GamingIntelligence: Schleswig-Holstein ready to break German State Treaty

By Steve Hoare, published at GamingIntelligence.com – 19.04.2011

The closure of the biggest US-facing online poker sites by the Department of Justice has been grabbing the headlines in recent days, but European operators may soon have more good news to cheer closer to home as the German state of Schleswig-Holstein looks set to force through its Gaming Act, a move that would leave the rest of Germany with no gaming legislation.The gaping chasm between the viewpoints of Schleswig-Holstein and the likes of Bavaria makes a compromise unlikely. Talks between the 16 state presidents over a new State Treaty to govern online gaming are ongoing but have been characterised as a “hard fight”.

Wolfgang Kubicki, the head of the FDP wing of the Schleswig-Holstein coalition government,  told Gaming Intelligence: “If the State Treaty will not be changed substantially, Schleswig-Holstein will pass its own law in July.

“The draft of the State Treaty on Gaming is not acceptable. The State Treaty on Gaming violates the European Union law. It doesn’t accept the freedom of services in the EU and it limits the number of licences unjustly and arbitrarily.”

If there is no compromise and Germany’s 16 states can not find a common solution then the  monopoly structure in Germany will be finished. An apocalyptic outcome where private operators can operate freely without interference from the government and without contributing taxes to government coffers is the natural conclusion of events that began with the European Court of Justice’s September 2010 judgment regarding Carmen Media.

That case clearly stated that it does not matter if EU member states pursue a monopoly system as long as the policy is coherent.

“Coherence is a basic tenet for any kind of regulation according to the EU and if you miss coherence then you don’t have any other regulations. That would be the end of it,” said Schleswig-Holstein-based gaming lawyer Thomas Stritzl, a former government vice-president and MP.

Wulf Hambach of Hambach & Hambach, who advised Carmen Media on the ECJ case, added: “As soon as Schleswig-Holstein steps out, you not only have an incoherence between the federal system and the states but also between different states.

“Then those that do not get licences [under the State Treaty] can not be blocked because their brand new State Treaty will be totally incoherent and therefore not applicable because it is breaking EU law. So it will fail from the first second.”

Ten operators  (bwin.party, Tipico, JAXX, PokerStars, Buchmacher, Betfair, Duetscher Lottoverband, Digibet, myBet, William Hill) have already said they will apply for a Schleswig-Holstein licence but have denounced the State Treaty.

Hambach looks at the end of the broadcasting monopoly in Germany in the 1980s for a particularly pertinent precedent. R.SH (or Radio Schleswig-Holstein) was the first private company to break the broadcasting monopoly, which set off a domino effect when politicians realised that you cannot stop the residents of one state listening to a radio broadcast from another state.

“The states realised that they cannot halt the radio. The same will happen again with internet gaming,” predicted Hambach.

The furore over the new State Treaty was ignited when it proposed a limit of seven sports betting licences and a tax rate of 16.66 per cent of turnover rather than profit, which is the system of tax favoured by Schleswig-Holstein.

Kubicki explained: “We want to liberalise and legalise the gambling market with the instrument of licensing. This will give us the chance to supervise the market and to generate revenues for our budget. The government factions like to have a deregulation in line with the market and reasonable taxation. The main aim of the act is to dry up the existing grey and black market in the gambling industry. The draft to tax the bet amount is non-competitive. We prefer to tax the gross earnings. We also claim additional freedom for promotion, live bets and online gambling.”

The Schleswig-Holstein Gaming Act will be signed by the heads of the parliamentary groups, Kubicki and CDU leader Christian von Boetticher rather than the president.

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