effect, says Claus Hambach, founding partner of Munich-based law firm Hambach and Hambach.

Therefore, it remains possible that Lower Saxony could launch new proceedings against the online casino website, he said. Alternatively, the court may decide that it has already issued a definitive ruling on the SNG case and refuse to hear a new challenge.

“It is hard to predict what will happen as offering an online casino definitely breaches the wording of the Interstate Treaty, but SNG could not be subject to criminal law as it is in possession of a valid state licence,” Hambach told GamblingCompliance.

SNG said in a press release that it expected to be permitted to operate regardless of the new treaty as applicable gambling legislation in Lower Saxony specifically “permits the operation of an online casino for and in the state of Lower Saxony.” SNG is only permitted to offer its online casino games within state borders.

The case of those looking to overturn the new treaty will be strengthened if SNG is able to launch its own, legitimate internet casino within Germany, according to Hambach. Certain online gaming websites, including the state-owned Wiesbaden online casino and Irish bookmaker Paddy PowerPortfolio have already withdrawn from the German market as a result of the new treaty. But even though the treaty has sought to outlaw internet gambling, conflicting court rulings have allowed operators such as Bwin e.K., which has an old GDR sports betting licence, and now possibly SNG, to continue in operation.

“Everywhere we have these small islands where the authorities cannot enforce the new treaty, which suggests it will not be possible to achieve interstate treaty’s stated aims,” Hambach said.

According to Chrubassik, it will be impossible to maintain a blanket ban on internet gambling in Germany, and the state treaty’s player protection aims would be better served by regulation.
“It is impossible to implement a ban on internet gaming sites. The clock cannot be turned back on the reality of the internet,” he said. “Only licensed internet gaming sites can meet regulatory channeling requirements and prevent players from turning to illegal, unregulated sites. [SNG] are committed to these requirements.”