A Black Day for the new German State Treaty on Gambling

The Verwaltungsgericht (Administrative Court) of Schleswig – like the EU Commission -thinks that EU laws are being violated and has decided to refer questions relating to European law issues in the context of the new sports betting monopoly to the ECJ.

The 30th day of the new year 2008 was, from the legal point of view, definitely anything but a good day for the advocates of the State Treaty on Gambling, which is only a few weeks old. This is because on Wednesday this week, the young Treaty was not only sharply attacked by the European Commission; the VG of Schleswig – like the EU Commission – also thinks that EU laws are being violated and has decided to refer questions relating to European law issues in the context of the new sports betting monopoly to the ECJ.

The hearing in Schleswig pertained to the law suit filed by an online provider of sports bets based in Gibraltar who – represented by Hambach & Hambach Law Firm – is looking for the acknowledgement of his European licence for the German Federal State of Schleswig-Holstein as well, as he can invoke the European freedom to provide services.

The background: According to the European Court of Justice, the freedom to provide services also applies for offers provided on the gambling market. However, restrictions to this freedom are possible, provided they are aimed at pursuing general interest objectives and provided the measures taken are suitable and proportionate. The Federal State of Schleswig-Holstein invokes the objectives stipulated in the State Treaty on Gambling, i.e. the combat of gambling addiction and the protection of minors. The private sports betting company replies that the State Treaty on Gambling above all is intended to safeguard the Federal States’ fiscal interests, and thus cannot create a consistent and systematic regulation. The area of slot machines in particular, which is especially relevant with regard to addiction issues, is not affected by the new regulation. Even when looking at the area of sports betting in isolation, the regulation lacks consistence, as (Internet) horse race betting continues to be liberalised under German Federal legislation. Also, according to a current survey by the Deutsche Hauptstelle für Suchtfragen (German Institution for Addiction Issues, Jahrbuch Sucht 2008), the addiction dangers of lotteries is 0.0%. Lawyer Ms. Münstermann states that “a monopoly can hardly be justified by reasons of player protection if the danger in the monopolised areas is close to zero, and if at the same time gambling offers which actually do present dangers are being liberalised.” Lawyer Dr. Wulf Hambach adds “The referral to the ECJ is a consistent and correct decision by the VG of Schleswig, and is definitely in our client’s best interests.”

The VG of Schleswig asks the ECJ whether consistent and systematic restrictions of the sports betting market are possible, when areas which are relevant with regard to addiction are not included in the scope of application – as is the case with the State Treaty on Gambling:

“The Chamber has expressed legal concerns as to whether the objective of preventing gambling addiction and protecting minors – on which the State Treaty between the Federal States is based – may lawfully exclude private providers from the area of lotteries and sports bets only. Other forms of gambling, for instance slot machines, which are regulated by Federal statutes, are not subject to such restrictions.”

(Source: Press release of the VG of Schleswig dated 30 Jan. .2008)

The concerns expressed by the VG of Schleswig are obviously shared by the European Commission, which makes the following consideration in its press release dated 31 Jan. 2008:

“However, it should be noted that in Germany horse race betting on the Internet is not prohibited and slot machines have been widely expanded. Moreover, advertising of games of chance by mail, in the press and on radio is still permitted.

The European Court of Justice has previously stated that any restrictions which seek to protect general interest objectives, such as the protection of consumers, must be “consistent and systematic” in how they seek to limit activities.”

(Source: Press release of the Commission IP/08/119

Link: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/08/119&type=HTML&aged=0&language=EN&guiLanguage=en)

This is a body blow to the State Treaty on Gambling which will – only one month after it has come into force – not only occupy the European Commission in infringement procedures, but also the ECJ due to the referral by national courts. The 30 Jan. 2008 will probably not have been the last Black Day for the young monopoly. It may, however, be the day which heralded the beginning of the end of the new State Treaty on Gambling.