The present memorandum will briefly analyze the ECJ’s landmark ruling in Liga Portuguesa de Futebol Profissional Bwin[1] (hereinafter referred to as the “ruling”): it will highlight both the main features and the gist of the aforementioned ruling with regard to online gaming operators’ business within the EU.
Although the ECJ’s ruling did not uphold the mutual recognition principle, in the field of online gaming activities, it is our understanding that the so-called “conditional recognition principle” has not been expressly dismissed by the ruling. According to this principle, each Member State should be entitled to issue and enforce its own gaming regulations at national level yet it would also have to take into account the licenses, and the conditions fulfilled, granted by other Member States, when it comes to assessing whether to grant a license to an online gaming operator. In this respect, our understanding of the ruling is that Member States will enjoy a wide margin of discretion as regards the assessment of online gaming operators’ applications for licenses, provided, however, that the general principle of proportionality is complied with.
Main features of the ECJ’s ruling
As regards the infringement of the freedom to provide services
• The ECJ considers that the Portuguese legislation at stake is incompatible with the principle referred to above (recital 54), in accordance with settled case law of the ECJ (Gambelli, Placanica).
Needless to dwell on the above-mentioned since the ECJ’s statement is straightforward and requires no further explanation.
As regards the justification of the above-mentioned infringement of the freedom to provide services
• First, the ECJ recalls the principles laid down by its earlier case law (recital 57) regarding online gaming activities within the EU (Gambelli, Placanica, Schindler and Läära).
In our opinion, this statement is of paramount importance because it implies that the ECJ does not intend to depart from the above-mentioned case law regarding online gaming activities within the EU. Accordingly, the ruling must be read, and interpreted, in light of the ECJ’s earlier case law. Thus, one may argue that the ruling stands on its own facts and must not receive a wider interpretation.
• Second, according to the ECJ, it should be noted that the fight against crime may constitute an overriding reason in the public interest that is capable of justifying restrictions in respect of operators authorised to offer services in the games-of-chance sector. Games of chance involve a high risk of crime or fraud, given the scale of the earnings and the potential winnings on offer to gamblers (recital 63).
• Third, the ECJ infers from the foregoing that Member States are free to set the objectives of their policy on betting and gambling and, where appropriate, to define in detail the level of protection sought. However, the restrictive measures that they impose must satisfy the conditions laid down in the case law as regards their proportionality (Placanica and Others, recital 59).
To our estimation, one must conclude from the two above-mentioned statements that Member States enjoy a large margin of discretion as regards the definition of the overriding reasons of public interests pursued by their national legislations, provided, however, that the latter do not go beyond what is necessary to attain the legitimate aim pursued. In this respect, our understanding is that such national legislations could still be challenged if it is proven that Member States have committed a manifest error of assessment. The threshold is high, but not impossible to attain depending on the circumstances.
• Fourth, the ECJ then recalls that it is apparent from the national legal framework, set out in paragraphs 12 to 19 of its ruling, that the organisation and functioning of Santa Casa are governed by considerations and requirements relating to the pursuit of objectives in the public interest (recital 66).
The above-mentioned statement supports the contention that the ruling must not be broadly interpreted. In fact, the ECJ seems to attach a great deal of importance to the specific legal framework in relation to Portugal. Accordingly, one must carry out a case-by-case assessment of all national legislations under scrutiny. It is likely that some Member States’ legislations will not satisfy the conditions set out by the ECJ’s ruling.
• Fifth, the ECJ held, in a statement of principle, that it should be noted that online gaming activities are not subject to Community harmonization (recital 69). According to the ECJ, Member States are entitled to consider that the mere fact that an online gaming operator, such as Bwin, offers legal services in this sector through the Internet in another Member State where it is located and where it is in principle already subject to legal conditions and controls by the competent authorities of that State, cannot be considered a sufficient guarantee of national consumer protection against the risks of fraud and crime, given the likely difficulties which could be encountered in such a context for the authorities of the Member States of establishment to assess the quality and integrity of online operators.
As noted above, this statement must be interpreted in the context of the Portuguese legislation under scrutiny by the ECJ.
• Sixth, according to the ECJ, due to a lack of direct contact between the consumer and the operator, gambling accessible via the Internet may carry risks of different nature and greater importance in comparison with traditional markets with regard to possible fraud committed by operators against consumers.
Moreover, according to the ECJ, one cannot rule out the possibility that an operator, who is sponsoring some sporting events on which it takes bets and some of the teams participating in these competitions, is in a situation that allows it to directly or indirectly influence the result of the latter and thus increase its profits.
In view of the foregoing, the ECJ therefore considers that the restriction at issue is, given the peculiar characteristics related to the provision of gambling via the Internet, to be regarded as justified by the objective of fight against fraud and crime.
Narrowing down the scope of the ECJ’s ruling
It is our understanding that three alternative routes could be considered to narrow down the scope of the ECJ’s ruling. These routes will be briefly explained below.
Route 1
The ECJ’s ruling must not be broadly interpreted because its scope is limited to the peculiar legal regime applicable in Portugal with regard to online gaming operators. In other words, the ruling needs (i) to be distinguished from the legal regimes applicable in other Member States of the EU and (ii) stands on its own facts. Therefore, online gaming operators can still rely successfully on the freedom to provide services, as enshrined in Article 49 of the EC Treaty, to challenge national measures in the field of online gaming. Futhermore, the aforementioned ruling does not modify the current state of EC law with regard to the “conditional recognition principle”, it is worth recalling that it is settled case law of the ECJ that a host Member State needs to take account of the conditions fulfilled in a home Member State when the former assesses whether to grant a license to exercise a regulated activity in its jurisdiction.
Route 2
Online gaming operators are still entitled to rely upon the proportionality test in order to challenge national measures in the field of online gaming. However, it seems that the ECJ will be scrutinizing the national measures in question through the manifest error of assessment approach, namely Member States will enjoy a wide margin of discretion as regards the measures under scrutiny. That being said, it cannot be ruled out that some measures would fail to pass the above-mentioned proportionality test.
Route 3
Since the ruling is based on the application of Article 49 of the EC Treaty, it is worth considering to rely upon Article 86, § 1, read in conjunction with Articles 82 and 10, of the EC Treaty in order to challenge national monopolies conferred on the incumbents. In accordance with settled case law of the ECJ, the aforementioned Articles, read in conjunction, are aimed at preventing Member States from either creating or favouring national monopolies capable of abusing of their dominant position on the market. In this regard, it seems to us that it is undisputed that national gaming monopolies are holding such a dominant position.
[1] ECJ., 8 September 2009, C-42/07, not yet published, made available at www.curia.europa.eu.
