Legal core assessment of German e-business

TIME Law News 1|2008

a) “The utilisation of music on the internet – still a legal minefield¹“

As stated already in the introduction, the online utilisation of third-party content is connected with substantial legal problems which must be clarified prior to the utilisation of such content. Otherwise there is the threat of drastic legal problems.

Just as Bayern Munich’s goal guarantor Luca Toni, in spite of knowing the rules, frequently is offside, many users stumble into the numerous pitfalls of the various fields of law, such as the law on copyrights, personality rights, name rights and trademark rights, in spite of having masses of information available warning them that the internet is not an unregulated field.

On 15 April 2008, Spiegel Online correspondingly, under the headline „photo agency Getty triggers online wave of cease-and-desist letters“, reported on the assertion of copyright claims by the photo agency Getty against numerous individuals using images online on their websites. This is not only a German problem. Internet forums show that Getty is pursuing those utilising online images without authorisation in other (European) countries as well. According to the information on Spiegel Online, Getty claims payment of a sum of approx. 1,500.00 Euro for a one-time utilisation per image. The unauthorised use of several images may therefore lead to painful damage payments.

Music generally is not unregulated common property!

In addition to the unauthorised utilisation of images, an online presentation may also violate other rights.

An example is the unauthorised utilisation of music within the framework of the online presentation, e. g. in e-shops. In the past, copyright claims based on the unauthorised exploitation of music, in particular ring tones, by subsidiaries of globally acting large groups of companies, were brought before courts by the holders of the rights. The former illegal download offers provided by Napster also occupied the courts. Streaming offers on Youtube have also been attacked (out of court). The International Federation of the Phonographic Industry (ifpi), i.e. the professional association of the large record labels, founded a separate company assigned with the research and prosecution of illegal online music offers on sharing networks (e.g. Gnutella). The reports to the police and the cease-and-desist letters issued to users generated this way have probably reached a four to five-digit number in the meantime.

German law important for foreign companies as well!

The problems connected with the online utilisation are not limited to German providers. Under certain conditions, foreign online providers also are obligated to comply with the requirements of German copyright law. German copyright law, just as German competition and trademark law, is applicable to foreign online cases if they are targeted directly to Germany. The Telemediengesetz (German Act on Telemedia) on the one hand provides for a privileged position for foreign online providers, according to which generally the law of the country of origin is to be applied. However, this regulation is not applicable to copyright questions, according to section 3 subsection 4 No. 6 Telemediengesetz. This means that German copyright law is applicable to foreign offers with a national reference. As the execution of German court judgements is possible within the European Union, foreign providers should also comply with the requirements of German copyright law when utilising music (online).

Rights to the music must be obtained!

Therefore, prior to using music (online), it must always be clarified which rights to the music must be obtained. There are only few exceptions where music may be used without approval by the holder of the rights (e.g. for a work of music 70 years after the author’s death), which should be legally examined in each individual case.

The described cases of illegal use of images and of music clearly show that it is necessary to clarify third-party rights in advance, during the phase of preparation of a concept and production of a website presentation. However, due to the variety of the applicable statutory regulations and due to the complexity of the various legal matters, this is easier said than done. The provider of online content must, in addition to the problems of (IT) law, such as compliance with the regulations on distance contracts and with data protection law, also comply with the provisions of the laws on copyrights, personality rights, names, marks and trademarks. The main area affected in the case of the utilisation of music is copyright law.

Where can I obtain the necessary rights to utilise music?

A particularly complex field is the question of obtaining the utilisation rights for using the music. Music transports emotions, and films and advertising campaigns would be unthinkable without it. As the internet will in the future not only be used as a source of information but more and more also as an entertainment medium, the use of music will increase.

However, it could be dissuasive that the necessary approvals must be obtained from the (numerous) holders of rights to the work of music and the musical recording prior to being able to utilise a piece of music. In contrast to regular goods and services, the authorisation to use a piece of music cannot be obtained by means of so-called “one-stop shopping”, i.e. from one person or one company. Rather, several contracts with different parties will be necessary. Uli Hoeneß, Vice-Chairman of FC Bayern Munich, would definitely feel at home here, as he would be able to once again prove his negotiation skills against several “opponents”.

Works of music are created by a composer and a texter or several composers and texters (authors) who thus obtain copyrights to the work of music. The piece of music is recorded by musicians and the singer as well as a producer who not necessarily are identical with the authors. The musical recording or the recorded performance, i.e. the rendition of the work by the singer and musicians as well as the recording by the producer (production of sound carriers) create so-called performing rights which also are regulated in the Urheberrechtsgesetz (German Copyright Act). This means that if music is to be used on a website, the copyrighted utilisation rights to the work and the copyrighted performing rights to the recordings must be obtained.

The majority of authors have (exclusively) transferred their rights to the musical works to a collecting society (Germany: GEMA) and to one or several music publishers for the purposes of exploitation. If several authors contributed to the creation of a musical work, all of the (co-) authors may conclude a contract on his/her part of the musical work with a different publisher. The music publisher and the collecting society administer different rights to the work.

The persons entitled to protection of performing rights, i.e. the singers, musicians and producers of the musical recording, will have granted the right to utilise the recordings to a record label. For cases of a secondary exploitation of the recordings (e.g. broadcast on the radio), performing rights to the recordings will have been granted to a performing rights society (Germany: GVL), by the singer and musicians as well as by the record label. This means that a division of the exploitation rights also takes place with regard to the musical recording.

The contractual relations described above only roughly show the chains of rights between the individual persons and companies who substantially participate in the exploitation of music. Other persons and companies may also be involved. However, for the sake of comprehensibility, we refrain from including a conclusive description.

The provider of a web offer now is faced with the question, whom of the many parties involved he/she will have to contact to be able to use the music online. This mainly depends on the type of utilisation. It is possible that a piece of music is meant to be used online in connection with advertising. Furthermore, a distinction must be made between downloads and streaming. The user must also examine whether the interactive use of music is possible or if the user can only listen to the music without being able to influence the beginning, length and end.

A detailed evaluation of each individual case of utilisation cannot be provided here due to the large number of utilisation possibilities. However, the following may be said as a rough assessment for the German territory: In cases of a utilisation of the work/recording of music for advertising purposes, the author and his/her music publisher and the GEMA as well as the producer or his/her record label must be contacted. In the area of downloads, a licence must be obtained from GEMA and the record label. An evaluation in the area of streaming decisively depends on the question of inter-activity. GEMA as well as GVL (in case of no inter-activity) or GEMA and the record label (in case of inter-activity) may be responsible.

However, prior to any utilisation it is necessary to legally examine in detail how the music is to be used in the specific case. This is the only way to filter out the affected rights and the parties holding these rights. A legally binding evaluation thus is only possible when looking at the specific case in question.

Payment for music!

Determining the affected rights and the correct addressee of the utilisation inquiry is, however, only the first step on the way to the licence. Now, the remuneration sum must be agreed. As numerous fixed tariffs are offered in the area of online utilisation (e.g. for music-on-demand or webradios), in particular by the collecting and performing rights societies, the user should in advance obtain information on the tariffs and their applicability to the intended type of utilisation. Through this procedure, the offer can subsequently be adapted to be able to use an economically reasonable tariff. Should a record label and/or a music publishing company be responsible, the user of the piece of music will be forced to enter into specific negotiations with this company.

Conclusion

Just as Luca Toni is puzzled by the offside traps set by his opponents, licensing music is not an easy business. One thing, however, applies for Luca Toni as well as for the user of music: If you stick to the rules, what you will get is a goal – or legal utilisation of music respectively.

The compliance of online offers with the statutory provision must be the top focus for German as well as foreign providers, despite the complexity of the various fields of law involved. The necessary rights should be obtained in advance, after consultation of a lawyer familiar with the trade. In our times, characterised by so-called “waves of cease-and-desist letters” and by companies systematically scanning the internet for infringements, there is the threat of painful damage claims for violations, in addition to the obligation to stop using the music due to cease-and-desist claims. On top of this, violations of copyrights may be subject to criminal prosecution.

It definitely is in the interest of the users to be able to use music without any restraints. However, it is essential to obtain a proper licence in order to also ensure musical diversity for the users. Luca Toni also is forced to live with the offside decisions against him – whilst still firmly targeting the goal-getter crown.

b) Threat to existence due to cease-and-desist letters – updates, continuous monitoring and legal consultation in cases of doubt regarding the content of the internet site will pay off²

Cost trap cease-and-desist letters

The risk of becoming the addressee of a cease-and-desist letter dangles above all internet providers like the sword of Damocles. The reasons for such cease-and-desist letters are varied and often are found in what seem to be bagatelles. A few thoughtless words in the notification on the user’s cancellation rights, in the general terms and conditions or the price information may lead to costs amounting to four or five-digit sums. The notification on the user’s cancellation rights is a particularly good example for the fact that even diligent businesses are not safe from cease-and-desist letters, as even the sample notification compiled and suggested up to now by the German Federal Ministry of Justice did not provide protection.

Cease-and-desist letters under competition law are always connected with the request to reimburse the costs for the assignment of a lawyer and may lead to surprisingly high court and lawyer’s fees for a legal dispute if the action is lost, as values for such disputes have been fixed at up to 30,000 Euros³. However, in the meantime there is a tendency in court decisions and legislation to take action against “mass cease-and-desist letters” issued by one provider, and against the collusive cooperation between a “cease-and-desist lawyer” and a company, because competition law is not meant to create a source of income for lawyers, but to provide competitors with means of taking action against the advantages obtained through infringements by their fellow competitors.

However, large and small providers on the internet must equally anticipate to be issued cease-and-desist letters which may make an expensive issue out of what seemed to be a minor carelessness. The old sample notification on the user’s cancellation rights, for instance, was objected to because according to its wording, the deadline for the issue of the cancellation declaration began “at the earliest upon receipt” of the notification instead of on the day “after receipt” of the notification. This risk is a serious burden for the internet economy in Germany; almost 50% of the online shops questioned in a study felt that their existence is threatened by the practice of cease-and-desist letters in Germany⁴.

New sample notification on cancellation rights

With the sample notification on cancellation rights, the legislator intended to provide a proper notification, upon the economy’s request, in order to make the wording of the notification easier for the companies, and at the same time to fulfil some statutory information obligations. However, this sample notification on cancellation rights has been criticised by the courts, so that even such businesses who had trusted in the validity of the sample notification received cease-and-desist letters. As a consequence of this criticism by the courts, a new sample notification on the user’s cancellation rights was compiled. Internet providers using the former sample text should modify the text correspondingly⁵. If the shop is re-designed, the new regulation, valid as of 1 Apr. 2008, should be implemented immediately, for all existing internet offers this should be implemented by 30 Sep. 2008 at the latest.

The new statutory regulation takes into consideration the criticism voiced by the courts up to now; however, there always is the danger that some judges may hold that the new sample notification text is not free of mistakes either. For the practice, what remains to be stated is that the wording of the sample notification still is long and clumsy. The ultimate aim, which is to inform the consumer in an easy and understandable way, can hardly be achieved by this. However, the new sample notification text will probably provide businesses with the highest possible level of protection against cease-and-desist letters.

General terms and conditions and distance sales law

Additional pitfalls are lurking in the general terms and conditions and in the compliance with the information obligations for distance sales contracts. For instance, a violation of the necessary precision of the general terms and conditions may already lie in the inclusion of the – often used – supplement “usually” when stating the delivery time⁶, and a reference to “insured shipment” may be considered to mislead the consumer⁷. Not all faulty clauses in general terms and conditions present a reason for a cease-and-desist letter; however, special attention is to be paid to the transparency of the wording, the price information and the compliance with the statutory provisions in the area of warranty rights⁸. Mistakes and inaccuracies in these areas may lead to the assumption of an anti-competitive advantage for the user of this clause, and thus allow the issue of a cease-and-desist letter.

Data protection – an underestimated duty?

The users’ interests in the protection of their data should not be underestimated, as can be seen from the angry reactions to the intended modification of the data protection regulations by StudiVZ around the turn of the year. The enthusiasm shown by the users when compiling their user profiles and filling them with content does not mean that they agree to their data being used for commercial advertising purposes.

Many internet providers regard the compliance with data protection regulations as a nuisance and negligible duty. However, in particular web 2.0 in all its forms of appearance shows that users readily and willingly disclose personal data, while they have some reservations against the utilisation of their data for commercial advertising. The statutory requirements and the extent of the users’ consent, however, are of substantial importance for the use of the customer data, in order to avoid costs for cease-and-desist letters, fines or even penalties under criminal law. Section 43 subsection 3 BDSG (Bundesdatenschutzgesetz – German Federal Data Protection Act), for instance even provides for a fine of up to 250,000 Euro, and section 44 BDSG provides for imprisonment of up to two years in case of an intentional violation of certain provisions of data protection law.

c) E-payment in Europe: Current technical and legal framework conditions⁹

”When I was young I thought that money was the most important thing in life; now that I am old I know that it is.”

Oscar Wilde

The basic requirements for payments of money have always been the same, and remain unchanged even now while the important flows of money only take place in the virtual world:

The wish to ensure safe payments and fast transactions.

While the virtual world promises independence of business transaction from time and place, the speed of payments with a sufficient level of security still had to be developed and had to be accepted by the users.

The new uniform European payment standard “Sepa” is meant to speed up money transfers in Europe in the future, however, it is not to be expected that the transferred sum will be credited in the same second. However, this is exactly what e-business requires, and what, prior to the introduction of alternative payment methods, could only be achieved through the use of credit cards. The reservations against the disclosure of the credit card number on the internet and the restricted access to credit cards due to the necessary credit worthiness still left a gap which was filled by the new payment methods such as PayPal, Giropay, Click & Buy or Moneybookers. Here, the transferred sum is credited immediately, also providing a minimum security standard with account and password authentication.

With PayPal, the payment system purchased by ebay, and the payment system Click & Buy used for a number of news magazines, a high level of market saturation and popularity of e-payment has already been achieved. However, some legal questions are yet to be clarified; new technical standards are required and additional regulations are expected, a small selection of which shall be described hereinafter.

EU Commission: User trust in e-payment in need of improvement

EU Commissioner Charly McCreevy recently declared on a study carried out on behalf of the Commission in 2007, that the EU Commission actively strives to keep the dangers due to fraud in cashless payment transactions at the lowest possible level, in the interest of the consumers as well as the financial service providers and credit institutions. According to the study, the users’ trust can still be improved, while significant directives, such as the Directive on the Prevention of Money Laundering (2005/60/EC) and the Directive on Payment Services (2007/64/EC) have either not been incorporated into national law, or this has only been done recently. The long-term success of these regulations and the spread of improvements among the users have therefore for the most part not yet been achieved.

New security standards for credit card transactions

The obligation to comply with new security standards for credit card transaction has developed without any pressure from Europe (PCI DSS – Payment Card Industry Data Security Standards).

This concerns regulations created directly by the leading credit card organisations, and which obligate all companies working with credit card transactions. This ensures additional security against system manipulation – in the interest both of the credit card institutions and of the customer.

In order to implement the regulations, it was made clear that the credit card institutions are entitled to impose severe penalties on their trading banks, while the dealers may be obligated to hold the banks harmless and bear any damages which may have been incurred. Contractual penalties of up to 500,000 US dollars per case of infringement are possible if data have been compromised due to the non-compliance with security standards. The most painful possible penalty would, however, be the discontinuance of acceptance of credit cards for the provider concerned.

For companies with more than 6 million credit card transactions per year, 30 September 2007 was the deadline for the implementation of the new PCI DSS. From January 2008 onwards, these compliance requirements also apply for companies with one to six million credit card transactions.

Framework with regard to supervisory law for e-money providers

A long-term cooperation with an e-payment provider in Germany is not only measured according to its business concept and solvency, but also according to the legal requirements. As the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin – Federal Financial Supervisory Authority) supervises among others the credit and financial services institutions and is authorised to close down their businesses if they do not have sufficient licences, the requirements set by this institution are decisive under the Kreditwesengesetz (German Banking Act).

As the requirements set by the BaFin, in particular for e-money institutions located in Germany, are very demanding, and the definition of the term “e-money“ by the BaFin is very narrow and restricted, this business form has hardly developed with German business locations and German banking permissions (the only known company is NCS mobile payment GmbH – Crandy).

The promising business areas already existing on a large-scale for e-money institutions thus are operated from other countries. With a registered location in one of the countries of the European Economic Area, the provider can extend the licence it holds there under the bank or finance supervision of its own country to the entire European Economic Area, with the help of the “European single passport”.

Applications for the “European single passport“ are filed with the supervisory authority in the respective country in which the company is based. The foreign supervisory authority informs the German BaFin of the intended commencement of activities of the e-money institution, whereupon BaFin will inform the institution within two months of some special regulations applicable in Germany which must be complied with; following this, business operations in Germany (e.g. via the internet) can be commenced.

With this regulations, less strict requirements set by other countries of the European Economic Area can be exploited to the advantage of the e-money institutions which are based in the European Economic Area and wish to do business in Germany without applying for a separate licence there.

The economically interesting German e-money market can thus be operated cross-border without the requirement of any large expenses. This means that there is an opening in the banking market, the possibilities of which have not yet been fully utilised.

Summary

The new e-payment methods can boast high growth rates and continuous new designs which require the implementation of further technical security standards and provide specific chances of a cross-border market from the legal point of view. However, legal security in detail does not exist so far, so that a specific risk analysis is necessary, from the point of view of supervisory law as well as with regard to the risks of money laundering. This not only applies to e-payment providers, but also to internet shops or service providers only looking to cooperate with an e-payment provider.

1The article „The utilisation of music on the internet – still a legal minefield“ was written by the Attorney-at-Law Marco Erler

2 The article an article „Threat to existence due to cease-and-desist letters – updates, continuous monitoring and legal consultation in cases of doubt regarding the content of the internet site will pay off“ was written by Attorney-at-Law Susanna Münstermann

3 compare OLG (Higher Regional Court) of Hamm, resolution dated 28.03.2007, ref. 4 W 19/07.

4 Poll by Trusted Shops GmbH, Shop-Abmahnungen im Internet, April 2007.

5 You will find the current version in Annex 2 to the Informationsverordnung zum Bürgerlichen Gesetzbuch (Information Decree to the Civil Code) under www.gesetze-im-internet.de.

6 KG (Regional Court) of Berlin, resolution dated 03.04.2007, ref. 5 W 73/07.

7 LG (Regional Court) of Hamburg, resolution dated 06.11.2007, ref. 315 O 888/07.

8 For instance, the hidden exclusion of sales to consumers is not legally valid (OLG of Hamm, judgement dated 28.02.2008, ref. 4 U 196/07), nor is the reference to third-party general terms and conditions (Landeslotteriegesellschaft) which also are meant to be included into the procurement contract (OLG of Celle, judgement dated 28.02.2008, ref. 13 U 195/07).

9 The article “E-Payment in Europe: Current technical and legal framework conditions”was written by Attorney-at-law Dr. MIchael Hettich

Jackpot Promotion Ban ‘Commercial Suicide’ For German Lotteries

published on GamblingCompliance, June 6th, 2008 by James Kilsby

A High Court has ruled that Bavaria’s state-owned lottery can no longer mention jackpot amounts in advertisements as to do so would violate the advertising provisions of Germany’s Interstate Gambling Treaty, which came into force in January. The local ruling is likely to have a nationwide effect and could strangle the ability of all German lotteries to promote their services, say observers.

The Bavarian High Court in Munich has banned Bavaria’s state lottery from mentioning jackpot amounts in advertising campaigns, upholding the March 2008 ruling of a lower court.

The court said that the lottery could face a fine of up to €250,000 if it continues to run such campaigns.

The case was brought by Bavaria’s competition watchdog against three particular adverts for the state lottery, a member of Germany’s state monopoly lottery grouping Deutscher Lotto- und Totoblock. In its decision, the High Court agreed with the earlier Administrative Court ruling that all three instances violated section 5 of the Interstate Gambling Treaty.

One advert featured the slogan “Play with…”, while another detailed the current jackpot being offered by the lottery. The Court said both contravened the Interstate Gambling Treaty’s advertising provisions by offering enticements to gamble.

As well as banning the television advertising of all gambling products, the Interstate Treaty states that all “advertising in relation to public games of chance shall be limited to providing information on the game of chance and clarification of the opportunities pertaining thereto.”

Furthermore, it states that lottery adverts “should not be to call on or encourage individuals to participate in games of chance.”

According to Wulf Hambach, gaming law specialist with Munich-based firm Hambach & Hambach, the treaty’s advertising provisions reflect a preceding March 2006 Federal Constitutional Court ruling that effectively said state governments could only maintain their monopolies over lottery and sports-betting products if they drastically limited their own ability to advertise.

Said Hambach: “The Interstate Gambling Treaty says that lottery monopolies should reduce their advertising down to what is purely information. However, the High Court said that a lottery jackpot is not just information; it is also a way of promoting the lottery. So to include mention of the jackpot in an advertisement runs contrary to the Interstate Treaty.”

Although the decision was in a state court, Hambach believes that the same reasoning could be applied throughout Germany. “The ruling will definitely have a federal impact,” he said, adding that a possible effect could therefore be that all Germany’s state lotteries are prohibited under the new gambling treaty from mentioning jackpot amounts when advertising their games.

The impact of higher jackpots – and lotteries’ ability to promote them – on German lottery revenue was underlined just last December when sales records were shattered as a series of rollovers saw the maximum prize in a midweek interstate lottery draw climb as high as €45m.

With the Interstate Treaty not yet in effect, lottery operators were able to capitalize on the media frenzy that accompanied the inflated jackpot by taking out extensive advertising campaigns.

Repeating that level of revenue would be impossible under the Interstate Treaty, warned Norman Faber, president of private lottery association Deutscher Lottoverbandes. “Lotto set the record sales in motion with an enormous advertising campaign. All that is to be forbidden starting from January,” he said after the record-breaking draw.

For Hambach, the Bavarian High Court decision further underlines the commercial cost Germany’s state lotteries will face under the Interstate Treaty which extended their gambling monopolies.

“It has been suggested that the treaty’s restrictions would sever the limbs of the state operators, and not being able to promote jackpots means one of those has now been cut off.

“Only now are people coming to see the reality that the treaty is tantamount to commercial suicide for the state monopolies themselves.”

For further informations please see the website of GamblingCompliance Ltd.

Update on relevant 2007 case law

In this article, we provide an overview of European case law that is relevant for private gaming operators. We discuss case law from Germany, Denmark, Sweden, the Netherlands, Malta, Belgium, France and Norway. We also discuss the major regulatory and political developments.

Germany:

2007 has been marked by mostly “favorable” case-law for private gaming operators and by seven references for a preliminary ruling on the interpretation of national betting and gaming provisions with article 49 EC Treaty, currently still pending.

Moreover, following the entry into force in January 2008 of the new interstate treaty (“Glücksspielstaatsvertrag”), the European Commission has opened an infringement proceeding against Germany. The European Commission questions whether the treaty is consistent with article 43 and 49 of the EC Treaty. It also has doubts on the consistency of the treaty with article 56 of the EC Treaty (free movement of capital).

Here are a few lines on the recent relevant national decisions:

– In January 2007, the Higher Administrative Court of Bavaria decided that the Bavarian ministry for research and sciences was not entitled to order the Bavarian agency for new medias to prohibit the advertising of sports betting.

– In May 2007, the Higher Administrative Court of Bavaria ruled that a national measure prohibiting internet gaming was not justified since current technologies do not permit the enforcement of such a prohibition.

– In July 2007, the administrative court of Stuttgart made a reference for a preliminary ruling to the ECJ concerning the consistency of the sports betting monopoly and of national gaming licences with articles 43 and 49 of the EC Treaty.

– A Stuttgart court also held that the local football club (VFB Stuttgart) could not be prevented from advertising for Austrian bookmaker Bwin.

– On 6 November 2007, the administrative court of Hesse cancelled the regional authorities decision to prohibit Bwin from offering its services in the state of Hesse on the ground that it was technically impossible to prohibit the provision of online gaming in one state only.

– The administrative court of Dresden cancelled in October 2006 a decision by the German authorities ordering Bwin and other sports betting operators to stop their activities in Germany. The court considered that the situation was not clear in view of national and European Community law. It also referred to the March 2006 Federal Constitutional Court decision ordering the German state to reexamine the national sports betting monopoly in the light of European Community law.

– The Federal Court of Justice confirmed in August 2007 a regional decision cancelling prosecutions against a bookmaker accused of having operated illegal sports betting in the state of Saarland in 2003 and 2004.

– In December 2007, the Higher Administrative Court of Saxony decided that the licence granted to Bwin by the ex RDA in 1990 entitles it to offer online sports betting only in the 5 ex-DDR states. This decision contradicts previous regional court decisions (Hesse and Bavaria).

– The administrative court Frankfurt/Main decided in January 2008 in interim proceedings in favor of a suspending effect for a private sport betting provider against a cease and desist order.

– In January 2008, the administrative court of Schleswig seized the ECJ of a request for a preliminary ruling in the context of the new sports betting monopoly. The hearing in Schleswig pertained to the law suit filed by an online provider of sports bets based in Gibraltar who is looking for the acknowledgement of his European licence for the German Federal State of Schleswig-Holstein as well, on the basis of the principle of the freedom to provide services. The court asked the ECJ whether consistent and systematic restrictions of the sports betting market were possible, when areas (i.e., slot machines) which are relevant with regard to addiction are not included in the scope of application of the interstate treaty.

– The administrative court of Regensburg suspended in January 2008 a defended claim against a cease and desist order with regard to the preliminary rulings at the ECJ.

– In February 2008, German Federal Court of Justice dismissed competition law actions filed by state-run gambling providers (among others Westlotto) against private sports betting providers holding ex-DDR and EU licences (among others bwin).

– In March 2008, the Federal Court of Justice dismissed Bwin’s claim to delay the application of a Cologne court decision dating September 2007 which was rendered following an action brought by Westlotto and granting the latter the right to claim damages for unlawful competition; this decision was rendered whilst Bwin’s appeal of the Cologne court decision is still pending.

– In March 2008, the Higher Administrative Court of Baden-Württemberg allowed an appeal against a dismissive judgment by the Administrative Court of Karlsruhe, due to substantial doubts as to whether politics regulating games of chance in Germany are implemented in a consistent way. The case concerns a claim by a plaintiff that its UK licence is also valid in the state of Baden-Württemberg and is to be regarded as a licence under German law. The court will most probably suspend the proceedings until the ECJ has replied to the requests for preliminary rulings of which it had been seized.

– In April 2008 the administrative court Berlin explained in detail why in interim proceedings the private interests of the sports betting provider outweigh the public interest. The court especially elaborates on the guidelines set by the Federal Constitutional Court in 2006 and gives examples why most probably these guidelines have not been realized in Berlin.

– For the first time a German court decided in principal proceedings in favor of private sports betting broker. In April 2008 the administrative court in Freiburg focused on the legal situation in Baden-Wuerttemberg and how the state monopoly is realized. The court came to the conclusion that the marketing concept of the state provider is contradictory to the goals of the interstate treaty.

Denmark

Case law

Danish case-law in 2007 includes two judgments that are noteworthy to the gaming industry. Although the first one was favorable for specific private gaming operators, the second overturned the first judgment. These judgments were rendered in a case revolving around the legal regime applicable to poker. In July, a District Court in Lyngby acquitted the president of the Danish Poker Association of charges of organizing illegal gaming. The District Court considered tournament poker (Texas Hold ‘em style) to be skill game and not a game of chance. However, this landmark judgment was overturned by the High Court on 19 December 2007, ruling that poker was in fact a game of chance. It is reported that an appeal at the Supreme Court can be awaited.

Political developments

Developments outside the courts are also noteworthy. On 21 March 2007, the European Commission sent Reasoned Opinions to several Member States: Hungary, Finland and Denmark. The European Commission stated that the regulations on sports betting of these countries are in breach of the freedom to provide services, as laid down in article 49 of the EC-Treaty. The Commission considers these regulations to be incompatible with EU law, and have not been shown to be necessary, proportionate and non-discriminatory.

The pressure from the European Commission may have been effective. In April 2008, the Minister of Tax Kristian Jensen stated that the Danish government is considering a reform of the gaming market which includes licensing opportunities for online gaming and skill games (including sports betting). The Minister emphasized that the licensing requirements for online gaming and skill games will be strict.

Sweden

Case law

A judgment by the Supreme Court ordered the Court of Appeal to assess the compatibility of Swedish gaming law with the EC-Treaty. This decision obliged the Court of Appeal to assess the compatibility of Swedish gambling legislation with EC law in light of the Reasoned Opinion sent by the European Commission and the case-law in Placanica (C-338/04). Following this judgment, the prosecution of media that carried gaming ads was halted by the Prosecutor-General.

Infringement proceedings

The European Commission has criticized both the Swedish legal regime on sports betting and the Swedish legal regime on poker. Regarding sports betting, the Swedish government received a Reasoned Opinion on 27 June 2007, together with France and Greece. A Reasoned Opinion constitutes the second stage in an infringement procedure. The third and final stage is a legal procedure with the European Court of Justice, in which Sweden can be ordered to alter its regulations.

The Netherlands

Case law

Several private gaming operators have tried to obtain gaming licenses in the Netherlands. The Minister refused all of these applications. Two remarkable judgments on refusals for gaming licenses were rendered by the Council of State in 2007. These judgments paved the way for a third judgment by that same judiciary in which the Council referred to the European Court of Justice for an answer on preliminary questions regarding the application for gaming licenses. In the first case, a District Court had rendered a positive ruling for private gaming operators, but the Council of State overturned that ruling. In the second case, the Council itself gave a ruling that can be considered positive for the private gaming industry.

– The first judgment revolved around the refusal of a casino license to CFR, a subsidiary of French casino operator Tranchant. The District Court of Breda had ruled that the State had not proven that the monopoly is a justified infringement of EU-law, while referring to the Gambelli judgment. The Council of State overturned this decision, stating that the Dutch regulations are coherent and systematic and fall within the criteria formulated by the European Court of Justice in Gambelli and Placanica.

– In the second judgment, the Council’s ruling was more positive to the private gaming industry. The well-known lottery intermediary Schindler had applied for a license to operate its own charity lottery. Three of such licenses are already issued at a semi-permanent basis and there is no law that restricts the number of operators. This is a remarkable difference with the CFR decision, because the monopoly for the operation of casinos is laid down in the 1964 Gaming Act.

– On 14 May 2008, the Council of State rendered its referral judgment in the case Betfair. It asked questions on the subjects of mutual recognition of gaming licenses, equal treatment of potential candidates for licenses and the transparency of the allocation procedure. Further more, it asked under which conditions the exclusion of third parties in the allocation of gaming licenses is justifiable.

– In the proceedings on the merits, the De Lotto vs. Ladbrokes case is pending before the highest civil judiciary; the Supreme Court. The opinion of Advocate-General mr. Keus is noteworthy. He opposes a referral to the European Court of Justice, because he considers the pending infringement procedure by the EC on the very same subject to be more suitable to assess the compatibility of the Dutch policy on sports betting with European law. Despite his reluctance to refer to the ECJ, his opinion does contain well thought proposals for preliminary questions.

Political developments

Besides the developments in case-law, their have also been regulatory issues that are noteworthy to the private gaming industry. At the moment, all offering of online gaming to Dutch residents is prohibited. To counteract private gaming operators, the authorities intended to create a state monopoly for online gaming by introducing a new piece of legislation, the Online Gaming Act. The exclusive license would have been issued to state owned casino monopolist ‘Holland Casino’. The Senate rejected the proposed Online Gaming Act in the narrowest vote possible.

– Another method for the Dutch authorities to counteract private gaming operators is the blocking of financial transactions with online gaming operators. This only relates to banks with Dutch licenses that process direct transactions between Dutch residents with Dutch bank accounts and a specific black list of online gaming operators.

– Because the payment blocking can be easily circumvented, the Minister also intends to address Internet Service Providers. The Minister considers these service providers to be facilitating an illegal act. The Ministry will ask these service providers to block the access to the websites of online gaming operators. It is likely that this will also include a blocking of the gaming servers.

Infringement proceedings

In 2006, the European Commission sent a Letter of Formal Notice and a Supplementary Letter of Formal Notice to the Dutch authorities, regarding the regulations on sports betting who seem to be violating the freedom to provide services. On 28 February 2008, the European Commission also sent a Reasoned Opinion, which is the second stage of an infringement proceeding. It is reported that in this Reasoned Opinion, the European Commission asked the Netherlands to alter its regulations on sports betting. The third and final stage is a legal procedure before the European Court of Justice, which may order the Netherlands to alter its regulations.

Malta

Case law

On 9 January 2007, the Court of Appeal delivered a favorable judgment to the private gaming industry. In this landmark judgment, the Court prevented the enforcement in Malta of a French judgment in a case between French horse betting operator PMU and the Maltese company Zeturf. It is noteworthy that under Council Regulation 44/2001, only judgments in civil and commercial matters in the Member States of the EU can be enforced. The Court of Appeal decided that the French judgment consisted of a public law nature, concerning the protection of state monopolies.

Belgium

– The sponsoring of cycling teams by private gaming operators led to the decision of race organizer ASO to refuse a ProTour cycling team to participate in two ProTour Belgian cycling events. In a judgment of 27 June 2007, the president of a Belgian commercial court ordered the ASO to allow the participation of a cycling team sponsored by the private gaming operator Unibet.

– The Liège first instance court dismissed an action filed by the French tennis Federation against three private online betting operators (Ladbrokes, Bwin and Betfair) on 28 April 2008. The action was aimed at preventing Belgians from betting on the results of the Roland Garros tournament and the French Master Series. The judges concluded that these private operators had behaved in a prudent and diligent manner, and secondly, considered that the use of a sports event name for online betting cannot be considered an act of parasitism. The use of the name of a sports event is necessary to identify the game on which the participant can place a wager. It is noteworthy that in France, a similar action of the FFT against private online betting operators Unibet and Expekt was allowed by the District Court (Tribunal de Grande Instance) on 30 May 2008. In contradiction to the Belgian court, the French court did consider the use of a sports event name by online betting operators to be an act of parasitism.

France

Case law

2007 has especially been marked by the landmark decision rendered by the Cour de cassation in July 2007. Furthermore, two decisions rendered in 2008 highlight the forthcoming liberalization of the gambling sector in France.

– On 25 March 2007, the District Court of Nanterre condemned two persons for having made accessible an online gambling website from the French soil, in spite of the prohibition. The judges considered that the French criminal law was to be applied because the website was accessible to the French public.

– On 10 July 2007, France’s Supreme Court, the Cour de Cassation, endorsed the ECJ teaching of the Gambelli and Placanica cases by deciding that where French gaming laws restrict free movement of services, lower courts must verify whether these restrictions comply with the requirements set by article 49 of the Rome Treaty. The Supreme Court also required from lower courts that they check whether general interest is guaranteed in the Member State where private operators are established.

– In January 2008, the Court of Appeal of Versailles decided to assess whether the French gambling legislation is compatible with community law and the criteria established by the European Court of Justice case law.

– On 9 May 2008, the highest French administrative court, the Conseil d’Etat, as requested by the Maltese operator Zeturf Ltd., decided to suspend its decisions until the European Court of Justice rules on two preliminary questions regarding the consistency of PMU’s monopoly with the EC treaty and how the infringement to the free provision of services should be considered: from the sole perspective of the provision of online betting services or more widely from the perspective of the whole gambling sector.

– On 30 May, the Paris District Court decided to block Roland Garros betting by the private operators Unibet and Expekt. The judges found that the betting operators were guilty of commercial free-riding, by unduly profiting from the investment made by the French Tennis Federation.

Regulatory developments

The law on the prevention of delinquency has encapsulated criticism, especially the application decree regarding the obligation for financial institutions to block the transfer of funds from unauthorized websites.

– The law on the prevention of delinquency, adopted on 5 March 2007, provides a set of legal sanctions (including criminal convictions) for online gambling operators.

– On 30 November 2007, France notified the European Commission of the draft decree, requiring financial institutions to block the transfer of funds from unauthorized websites. The European commission announced its opposition to this legislation on February 29, 2008 in an opinion which prolongs the standstill period of this act to March 31, 2008. France has still not submitted a report explaining its reaction to the opinion.

EFTA

The gaming regulation of the Kingdom of Norway and its compatibility with the freedom to provide services and the freedom of establishment were the subject of two EFTA-Court cases. Norway is not a Member State of the European Union, but it is a Member State of the European Economic Area (EEA). The EEA is based on the same “four freedoms” as the European Community. Compliance with these four freedoms in the EEA is examined by the court of the European Free Trade Association (EFTA).

Case law

– On 14 March 2007, the EFTA-Court ruled that the implementation of an exclusive rights system for gaming machines in Norway is compatible with the freedom of establishment and the freedom to provide services. This case was lodged by the Surveillance Authority of the EEA.

. On 30 May 2007, Norway’s gaming regulations were again discussed by the EFTA-Court in a proceeding on preliminary questions. These preliminary questions were referred by the Oslo District Court in a case between British bookmaker Ladbrokes and two Norwegian Ministries. The EFTA-Court emphasized that requirements fulfilled in the Home State must be taken into account.

Trademarks: Online gaming operators vs. sports organisations

Online gambling operators have recently been at the centre of two court cases, one in France and one in Belgium. Both cases concern trade mark law, an area harmonised by European Community

In the most recent case, opposing the French Tennis Federation v. Ladbrokes, Betfair and Bwin, the tribunal of Liège (Belgium) ruled in favour of online bookmakers, judging that the use of the French Open name on their websites did not qualify as an act of unlawful parasitism.

In an earlier decision (3e Chambre,Tribunal de Grande Instance de Paris, 30.01.08), the Tribunal de Grande Instance of Paris, considered that Unibet’s use of the name “Juventus” in order to promote its online sport betting activities constituted an act of counterfeiting.

Unlike gambling policy, where general principles of EC law on the free movement of services apply, trademark law is harmonised by EC legislation. Directive n°89/104 (“the Directive”) provides the regulatory regime legal for trademarks framework in the 27 Member States. In this context, how can the different interpretations of similar facts be explained?

Trade mark law grant owners of a sign or mark an exclusive right to it. This exclusive right creates an exception to the economic freedoms guaranteed by the E.C. treaty (“the Treaty”), including the free provision of services. Hence, whenever judges assess facts in light of trademark law they need to consider and weigh in the balance two opposite values: the individual and limited protection of trademark owners and the general EU wide freedom to trade.

In the two decisions, the national judges applied the same techniques, with the same legal criteria, but they arrived at different conclusions. Indeed These are the first such cases concerning online gaming operators. The present case law illustrates, once again, the challenges that online economic operators pose to the traditional legal analysis.

After a brief analysis of the national ruling they will be placed in their broader legal context.

A trade mark aims to protect both its owner and consumers. For consumers, trademarks “guarantee the origin of the product bearing the sign to the consumer or final user, allowing him/her to distinguish, without any likelihood of confusion, this product from those of a different origin” .

A trademark also grants an exclusive right to its owner when putting products into circulation for the first time. Competitors or individuals cannot to take advantage of the status and reputation of the trade mark by marketing their own products under the protected trade mark .

Article 6 of the Directive sets limits to trademark rights, to ensure the respect of free competition within the Single market. One may use a protected trademark as long as it is necessary to indicate the intended purpose of a product and is consitent with honest commercial practice .

The Belgian decision

The Fédération Française de Tennis (“FFT”) had lodged a complaint before the Tribunal de première instance of Liège, requesting that Betfair, Ladbrokes and Bwin cease offering betting services on the French Open and the French Master Series to Belgian citizens. The FFT claimed that offering these services induced for example, for players to act corruptly for financial advantages and that the use of the name “French open” harmed its legitimate interests. The FFT accused the three operators of economic parasitism, exploiting the name, reputation and renown of the French Open.

Belgian law does not define or punish economic parasitism as such. The judges turned instead to case law and academic works, which consider that parasitism is “any behaviour where an operator benefits unduly and directly from another operator’s substantial efforts or investment without equivalent efforts or investment”.

The Liège court dismissed this argument considering that the defendants did not use the name “French Open” in a promotional way. Indeed, it was considered that the “mere mention of the event’s name was necessary information to the [operators’]online betting activity” which could not therefore “be considered as an act of parasitism since its sole purpose was to entitle the player identify which sport evenst to place a bet on”.

The French decision

The Juventus Footballclub brought a claim before the Tribunal de Grande Instance of Paris against Unibet Ltd (“Mr Bookmaker.com Ltd) for trade mark infringement. The online betting operator was charged with acts of counterfeiting for mentioning the protected football club name on its website. The French court considered that Unibet, by using the Juventus brand in slogans or commentaries looking to promote their online betting activities, had committed acts of counterfeiting” .

The court recognised that Unibet was entitled to use trade marks to identify the matches where players could place their bets. However, judges considered that the use of the Juventus brand by Unibet was not merely “necessary” but that it was also a way to promote its own business activity. Unibet was therefore taking an unfair advantage from the fame and prestige of the famous Italian club.

It is not clear whether Unibet has decided to appeal this decision.

The European Court of Justice position on trademarks

Where an area of law has been harmonised, national courts may interpret, autonomously the law, in the light of the Treaty and the Directive in question itself. Therefore there should be less room for divergent interpretations. However, the European court of Justice (“ECJ”) remains the ultimate and supreme judge of EU law.

The ECJ has previously defined the limits of article 5 and 6 of the Directive in the Gillette case : “the lawfulness of the use of the trademark [under the 88 Directive] depends on whether that use is necessary to indicate the intended purpose of a product”. The use of a trademark is deemed necessary, “where such use in practice constitutes the only means of providing the public with comprehensible and complete information on that intended purpose, in order to preserve the undistorted system of competition in the market for that product.”

The use of a trade mark will be deemed contrary to honest practice in industrial and commercial matters when:

• Third party creates the impression that there is a commercial connection between it and the trade mark owner;

• It affects the value of the trade mark by taking unfair advantage of its distinctive character or repute;

• It casts discredit or denigration on that mark.

The ECJ has clearly established the principle that when an operator wishes to claim the benefit of article 6 of the Directive (restrictions to trademark exclusive right), a trade mark should be used in an informative purpose or in a purely descriptive way .

Analysis

In both the French and the Belgian cases, gambling operators used trademarks for the purpose to providing services to the public. The information was meant to help customers identify the sports event on which they could place bet.

The Belgian court referred to this informative purpose as its basis for ruling in favour of the online betting operators. It considered that the exclusive rights granted by trade mark owners cannot prohibit its necessary and honest use for an informative purpose. The analysis appears closer to the ECJ position.

On the contrary, the French court seemed to have adopted a less liberal approach, considering the mere use of a protected name is likely to be a prohibited use. This position has not been consistently adopted by French courts which have previously been more moderate in their rulings. This is the first time that such an infringement has been held to have been committed on an online gaming operator.

Until very recently, the French monopolies and the French authorities have led aggressive campaigns against online operators. Could the French decision be the result of such bad press? Indeed, the main claims were that online gambling brings corruption, and does not financially contribute to the development of the sports events that they exploit.

This judgment could indeed show the reluctance of the French establishment to admit online gambling as a decent economic activity. Will this case remain isolated? The forthcoming French online gambling legislation may bring an answer to this question.

Online Gaming Act: a new monopoly and new restrictions

This article was previously published in World Online Gambling Law Report, Volume 7 Issue 3, March 2008.

As well as creating a new temporary exclusive license for state-owned operator Holland Casino, a proposed Online Gaming Act also suggested that the Ministry of Justice is to target financial institutions dealing with unlicensed remote gambling operators. Justin Franssen and Aernout Kraaijeveld, of Van Mens & Wisselink, explain how although the Ministry’s initial proposals have been watered down, the proposed Act still fails to justify its restriction on the freedom to provide services.

In the political debate on the proposed Online Gaming Act, which creates a new exclusive temporary license for remote gaming for Dutch state-owned casino monopolist Holland Casino, the enforcement of the prohibition of remote gaming is brought into focus. The Minister intends to address financial institutions licensed in the Netherlands and Internet Service Providers (ISPs), urging them to stop facilitating unlicensed remote gaming operators. On 29 January 2008, the Ministry of Justice issued a press release stating that it will ‘take a firm line’ against financial institutions dealing with 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 ISP’s.

The Ministry put together a 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 operate illegal remote gaming websites in the Netherlands, or foreign remote operators targeting the Netherlands. The press release mentioned 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. The Minister of Justice stated in this debate that the Ministry has consulted financial institutions on its intentions to combat unlicensed remote gaming operators. The Ministry expects financial institutions, such as banks and operators of online payment systems, to comply with Dutch law and stop facilitating payments to remote gaming operators. Furthermore, he stated that his statement made against the institutions was ‘persuasive enough’. Senators asked if this ‘firm line’ includes criminal prosecution, which he promptly confirmed. However, no clear jurisprudence exists which confirms the position that facilitating payment services is illegal. In our view, it might be a misinterpretation of the 1964 Gaming Act to conclude that this Act prohibits the facilitation of payment services to online gaming operators. The Ministry based its statements on an alleged violation of article 1 of the 1964 Gaming Act that prohibits the offering of the opportunity to participate in games of chance without a Dutch license and the promoting of participation in such games of chance.

These statements 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 it 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 criticism from the NVB, as uttered on its website may have been effective. In his letter to the Senate of 4 March, the sharpness of the Minister’s statements of 29 January was toned down. The Minister now states that only the provision of bank accounts to remote gaming operators is illegal. The Minister also acknowledges that banks cannot completely monitor or block financial transactions between Dutch residents and remote gaming operators. Dutch banks cannot prevent Dutch residents from transferring 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 cannot oblige it to break up its relations with remote gaming operators.

The legality of facilitating payments

In view of the legislative history of article 1 of the 1964 Gaming Act, it is arguable that “promoting” should be defined as: ‘to induce others to participate’ in games of chance. The legislative history mentions, by way of example, an intermediary that sells foreign lottery tickets in the Netherlands. It must be noted that the Ministry of Justice uses a broad interpretation of the word ‘promoting’ in order to also include ‘facilitating transactions’ between Dutch residents and remote gaming operators. To substantiate its position, the Ministry of Justice selectively cites a civil (summary) judgment by the Court of Appeal at The Hague from 19 November 1998. The Court of Appeal ruled that ‘promoting’, inter alia, includes advertising and facilitating the participation and the payment of the bets by the participants. However, this civil injunction judgment was given in the case of an intermediary selling tickets for German lotteries in the Netherlands, similar to the example given in parliamentary history.

A different interpretation of the word ‘promoting’ can be found in a criminal judgment rendered by the Supreme Court of 23 February 1971. This case regarded the publication of winning numbers of a foreign lotto in a local Dutch newspaper. The Supreme Court ruled that all the physical acts that potential participants have to perform in order to participate in an unlicensed game of chance have to be distinguished. The Supreme Court distinguished the following acts: obtaining the lotto forms, filling in these forms, sending the forms and the wager to the foreign operator, obtaining the result of the lotto and report oneself to the foreign operator to collect the winnings. The local newspaper helped obtaining the results of the game by publishing them. This publication did not contain any recommendation. According to the Supreme Court, the publishing of the results is only simplifying an already simple act (for which at least four alternatives were widely available). It cannot be considered to be promoting the participation in unlicensed games of chance.

Following the Supreme Court’s rationale, the same conclusion can be made for the facilitation of payment services. Transferring funds to an operator of remote gaming is just one of several acts that an individual has to perform in order to participate in remote gaming. Since several alternatives to transferring funds directly from a Dutch bank account into the operators bank account are available, such as through foreign online bank accounts, it is reasonable to assume that contrary to the Minister’s statements the facilitation of payment services to remote gaming operators is not illegal under the 1964 Gaming Act.

It is noteworthy that regulations in France and Germany with similar effects to the Minister’s approach of financial institutions have lead to criticism from the European Commission (EC). France received a Detailed Opinion from the EC on 3 March regarding a draft decree, and Germany received a Letter of Formal Notice on 31 January after it implemented the federal Inter State Gambling Treaty (IGT). The EC criticized the IGT for infringing the free movement of capital as laid down in article 56 of the EC-Treaty. It is likely that the intended Dutch enforcement of the prohibition on remote gaming will also lead to criticism, and a possible infraction procedure, from the EC. If financial institutions are prosecuted, it is possible that Dutch courts will consider this prosecution to be in violation with European law and either acquit the financial institution or ask preliminary questions to the European Court of Justice (ECJ) regarding the conformity of such prosecution with European law.

Prediction of future developments

In its fight against remote gaming operators, the Netherlands has drafted legislation creating a monopoly on remote gaming for the state-owned casino monopolist Holland Casino, and at the same time increased the pressure on intermediaries. The proposed legislation has already met severe criticism on its conformity with European law from the EC, the Council of State and the Senate. The main criticism is the lack of a justification for the restriction of the freedom to provide services. A vote in the Senate was planned on 5 February 2008, but in an unlikely move, the Minister asked the Senate to postpone the vote. A second debate will be held on 18 March. As the proposed legislation was rejected by the Senate in a narrow vote on 1 April, it is possible that the Netherlands will avoid infringement proceedings by the EC for infringing European la. However as the Minister of Justice, Ernst Hirsch Ballin, wants to re-introduce proposals for a single online license to be granted to Holland casino in the Gaming Act reforms scheduled to be debated in the lower house this summer, this seems unlikely.

Justin Franssen Attorney

Aernout Kraaijeveld Paralegal

Van Mens & Wisselink

franssen@vmw.nl

kraaijeveld@vmw.nl

www.vmw.nl