New French Gaming Legislation: Requirements Imposed on Operators by the Cahier des Charges

On March 1st, 2010, the ARJEL (the newly-created National Regulatory Authority of the French online gambling market) has issued a Draft Specification Requirements List (Cahier des Charges in French, hereinafter referred to as the “Requirements List”) which provides the reader with useful guidance with respect to the definitive outlook of the Requirements List. It is worth recalling that the goal of the Requirements List is to provide for the conditions which must be fulfilled by online gambling operators willing to obtain a license to offer games of chance to French consumers. It is on the basis of the guidance provided in the aforementioned Requirements List that potential applicants for a license can prepare their licensing application file.

Useful Information Regarding The Need To Respect The Legislative Timetable

First of all, the date of the Requirements List’s publication confirms the timetable indicated by both the French Government and the ARJEL regarding the New Gaming Legislation’s entry into force. The goal is to give sufficient time to potential applicants so as to grant them a French license for the World Football Cup due to start on June 10th of this year.

Upon publication of the New Gaming Legislation’s Implementing Regulations in the French Official Gazette, which should occur a month following its adoption at the National Assembly, potential applicants should be allowed to submit to the ARJEL their licensing application file.

One has to bear in mind that the Requirements List will have to be submitted for final approval to the French Ministers of Interior, Budget, Agriculture and Sports, prior to its subsequent entry into force. However, one can reasonably suppose that the core principles contained in the Requirements List should remain unchanged. Thus, the New Gaming Legislation’s Implementing Regulations should be in line with the current wording of the Requirements List.

The Requirements List In A Nutshell

The Requirements List is voluminous (37 pages). It is composed of 11 main chapters that potential applicants have to comply with in order to obtain a license granted by the ARJEL.

The potential applicant will have to provide the ARJEL with economic, accounting and financial information. A description of the applicant’s online gambling website must be provided to the ARJEL, details on the processing of players’ accounts must be provided as well, any sub-contracted activities must be clearly mentioned as well as all kinds of internal controls and procedures. The ARJEL seems to be putting a particular emphasis on those issues.

It is worth mentioning that the licensing fees, to be paid by potential applicants when submitting a licensing application file to the ARJEL, should vary according to the number of requested licenses. For a single license, the fees should amount to €5000 ; for 2, €8000 and for 3, €10000. This is fresh information given that Article 38 of the New Gaming Legislation only provides for a threshold as to the fees to be paid by applicants for a license. (Article 2.6 of the Requirements List).

One should also note that certain requirements deal specifically with the treatment of information with regard to CNIL obligations, legal mentions of the site etc.

The Requirements List deals specifically with the technical architecture of the applicant’s online gambling website. This underlines the importance attached by the ARJEL to the issues of IT security. However, whilst some additional requirements could be added in the 6 months period prior to certification, it is nevertheless foreseen that, from the very beginning of the licensed activity, the frontal website fulfils a certain number of imperative requirements.

As regards means of payment, the Requirements List provides for the authorized means of payment as well as the kind of information to be transmitted to the ARJEL. It should be noted that certain provisions relating to payments are likely to require considerable efforts of adaptation from online gambling operators.

The ARJEL should have four months for (probably less taking into account the timetable) assessing the licensing application files (Article 2.0.4 of the Requirements List), any modification of the Requirements List in the meantime would cause a new delay. Similarly, in the course of the preparatory phase of the investigation to be carried out by the ARJEL, if the applicant does not respond positively in the required time to a potential demand for further information from the ARJEL, the licensing application file will be rejected (Article 2.3.2 of the Requirements List).

Transparency and Stability

Transparency is first of all required in financial matters. It will be necessary to provide precise documentation regarding the Board Members of the Companies involved in the licensing application process (“all individuals or parties owning more than 5% of the capital or voting rights…as well as the, or those, controlling them”) (Article 3.2.part 2 of the Requirements List).

Financial stability is also required: the financial stability of the applicants must guarantee that they will not default on the payments or winnings of the players. In the event of financial difficulty, the presence of a board member or shareholder of standing could be sufficient to reassure the ARJEL. It is worth recalling that, insofar as legal entities are concerned, the presence of a board member does not oblige him or her to cover the debts of a company in which they hold shares.

Financial stability will also be scrutinized in the light of the provisional elements that must be transmitted together with the licensing application file (Article 4.1 of the Requirements List). The analysis of these provisional elements should enable the ARJEL to ascertain whether the national rules, as regards fiscal obligations and financial stability, are respected. These elements will be dealt with more specifically later when on dealing with licensing applications files.

In order to reply to the requests for explanations concerning the conditions laid down in the Requirements List, the ARJEL foresees a public and anonymous reply to these requests through its website (“A FAQ (frequently asked questions)….will shortly be proposed…as a complement to the downloadable documents”). Therefore, it would be wise to carefully follow the updates and interpretations that will be made publicly available by the ARJEL.

In conclusion, the availability of the Requirements List mandates potential applicants to tackle with rigor and precision the licensing application files that will be submitted to the ARJEL. The Requirements List should allow online gambling operators to comply with the criteria demanded in order to obtain a license before the beginning of the World Football Cup in South Africa.

It is therefore recommended to operators, wishing to submit a licensing application file to the ARJEL, to immediately start preparing their files: the objective being to be amongst the first operators to obtain a license to offer games of chance to French consumers. In this case, co-ordination of technical, financial, and legal files is necessary in order to allow operators to be ready in time.