Current affairs in the Netherlands

Gaming law in the Netherlands has seen numerous developments in the first months of 2008. The European Commission took a new step in the infringement proceeding targeting the sports betting monopoly. The proposed Online Gaming Act has been rejected by the Senate. The highest administrative judiciary intends to ask preliminary questions to the European Court of Justice on the allocation of sports betting and horse betting licenses.

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Despite these developments, the government has made it clear that it does not intend to liberalize its policy on gaming. The Netherlands Moreover, Justice Minister Ernst Hirsch Ballin has stated that he intends to maintain the prohibition on online gaming by addressing payments service providers and Internet service providers assisting online gambling operators.

The Rejected Proposal for an Online Gaming Act

Currently, all offering of online gaming to Dutch residents is illegal. This includes the offering of online gaming to Dutch residents by operators licensed in other member states. It is not possible to obtain a license for offering online gaming in the country.

The proposed Online Gaming Act was a part of the government’s fight against online gaming operators. The proposed act would have created an exclusive but temporary license for online gaming. Justice Minister Hirsch Ballin’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 Holland Casino, the state-owned casino gambling operator. Holland Casino, in turn, was supposed to offer a trustworthy and safe alternative for the estimated 400,000 Dutch residents that are currently gambling with illegal operators. The proposed act has met fierce criticism from the European Commission, high advisory bodies 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 April 1, 2008, Senate members voted 35-37 against the proposed act.

It is noteworthy that a majority of the Senators did not express any concern about a possible infringement on European law, or about provoking the European Commission to initiate a second infringement proceeding on Dutch gaming regulations. The main arguments expressed in the debate ranged from a wish by the conservative Christians and socialists for a total ban on online gaming and a strict enforcement policy on illegal operators on the one side, to, on the opposite 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 government’s efforts to create an exclusive license for Holland Casino have come to a full stop. Justice Minister Hirsh Ballin has stated that he now intends to incorporate the exclusive online gaming license in the newly-proposed Gaming Act. This new act is intended to replace the 1964 Gaming Act. The justice ministry expects that this separate piece of legislation will be discussed in the Tweede Kamer, or Lower House, this summer. Setting aside the possible incorporation of regulations on online gaming in the near future, the proposed act would not drastically change Dutch gaming policy. In our view, the most notable change is the installation of a Gaming Authority with more competences than the current Gaming Board.

Reasoned Opinion on Sports Betting Monopoly

The European Commission has initiated an infringement proceeding against the Netherlands because of the single-license system for sports betting. The commission has stated in its letter of formal notice, dated April 4, 2006 — and in its supplementary letter of formal notice, dated March 21, 2007 — that this monopoly on sports betting infringes the freedom to provide services, contained in Article 49 of the European Community Treaty (EC Treaty).

On February 28, 2008, the European Commission issued a press release stating it had sent a reasoned opinion to the Netherlands regarding its policy on sports betting. A reasoned opinion initiates the second stage of an infringement proceeding. (The third and final stage is a proceeding before the European Court of Justice.)

In the reasoned opinion, the Dutch government was reportedly asked to change its current regulations into regulations that are compatible with European law. However, Justice Minister Hirsch Ballin has thus far refused to publish the reasoned opinion. During the second senatorial debate on the Online Gaming Act, Mr. Hirsch Ballin stated that when his reaction to the European Commission is published, he will publish the reasoned opinion. It is expected that Mr. Hirsch Ballin will ask for an extension of the date by which a response must be given. If so, it is expected that the reasoned opinion and the reaction will be made public in late June of this year.

During the senatorial debate Mr. Hirsch Ballin emphasized that he does not agree with the Commission’s point of view. He persisted in his position that the Dutch policy on sports betting does not contravene Article 49 of the EC Treaty. Mr. Hirsch Ballin also noted that the European Commission expects the Netherlands to recognize sports betting licenses issued in other member states. According to Mr. Hirsch Ballin, however, there is no case law by the European Court of Justice stating that the principle of mutual recognition of licenses is relevant in gaming law.

Pending Proceedings

At the moment, two cases involving online gaming operators are pending before the highest judiciaries. In the proceedings on the merits, the De Lotto v. Ladbrokes case is pending before the highest civil judiciary, the Supreme Court. The opinion of Advocate General Keus is noteworthy in many respects and discussed below. In the administrative case, Betfair v. Ministry of Justice, preliminary questions from the Council of State to the European Court of Justice are expected.

De Lotto v. Ladbrokes

The dispute between De Lotto and Ladbrokes was decided in summary proceedings by the Supreme Court on February 18, 2005. The pending litigation constitutes the proceedings on the merits.

De Lotto demanded an injunction verdict, prohibiting Ladbrokes from offering games of chance to Dutch residents. De Lotto stated moreover that Ladbrokes, by offering said services, committed a tortious act. According to De Lotto, Ladbrokes is, de facto, given an unjustified advantage, because De Lotto is bound to strict Dutch licensing obligations and requirements while Ladbrokes is not. In the proceedings on the merits, a more substantive examination of the conformity of Dutch gaming policy with European law, and of the role of the sports betting licensee, De Lotto, can be made in comparison to the summary proceedings.

In his opinion, delivered during the hearing on April 4, 2007, Advocate General Keus referred to the infringement proceedings initiated by the European Commission. Other preliminary questions from courts in other member states that are relevant to this case are also discussed, as is the fact that the Council of State intends to ask preliminary questions regarding the allocation of sports betting licenses. According to Mr. Keus, an infringement proceeding by the European Commission is a more suitable framework for a substantive examination of the Dutch gaming policy, compared to the national civil dispute between De Lotto and Ladbrokes. Mr. Keus emphasized that if the European Commission proceeds with the infringement proceeding, this will lead to a final answer from the European Court of Justice on the conformity of Dutch gaming law with the EC Treaty.

Although Mr. Keus concluded that Ladbrokes’ appeal on European law should be rejected, he also provided guidelines for the subjects of possible preliminary questions, and proposed two possible, preliminary questions regarding the compatibility of European law with the Dutch situation.

The first proposed question is based on a comparison of the current gaming policy and its aims — as described by Mr. Hirsch Ballin — with a situation in which there is no national regulation of gambling, and asks if the current situation is compatible with European law. However, this proposed question takes for granted that the Dutch gaming policy is aimed at, and suitable for, the containment of the human urge to gamble. This is the definition of the aims of the current gaming policy expressed by the government, a view which Ladbrokes opposes.

The second proposed question relates to the specific nature of a civil injunction proceeding by a licensee against a non-licensed competitor. Mr. Keus proposes to ask the European Court of Justice whether an injunction verdict by a judiciary, which leads to a specific restriction on the freedom to provide services, should also be justified by a reason of overriding general interest — such as the protection of consumers, prevention of problem gambling and the counteraction of fraud and criminal activities — as defined in case law by the European Court of Justice.

Betfair v. Ministry of Justice

In Betfair v. Ministry of Justice, the highest administrative judiciary — called the Council of State — stated in a letter to the litigating parties on Feb. 4, 2008 that it intends to ask preliminary questions regarding the compatibility of the Dutch allocation of the exclusive license for sports betting and the exclusive license for horse betting.

In its proposal for preliminary questions, the council formulated questions on the principle of mutual recognition of gaming licenses, the transparency of the allocation of an exclusive license and the automatic renewal of gaming licenses.

The litigating parties were offered a four-week period during which to formulate comments on draft preliminary questions that were proposed by the council. It is not yet clear when the final questions will be made available by the council.

Possible Blocking of Financial Transactions and Access to Web Sites

In a press release dated Jan. 29, 2008, the ministry of justice stated that it will “take a firm line” against financial institutions that offer services to unlicensed gaming operators. On March 4, 2008, Justice Minister Hirsch Ballin sent a letter to the Senate which mentioned his intention to address not only financial institutions, but also Internet service providers.

The justice ministry compiled a blacklist of 30 online operators that are aimed at the Dutch market. This list will be issued this spring to the Dutch Banking Association. The ministry expects financial institutions to refuse clients who are either operating illegal online gaming Web sites in the Netherlands, or clients who operate online gaming Web sites from abroad and are excepting Dutch residents as clients. The press release stated that the ministry will take legal action 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 justice ministry, which, itself, has no authority to indict individuals or companies — it can merely file a complaint with the public prosecution department.

On the evening of Jan. 29, 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 Mr. Hirsch Ballin promptly confirmed.

These statements by Mr. Hirsch Ballin resulted in several critical reactions in the press from the Dutch Banking Association and Currence, operator of leading Dutch payments service provider IDEAL. A spokesman for Currence mentioned in a radio interview on Jan. 30, 2008 that it is in principle unwilling to comply with Mr. Hirsch Ballin’s request, for as long as no judge rules that facilitating payment transactions to gaming operators is illegal. The Dutch Banking Association mainly pointed to the practical problems and stated that the debate on the acceptance of clients should only relate to Dutch accounts, held by Dutch companies at Dutch banks.

The criticism from the Dutch Banking Association, as expressed on its Web site, may have been effective. In a letter to the Senate dated March 4, 2008, Mr. Hirsch Ballin was less threatening in his remarks than in his Jan. 29 statement. Mr. Hirsch Ballin now stated that only the provision of bank accounts to online gaming operators is illegal. The justice minister also acknowledged 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 (Mr. Hirsch Ballin explicitly mentioned a PayPal account). Since PayPal has a banking license in Luxemburg, the justice 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 payments service providers can be circumvented, Mr. Hirsch Ballin stated on March 4, 2008 that he intends to address Internet service providers, as Internet service providers can remove, or block access to, illegal Web sites. Mr. Hirsch Ballin stated that the police and the public prosecution department can indicate this possibility to the Internet service providers regarding online gaming operators. The justice minister stated that such an approach on illegal Web sites by police and public prosecutors often leads to a “positive action” by the Internet service providers.

According to Mr. Hirsch Ballin, the public prosecution department is willing to take action against operators of online gaming, and against intermediaries such as payments and Internet service providers that serve these operators.

However, if the approach as described above proves to be ineffective, Mr. Hirsch Ballin has threatened to propose legislation that blocks transactions to and from online gaming operators. This legislation would be similar to the U.S. Unlawful Internet Gambling Enforcement Act. The justice minister did 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 March 3, 2008, France 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 its 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 the (eventual) Dutch legislation, prohibiting financial transactions to or from online gaming operators, can also be non-binding because such legislation potentially constitutes a violation of European law, notably Article 56 of the EC Treaty.

Conclusion

Despite several setbacks in administrative proceedings and the creation of a state monopoly on online gaming, Justice Minister Hirsch Ballin seems to be reluctant to make a move towards liberalization of the Dutch gaming market. With the latest statements on the blocking of payments and Internet service providers, Mr. Hirsch Ballin has shown that he intends to take the fight against online gaming operators to a new level. While it has become clear that the blocking of financial transactions can be easily circumvented, it is still unclear how Internet service providers will react to the government’s appeal to block access to online gaming Web sites.

This article was previously published in I-Gaming News and on the I-Gaming News website, as a preview to the 2008 European Gambling Briefing in Amsterdam. (http://www.igamingnews.com/index.cfm?page=artlisting&tid=8659)

Germany: A turbulent regulatory framework

by Dr. Wulf Hambach, Senior Partner, Hambach & Hambach Law Firm
Specialization: TIME-Law (Telecommunication – IT – Media & Entertainment)

Approximately 100 days have now gone by. As is customary for newly established governments, this period of time is sufficient to take stock of the success or failure of the route taken by a government or – in this case – of the success of a law. This is because the “legislative period” of the State Treaty on Gambling surprisingly also is 4 years and – just as a government – a law can also be overthrown before the end of this period. Regarding the route taken by the Merkel government: “Should, for instance “Golden TV Productions” in 2016 produce its big TV movie “Angie – a Chancellor’s fateful years”, we already now know what the tenor will be for 2005/2006: Initially: Pain after the elections were almost lost. After that, a change to harmonious pictures – rapprochement between the Conservatives and the Social Democrats and Angela Merkel as the phoenix from the ashes. Cinderella turns into the most popular head of government ever in the Federal Republic of Germany.”

Let us now move to the question: How do 100 days of the State Treaty on Gambling “feel”.

The law was announced as a “court-proof solution”, and thus as a legal blessing. Flashback: As late as 15 Mar. 2007, the legal counsel for the German Lotto- und Toto-Block, Dr. Manfred Hecker, declared during a hearing before the state Parliament of North-Rhine Westphalia (quote from the official minutes of the hearing before the Parliament on the topic of gambling):

“Let us initially turn to a monopoly which is based on an irreproachable legal foundation. Such a monopoly, contrary to the present situation, is court-proof. This means that it will be possible to prevent illegal providers by means of administrative law, civil law and also criminal law from offering, operating and brokering their illegal services in the German market.”

Let us initially turn to the financial consequences for the German Federal States:

The former Minister of Finance and the Interior for the State of Schleswig-Holstein, Ralf Stegner, obviously just like the decision-makers in the other Federal States, was of the opinion that the maintenance of the state monopoly in the area of sports betting and lotteries is indispensable for charitable purposes. Mr. Stegner, in the final parliamentary debate regarding the State Treaty on Gambling on 13 December 2007 in Kiel, still said – quote:

“…At the same time, the maintenance of the state monopoly continues to secure the state’s income from lotteries and sports bets, which is used for charitable purposes such as sports, culture and social projects…”

The Prime Minister of Schleswig-Holstein, Peter Harry Carstensen, also could only justify his “giving in” – contrary to his personal opinion – regarding the draft of the State Treaty on Gambling with financial interests:

“At present, there are no legally safe alternatives to ensure the income from gambling for charitable purposes.”

compare: http://www.ftd.de/politik/deutschland/224566.html?mode=print)

Less than four months later, a report on the State Treaty on Gambling in the newspaper Kieler Nachrichten was fittingly titled “Gambling: Is the State the loser?”. This is because even now a massive reduction in gambling turnover for the first quarter of 2008 must be recorded for the state-run providers. The news met with a divided response among the members of the parliamentary parties in government. “What we feared would happen is now actually happening”, declared the member of parliament for the CDU, Hans-Jörn Arp, who had been fighting vehemently against the State Treaty. For the Chairman of the State’s FDP parliamentary party, Wolfgang Kubicki, it is a “financial catastrophe”.

On the figures:

Gross earnings of the gambling houses are down 10 per cent, Oddset’s turnover collapsed by up to 50 per cent. For the KENO-bet, the reduction amounted to 30 per cent, Lotto on Wednesday and on Saturday each had to record losses of approx. 11 per cent of their turnover. Thus, altogether about 8 million Euro of turnover have been lost since January”, said Mr. Kubicki after inspecting the parliamentary query (Drucksache 16/2007) at the end of April 2008.

The Bavarian Ministry of State also had to take criticism from the Highest Bavarian Court of Auditors. This institution, in its annual report for 2007 in particular states that an examination of the marketing organisation and of the cost structures of internet marketing is overdue. This is because the state-run lottery administration subsequently expanded and improved sales continuously through the internet. For instance, additional personnel was employed specifically for the gambling offers on the internet, and several million Euro were invested into software and hardware. Between 2001 and 2006, this distribution channel developed very successfully.

As the internet offers up until recently were blocked in Bavaria and most of the other Federal States in 2007, the lottery administration calculates that turnover will be down by approx. 50 million Euro for the last year. According to the Court of Auditor’s estimate, this alone would lead to reduced income (net proceeds and lottery tax) for the State of Bavaria amounting to 20 million Euro. A few days ago, Lotto Bayern resumed its offers through the internet. The justification provided in this context of the alleged fight against addiction will not be very credible against this background.

The reasons for the huge reductions mainly are massive restrictions on advertising and marketing, which is what the independent ifo-Institut already predicted at the end of 2006 in a comprehensive study on gambling. The self-imposed shackles will most probably lead to further losses in turnover for the state-run providers, and to an expansion of the black market, if the monopoly is obstinately maintained without taking into consideration the actual circumstances.

Legal consequences for the Federal States

“At this point, I do not wish to respond in detail to the concerns regarding European and constitutional law expressed against the State Treaty on Gambling by the Parliamentary Scientific Service and by others…”.

This was the reply to the legal concerns given by the Minister of the Interior of Schleswig-Holstein in the Parliament’s final debate on the State Treaty on Gambling at the end of 2007. The Parliamentary Scientific Service had raised considerable legal concerns in case of an implementation, based on a study by Prof. Dr. Johannes Caspar dated 11. October 2007, which – had it been considered reasonably – could only have led to a rejection of the new law. The legal weaknesses have also already been recognised by numerous German administrative courts.

The non-compliance with constitutional and community law of the State Treaty on Lotteries has not only been confirmed by the European Commission, but – since the beginning of this year – also by more than a dozen German administrative courts. Under the title „A black day for the State Treaty on Gambling“ the law firm Hambach & Hambach reported as early as in January 2008 that the Administrative Court of Schleswig – just like the EU Commission – considers that EU law is being violated and that the Court submitted to the ECJ questions under European law regarding the new sports betting monopoly. Since the beginning of the year, the main proceedings of several law suits were suspended, also by the highest administrative courts of the Federal States, against the background of these preliminary ruling procedures. The law firm has now also been able to obtain a positive decision for a private provider of sports bets in the main proceedings before the Administrative Court of Freiburg, and thus a suspension of the State Treaty on Gambling for this client. On 8 May 2008 Hambach & Hambach received the reasons of this pathbreaking decision. The court states among other things:

“A sports betting agent (betshop) who transfers bets to an EU-licensed operator does not act illegal in the sense of Art. 284 of the German Criminal Code (illegal gambling) as the new Interstate Treaty on Gambling breaches EU law. Therefore the authorities cannot base an administrative prohibition order on the violation of criminal law.”

The Court’s arguments are a downright slap in the face for the new distribution concept of the German Lotto- und Totoblock: During the hearing, the Court reached the conclusion that the state supervision did not even dictate a marketing concept for the state-run provider, that no advertising guidelines had been created and that the receiving offices would continue to work on a commission basis. The receiving offices – accessible to the public – continue to present a danger for youth protection, just as had been criticised by the Federal Constitutional Court in 2006. Thus, the VG of Freiburg for the first time held that a sports betting broker also has the right to broker sports bets at fixed odds for providers holding a licence in another EU country, without having to obtain permission by an authority in Baden-Württemberg.

The Federal State’s failure to implement advertising guidelines and the unrestrained fuelling of the passion for gambling by the state-run operators inevitably lead to an examination by the courts. For instance, the queues in front of the lottery shops known from the past have recently come to an abrupt end through a decision by the Higher Regional Court of Munich dated 22 April 2008. In a case against the Federal State of Bavaria, the Court prohibited advertising for a lottery jackpot in three cases. The slogans “play along” and “Lotto … current jackpot: approx. 18 million Euro” were held not to comply with the requirements set by the State Treaty on Gambling for the advertising for the operation of lotteries. This was reported by the Wettbewerbszentrale (central office for the prevention of unfair competition), an inter-branch and independent institution of the German economy, which had initiated the proceedings.

However, it is not just the private (online) providers of sports bets who criticise the implementation of the new State Treaty, but also large German advertising vehicles such as the football club VfB Stuttgart, who initiated a court clarification of the advertising prohibition for BWin. Friedhelm Repnik, boss of the Toto-Lotto-Gesellschaft of Baden-Württemberg, defends the state betting monopoly and considers a clarification by the courts as initiated by the club to be “simply indecent”, as he said in a recent interview with Südwest Aktiv. During the same interview, Mr. Repnik, when asked what the advertising prohibition would mean with regard to the addiction potential, replied – quote:

“We no longer advertise in a stimulating way, but only provide information.“

Conclusion

The first 100 days of the State Treaty on Gambling have been disillusioning for the advocates of the gambling monopoly. This is because in reality we are rather seeing the beginning of the end of this short-lived law. We may even see BWin banners in the Allianz Arena during the next Bundesliga season, instead of lottery “information” provided by the state

The French Tennis Federation looses a set in the Roland Garros online betting issue

Following a legal action brought in Belgium under summary proceedings by the French Tennis Federation (FFT) against Ladbrokes, Bwin and Betfair and aimed at preventing Belgians from betting on the Roland Garros and French Master Series results, the first court Tribunal of Liège dismissed the action.

The FFT accused the defendants of not behaving as “prudent and diligent operators”, and of acts of parasitism (unlawful competition) .

Hence the FFT asked namely for:

• A total ban on online betting taken by the Belgian public on the upcoming 2008 Roland Garros tournament and the Paris Masters 2008

• The annulment and the reimbursement of bets already taken by Belgian residents

The defendants’ lawyers argued that gambling is a legal and ancestral practice in sport that has never been challenged until now. In addition, they exposed that their clients had enacted a code of conduct and respect corporate governance rules. They also explained that the defendants had set up individual measures to fight against bribery.

On April 28th, the Liege first instance court ruled in favour of the defendants.

It is to be emphasized that the litigation brought before the Belgian judge was international. Thus, the plaintiff was a sport federation which was granted powers from the French Government to organize tournaments in Paris while the defendants were companies that are not based in Belgium. That’s why the first question that arose in this case was the competence of the Liège first instance court. The judge grounded its decision on article 5.3 of the European regulation 44/2001, which provides that “A person domiciled in a Member State may, in another Member State, be sued in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur”. It is not contested that regarding Internet matters, the place where the harmful event occurs is wherever a website is accessible. In order to establish the accessibility of the involved websites, the judge assessed several criteria including the available language (English is deemed to allow perfectly an access from the Belgian market), the targeted market (it appears that bets on the Belgian football league are possible) and the fame of the FFT tournaments in Belgium. Consequently, the Liège first instance court declared itself competent to rule in this case.

It is interesting to confront this reasoning with several decisions of the Paris Court of appeal (Cour d’appel de Paris, 4ème ch.A, 6 juin 2007, n°06/14.890). Indeed, the French court appears to adopt strict criteria to avoid a systematic territorial competence to the French jurisdiction. Thus, the judges expect a “sufficient, substantial and significant link between the activity and the harmful event.

First, the court, taking into consideration the corporate responsibility of the EU operators concerned and the procedures in place “preventing all anonymous bets, ensuring perfect traceability” concluded that these operators had behaved in a prudent and diligent manner. Interestingly, the judge also took into account “the various measures, namely for the protection of minors” implemented by Bwin, as well as its membership of “ESSA (“European Sport Security Association”) which aims to guarantee the integrity of sports betting offers and to keep sports honest and free from fraud”.

Secondly, the judges took into account the fact that the defendants did not use the names of the FFT tournaments in a promotional way. Indeed, it was considered that the “simple mention of the name of a sports event is a necessary indication for the online betting activity” which therefore “cannot be considered as an act of parasitism since its sole purpose is to let the player identify which sport event to place a bet on”.

The Belgian judge ordered the French Tennis Federation to pay €5000 per case for the recovery of legal costs.

It should be noted that the FFT is also facing an action from Bwin in the Paris high court. The latter will undoubtedly use this first victory to support its claim in these other proceedings.

Danish Minister announces liberalization of online gaming and sports-betting

The Minister for Taxation, Kristian Jensen, told Danish radio station that the governments prepares to formally liberalise online gaming and skill-games.

The Danish government is preparing a formal liberalization of online gaming and skill-games. Fixed-odds betting is considered a skill game in Denmark. Danish Tax Minister Kristian Jensen said that the Danish gaming market is already competitive because of the nature of the internet. He also acknowledged that Danish authorities have ample possibilities to prevent its citizens from participating in online gaming. Therefore, a licensing system for online gaming and skill-games will be prepared.

Mr. Jensen emphasized that licensing conditions will be strict, and operators should expect a Danish tax burden. Further specifics on the liberalization, such as a time schedule, are still unclear.

The monopoly for lottery games will not be affected by the liberalization and will remain in the hands of the state-owned Danske Spill.

EC Observations to Italian New Online Gaming Rules

First remarks on the proposed online gaming rules by Italy in the wake of the observations submitted by the European Commission

At the end of the scrutiny of the proposed draft featuring the new and quite more European-friendly online gaming rules Italy intends to adopt (“the New Rules”), the European Commission wrote on 14 April 2008 a letter to the Italian Minister of Foreign Affairs (“the EC Remarks”) to make certain recommendations and comments in relation thereto. What follows is a brief summary and comment of the most relevant aspects of the EC Remarks.

First and foremost it is interesting to note that there is no explicit statement in the EC remarks ruling out the concession regime currently implemented by the Italian gaming authority (“AAMS”). As a matter of fact, at point 2 of its note the Commission stresses the importance that said concession regime should remain open-ended, ie. no numerus clausus restrictions should be imposed by AAMS to thereby limit the number of foreign operators who may wish to access the local gaming market. So if on the one hand the EC reiterates its firm opposition to any attempt possibly made by AAMS (or any other national regulatory bodies throughout the EU) to cap the licences that can be awarded at local level, on the other hand it implicitly confirms the full validity of the state-granted concession regime altogether with respect to online gaming.

Turning its attention to the new AAMS requirement whereby a licence may be sought even by a non-gaming operator (whereas currently the applicant has to prove that it already holds an online gaming licence), the EC recommends AAMS to ensure that for purposes of assessing the actual eligibility of a non-gaming operator as well as licence applicant it apply fair, transparent, non-discriminatory and proportionate standards as also recently ruled by the European Court of Justice in re Europa 7 (C-380/05 of 31 January 2008).

Another request contained in the EC Remarks is aimed at amending any reference in the New Rules to operators based/licensed in the EU to cover instead operators based/licensed in the EEA – European Economic Area (which includes Liechtenstein, Norway and Iceland plus the whole European Union).

It is reasonable to believe that AAMS will have no problems in accepting the above suggestion. Actually to further encourage licence applications from throughout Europe it cannot even be ruled out that AAMS might possibly consider taking a “whitelist” approach similar to the one followed in January 2007 by the UK Department of Culture, Media and Sports with respect to non-EEA jurisdictions like the Isle of Man and Alderney, as a result of which all operators licensed there now can legally advertise their gaming services in the UK too.

Always with respect to the licensing requirements laid down in the New Rules, the Commission criticises the one-off AAMS licence fee (currently set at €300.000 yet scheduled to progressively go down year by year) which is generically justified as a “contribution towards expenses incurred by AAMS for the management and functioning of the licence-related infrastructure”. While conceding that in the New Rules the licence fee will be substantially slashed on an annual basis until the natural expiry date of the current licences (30 June 2016), the Commission requests AAMS to prove the alleged proportionality between the fee charged and the expenses the Italian regulator claims to incur

With respect to the requirement of the New Rules whereby an AAMS licensee may no longer have to (re)locate its gaming servers provided (i) they are still based in the EU/EEA and (ii) a safe 24/7 connection between the servers and the AAMS centralised system is guaranteed, the Commission urges AAMS to provide alternative operational solutions that should prove less burdensome and costly for the operators while equally and adequately allowing all checks and monitoring required by AAMS.

This remark reflects a largely popular concern across the online gaming industry, namely that AAMS is unduly forcing its licensees to fully link up their gaming platforms to its centralised system and database via the setting up of quite a complicated and expensive connection procedure which according to the claim of many concerned foreign operators results in unnecessary costs and much longer kickoff times.

Last but not least, the EC Remarks carry a very crucial query for the Italian authorities asking to know whether once the New Rules fall in place all EU operators that will then become licensees and which are currently included in the AAMS namelist of ”illegal” gaming sites, will be eventually struck off said list. This is undoubtedly not an easy answer to be provided by AAMS specially if one bears in mind that all its current licenses who do continue to operate a ‘.com’ site in parallel to the AAMS-licensed ‘.it’ one have not seen their names wiped off the AAMS blacklist, which seems to suggest that the Italian gaming regulator may not be so prepared to relax its grip over the unlicensed sites.

The Italian authorities and AAMS in particular are now expected to carefully review and digest the EC Remarks prior to deciding how to bring about the implementation of the New Rules, something which will hardly be a matter of just a few more weeks.

Yet all in all regulations-wise there do not appear to be any insurmountable problems nor irreconcilable positions between Brussels and Rome hence it is fair to say that if and when AAMS properly deals with and addresses all the issues raised by the EC, once the New Rules become effective all state-granted concession regimes still prospering across the EU will be strengthened and corroborated even further.

Quirino Mancini, partner

Sinisi Ceschini Mancini (qmancini@scm-partners.it)