This article was previously published on GamblingCompliance.com (http://www.gamblingcompliance.com)
Gaming legislation in the Netherlands is restrictive, as it is in most of continental Europe. Based on the 1964 Gaming Act, monopolistic licenses are granted for most types of gaming.
Table of Contents
· 1. Background
· 2. Regulations
o 2.1. Introduction
o 2.2. The 1964 Gaming Act
o 2.3. The infringement proceedings on sports betting
o 2.4. The proposed Gaming Act
o 2.5. The proposed Online Gaming Act rejected by the Senate
o 2.6. Blocking of financial transactions and blocking of access to websites
o 2.7 The proposed Online Gaming Tax Act
· 3. Case-law
o 3.1. Introduction
o 3.2. Civil case-law: De Lotto vs. Ladbrokes
o 3.3. Application for a casino license: CFR vs. Minister of Justice
o 3.4 A different approach: Schindler vs. Minister of Justice
o 3.5 Pending case-law Betfair vs. Minister of Justice
· 4. Problem Gambling
· 5. Money Laundering
· 6. Summary
By Justin Franssen & Aernout Kraaijeveld
1. Background
The Kingdom of the Netherlands is a constitutional monarchy. Its governmental system is structured as a parliamentary democracy. The parliament is bicameral and consists of a Second Chamber (House of Representatives) and a First Chamber (Senate). Together with the government, the parliament is the legislator. The legal system is based on Civil law and consists of a number of Codes which are interpreted directly by the courts.
The 1964 Gaming Act is one of these codes. It contains a total prohibition on the offering of games chance, unless a license is granted. The only licenses that can be granted are licenses for specific types of gaming that are mentioned in the 1964 Gaming Act. It is not possible to obtain a license to offer online gaming, which is therefore prohibited. Over the past years, it has become common to extend gaming licenses upon expiration. A public tender after the expiration of a Dutch gaming license has not been held in recent history.
Dutch gaming policy is mostly upheld by gaming operators who possess Dutch gaming licenses. These operators have instigated dozens of civil injunction cases against operators of (online) gaming that do not possess Dutch gaming licenses and target Dutch residents. Although criminal prosecutions of violations of the 1964 Gaming Act are rare, operators of Call TV-programs (“participation TV”) have been raided in September 2007 by the public prosecution department and the Fiscal Investigation Department and are currently under criminal investigation for violation of the 1964 Gaming Act. The operators of online gaming that were summoned have all stated that the Dutch gaming policy is invalid because it infringes European law. Although there was a critical interlocutory judgment in a lower court, the judiciaries (including the Supreme Court) have been reluctant to either declare the sports betting policy to be incompatible with European law or to refer preliminary questions on this matter to the European Court of Justice (ECJ).
At the moment a totally revised Gaming Act awaits approval by the lawmakers. This newly proposed Gaming Act will replace the current 1964 Gaming Act. It does not contain a dramatic change in the current gaming policy. A different piece of proposed legislation, the Online Gaming Act, would have granted an exclusive but temporary license for online gaming to the state-owned casino-monopolist Holland Casino. This proposed legislation was rejected by the Senate on 1 April 2008. However, the Minister has made it clear that he now considers to incorporate regulations on online gaming in the proposed Gaming Act.
Several gaming operators that are licensed in other EU-Member States have applied for gaming licenses. The Minister of Justice so far refused to grant licenses to parties other than the current licensees. In appeal proceedings, the highest administrative judiciary (the “Council of State”) has so far rendered two remarkable judgments, one on an application of a license to operate a casino and the other on an application to operate a charitable lottery. In the last case, the Council of State made critical remarks on the impact of European law on the licensing system. In the pending Betfair vs. Minister of Justice case, the Council of State has referred preliminary questions to the European Court of Justice regarding the allocation mechanisms for the sports betting and horse betting licenses.
Dutch gaming legislation is also challenged by the European Commission because of claimed inconsistency with the EC-Treaty. The European Commission sent a Letter of Formal Notice to the Dutch government on 4 April 2006 and a supplementary Letter of Formal Notice on 21 March 2007. In its responses of 12 July 2006 and 13 July 2007, the Dutch government bluntly denies any inconsistency with the EC-Treaty. A Reasoned Opinion was sent to the Netherlands on 28 February 2008 but has not been made public yet.
2. Regulations
2.1. Introduction
The legal base of the Dutch gaming policy can be found in the 1964 Gaming Act. This act stipulates that offering games of chance without a license is prohibited. The act includes an enumeration of the specific games for which a license can be granted. The 1964 Gaming Act is further discussed in paragraph 2.2. Gaming machine operators are subject to specific regulations, which are not examined in this article.
The infringement procedure by the European Commission regarding the Dutch monopoly on sports betting attacks regulations that are incorporated in the 1964 Gaming Act. Because of its possible impact on the regulatory environment, it is discussed in this chapter. A brief introduction to the pending infringement proceedings is enclosed in paragraph 2.3.
Following previous developments in the gaming industry and the introductions of new games of chance, the 1964 Gaming Act has been altered many times since it was fist adopted. The Minister of Justice intends to replace the 1964 act with a new Gaming Act, which was published for consultation in November 2007. We discuss the new proposed Gaming Act in paragraph 2.4.
Paragraph 2.5 elaborates on the rejected proposal for an Online Gaming Act. Because the 1964 Gaming Act does not provide for a legal base to grant a license for online gaming, the Minister intended to introduce a separate piece of legislation, the Online Gaming Act. With this act, a monopoly on online gaming would be granted to Holland Casino. This act was rejected by the Senate on 1 April 2008.
On 29 February and on 4 March 2008, the Minister of Justice and his Ministry have made public statements on a new approach to counteract operators of online gaming. The Minister intends to counteract operators that are aimed at Dutch residents by blocking financial transactions between the operators and Dutch residents. He also intends to address Internet Service Providers in order to block the access to the websites and servers of these operators. These recent developments are discussed in paragraph 2.6.
In order to counteract operators of online gaming, the authorities plan to impose a tax duty on these operators. The proposed Online Gaming Tax Act is discussed in paragraph 2.7.
2.2. The 1964 Gaming Act
The 1964 Gaming Act states in article 1(a) that it is prohibited to “give the opportunity to compete for prizes or premiums, if the indication of the winner is subject to any form of chance, on which the participants generally can not exercise any predominant influence, unless a license is granted”. According to article 1 (b), it is also prohibited to promote the participation in such games of chance.
Following case-law, an online operator is said to be aimed at Dutch residents if the operator does not block access to its games by Dutch residents.
The offering of games of chance is a criminal offence and penalized under the Dutch Economic Offences Act. So far, the Dutch authorities have never prosecuted foreign operators of online gaming.
The 1964 Gaming Act allows monopolistic licenses for the State Lottery, casino games, lotto, sports betting and horse betting. Multiple, non-exclusive licenses can also be granted for charitable lotteries. No license can be granted for any other types of national gaming, which are therefore illegal. Besides the fact that licenses for games with a price pool higher than € 4500 are granted by the Minister of Justice, no provision for the application or allocation procedure or public tender for these licenses is included in the 1964 Gaming Act.
2.3. The infringement proceedings on sports betting
The current infringement proceeding by the European Commission focuses on the general prohibition and the articles that regulate the sports betting license. In the first Letter of Formal Notice the Commission states that it is of the opinion that the prohibition of games of chance not licensed in the Netherlands forms an unjustified restriction to the freedom to provide services (article 49 EC). The response by the Dutch governments led to the supplementary Letter of Formal Notice, in which the Commission states that it is of the opinion that both the monopolistic license for sports betting and the prohibition of games of chance that are not licensed in the Netherlands infringes article 49 EG.
It is clear that the existence of a monopolistic license for sports betting forms a restriction on the freedom to provide services contained in article 49 EC. Given the broad scope of this article, this conclusion is not surprising. In order to determine the validity of the national legislation on which this monopoly is based, it must be determined if the restriction can be justified. The EC-Treaty provides grounds for justification, but the restriction can also be justified by imperative requirements in the general interest. These imperative requirements are formulated in case-law by the ECJ. In the Gambelli judgement of 6 November 2003 (C-243/01), the ECJ confirmed earlier case law that stated that these imperative requirements include the protection of the consumer and the prevention of both fraud and the incitement to squander on gaming. In the Gambelli judgment, the ECJ added that the restrictions based on these grounds and on the need to preserve public order must also be suitable for achieving those objectives. The restrictions must serve to limit betting activities in a consistent and systematic manner.
The Dutch government states that its gaming policy can be justified by these imperative requirements because the policy is aimed at consumer protection, counteraction of fraud and criminality and the prevention of gambling addiction. The government intends to ‘channel’ the human urge to gamble by providing a safe and controlled gambling environment. To provide such a safe and controllable environment, it chose to create and maintain monopolies on several specific games of chance.
In its Letters of Formal Notice, the European Commission enumerates several arguments that state that the Dutch gaming policy is not consistently and systematically aimed at the limitation of betting activities and the policy is therefore not suitable to achieve the objectives of the gaming policy. Some of the Commissions arguments are as follows:
Despite the substantial marketing efforts by Dutch licensed gaming operators, which are often very persuasive, the Dutch government claims that the current gaming policy counteracts gambling addiction. The European Commission is doubtful of this claim. In its supplementary Letter of Formal Notice, the European Commission also criticizes the research material on which the Dutch claim is based. The Commission states that the Dutch Gaming Boards’ annual reports show different figures of the sums spent on marketing than the figures that the Dutch authorities provided to the Commission, and demands an explanation for these discrepancies.
A basic argument involving the aims of the gaming policy pops up when the financial aims of sports betting operator ‘De Lotto’ are examined. In several annual reports, De Lotto stated that its main aim is the procurement of funds. According to European case-law, financial interests cannot be used to justify a restriction on the freedom to provide services.
The Dutch government is of the opinion that the banning of foreign operators, even operators from other Member States who are licensed and monitored in their home countries, is justified by a general aim of preventing fraud, criminality and other illegal activities. The Commission disagrees. The Commission states that if an operator is subject to appropriate supervision, the prevention of fraud, criminality and other illegal activities cannot be used to justify an infringement of the freedom to provide services. The Commission emphasizes that the Dutch government did not provide any proof or indication of fraud and criminal activities by operators licensed in other Member States.
On 28 February 2008, the European Commission published a press release in which it announced that it had sent a Reasoned Opinion to the Netherlands. The Commission has formally requested the Netherlands to amend its laws. A Reasoned Opinion is the second stage of an infringement procedure. If there is no satisfactory reply within two months, the Commission may refer the matters to the European Court of Justice.
2.4. The proposed Gaming Act
The content of the current 1964 Gaming Act is largely maintained in the proposed new Gaming Act. In our perception, the most interesting change is the suggested replacement of the current Gaming Board with a new, more powerful Gaming Board. At the moment, the Gaming Board is an advisory body to the Ministry of Justice. In the legislative proposal, the Gaming Board will be responsible for licensing and will have the ability to fine breaches of the Gaming Act, which is currently not the case.
Furthermore, licenses will be limited to five year terms. After these terms they will expire and are eligible for renewal by the Gaming Board. At the moment, licenses are issued by the Minister of Justice. It may very well be that the licensing process will become less politically motivated. This may create licensing opportunities for the (remote) gaming industry.
It is possible that the Gaming Act will be enforced differently. Currently, the Gaming Act is largely enforced by the licensees via civil injunction proceedings, such as in the De Lotto vs. Ladbrokes and De Lotto vs. Unibet proceedings. Under the new Gaming Act, it is reasonable to assume that violations of the Gaming Act by online operators will be attacked by the Gaming Board via a system of administrative sanctions.
2.5. The proposed Online Gaming Act rejected by the Senate
At the moment, all offering of online gaming to Dutch residents is illegal. This prohibition includes the offering of online gaming to Dutch residents by operators licensed in other Member States. It is not possible to obtain a Dutch license for offering online gaming.
The proposed Online Gaming Act was a part of the governments’ fight against online gaming operators. If accepted and implemented, the Online Gaming Act would have created an exclusive but temporary license for online gaming. The Minister’s intention was that the temporary offer would be an experiment to gain knowledge on and experience with online gaming. The experimental license was supposed to be granted to State-owned casino monopolist Holland Casino. Holland Casino was supposed to offer a trustworthy and safe alternative for the estimated 400.000 Dutch residents that are currently gambling with other (“illegal”) operators. The proposed Online Gaming Act has met fierce criticism from the European Commission, high advisory bodies such as the department of legislation of the Council of State and members of the Senate. One of the points of critique was a possible infringement of European Law. Two rounds of debate were held in the Senate, and on 1 April the Senate voted 35 in favour and 37 against the proposed Online Gaming Act.
It is noteworthy that a majority of the Senators did neither show any concern of a possible infringement of European law, nor of provoking the European Commission to initiate a second infringement proceeding on Dutch gaming regulations. The main arguments uttered in the debate ranged from a wish by the conservative Christians and socialists for a total ban on online gaming, combined with a strict enforcement policy on illegal operators on the one side, and on the other side the liberals’ wish to admit more companies in the participation of the experiment.
However, the rejection of the proposed Online Gaming Act does not mean that the governments’ efforts to create an exclusive license for Holland Casino have come to a full stop. Minister of Justice mr. Hirsh Ballin stated that he now reconsiders his options, among which the incorporation of a new exclusive online gaming license in the proposed new Gaming Act. It is not yet known how he envisages this incorporation.
2.6. Blocking of financial transactions and blocking of access to websites
In a press release of 29 January 2008, the Ministry of Justice stated that it will “take a firm line” against financial institutions that facilitate unlicensed gaming operators. On 4 March 2008, the Minister sent a letter to the Senate which mentioned the Minister’s intention to address not only financial institutions, but also Internet Service Providers (ISP’s).
The Ministry intends to put together a black list of 30 online operators that are aimed at the Dutch market. This list will be issued this spring to the Dutch Banking Association (NVB). The Ministry expects financial institutions to refuse clients who are either operating illegal online gaming websites in the Netherlands, or clients who operate online gaming websites from abroad and are excepting Dutch residents as clients. The press release stated that the Ministry will take legal actions against companies who “nevertheless have relations with clients who operate illegal gaming websites in the Netherlands.” It is noteworthy that the press release was not issued by the public prosecution department but the Ministry of Justice. The Ministry itself has no authority to indict individuals or companies; it can merely file a complaint with the public prosecution department.
In the evening of 29 January 2008 a debate on the proposed Online Gaming Act was held in the Senate. Senators referred to the press release that was issued in the morning and asked if this “firm line” includes criminal prosecution, which the Minister promptly confirmed.
These statements by the Minister resulted in several critical reactions in the press from the Dutch Banking Association (NVB) and “Currence”, the operator of leading Dutch PSP “IDEAL”. A spokesman for Currence mentioned in a radio interview on 30 January 2008 that Currence is in principle unwilling to comply with the Minister’s request for as long as no judge has ruled that facilitating payment transactions to gaming operators is illegal. The NVB mainly pointed out the practical problems and stated that the debate on the acceptance of clients should only relate to Dutch accounts, held by Dutch companies with Dutch banks (meaning: licensed in the Netherlands).
The criticism from the NVB, as uttered on its website www.nvb.nl [22] may have been effective. In a letter to the Senate of 4 March, the Minister sharpness of the statements of 29 January was toned down. The Minister now states that only the provision of bank accounts to online gaming operators is illegal. The Minister also acknowledges that banks cannot completely monitor or block financial transactions between Dutch residents and online gaming operators. Dutch banks cannot prevent Dutch residents to transfer funds through a third party, such as an online bank account at a bank in another jurisdiction. The Minister explicitly mentions a Paypal account. Since Paypal has a banking license in Luxemburg, the Ministry stated that it cannot oblige a bank with a foreign license to break up its relations with online gaming operators.
Because of the fact that the blocking of Dutch PSP’s can be circumvented, the Minister stated on 4 March that he now intends to also address Internet Service Providers. These ISP’s can remove illegal websites, or block the access to illegal websites. The Minister states that the police and the public prosecution department can indicate this possibility to the ISP’s regarding online gaming operators. The Minister states that such an approach of illegal websites by police and public prosecutors often leads to a ‘positive action’ by ISP’s.
According to the Minister, the public prosecution department is willing to take action against operators of online gaming, and against intermediaries such as PSP’s and ISP’s that facilitate these operators.
However, if the approach as described above proves to be ineffective, the Minister also stated that he intends to propose legislation that blocks transactions to and from online gaming operators. This legislation will be similar to the American UIGEA. The Minister does not mention that similar regulations to the UIGEA that prevent financial transactions to and from online gaming operators have already been criticized by the European Commission as infringements of the free movement of capital as laid down in article 56 of the EC-Treaty. On 3 March, France has received a ‘Detailed Opinion’ from the European Commission following a draft decree similar to the UIGEA, and Germany has received a ‘Letter of Formal Notice’ because of the German Interstate Gambling Treaty. The Letter of Formal Notice contains criticism on the prohibition of financial transactions with online gaming operators. These documents are a clear sign that (eventual) Dutch legislation prohibiting financial transactions to or from online gaming operators can also be non-binding because such regulation potentially constitutes a violation of European law, notably article 56 of the EC-Treaty.
2.7 The proposed Online Gaming Tax Act
The proposed Online Gaming Tax Act (bill 30 583, hereinafter ‘OGTA’) was originally meant to be complementary to the Online Gaming Act. Despite the rejection of the Online Gaming Act, the authorities decided to pursue the legislative process of the OGTA.
The OGTA will impose a tax burden on operators of both domestic operators of online gaming and the individuals that have won prizes in foreign online gaming. For the participant in foreign online gaming, the tax rate is 29%, levied on the positive difference between the wagers and the prizes for each month. The participant is not subject to gaming tax in the Netherlands if a similar tax has been levied in the country were the operator is based.
The current tax exemption for prizes won at foreign gaming operators that do not surpass €454 is not maintained for winners of prizes with foreign online gaming operators. The increase of the tax burden goes even further. Gaming Tax is also levied on all valuable goods that the participants were given, because of their participation in a game of chance. In our opinion, the current text may even include a tax on promotional wear given to participants.
On 26 June 2007, the House of Representatives accepted the OGTA. The Senatorial Finance Commission examined the OGTA in a closed meeting on 20 May 2008, after which it sent a report to the government. The Commission has several points of critique, including doubts on the enforceability of the proposed legislation. It is not yet known when the government will answer the questions and critique raised in this report.
3. Case-law
3.1. Introduction
In most of the civil case-law, the operators that do not possess Dutch gaming licenses have taken the position that since the Dutch government does not pursue a coherent and systematic restrictive policy, the Dutch gaming act is irreconcilable with the EC-Treaty. This debate came to a provisional climax by the Supreme Court’s judgment of 18 February 2005 in the summary case De Lotto vs. Ladbrokes, in which the Supreme Court decided that the 1964 Gaming Act is a justified infringement of the EC-Treaty. At the moment, the proceedings on the merits between De Lotto and Ladbrokes are pending before the Supreme Court.
After the 18 February 2005 decision, administrative proceedings were also started regarding the allocation of the gaming licenses, which can also be seen as irreconcilable with the EC-Treaty. The highest administrative judiciary, the Council of State, gave two remarkable rulings in the cases of CFR vs. Minister of Justice and Schindler vs. Minister of Justice. In the pending case Betfair vs. Minister of Justice, the Council of State has referred preliminary questions to the ECJ.
3.2. Civil case-law: De Lotto vs. Ladbrokes
The De Lotto vs. Ladbrokes case was the first case in which the Supreme Court was asked to render a decision on the conformity of the Dutch gaming policy, in particular the sports betting monopoly, with European law. The judgment was rendered on 18 February 2005.
On 6 November 2003, the ECJ rendered the Gambelli-judgment, which is discussed above. The Supreme Court referred to this decision and the requirement that the national policy should be consistent and systematic, and therefore suitable for the achievement of its stated aims. In its examination of Ladbrokes’ claim that the 1964 Gaming Act is incompatible with European Law and therewith non-binding, the Supreme Court confirmed the evaluation of the Court of Appeal which concluded that the prohibition of all games of chance without a license is suitable to achieve the governments objectives. The main objective is canalizing the human urge to gamble whilst also protecting the consumer, counteracting fraud and criminal activities and preventing gambling addiction. Therefore, the Supreme Court considers the 1964 Gaming Act not to be an infringement of European law.
It must be noted that this case was a summary civil proceeding in a dispute between two private parties. It was not feasible to thoroughly examine the Dutch gaming policy. The judiciaries only conducted marginal examinations of the actual implementation of the government’s policy.
At the moment, the proceedings on the merits are pending before the Supreme Court. De Lotto has won al cases in lower courts, obtaining injunction verdicts against Ladbrokes. As it was in the summary proceedings, Ladbrokes is ordered to block access to its websites from the Netherlands. The opinion of Advocate-General Keus, delivered on 4 April 2008 is noteworthy. Although several new judgments have been rendered by the ECJ on the national gaming regulations of Member States, and the European Commission has instigated infringement proceedings on the same issue that is at hand in the De Lotto vs. Ladbrokes case, the Advocate-General concluded that Ladbrokes appeals on European law should be rejected.
The reason for this conclusion is that A-G Keus considers the ongoing infringement proceedings between the European Commission and the Dutch government to be a more suitable framework for an examination of the compatibility of the national gaming policy with European law. Despite his conclusion that the appeals on European law should be rejected, the Advocate-General does propose drafts for two possible preliminary questions to the ECJ. A-G Keus refers to recently referred preliminary questions to the ECJ from courts in other Member States that are dealing with similar issues, most notably the joint cases C-316/07 (Markus Stoss), C-409/06 (Winner Wetten), C-64/08 (Engelmann), C-525/06 (Euro Millions), C-46/08 (Carmen Media Group) and C-42/07 (Liga Portuguesa de Futebol Profissional). Because of the broad scope of the questions referred by other courts, A-G Keus proposes different preliminary questions that may contribute to the debate on national gaming monopolies. He proposes one broad question on the applicability of the status quo in the Netherlands as described by the government. More interesting is the second question. This specific question emphasizes on the nature of this civil case. A-G Keus proposes to ask the ECJ if a measure by a judiciary, imposed in an injunction judgment in a civil dispute on the offering of remote gaming, also needs to contribute to the realisation of the aims of the national regulation. In other words: does a judgment that restricts the freedom to provide services also need to be justified by imperative requirements in the general interest.
3.3. Application for a casino license: CFR vs. Minister of Justice
The Compagnie Financière Régionale (CFR), a subsidiary of french casino operator Tranchant, applied for a license to operate a brick and mortar casino in the Dutch municipality of Bergen op Zoom. Because of the fact that the 1964 Gaming Act only provides for a single license to operate casinos in the Netherlands, and this license is already granted to (the state-owned) Holland Casino, CFR’s application for a license to operate a casino was refused by the Minister of Justice.
CFR objected to this refusal and appealed the Minister’s decision at the Administrative division of the District Court of Breda. In a surprising move, the District Court annulled the refusal on 2 December 2005. The District Court examined the marketing budgets and efforts of Holland Casino, and the expansion of the number of casinos. After considering that the expansion and the marketing policy of Holland Casino cannot be considered to be systematic and coherent, the District Court ruled that the Minister had failed to show that the legal monopoly is a justified restriction on the freedom to provide services.
The Minister of Justice and Holland Casino (that joined the Minister in the proceedings) appealed this decision at the Council of State, which annulled the judgment of the District Court on 14 March 2007 and decided that the Minister is allowed to refuse the application for a license to operate a casino. According to the Council of State the examination of specific aspects of the gaming policy cannot lead to the conclusion that European law is infringed: the national policy on casinos should be examined as a whole. Because of the fact that the limitation of casino operators serves the objectives of regulating and controlling the total supply of gaming opportunities and canalizing the urge to gamble, the Council of State considers the Dutch casino policy to be in full compliance with European law.
3.4 A different approach: Schindler vs. Minister of Justice
Four months after the CFR vs. Minister of Justice case, the Council of State ruled differently on the application for a license to operate a charity lottery. The number of charity lotteries is not limited in the 1964 Gaming Act. At the moment, three such licenses have been granted.
The Council of State gave two remarkable statements: first of all, it considered that the Minister failed to proof that refusing this single application for a license to operate a charity lottery is proportionate in order to achieve the aims of the government’s gambling policy. As mentioned above, those aims are canalizing the urge to gamble, with special attention to the protection of consumers, prevention of gambling addiction and the counteraction of fraud and other criminal activities. Apparently, the Council considers it possible that other measures, that are less restrictive on the freedom to provide services, are possible alternatives to the limitation of charity lottery-licenses to three.
Besides this statement on the proportionality of the refusal of this single license with regard to the freedom to provide services, the Council of State also criticizes the automatic renewal of these licenses to the existing operators. The Council of State also makes a remark on the fact that there is neither a form whatsoever of a public tender upon expiry of these five year-licenses, nor on the expiry of any gambling license named in the 1964 Gaming Act. According to the Council, this restriction on the freedom to provide services cannot be justified by the Ministers objective of keeping control on the gambling market, because this objective can also be reached by a licensing procedure that is based on objective criteria and with similar conditions for potential operators that are free to bid for a license.
The differences in these two judgments, which were delivered by the exact same Councillors, may be found in the fact that licenses for charity lotteries are not exclusive, and the casino-license is. CFR applied for a license besides the license of Holland Casino, while the casino-license is exclusive. Also, the license to operate casinos in the Netherlands is granted for an indefinite period, while the licenses for charity lotteries and most other types of games of chance are granted for five-year periods. A definite answer to the reasons why these two judgments led to different outcomes may be given in the pending Betfair vs. Ministry of Justice case.
3.5 Pending case-law Betfair vs. Minister of Justice
At the moment, the case Betfair vs. Minister of Justice is pending before the Council of State. On 14 May 2008, the Council issued its referring judgment, in which it refers preliminary questions to the European Court of Justice.
This case differs from the CFR vs. Minister of Justice and Schindler vs. Minister of Justice cases in the fact that Betfair applied for the sports betting-license that is now granted to De Lotto and the horse betting-license that is now granted to Scientific Games Racing. Both CFR and Schindler had applied for a separate license, besides the existing licenses. Therefore the allocation of the existing exclusive licenses, which was briefly mentioned by the Council of State in the case Schindler vs. Minister of Justice, can now be thoroughly examined.
Because of the possible consequences for their operations, both De Lotto and Scientific Games Racing decided to join the Minister in the proceedings. At the moment, two hearings have been held in this case, the first on 30 August 2007 and a re-opening on 10 November 2008 after the judgment by the European Court of Justice in the case European Commission vs. Italy, C-260/04 of 13 September 2007. The Council decided to re-open the proceedings to allow the litigating parties to express their views on the consequences of the judgment in case C-260/04 to the case at hand. The Council referred to the ECJ with questions on the mutual recognition of licences, a question on the equal treatment of potential candidates and the transparency of the allocation procedure and a question whether, and if so under what conditions, the exclusion of third parties in the allocation of gaming licenses is justifiable.
4. Problem Gambling
In 2005, the Dutch Ministry of Justice commissioned a detailed study to establish the problem gambling prevalence rate in the country. Conducted by the Addiction Research Institute (Centrum Verslavings Onderzoek-CVO), the study revealed a significant drop in the numbers of problem gamblers in the country. While a previous scientific study from the same institute of the University of Utrecht had shown there were over 70,000 problem gamblers in Holland in the mid-1990s, the new study showed this number had fallen to less than 40,000 in 2005. However, the new study has a very high margin of error, with the authors admitting in the preamble that the number could be anywhere between 21,000 and 59,000.
This amounts to a 0.3 percent problem gambling prevalence rate for the population aged 16 or over. Compared to the USA and Canada, which have rates of around 2-3 percent, this is amongst the lowest recorded prevalence rates in the world, with only Sweden having a lower rate of 0.2 percent.It should be noted that the prevalence rate is subject to much debate amongst industry insiders. The fact that the previous figures were ten years old and no follow-up had been conducted means that the reasons for the decrease are more speculation than fact.
Another problem lies in the notion that this report was ordered and paid for by the government, which also holds a monopoly on gambling. While the impartiality and integrity of the CVO is not in question, the monopolistic nature of the industry means that the authorities, by having a certain control over the access the CVO had to data and the actual gamblers to be questioned, could have had a certain impact on the study parameters.
The results of the study are also in contradiction with other observations. For example, the number of problem gamblers seeking help was increasing at the same time the problem gambling rate was supposedly decreasing.For example, after a sharp decrease following the ban of fruit machines, the number of addicts rose 7 percent in one year. This was made clear from figures of the foundation, Stichting Informatievoorziening Zorg (SIVZ) published in 2003.
The SIVZ numbers are an indication that the 0.3 percent rate might not reflect the real situation, especially given that sports betting and lottery players were not taken given much consideration in the calculation of the CVO prevalence rate study.The CVO study did come to the conclusion that problem gambling measures taken by the state had been very effective, most notably the self-exclusion program at Holland Casinos. Another important action by the government against problem gambling credited for the decrease was the removal of fruit machines from certain types of restaurant venues.
Although the preventative measures taken by Holland Casino and gaming machine operators have made a substantial contribution, the same cannot be said for amusement centre and bar staff, whose training is limited.
Other findings from the study revealed that despite a low problem rate, the country had a high participation rate. For example 80 percent of the population admitted having bought lottery tickets, 31 percent bought a instant lottery scratch card, 35 percent have played on a slot machine and VLTs and 25 percent had been to a casino. In all, 87 percent of the population a partaken in one form of gambling or another in the 12 months preceding the study.
Other forms of gambling proved less popular. Only 4 percent of the population had participated on horse race betting and, another 4 percent admitted to have gambled illegally. A dismal 1 percent of the population had gambled on an internet casino or betting site.At the European Association for the Study of Gambling conference held in Slovenia July 1-4 2008 Johan van Kastel, head of security for Holland Casino, gave a detailed overview of his company’s problem gambling policy.
Van Kastel mentioned that the mandatory identification of players before they are allowed to enter the casinos makes it easy to track gambling behaviour and act if problems are detected. For example, he stated that if a player visits casinos more than 10 times within a single calendar month, this player will receive an advice slip from the reception counter mentioning the various problem gambling resources available in the country. If a patron visits the casinos more than 15 times in a month, a mandatory interview with a specially trained employee is conducted.
Floor managers are also trained to detect behaviour such as long uninterrupted periods of playing or aggressive behaviour suggesting distress. These managers invite the player for a “screening interview” to establish the depth of the problem. If a serious problem is detected, the manager then refers the client to the security department for a “confrontation interview”. The result of the confrontation interview is often a ban of 6-months to 1 year. This can be as a result of a demand for self-exclusion or based solely on the security officer’s opinion.
If the client wants to come back after the ban a “return interview” is given in order to ensure that the problem has been resolved and that it is safe for the player to return to the gaming floor. Multiple “follow-up” interviews can be conducted to assess the player’s situation, especially if large sums of money are lost after the return. Van Kastel mentioned that 20,000 of the above mentioned interviews are conducted every year, out of a total casino visitor number of nearly 1 million.
In recent years, Holland Casinos has also developed a working partnership with the Human Assistance Network for Daily Support (HANDS). HANDS is an independent organization which provides a telephone helpline for problem gamblers. Leaflets and posters are scattered throughout the venues and staff have been trained to divert people to HANDS when problematic behaviour is observed. This is in addition to many health department and private services offered to problem gamblers.
5. Money Laundering
At the same EAGS conference in July 2008, Johan van Kastel also gave a presentation on Holland Casinos’ anti-money laundering frame work. First and foremost, he explained that his company was giving extensive training to all employees who handle cash on how to identify suspicious financial transactions. This is often done by keeping records of people who convert large denomination bills (€500) without playing for a long time or people who arrive with large stacks of small bills and also do not play and convert their chips back to cash or cheques.
This process, which is known as “layering” or “splitting”, is usually identified by cashiers and video surveillance personnel.Van Kastel mentioned that while money laundering in Holland Casinos did take place, most criminals in Holland used another process called “integration”, which consists in buying cash businesses such as restaurants and bars and declare false revenues, thus integrating the “dirty” money into their accounting practices.
While van Kastel agrees that his casinos are not free of money laundering, the elaborate security measures implemented in the last decade have been deemed successful in reducing illegal financial transactions, especially in the foreign currency side of the business. Any transaction of €15,000 triggers a special reporting method where the client is obligated to fill a special form which will be kept as a record.
The Disclosure of Unusual Transactions Act (Wet Melding Ongebruikelijke Transacties) came into force in the Netherlands in 1994. The Act created an anti-money laundering reporting agency, the Office for the Disclosure of Unusual Transactions . Under the Act, casinos are required to report to the Office any transactions which they unusual or suspect. This obligation is required of casinos as they are quasi-financial service providers.
The security department of Holland Casinos also conducts background checks on players who exchange large amounts of money at its venues. For example, van Kastel mentioned the story of an individual, Reinier S., who had been excluded after losing large amounts of money and threatening the staff. Reinier had been defrauding his employer to cover gambling losses and later killed his wife when she confronted him about his actions.
Another example given by van Kastel is the case of a client who played with bags of money that was soiled and had a bad smell. When asked by security why his currency was in this state, he replied that he had lots of money buried and could always get more. A thorough background check of this person revealed that he was an eastern European crime boss alleged to be involved in large-scale drug trafficking in his home country. He was later banned from all casinos in the Netherlands.
As a result of its efforts in combating problem gambling and money laundering, Holland Casinos received the international award for ‘Socially Responsible Operator of the Year” at the 2008 Gaming Awards ceremony held in London.This award is by no mean an indication that Holland Casinos has gotten rid of problem gambling and money laundering on its premises, as can be attested by a number of scandals and media stories published in recent years on both issues. However, the company has come a long way since the opening of its first casino in the mid 1970’s.
6. Summary
Dutch Gaming law is still restrictive in nature, and the Minister intends to pull financial institutions and internet service providers into his struggle with online operators. The government shows no move whatsoever towards liberalization of the Dutch gaming market.
On the other hand, the government received serious setbacks: the European Commission instigated an infringement procedure regarding the monopoly on sports betting. The Senate rejected the proposal for a new state-monopoly on online gaming. In a pending administrative procedure, the ECJ will rule on the conformity with European law of the current automatic renewal of gaming licenses. The conformity with European law of the sports betting monopoly as such is under examination by the Supreme Court, while it is possible that the European Commission will instigate a procedure on this very same subject with the European Court of Justice.
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