A winning ticket for Bwin and the Liga Portuguesa de Futebol Profissional

In the Case C-42/07 brought before the ECJ by the Portuguese Court, opposing the Liga and Bwin against Portugal, Advocate General’s recommendations strengthen the consequences of the notification requirement in application of EU Directive 98/34 in the field of gambling. Accordingly, the fines based on the non notified Portuguese Decree cannot be applied. In addition the opinion also considers the Portuguese online monopoly may be compatible with the opening of the gambling market.

In the Case C-42/07 brought before the ECJ by the Criminal Court of First Instance of Porto in a case opposing the Liga Portuguesa de Futebol Profissional (the Liga) and Baw International Ltd (Bwin) against Portugal’s Santa Casa da Misaricordi de Lisboa (Santa Casa), Yves Bot ECJ’s Advocate General’s conclusions were rendered public on October 14th 2008.(1)

His opinion strengthens the consequences of the notification requirement in application of EU Directive 98/34 in the field of gambling. Accordingly, a non notified national regulation cannot bring any effect to a cross-border gambling case. In addition the opinion also addresses the question of the compatibility of an online monopoly with the opening of the gambling market.

We will first go through the case background and then examine Yves Bot ECJ’s Advocate General’s reasoning with regard to the two main findings of his opinion.

Background

Origins of the case in Portugal

It all started as Bwin and la Liga Portuguesa de Futebol Profissional announced a high profile sponsorship in 2005. Portugal’s Santa Casa was then holding the exclusive right to organise and operate lotteries and off-course betting in the whole of national territory.

Portugal’s 2003 Decree extended Santa Casa’s betting exclusive right to operate betting activities through all electronic means of communication, in particular the internet. This legislation also provides for penalties in the form of administrative fines in case of breach of Santa Casa’s exclusive right and for illegal advertisement.

The Portuguese authorities considered that Bwin and The Liga committed an infringement to the prohibition foreseen in 2003 Decree as it constituted a clear off-course betting by electronic means offer and advertising. In consequence, the authorities applied a fine of €74,000 and €75,000 to the respective offenders.

Bwin and the Liga challenged the fines before the Criminal Court of first Instance in Porto. The Court decided to refer the following question to the European Court of Justice for a preliminary ruling as to whether its national legislation, in providing for such a system of exclusive rights for off-course betting on the internet, is in conformity with Community law.

Developments of the case at EU Level

It is interesting to note that the Advocate General’s opinion takes position regarding an issue raised not by the national court but by the European commission

The Criminal Court of First Instance of Porto asked the ECJ following questions:

“1) Does the monopoly granted to Santa Casa, when relied upon against Bwin, that is to say against a provider of services established in another [EU member state] in which it lawfully provides similar services, which has no physical establishment in Portugal, constitute an impediment to the free provision of services, in breach of the principles of… the European Treaty?

2) Is it contrary to Community law, in particular to the above mentioned principles, for rules of domestic law… to establish a monopoly in favour of a single body for the operation of lotteries and mutual betting and then to extend that monopoly to ‘the entire national territory, including… the internet?” (2)

Subsequently, the European Commission raised additional questions regarding the failure of Portugal to notify the challenged piece of legislation: Can fines be applied to a cross-border internet gambling provider, when the national piece of legislation applicable has never been notified as Directive 98/34 requires it ?

All parties considered the argument raised by the Commission’s written submission, as out of the scope of the questions referred to the Court and irrelevant. Even Bwin’s and the Liga’s legal counsel were “convinced the lack of notification is not of particular relevance to the matter.”

The Portuguese Government added that it is for the national court to ascertain the Community law applicable. In the alternative, the Portuguese Government claims that games of chance and gambling were excluded from the ambit of Directive 2000/31 on electronic commerce and Directive 2006/123 on services in the internal market and therefore do not fall under the notification’s requirement of Directive 98/34.

However, Advocates General’s conclusions recommended to the Court to follow the opposite legal opinion.

Analysis of Advocate General’s Yves Bot opinion

EU notification’s requirement encompasses strictest consequences

The Advocate General first recalls that the ECJ may consider some provisions of Community law even if the national Court did not refer to it in its question.

As to the applicability of Directive 98/34, Advocate General’s reasoning relies on the objective of this directive. Namely, in order to effectively put in place a free market of good and services, barriers arising from the adoption by the Member States of different technical regulations should be removed or reduced. It follows that, in application of the Directive 98/34, as amended by Directive 98/48, national initiatives in the field of services of the information society -that is to say by electronic means- have to be notified to the Commission, European standardisation bodies and the other Member States. Such notification aims at enabling the Commission and the other Member States to inform the notifying Member State of their viewpoint and to propose standardisation which is less restrictive to free trade.

Therefore, Advocate General’s first examines whether the national measure, which extended Casa Santa’s monopoly to betting offered through electronic means and which laid down penalties for any operator which disregards that exclusive right, is a technical rule within the sense of Directive 98/34.

In application of the above, Portuguese 2003 Decree is to be considered as a technical regulation and fall within the scope of Directives 98/48 and 98/34 “in so far as they prohibit any other operator from offering lotteries and off-course betting on the internet in Portugal.” (3)

In addition, in response to the Portuguese Government’s objection, Advocate General underlines that, “where the Community legislature wished to exclude games of chance and gambling from a measure relating to services, such as Directive 2000/31 on electronic commerce and Directive 2006/123 on services in the internal market, it provided for such exclusion expressly.”(4) On the opposite, Directive 98/34 does not create such exception.

Accordingly, Portuguese 2003 Decree ought to have been notified to the Commission, which was not the case.

In line with a former ruling of the Court (5) , the Advocate General takes the view that the obligations of notification and postponement laid down in the Directive 98/34 are unconditional and sufficiently precise to be relied on by individuals before national courts. Consequently, such technical regulation which has not been notified is therefore inapplicable to individuals, and national courts must decline to apply it.

As a consequence, the Advocate General recommends that “if that legislation was not duly notified to the Commission of the European Communities, it cannot be relied on against private operators such as the Liga and Bwin.”(6)

Monopolies and opening of the market may not be incompatible?

As to the question of compatibility of the Portuguese Decree with Community law, as explicitly referred to the Court, the Advocate General recalls the fundamentals of the opening of the market.

The Advocate General recalls settled case-law stating that a piece of legislation restricting free provision of services must be justified by overriding reasons relating to the public interest, it must be appropriate for ensuring the attainment of the objectives which it pursues, it must not exceed what is necessary for attaining them and it must not be applied in a discriminatory way.(7)

That is to say that a monopoly given to a single entity may not be contrary to EU law under specified conditions. Advocate General recalls that “a Member State should be required to open up this activity to the market only if, in law or in fact, it treats the gambling and games of chance as true economic activities which yield maximum profits.”(8)

In line with the above, Advocate General considers that the exclusive right to organise online gambling granted to the Santa Casa is in fact a restriction of the freedom to provide services.

However, taking into consideration the risks created by games of chance and gambling on the internet, Yves Bot advocates for Member States to legitimately restrict the right to organise and operate such games with the aim of protecting consumers and maintaining public order.

He considers that the Portuguese monopoly, granted to a century old non-profit-making organisation aiming to finance causes of public interest, may fall under the justifications compatible with EU law.

Following the Portuguese Government arguing for public order objectives, he takes the view that such legislation is appropriate. Finally, he considers that it is not, as such, excessive or discriminatory.

Conclusion

As a conclusion, Advocate General’s opinion may constitute the winning ticket for Bwin and the Liga if the Court decides to follow Yves Bot’s recommendations (this is usually the case). He underlines that even if Member States have argued that the 98/34 Directive was not relevant in the proceedings, a judgement giving a preliminary ruling is binding. Therefore, it is likely that no fine would be applicable to the Bwin’s and Liga’s infringement.

As to the EU compatibility of this regulation, the Advocate General confirms a principle already settled down in former ECJ ruling: justified restrictions to the free provision of services for public order purposes are compatible with EU law. Considering the particular risks inherent to the gambling activities, he defends the Portuguese regulation. This reasoning could be of greatest interest for the Member States currently reluctant to revise their monopolies in the field of on-line gambling.

However, in this respect, the European Commission may decide not to completely follow the Advocate General’s opinion.

To be continued …

Notes

1. See attached

2. OJ C 69 of 24.03.2007, p.9

3. Case C-42/07, opinion of Advocate General, Paragraph 160

4. Case C-42/07, opinion of Advocate General, Paragraph 174

5. Case C-194/94 CIA Security International [1996] ECR I 2201, Paragraph 44

6. Case C-42/07, opinion of Advocate General, Paragraph 6

7. See Case C 124/97 Läärä and Others [1999] ECR I 6067 Läärä and Others, paragraph 37, and Case C 67/98 Zenatii [1999] ECR I 7289Zenatti, paragraph 35

8. In the above mentioned cases, the Court considers that the authorisation by a Member State for the operation of gaming and betting activities by an entity with an exclusive right or by a specified number of operators is not incompatible with the aims of protecting consumers from being tempted to spend excessively and maintaining public order. According to the Court, limited authorisation of games of chance and gambling on an exclusive basis, which has the advantage of confining the desire to gamble and the operation of gambling within controlled channels, of preventing the risk of fraud or crime in the context of such operation, and of using the resulting profits for public interest purposes, likewise falls within the ambit of those objectives.