Press release ‒ Conference of FDP parliamentary party leaders, 3 September 2009 in Berlin FDP calls for reform of the Interstate Gambling Treaty. Experts in the fields of addiction, economics and law all opposed to Internet ban

published by Claudia C. Lang, Press officer of the FDP faction of the Lower Saxony federal state parliament

The discussion on reform of the gambling market was reignited at the conference of FDP parliamentary party leaders, who this time cast their sights abroad. International experts in the fields of addiction research, economics, gambling regulation and law came together on Thursday in Berlin for the conference, entitled “The impact of the Interstate Gambling Treaty – consequences of the monopoly and opportunities for liberalising the gambling market.” The purpose of the event was to draw attention to the consequences of the Interstate Gambling Treaty and to evaluate new, alternative models in place in other EU countries.

On paper, the state monopoly on gambling serves to protect players and was achieved by way of a general prohibition of Internet gambling. Jörg Bode MdL (Member of the Landtag), chairman of the FDP faction of the Lower Saxony federal state parliament and the event’s patron, is opposed to the current ruling and, in view of the ongoing evaluation of the Interstate Gambling Treaty, has demanded an in-depth study into the impact of the Treaty.

Detlef Parr MdB (Member of the Bundestag), the FDP Bundestag faction’s spokesperson for sports affairs, addiction and illegal drugs, also recognises the need for reform and has called for the Interstate Gambling Treaty to be terminated ahead of schedule by the Federal States, so that suitable reform measures can be brought in without delay, decriminalising Internet games such as sports betting and online poker for players and organisers, while continuing to protect players and simultaneously securing funding for good causes.

Dr. Wulf Hambach, partner of gambling law specialists Hambach & Hambach, pointed out that the aims were identical to those pursued by other countries with more liberal models in place. He explained that the objective of establishing an attractive, controlled and regulated gambling market had been thwarted by the German Internet ban, since online players were being driven to the black market. In particular, the legal aims pursued by the Interstate Gambling Treaty (namely combating addiction and associated crime, and channelling players’ desire to play) are compromised by an Internet ban. He went on to say that Germany was alone in adopting such a model, since Internet gambling is permitted by law in 21 of the 27 EU Member States and is regulated, or at least tolerated.

Specialist lawyers from France (Thibault Verbiest) and Italy (Quirino Mancini) and legal advisers from Norway (Rolf Sims) and Gibraltar (Phill Brear) presented the models adopted by their respective home countries to the audience and offered advice on reform. Quirino Mancini, lawyer and partner of Sinisi, Ceschini, Mancini & Partners Law Offices, put forward the view that Germany ought to introduce a uniform supervisory authority and policy, since separate policies for each individual Federal State are simply not workable in practice. In particular, he highlighted Italy’s leading role in regulating online poker, where the game is classified as a game of skill and thus permitted by law.

Behavioural scientist Prof. Iver Hand (director of the player project Verhaltenstherapie Falkenried MVZ GmbH) criticised the over-use and consequent trivialisation of the term “compulsive gambling”. He said that the typical warning given, “gambling can be addictive”, was more reminiscent of an advertising slogan. Committing to the concept of compulsive gambling blocks any funding for behavioural research, although behavioural disorders cannot simply be lumped together with physical dependencies such as alcoholism. He added that psychotherapeutic training was an essential requirement for successful treatment, and that all therapists employed needed to receive adequate sponsorship and training, a path that as yet remains untrodden in Germany for political reasons.

Prof. Friedrich Schneider analysed the drop in turnover in the public gambling sector in 2008 (between 12% and 30%), as well as the simultaneous growth of the black market. He pointed out that those who are intent on gambling on the Internet will not be deterred by a written ban, but will continue to do so. The associated loss of jobs, tax revenue and added value for the German economy due to lack of advertising revenue led him to urgently recommend at least a partial liberalisation.

In the concluding panel discussion, the consequences described above were discussed with Wolfgang Angenendt, representative of the Deutsche Toto- und Lottoblock (the association of federal state lottery companies), and Christian Kipper, executive director of the ARD Fernsehlotterie (television lottery). Wolfgang Angenendt qualified the drop in turnover and said that he sees no alternative to the current monopoly, due to the rules laid down by the Federal Constitutional Court. Mr Kipper criticised the advertising restrictions and the prohibition of Internet sales, which he said seriously compromised numerous charitable projects supported by the ARD Fernsehlotterie. As a result, he said, the dual aims of “helping and winning” can no longer be communicated and particularly younger members of the public for whom the Internet is a primary sales medium cannot be reached as a result of the ban.

By way of conclusion, Detlef Parr MdB explained that emergency reform on a national level would be required if the necessary steps are not taken at the Federal State level. He said that a reform of this kind was conceivable for both sports betting and online games such as online poker, so that members of the public are no longer persecuted by bans and driven to crime.

For the FDP, so much is certain: The Internet ban included in the Interstate Gambling Treaty is a dangerous path for Germany to go down, due in no small part to its ineffectiveness at combating addiction and the fact that it puts charitable projects such as those supported by the ARD Fernsehlotterie and professional and amateur sport at risk. Consequently, reform and alignment to EU standards are desperately needed.

Press officer:
Claudia C. Lang
Press officer
FDP faction of the Lower Saxony federal state parliament

Tel.: +49 511/30 30 4302
Mobile: +49 173/37 06 567
Claudia.Lang@lt.niedersachsen.de

Press Release PARR: ECJ fails to recognize the opportunities afforded by the internet and winds back the clock

published by Sports spokesman of the FDP Parliamentary Group, Detlef Parr on 8 September 2009

BERLIN. Sports spokesman of the FDP Parliamentary Group, Detlef Parr, comments on the ECJ ruling that the ban under Portuguese law on companies such as bwin offering games of chance on the internet is compatible with the freedom of services:

The ruling shows: urgent action is also needed in Germany – we have to rethink the existing regulations within the German Interstate Treaty on Gambling. Private gambling operators are just as able to meet the requirements for protection of gamblers as the state operators and indeed are already doing so.

The internet has long been able to offer effective protection for players. The Interstate Treaty on Gambling would, according to the latest ECJ ruling, only be deemed suitable for achieving the aim of combating addiction, if it did so in a coherent system. However, as comparable categories of gambling such as sports betting (state monopoly) and horse betting (private sector) are treated completely differently, this constitutes a clear violation of European law according to this latest ECJ ruling. The ECJ will thus withdraw recognition under European law of the Interstate Treaty on Gambling at the latest in the scope of the German preliminary ruling on Carmen Media.

The ECJ ruling is a step in the wrong direction. The ECJ has provided support for the national monopolies. The reasoning of the ECJ, that “the limitation of the freedom of services can be justified on compelling grounds in the public interest” is pure window dressing. Nobody has yet been able to absolutely define the specific conditions which must be met in order to justify government imposed limitations on betting operators.

The state has to provide such a definition. All those involved on a federal and Land level need to overcome their conventional, party mentality and find a solution which corrects the negative effects of the Interstate Treaty on Gambling.

Germany and the Inter-State Treaty

The Inter-State Treaty on Gambling and the implementation of the prohibition of gambling on the worldwide web – nothing is (im) possible. by Dr Wulf Hambach, Founding Partner and Susanna Münstermann, Senior Associate, Hambach & Hambach. Published in iGamingBusiness, issue May/June 2009.

The Inter-State Treaty on Gambling (Glücksspielstaatsvertrag) and the prohibition of online gambling aim, at least on paper, at steering the natural gaming urges of the population along well-ordered and supervised paths. That is why gambling supervisory authorities, access providers and banks are being faced with the question of whether the Inter-State Treaty on Gambling is the legal basis for “cutting off the communication and economic channels used” via blocking orders against access providers (ISP blocking) concerning (EU-licensed) online gambling offers or prohibition orders against banks (financial blocking).

But such a regulation is necessary in order to achieve a “court-proof solution”, as declared by the legal counsel for the German Lotto und Toto-Block, Dr Manfred Hecker, during a hearing before the state Parliament of North-Rhine Westphalia:

“Let us initially turn to a monopoly which is based on an irreproachable legal foundation. Such a monopoly, contrary to the present situation, is court-proof.

“An issue that comes up repeatedly is Internet gambling, which could also be prevented (particularly services by foreign providers, including those outside Europe) by cutting off the communication and economic channels used. This is because the firms based abroad need to communicate through the Internet and Internet service providers in order to make contact with the players.” (Unofficial translation, quote of the official minutes of the hearing, 15.3.2007)

It seems as if the Inter-State Treaty on Gambling provides the gambling supervisory authority with the power to prohibit banks from being involved in payments relating to illegal games of chance and access providers from cooperating regarding access to unauthorised offers of games of chance according to Section 9 Subsection 1, Sentences 2, 3, 4 and 5.

Is it possible to filter payments and websites? Who is liable for wrong decisions? May uninvolved third parties be obliged to act as deputies in order to monitor the legally disputed state monopoly? That’s reason enough to consult the experts.

Expert opinion
Under the patronage of the Verband der Deutschen Internetwirtschaft e.V. (eco) (Association of German Internet Businesses), in cooperation with the law firm Hambach & Hambach, an experts’ conference was held on March 26, 2009, dealing with the legal and technical demands of blocking orders for the purpose of implementing the state gambling monopoly.

Prof. Michael Rotert, Chairman of the eco board, referred to a letter from the German Federal Government to the European Commission and said that the phrase stating that “ISPs and banks will accept this as justified on their own accord, and will support the German States in the implementation of their politics” has led to considerable irritation. He explained that the state gambling monopoly is questionable from his point of view. Private providers are excluded for reasons of addiction prevention, whilst the monopolists are permitted to advertise the high jackpot sums on state-run television networks during prime time viewing on a Saturday evening.

As announced by Prof. Rotert, the expert lecturers were able to explain why neither blocking orders against ISPs nor prohibition orders against banks issued by the gambling supervisory authorities can be used as a means to implement the Inter-State Treaty on Gambling:

* There is no statutory basis for blocking orders against ISPs. The relevant provision in the Inter-State Treaty on Gambling is not a statutory authorisation.
* From the technical point of view, blocking of Internet sites is simply impossible. Legal and attractive online gambling offers provide the best level of protection.
* Blocking of online gambling offers involves considerable liability risks, as it is difficult to draw the line between illegal offers and legal online games of chance, legal games of skill and legal entertainment games and also because the state monopoly most probably is unconstitutional and contrary to European law.
* Prohibition orders against banks based on the Inter-State Treaty on Gambling are also contrary to constitutional and European law.

Cause for regulation
Mr. Schaeffer (Chief Security Analyst, TÜV Rheinlander Secure iT GmbH) gave a pictorial description of the structure of the Internet and came to the conclusion that the possibilities of bypassing blockings and censorship are endless, as the very idea of the establishment of the Internet was for it to bypass blockings independently. Blockings will only contribute to improved concealment of the networks. Online gambling should not be prohibited, but rather regulated. Providing attractive up-to-date offers which are continuously refined, will intercept the users and prevent their migration to illegal offers.

Attorney at law Dr. Hambach (Founding Partner, Hambach & Hambach Law Firm) explained from the point of view of gambling law why there are substantial liability risks involved with the blockings. In addition to the pending infringement proceedings and preliminary proceedings against the German gambling monopoly before the European Court of Justice – which is why licensed EU providers should not be blocked – other questions regarding differentiation remain difficult. Therefore, horse betting, games of skill and games with low stakes must not be blocked on the Internet, nor must mere entertainment games. The inconsistent German gambling law should be harmonised on the Federal level, and a gambling supervisory authority should be established which monitors the offers by private providers on the Internet.

Prof. Dr. Ohler (University of Jena, Chair for Public Law, European Law, Public International Law and International Commercial Law) gave a lecture on the topic “Capping of the flow of funds – monitoring by order of the gambling supervisory authorities”, and expressed substantial doubts based on constitutional and European law. Banks as uninvolved third parties may only be called upon to provide support in cases of the so-called “polizeilicher Notstand” (public emergency). From Prof. Dr. Ohler‘s point of view, the combat of illegal gambling cannot suffice to justify such public emergency. Also, the fact that the criteria for an automated filtering have not been defined, the lack of regulations in the Inter-State Treaty on Gambling in comparison with the act on money laundering, and concerns based on European law make it clear that the statutory regulation is inadequate.

Finally, it appears that the regulations of the Inter-State Treaty on Gambling were sewn in a great hurry and were solely governed by the political will. The evaluation and revision of its “big brother” in the USA, the Unlawful Internet Gambling Enforcement Act (UIGEA), clearly shows the weakness of these kinds of regulations. Instead of an efficient and automatic filtering, nothing more than a “know your customer” questionnaire remains due to the necessary differentiation between land based and online, licensed and illegal gambling offers.

Matter of opinion
Are the conclusions of the experts correct? Can banks and access providers rely upon the fact that all legal and technical concerns are taken into consideration?

The Bavarian Referent for gambling and father of the Inter-State Treaty on Gambling, Dr. Thomas Gößl, attended the Munich Gaming Conference on April 1, 2009, dealing with “Games on the Internet: Raffle, Gamble, Online Game –Challenges for the Protection of Minors”.

Dr. Gößl expressed the wish that one may accept the Inter-State Treaty on Gambling and the stop sign on the Internet, so that finally, calm is restored in the German gambling market. In his opinion, there are no reasonable doubts with regard to constitutional or European law. Other participants of this panel discussion, like Mrs Sabine Frank (Freiwillige Selbstkontrolle Multimedia-Diensteanbieter/Organisation for the voluntary self-control of the Internet), pointed out that several European Court of Justice decisions, dealing with the German sportsbetting monopoly, are still expected. Mr Prof. Schneider (ZAK (Commission for admittance and surveillance – commissioner for program and advertisement, Düsseldorf) formed the important view that a prohibition that cannot be enforced, leads to a loss of credibility.

Therefore, consumer restrictions cannot be placed on the Internet and blocking orders against some providers will not prevent the German consumer from gambling online. For the protection of consumers and minors one has to reproach the legislator with the total loss of a state controlled offer. It is unavoidable to reform the gambling law by creating a federal gambling law and a federal supervisory authority in order to steer the natural gaming urges of the population on the Internet along well-ordered and supervised paths.

Interview with Dr. Wulf Hambach: The licensing model is the best way for Europe

published on gamespectrum.bg, 2009-04-01

In your opinion, how should online gaming be regulated?

I think the licensing model is the best way for Europe. If we have 27 different licensing regimes there would be no problem for the offline world to regulate those 27 different jurisdictions but when it comes to online cross border and gaming, the best would be to have a licensing regime, which partially recognizes the existing licenses. So that’s the best way for taxation on one side and, on the other, the control body needs to be in the country where the license originates, for example Gibraltar, Malta.

Do you recognise any regulatory model for online gaming as a good one and what are its main features?

I think the UK model is most favourable but unfortunately the tax rate there is too high so that a lot of companies will not stay in the UK. However a very good thing is the UK still controls existing licenses by a white list approach, especially when it comes to advertising. So if an operator who comes from Alderney, for example wants to advertise in the UK, the UK regulator will look at the advertising restrictions and find out that Alderney is white listed, so the operator’s license shall be fully recognized and he is allowed to advertise. However the UK Gambling Commission and the Advertising department can still control advertising.

How can the player and the legitimate interests of the operators and the state be protected in online gaming?

Definitely by strong a strong legal framework and by taxation that is leading the fight against gaming addiction. On one hand the gaming taxation office collecting money has to be sure that there are enough funds allocated to projects for fighting gaming addiction. On the other hand, the operators need to be controlled with respect to fraud prevention. At the moment I think that existing EU jurisdictions and the fraud legislation standards are at a very high level. The other thing the operators should assure is that one player is not harming the others by manipulating software or using pots, poker rooms etc. in an Online Poker room for example. The gaming regulator should take care that the operators themselves implement enough measures to achieve enough protection.

How do you see the future of online gaming?

Right now there is always going be a struggle between the states for their interest into collecting money from the gaming sector. This interest will last for the next years also. Most of the European countries will offer a licensing regime, like Italy and Spain for example. This is the trend that cannot be stopped when we come to Internet gaming. The monopoly approach or total Internet gambling ban is not the future.

For further informations please see the website of gamespectrum.bg

Enforcement of the Interstate Treaty on Gambling in Germany – killer or a toothless tiger?

published in the Euroean Gaming Lawyer in association with InterGaming magazine, Volume 1, Issue 1, spring 2009 by attorney-at-law Dr Wulf Hambach (founding partner) and Susanna Münstermann (senior associate) of law firm Hambach & Hambach

Dr Wulf Hambach is a partner and cofounder of the law firm Hambach and Hambach Rechtsanwaelte, (www.timelaw.de), a specialised law boutique for advice on German and international law in the fields of telecommunications, IT, media and entertainment, with a special focus on gaming law. For several years Hambach has been a General Member of the International Masters of Gaming Law as well as member of the International Association of Gaming Advisors. Furthermore, he is co-founder of the European portal on gaming and gambling law www.gaminglaw.eu. In 2008 he was recommended as the number one in German gaming law by the independent ranking commentary Chambers and Partners. Recently he was named as Lawyer of the Year 2008 by the World Online Gambling Law Report, the leading sector publication. He can be reached at info@timelaw.de.

Susanna Münstermann studied law in Munich, specialising in European law and international public law. She gathered experience abroad in various places, including one year at the Università degli Studi di Verona, Italy. During her apprenticeship to the bar, she worked for a renowned law firm in Paris and for a lobby group in Brussels. Before joining Hambach and Hambach, she worked as legal adviser for the European Consumer Centre Germany and subsequently as project director for the eCommerce Contact Point Germany. Both these are located at the Franco-German consumer organisation Euro-Info-Verbraucher e.V. in Kehl, Germany, near Strasbourg, France. She specialises in media and entertainment law, information technology law and European and international private law.

Only a few days before the Interstate Treaty on Gambling (Glücksspielstaatsvertrag – GlüStV), with its total ban on internet gambling in Germany became effective, one of Germany´s leading internet security experts, Rolf vom Stein, put it in a nutshell.

He described the technical limits of internet censorship (keyword: ban on internet gambling) during an IT and banking expert panel in Cologne as follows: “The attempt to block the internet contradicts technical reality. The internet treats any form of censorship as an error and will find ways to bypass it.

“All established methods for the blocking of websites are complex and technically fragmentary. Also, blocking measures can be prevented or bypassed very easily by new technical developments (Web 2.0), through simple modifications by the providers or sometimes even through unaware steps taken by the users.”

However, from January 1, 2008, internet gambling offers are prohibited by law.

Consequently the German Federal Government’s statement in the infringement proceedings (No. 2007/4866) against the ITG dated May 20, 2008 (par. 64) says with regard to gambling offers: “Germany assumes that the internet providers, the banks and the banks’ associations whose support will be necessary for the implementation of this prohibition will, of their own accord, accept the prohibition as justified and will support the German states in the implementation of
their policies.”

What has been said so far sounds indeed as if the GlüStV and its enforcement tools (ISP and financial blocking) are indeed a killer for the private e-gambling industry.

Now to the crucial question: do the legal and technical experts see these enforcement tools also as a killer for the private e-gambling industry or more as a toothless tiger?

Blocking orders or voluntary self commitment by access providers

From 2009 onwards, the intention is to strictly monitor the internet prohibition. Recent press releases show that foreign internet offers are now meant to be blocked by corresponding orders against the access providers. In some cases, access to the offers could already be blocked by taking action against the Admin-C or the registrar.

Apart from this demand the discussion about website blocking is dominated by the Federal Ministry for Family Affairs, as Mrs von der Leyen started her initiative “to block the data highway of child pornography” last November and hustles the German access providers into a “voluntary” self commitment. The access providers fear that this voluntary self commitment could give rise to a host of new demands – and with regard to the previous discussions with the gambling supervisory authorities they do have cause for concern.

Especially as neither the Federal Ministry for Family Affairs nor the gambling supervisory authorities have taken into account the existing expert opinions:

First of all, the Commission for the Protection of Minors in the Media (KJM) has commissioned two studies dealing with the feasibility of website blocking from the technical and legal side.

Expert opinions: legal and technical difficulties

Professor Sieber (legal expert) came to the following conclusion: “The present legal situation does not allow any blocking measures which would interfere with the secrecy of telecommunications as provided for in Art. 10 GG (German Constitution), section 88 TKG (German Telecommunications Act).”

Professor Pfitzmann examined the technical side for KJM and came to the result: “Summing up, one can state that blocking on the internet is feasible in principle. However, it is often connected with considerable (and usually unforeseeable) side-effects.”

Second, also the BVDW (Federal Association Digital Industry) published an expert opinion that comes to the conclusion that due to the legal requirements of the German Telecommunication Act there is no legal basis for voluntary website blocking by access providers.

This result is also – last but not least – supported by the scientific service of the German Bundestag, but Mrs von der Leyen remains unimpressed. In her opinion the signal effect is worth all costs and administrative efforts (for the access providers) and considering child pornography all legal or technical arguments are negligible. In fact, some critical arguments of the Ministry of the Interior seem to have been lost in the heat of the battle and were not adopted in the common position of the Ministries of the Interior, Economics and Family Affairs.

Access provider: neutral gateway to the internet or deputy sheriff?

In the middle of this political discussion the access providers are desperately referring to their neutral role as providers of the entrance to the internet without being responsible for the information transmitted. It remains to be seen if the gambling supervisory authorities will enforce GlüStV by blocking orders in case the initiative of Mrs von der Leyen grinds to a halt and the gambling supervisory authorities cannot profit from any “voluntary” agreement.

But assistance is rendered by the Regional Court of Hamburg. In a recent decision the Regional Court of Hamburg decided about the question whether an access provider can be obliged to block a website with content that is infringing a copyright (disturbance liability). The court elaborates on the complex of technical and legal problems of website blocking and states that even though the technical feasibility is questionable as every DNS blocking is easy to circumvent, it is – in the opinion of the court – only necessary that the access of the user is blocked on its path that the website blocking is disrupting.

However, the court comes to the conclusion that considering the low level of effectiveness (remarkably the judge tried himself to find information in the internet how to circumvent DNS blocking and succeeded in a few minutes) and considering the costs arising from this measure for the access provider, the claim was dismissed as being not reasonable and unfounded.

Conclusion

The internet prohibition of gambling raises many questions. First of all, a conflict of generations becomes apparent, as the internet prohibition is only justified by an unwarranted and diffuse fear of the medium. “The player’s anonymity and the lack of any kind of social control make it seem necessary, under the aspect of preventing gambling addiction, to question the sales channel ‘internet’, for the area beyond sports betting.”

Contrary to this, today’s generation is well aware of the fact that the average internet user is not anonymous and that addiction prevention can be realised much more effectively by the provider of internet games than, for instance, on location at a casino where an individual’s playing behaviour cannot be recorded in a traceable way. Furthermore, the implementation of the prohibition beyond Germany’s borders requires censorship measures which usually are applied by countries such as China and North Korea, but are alien to a democratic and free society.

State supervision of gambling takes the easy way out in this context: by delegating its task of enforcing an internet prohibition to the internet providers, without providing them with feasible and effective action proposals for the implementation. The risk of hitting legal internet services as well due to imprecise blocking measures, and of thus exposing oneself to incalculable risks of damage claims, is simultaneously passed on to the internet providers in an inadmissible way.

It is alarming that the political discussions driven by understandable (child pornography) or doubtful (protection of problem gamblers or fiscal income?) reasons simply ignore all concerns that are outlined by legal and technical experts.

The toothless tiger is trying to threaten banks, access providers and the e-gambling industry. Once the blocking orders are issued and the legality is examined in court the toothless tiger will realise its weakness.