The European Commission’s Detailed Opinion on the Draft Belgian Gaming Law

On June 29th, 2009, the European Commission (hereinafter referred to as the “Commission”) has requested from Belgium further explanation in connection with the Draft Belgian Gaming Law. The Commission’s attention is particularly focused on two features of the Draft Belgian Gaming Law and requests that, if appropriate, the features in question be amended so as to be compatible with EU law. Accordingly, the standstill period has been extended during an additional month in accordance with Directive 98/34/EC of the European Parliament and of the Council laying down a procedure for the provision of information in the field of technical standards and regulations and of rules on information society services (hereinafter referred to as the “Directive”).

The story so far

On March 27th as part of the process aimed at removing technical barriers at European level, the Belgian Government notified to the Commission the Draft Belgian Gaming Law that had been approved by the Council of Ministers.

The above-mentioned notification triggers a standstill period of three months during which the Commission and the competent authorities of other Member States can review the Draft Belgian Gaming Law and study it. During this standstill period, the Commission may make objections on the Draft Belgian Gaming Law in accordance with the Directive. In this respect, the Commission sent a detailed opinion, on June 29th, 2009, to Belgium whereby the latter is asked to provide further information on two features of the Draft Belgian Gaming Law and, if appropriate, to amend the features in question so as to be compatible with EU law.

The Commission’s contention is briefly presented below.

First, the Commission emphasizes the need to take into account the conditions which had already to be met in the home Member State, when it comes to assessing the conditions that must be met to obtain a license to operate games on the Internet in Belgium. According to the Commission, the intention is not to automatically grant a license to the licensees who operate legally in another Member State but to avoid “the duplication of safeguards that have already been met in the home Member State”.

Second, the Commission criticizes the requirement that the licensee must first have an offline license and the server must be located in Belgium in order to obtain a license to operate games on the Internet in Belgium.

Belgian authorities are expected to discuss the Draft Belgian Gaming Law with the Commission in the upcoming weeks in order to reach a compromise and adopt the aforementioned Draft Law at the Parliament.

Analysis from an EC law perspective

It is our understanding that the Commission’s detailed opinion relies on sound EC law principles and settled case law of the ECJ1 in the field of both the freedom of establishment and the freedom to provide services with respect to gambling activities in the EU

As regards the requirement that the licensee must first have an offline license and the server must be located in Belgium in order to obtain a license to operate games on the Internet in Belgium, it seems clear that this requirement of the Draft Belgian Gaming Law is incompatible with both the freedom of establishment and the freedom to provide services enshrined in Articles 43 and 49 of the EC Treaty.

First, the aforementioned feature of the Draft Belgian Gaming Law imposes an unnecessary burden on foreign gaming operators willing to penetrate the Belgian market in terms of costly investments (e.g., setting up a legal entity incorporated under Belgian law, costs related to the re-location of the server facilities in Belgium) in comparison with the incumbents. Accordingly, the Belgian market will be less attractive for new entrants thereby constituting an impediment to both the freedom of establishment and the freedom to provide services as interpreted by a settled case law of the ECJ.

Second, it is our understanding that such a requirement could not be justified on the basis of either treaty-based justifications (enshrined in Article 46 of the EC Treaty) or mandatory requirements in accordance with the ECJ’s case law. In this regard, it seems to us plausible to argue that fight against money laundering and players’ addiction (see Gambelli and Placanica rulings referred to above) can be achieved by less stringent measures, such as an appropriate monitoring system, which would not go beyond what is necessary to attain the legitimate aim pursued.

As regards the Commission’s opinion concerning the need to take into account the conditions fulfilled in the home Member State, when it comes to assessing the conditions that must be met to obtain a license to operate games on the Internet in Belgium, it is undeniable that such an approach is consistent with both the freedom to provide services (Article 49 of the EC Treaty) and the so-called “conditional recognition principle”.

The wording of Article 49 of the EC Treaty is quite straightforward and needs not to be addressed here.

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. In this connection, it is undisputed that Belgium should be entitled to elaborate its own gaming legislation (with a national licensing regime) but must nevertheless take into account the licenses and requirements set out by other Member States. Thus, any EU-based operator should be eligible for a license in Belgium, without being required to establish (e.g., set up a legal entity incorporated under Belgian law) in Belgium. The best way to achieve this is to generalize the cooperation agreements between the EU gaming regulators so that a licensee in Member State A would obtain more easily (simplified procedure) its license in Member State B. The same system of cooperation agreements should be advocated with respect to “proper jurisdictions” outside the EU (e.g., Alderney, Isle of Man).

To conclude, the above-mentioned principle is the only viable regime, a compromise between (i) pure protectionist systems (e.g. the Netherlands), which deny any value as regards other EU licenses and (ii) pure liberal systems (e.g., the United Kingdom), which apply without restrictions the mutual recognition principle.

1ECJ, Schindler, 24 March 1994, C-275/92; ECJ, Läärä, 21 September 1999, C-124/97; ECJ, Zenatti, 21 October 1999, C-67/98; ECJ, Gambelli, 6 November 2003, C-243/01 ; ECJ, Lindman, 13 November 2003, C-42/02; ECJ, Placanica, 6 March 2007, C 338-04.

« BetClic » and « Europe 1 » are ready to suspend advertisements for online gaming.

On last Wednesday, “BetClick” and the French radio “Europe 1” announced they were ready to suspend theirs ads for online gaming if others private and public operators did so as well. Since two weeks indeed, they have been advertising on the radio or in the newspapers in order to promote online gaming activities.

The French government reaffirmed that advertisement for internet gaming is prohibited under the current French law and thus asked all operators, but also public operators, to suspend they advertisement for online gaming until the new law enters into force.

Since then, the “Française des jeux” and “Pari Mutuel Urbain”, confirmed they would stop their advertisement for online gaming despite their current monopole.

However, this restriction refers to offline advertisement (newspapers and radio essentially) while online advertisement keeps flourishing.

Interview of Thibault Verbiest for Game Spectrum

“Game Spectrum” is a magazine that is focused on the Balkan Region & Eastern Europe.

1. In your opinion how online gaming should be regulated.

It should be regulated in a proper way. It should be regulated in a way which is actually not just extreme positions between either the pure nationalism of some member states like France, the Netherlands or Germany nor it should be very naïve pro European approach of some bookmakers because their license in UK, Malta or Gibraltar they receive by the same talk and European passports to do whatever they want in the rest of the Europe. Those are two extreme positions but having in mind the opinions of other legal gaming advisors I would say that we need a compromise – the compromise is obtaining a local license or that means that if an operator is licensed in an European country and he wants to operate in another European country, he needs further to apply for a license in that other country through more simplified procedure that will not require entire establishment in that other country. So the operator may stay where he is and he is not obliged to move all his servers and the company to the other country. And to make it workable the only way is conclusion of corporation agreements between all European countries as long as we do not have the European directive of the online gaming Prohibition is not regulation. The prohibition leads to the absence of control and sometimes to criminal organization. Regulation with a compromise between national regulations and consideration for the other European countries is the best way. I think that the most important issue is a local gaming tax. The most of the European countries will demand to levy tax on online gambling and the best thing is to have so called “online gaming tax”, which is not based on the turnover or even benefit of incomes of the company. It should be based on the gross profit revenue of the portion of the games conducted with the players of the given country. It’s what the gaming operator actually perceives from the game -bet minus win.

2. Do you find any regulatory model for online gaming as a good one and may you point out its main characters?

Alderney is the best one with a very good regulatory environment with a long time experience. With the paradoxical situation that we got, that in one hand Alderney is British Satellite and is outside the European Union, plus it is not a European Member State, it has a very demanding proper regulatory environment, which is the source of exploration of other regulations like UK, France and Malta, as well found, in Alderney a very good source of exploration for its own regulations.

3. How the player and the legitimate interests of the operators and the state should be protected in online gaming?

One of the main things in my opinion is the question of the location of the servers. Many regulators like Italy or even Malta with the exception of Alderney, strongly believe that the only way to control online gaming industry is to make sure that the all peaces of the technology are based on the national sole. This is at the same time not feasible for many operators and is not a necessity for a good regulation. Gaming sites offering Cash Poker, for example, may have players from all across the globe and they will play against each other on pair to pair platform. In this case there will be players from Bulgaria, Italy, USA, China etc. and all of them will be playing against each other. The gaming server that actually makes it possible for each of players to play and to bet, should be located just in one place where it is being controlled by the regulator without possibility of having server in several jurisdictions or possibility to duplicate it. But duplication of the registration server, which is dedicated to the registration of the customers, is possible. Gaming server could be located just in one place and for instance France, Bulgaria, Spain etc. could have agreements with Alderney and Malta that the server may remain where it is because like this can be controlled what exact actions of the citizens of that particular country are, not of any other.

4. Do you think that the regulation of online gaming should be settled on in an international level?

Before saying international, let’s try to make it European first. In my opinion the international may appear in five, ten years maybe via WTO (World Trade Organization) as a good organization to set common standards, guidelines for international online gambling. But first step is European, because once the EU has agreed on the common standards, afterwards it will be able afterwards to negotiate a treaty with the countries as USA, China etc.

5. How do you see the future of online gaming?

We are now on the process of a big revolution in the way we provide gaming services, the franchise between the online and offline is very artificial, because most of the offline operators will offer online services either via internet or via offline premises. The games will become virtualized and computerized. Everything will be online even if it is offline. That is why it is so painful now for the traditional casino industry. They have to transform themselves and to understand that is not the other world outside it is just continuation of their activity. And they have to set up alliances with online operators. It’s a new industry merging will be the future.

Sands’ ‘cyber dive’

Billionaire Sheldon Adelson is banking on his organisation’s reputation by venturing into the new realm of nternet gambling. The hope is his move will reap huge dividends for LVS’ offshore i-gaming operations. But with foreboding US regulation,the future seems murky.

First Publication : Macaubusiness – April 2008 – by Marlene Prendeville in Las Vegas