Judgement goes in favour of Amalgamated Racing

Alphameric Plc has shared that the Court of Appeal dismissed an appeal against a High Court verdict related to its joint venture Amalgamated Racing Ltd.

Last year, Amalgamated successfully defended proceedings in the High Court over allegations that it had acquired certain media rights by violating UK competition law and the EC Treaty, Alphameric said in a statement. The claimants petitioned against the High Court’s decision and the matter came before the appeals court in May. Alphameric is a 50% shareholder in Amalgamated, its joint venture with Racecourse Media Services Ltd.

Bookmakers William Hill, Ladbrokes and Bookmakers’ Afternoon Gaming Services had claimed that Turf TV, run by Alphameric Gaming and Racecourse Media Services Ltd (RMS), itself owned by companies representing 31 of Britain’s 59 racecourses, was the product of an illegal cartel under both UK and European competition law. It has been highlighted that the bookmakers themselves have an interest in SIS FACTS, the successor to SIS, which held the sole rights to TV within licensed betting offices for 20 years until 2007. The bookmakers also had concerns over Turf TV’s pricing structure.

Betfred, which was involved in the 2008 case, settled out of court and in April signed a five-year agreement with Turf TV.

Produced for licensed betting offices in the United Kingdom and the Republic of Ireland, The Turf TV betting channel features exclusive live coverage from most of the premier events and festivals in the British Horse Racing Calendar, selected international racing events and is coupled with a complimentary suite of virtual events.

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.

Betfair challenges Dutch Payment Blocking in Court

This article was previously published in IGamingBusiness.

BETFAIR, one of the world’s leading online betting companies, has started legal action against the Dutch government in a court case which could result in a claim for damages running into millions of Euros.

The decision follows a letter from the Dutch Ministry of Justice urging Dutch banks to terminate their relationships with online gaming operators. The letter implies that facilitating transactions between Dutch residents and online operators is illegal. If the banks comply with the Ministry’s request, this would block access to the services of Betfair and many other gaming operators licensed in other EU-Member States.

Background of the payment blocking

The payment blocking is one of the latest battlefields for remote operators in the Netherlands. The first battle revolved around injunction proceedings instigated by the Dutch sports betting and casino monopolists (De Lotto and Holland Casino) against several online operators. These operators were ordered to cease offering gaming to Dutch residents. The operators all claimed that the Dutch gaming policy violates European law, and in the main proceedings between De Lotto and British bookmaker Ladbrokes, the highest court for civil matters referred questions to the European Court of Justice (ECJ) in June 2008. The second battle took place in the administrative courts, following rejected applications for Dutch gaming licences. Before the highest administrative court, Betfair already gained a preliminary referral to the ECJ in May 2008. Other measures that were announced in the wake of the transaction blocking are a media blocking and the announcement that the Ministry filed reports against at least three online operators with the Prosecution Department, which may eventually lead to criminal proceedings.

Online gaming operators are not alone in their fight against the Dutch gaming policy: the European Commission asked the Dutch authorities in February 2008 in its Reasoned Opinion to alter several provisions of the Gaming Act, because it considers the sports betting monopoly to violate European law.

The Ministry decided not to follow the demands of the European Commission. Instead, the Ministry of Justice decided to put its foot down and announced several measures to counteract online operators, amongst which the transaction blocking. Boards of banks and payment service providers are told that their institutions commit illegal activities by facilitating transactions to online operators. In its letters to the financial institutions, the Ministry asks them to make sure that the relationships with the industry are terminated: this has resulted in at least on bank to cease providing transactions to the industry. It must be noted that the authorities did not introduce new regulations to implement this payment blocking: instead, the general prohibition on ‘promotion of illegal gambling’ is said to include a prohibition on providing financial transactions to (illegal) operators.

Critique on Payment Blocking

Besides the European Commission’s critique on the sports betting monopoly and the referrals from Dutch courts to the ECJ, signs are appearing in other EU-Member States that these payment blockings themselves are incompatible with European law. In the national arena, the far-stretching interpretation of the Dutch regulations to also include the prohibition on providing transactions is criticized by lawyers and bankers alike. We elaborate more on these arguments hereunder.

European critique on similar measures

France received a detailed opinion from the European Commission in 2007 following a draft decree that contains a payment blocking. Germany implemented the Inter State Gambling Treaty in January 2008, which contains (amongst other things) a payment blocking. This treaty (a federal law) was subsequently criticized by the European Commission in a Letter of Formal Notice, inter alia for being a restriction to the free movement of capital, guaranteed by article 56 of the EC-Treaty.

Although the critique against the German and French payment blockings was a direct result of new (draft) regulations, the European Commission can also take actions against the Dutch payment blocking, even though it is the result of a new interpretation of the existing regulations. The European Commissioner for the Internal Market, mr. Charlie McGreevy, was quoted in the largest Dutch newspaper ‘de Telegraaf’ as stating that this measure violates the European Treaty. According to Commission spokesman Oliver Drewes, McGreevy requested the services involved to carry out an investigation into the bank embargo. Drewes also stated that the bank embargo will be included in the currently pending infringement proceedings.

Critique on the interpretation of the Gaming Act to include a transaction blocking

In legal literature, the Ministry’s position that the current regulations forbid providing transactions is criticized: the parliamentary history of the Gaming Act does not mention financial transactions, and from the explanatory memorandum to the Gaming Act, it is clear that the provisions were actually intended for, inter alia, intermediaries that sold participation slips in foreign lotteries. It does not seem to include a prohibition to facilitate payment transactions.

The Dutch Banking Association (NVB) stated that it does not agree with the Ministry’s position. It considers the interpretation of the Gaming Act wrong, and stated the Ministry should first obtain a criminal conviction before banks could be asked to implement the payment blocking. The NVB also stated that banks fear claims if they cease servicing these particular clients. Nevertheless, at least one bank has complied with the Ministry’s demands.

The Minister himself even made statements in parliament that can be explained as saying that the current regulations do indeed not forbid the provision of financial transactions. He stated that if his letters to the banks do not have the desired effect, he will introduce legislation similar to the American UIGEA. If the current regulations would already prohibit financial transactions to operators, such new legislation would obviously be redundant.

Betfair’s actions

Betfair is arguing that the Dutch Ministry of Justice commits a tort, under Dutch law, by making the request contained in its letter. Betfair is arguing in these proceedings that the Dutch government, by taking such a step, is acting in breach of European law (ie in breach of the principles of the freedom to provide services in the EU and the free movement of capital in the EU).

This civil action is aimed at obtaining a declaratory judgment to the effect that the recent actions of the Ministry of Justice (financial blocking by calling for a boycott by financial institutions) and the underlying policy are unlawful. Betfair may then continue the proceedings with a claim for damages.

In addition, as European law is relevant to this case, Betfair has also made an official complaint to the European Commission, which may lead to separate infringement proceedings against the Netherlands. Betfair also urged the Commission to proceed with its current infringement proceedings against the Netherlands relating to the sports betting monopoly.

What’s in the Crystal Ball?

Betfair is betting on two horses: the law suit against the State and the complaint with the European Commission. It will be an interesting race that may end with one or both of these horses ending up in the highest European Courtroom in Luxemburg.

The lawsuit

It will be hard for the civil courts to ignore the Dutch referrals that are currently pending before the ECJ. If the judges are unsure on the effects of European law on the payment blocking, this may lead to a third set of preliminary questions that specifically target the lawfulness of the payment blocking.

If the payment blocking is considered unlawful by a civil court, this will strike at the roots of the gaming policy. This may lead the Ministry to go for an ‘all or nothing’ strategy, which will encompass criminal prosecution. Another option might be an increase of the Ministry’s current efforts to create legal online gaming opportunities: an investigation into the regulation of online gaming and its possible licensing procedure is announced. The outcome of this investigation may lead to licensing opportunities for the industry.

The complaint

If the European Commission acts upon this complaint, it is possible that the complaint will boost the infringement procedure against the Netherlands, which will – according to EC spokesman Oliver Drewes – also include the payment blocking. It is generally expected that the current Commission will not proceed with the infringement proceedings. It will depend on the next Commission – especially on the Commissioner for the internal market – whether or not the Netherlands will be dragged before the ECJ.

Justin Franssen

Aernout Kraaijeveld

Justin Franssen wins ‘Lawyer of the year’ award

Justin was awarded the Lawyer of the Year award on 29 June 2009 at Tilney Hall (Hampshire) during the annual ‘Summer Retreat’ conference. He received the award from managing editor Lindsey Greig. World Online Gambling Law Report is written by senior international lawyers for all professionals who advise businesses with online gambling interests.

European Commission’s detailed opinion on the French bill regarding the opening of the remote gambling market

The European Commission has urged France to review the bill regarding the opening of the French remote gambling market.

Following the notification of the French bill regarding the opening of the remote gambling market, the European Commission rendered a detailed opinion on the 8 of June, 2009.

The French authorities are urged to clarify and amend some of the provisions of the bill in order to ensure the bill’s compatibility with European law.

* The first objection relates to article 16 of the bill and the system put in place for issuing licences. According to the Commission, this rule restricts the freedom to provide services (Art 49 EC Treaty). To be compatible with European law the French authorities are requested to clarify to which extend they will take into account the requirements of the legal system under which the operator is already licensed (country of origin).
* The second objection pertains to Article 52 of the bill which provides for an obligation for all licensed operators to obtain consent from the operating right owner of the sport event. According to the Commission, such a requirement could constitute a restriction to the freedom to provide services, as the betting offer would become less attractive.
* The third remark questions the justification of article 8 of the bill: French Government has to prove the necessity of this restriction. According to this provision, a maximum payback ratio is foreseen, whereby the Commission considers this might constitute an infringement to the freedom to provide services. In this respect, the French authorities are urged to adduce evidence concerning the link between the rate of return and fight against addiction.
* The last objection is related to article 39 of the bill which states for an obligation to have a fiscal representative established in France. This might constitute a restriction to the freedom to provide services, even despite the argumentation given by the French Government according to which this disposition is meant to ensure an effective fiscal supervision. Such an argumentation is not accepted (see Commission v. France judgement C-334/02) considering that such an obligation is disproportionate and can be replaced by a less restrictive measure.

This opinion obliges France to postpone the adoption of the law for one additional month. The new deadline ends on the 8 of July.

If the French Government does not modify the bill by the 8 of July, 2009 or ignores the EC opinion, it takes the risk that the Commission decides to launch an infringement procedure.