GamblingCompliance: Bwin.Party Shrugs Off German Court Defeat

The German Federal Administrative Court, based in Leipzig, yesterday upheld the legality of Germany’s ban on internet sports betting as it handed victory to Bavaria’s authorities over online betting giant Bwin.

It also neutered the firm’s East German betting licence, which Bwin had argued entitled it to offer nationwide sports betting, judging instead that it is only valid for land-based betting in the region of Saxony.

But Bwin.Party was joined by local lawyers yesterday in arguing that the ruling has already been overtaken by political events.

Germany’s regions announced in April that they would drop their internet gambling ban in favour of a restrictive five-year licensing system and an eye-watering 16.67 percent turnover tax.

The premiers from Germany’s 16 regions will sit down next Thursday to discuss further details and chew over some of the tough criticisms put forward against the legislation.

Seen against the backdrop of accelerating political reforms, a spokesperson for Bwin.Party yesterday said the national court’s ruling would have “no bearing on the bigger picture”.

“There is no impact on our customers as we continue to operate under our Bwin.com website as covered by our European licence,” he added.

News of Bwin’s court defeat in Germany, where the merged Bwin.Party entity derives 23 percent of its revenue, sent shares falling 2 percent before recovering slightly to end the day down 1.3 percent.

The company also confirmed that the Bwin e.K. owner who was the subject of the case will be appealing the decision to Germany’s constitutional court.

Steffen Pfennigwerth, whose small betting business had Bwin as a sleeping partner before it ceased operations in early 2009, said he would challenge the decision on the grounds that it infringed his rights.

“This judgment is completely irrelevant in practical terms,” Pfennigwerth added.

“The future of German regulations for games of chance will not be decided in the court. It will be determined at a political level with the ongoing deliberations of the German regions about the Interstate Treaty.”

The regions were planning to sign the new Interstate Treaty at next week’s June 9 meeting, but a hostile reaction from the multi-billion euro slot industry and simmering tensions over internet censorship has given the premiers more to think about.

A spokesman for Saxony-Anhalt, which is hosting the meeting, said last week that the regional leaders would not sign an agreement on gambling, leaving the industry to speculate that they will wait until after July 18 when the European Commission has ruled on the planned legislation.

At least two regions, Hesse and Saxony, are also understood to be wavering on their support for the Interstate Treaty and could switch behind the rival model put forward by the Schleswig-Holstein region.

Political powerhouse Bavaria swayed some of the premiers towards tighter internet gambling controls at the last meeting in April, but legal experts suggested it would be difficult to squeeze much influence out of the region’s court victory over Bwin this time around.

“The Administrative Court dealt with a case which mirrored a political situation which isn’t there any more,” Wulf Hambach, partner at German law firm Hambach & Hambach, explained.

“If they still want a gambling ban for the next five years, this ruling would mean that they could do it, but the regions want to open up the sports betting market now.”

Joerg Hofmann, a lawyer at Melchers, agreed: “It doesn’t matter if you think it’s a bad decision – it deals with a situation that is soon to come to an end.

“It’s a blow for the internet gambling industry, especially for sports betting, but the new framework is likely to bring in a totally different situation.”

One immediate effect is that the option of using its German Democratic Republic betting licence, obtained in 1990 in the dying days of Soviet German rule, is now closed off to Bwin.Party for internet gambling.

“The ban is binding even for private operators with ex-East Germany licences, which means the holders of such licences are not allowed to organise and offer [internet] betting in Bayern,” a statement from the court said yesterday.

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