Holland Debuts New Gaming Act

Justin Franssen of Amsterdam-based law firm Van Mens and Wisselink examines the proposed legislation and looks at how it may affect operators currently active in the Dutch market.

This article was published on gamblingcompliance (www.gamblingcompliance.com) on 13/08/2007.

On July 18, 2007, the Minister of Justice finally published the anticipated new Gaming Act (in Dutch ‘Wet op de kansspelen’). Revision of the current law was certainly overdue, as several amendments have been made over the years in response to changes in the Dutch gaming market. Illegal and new, riskier games have been introduced and, as a result, the legally available gambling services have been expanded in order to counteract illegal gambling. Different rules have been applied to different games, but these will now be harmonised under the proposed legislation. Online gambling is not covered by the Act but will instead be regulated by a separate piece of legislation, the Online Gaming Act. This Online Gaming Act is currently being debated in the Dutch Senate, ‘Eerste kamer’.

The wording of the bill suggests a tightening of Dutch policy on the offering of games of chance. Increased supervision and enforcement are the key elements in what appears to be a bid to establish a more restrictive gaming policy.

The most significant measure contained within the Gaming Act is the introduction of a new Gaming Authority to enforce the law. This article will examine the significance of this change as well as exploring what the main implications will be for current gaming operators in Holland. Finally, the proposed changes will be looked at from a European perspective, within the context of ongoing infringement and litigation proceedings brought against the Dutch government by the European Commission and private operators.

Gaming Authority

Compared to the current regulator (the Gaming Board) the new Gaming Authority will have greater powers and broader responsibilities. The Gaming Authority will be the body that issues, enforces and revokes licenses and supervises all Dutch licensees. Stricter measures of enforcement are also proposed by the Gaming Act. These are mostly administrative sanctions but some violations fall within the reach of penal law. The new legislation is far more specific than its predecessor as the language of the current legislation [which dates back to 1964] has been modernised and updated.

The Act makes a number of changes. License conditions and the reasons for which licenses can be revoked are harmonised. Direct intervention by the Minister of Justice is made possible in several circumstances. Quantitative and qualitative regulation of the marketing efforts of the gaming operators is also authorised. These marketing regulations are not yet an intrinsic part of the Act but they can be introduced if the current code of conduct on marketing fails to meet the Minister’s expectations.

The Act also defines for the first time precisely what is meant by the term ‘game of chance’. According to the definition it is “…competing for prizes, for which the determination of the winner occurs by chance, on which the participants generally cannot assert any effect.” Regarding the distinction between games of skill and games of chance, it is noteworthy that the Minister considered it wise to exclude, under certain conditions, science quizzes from gaming law.

The Gaming Authority will undertake executive, enforcement, and supervisory tasks concerning the gaming market in the Netherlands. The executive tasks relate mainly to licensing and the manufacturing of gaming machines. In addition, the Authority will provide education and counselling services to both the public and other authorities.

The Authority’s role as supervisor relates to ensuring that licensed gaming operators comply with the law and its regulations. It will have the power to enforce the legislation, however, by imposing administrative sanctions on non-compliant gaming licensees.

Furthermore, the new body will also be charged with suppressing illegal operators. It is noteworthy that in the explanatory statement of this proposed legislation, the Minister of Justice refers to a formal letter (TK 2005/2006, 29 849, nr. 30) proposing a choice of sanctioning systems. Given the fact that, over the past few years, the enforcement of the existing Gaming Law has been conducted primarily through civil litigation, this signifies a change in enforcement policy.

Appeals to the decisions of the Gaming Authority will have to be made to the District Court in Rotterdam, whose ruling can subsequently be appealed with the Trade and Industry Appeals Tribunal.

Implications for current licensees

The new legislation does not make any principal changes as to the type of gaming licenses that will be issued. These licenses cover the following games of chance: lotteries, scratch cards, incidental lotteries, sports and horserace betting, casinos, prize contests, free promotional games of chance, small games of chance and finally gaming machines. The terms and conditions of issuing the respective licenses, and the terms which with operators must comply, are, whenever possible, unchanged from the current regime.

Existing state monopolies will remain intact for the state lottery, lotto, and casinos. Existing licensees retain their licenses and a legal justification for limiting the number of lottery licenses available is introduced.

This reasoning is a curious aspect of the legislation. Introducing a cap on the number of licenses may be incongruent with the overall aims of the gaming policy. The current state-owned monopolies will continue to transfer their net revenue to the state but the other licensees will no longer transfer their funds to specific charities, as is the case now. Instead, the net result of their operations will be donated to a ‘public interest’, defined as a non-private interest or a non-commercial interest. Under this new definition, the current implicit inclusion of the state treasury in the term ‘public interest’ is made explicit. It has been a historic characteristic of Dutch gaming policy to protect consumers by forbidding the ‘exploitation of the compulsion to gamble for private gain’. Because of this, the net result is transferred to the treasury or charities.

A duty of care is imposed upon gambling operators to take action to prevent excessive gambling. The Cabinet can make specific regulations regarding this duty. A provision is already incorporated in the law in case the realisation of this duty interferes with privacy laws. This appears to reflect a genuine effort to take action to prevent gambling addiction.

The accountability of gaming licensees on the transfer of funds to beneficiaries, and the application procedures for these funds, are further regulated and made more transparent.

The Act reflects a concern for the blurred distinction between arcades and casinos. A restriction is placed on the number of gaming machines allowed in casinos, and arcades will be prohibited from using the word casino in their name, as is the situation with many current operators.

Regarding the internet, the issuing of tickets via the web is explicitly permitted for licensees. However, the Act does not authorise operators to offer games themselves over the internet.

Conformity with European Law

Dutch gaming policy is currently being disputed by the European Commission and is being challenged in court by foreign gaming operators. The new legislation contains language reacting to the ongoing discussions being held on the conformity of Dutch gaming policy with the EC-Treaty, mainly by imposing restrictions upon licensees and instructing them to act in compliance with the official aims of Dutch gaming law.

Dutch policy has been criticised as being inconsistent with the government’s stated aims. One of the main arguments centres on the extensive marketing and advertising budgets that current licensees have had at their disposal over the past decade., with the three state gaming monopolies among the biggest advertising spenders in the Netherlands. In the new legislation, the Minister acknowledges that marketing activities should be in harmony with the prevention of gaming addiction and excessive gaming. These marketing efforts are currently being regulated by a code of conduct, but the new Gaming Act also imposes limitations and authorises the Minister to intervene if the code fails to satisfy his demands.

Currently, licensees can offer free, supplementary games to their customers, alongside the main game they operate. These games are crucial to operators’ marketing strategies but in accordance with the new law, they will only be able to offer a supplementary game once per week.

In response to the alleged inconsistency between the extensive marketing efforts of Dutch operators and the government’s stated aim of preventing gambling addiction, the Minister refers to Dutch and ECJ jurisprudence on gaming. The Minister claims that extensive marketing is permissible under European law, so long as the volume of regulated gaming remains small in comparison to the volume it would be without the regulations.

The Minister says that Dutch gaming policy is consistent with the EC-Treaty and that the policy is suitable to achieve its aims. It is noteworthy that the Minister does not refer to EFTA case law, as he has done previously. In the recent case between Ladbrokes and the Norwegian government, the EFTA Court ruled that the aim of preventing gambling from being a source of private profit could not be justified if a state-owned monopoly is allowed to offer a range of gambling opportunities.

European law is also relevant for operators who offer games other than that for which they specifically hold a licence in Holland, with operators’ sideline activities forbidden, except under special conditions. It is debatable whether these restrictions conform to European law on unfair competition, especially if the restriction affects the operators’ business outside the Netherlands.

Licensees are no longer allowed to participate in other companies with a purely financial aim but participation as a contractor is allowed. A limited participation, at a maximum of 5 percent, as a perpetuated partnership with a foreign gaming operator is also possible.

Conclusion

This proposed legislation is partially a reaction to recent criticism of Dutch gaming policy at a European level. It shows awareness that the current Dutch gaming law is vulnerable. The main points of criticism have been the extensive marketing efforts of gaming operators, and consumer and player protection. All of these subjects are referred to in the proposal, and several restrictive measures are taken. At this moment, several institutions are being consulted and given an opportunity to make remarks. The date when the proposed legislation will become effective is yet uncertain.