This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
On 6 March 2007 the ECJ delivered its verdict in the Placanica case. The judgment, which stated that the Italian government's blanket refusal to license gambling companies listed in other Member States was a breach of EU law, was hailed by online gambling operators as the death knell for EU state gambling monopolies. However, whilst the judgment is without doubt a positive development for the online gambling industry, it does not really go any further than previous ECJ cases. In reality, the European Commission has had the tools to declare the gambling monopolies unlawful since 2003, if not before. The only question is whether Placanica will strengthen the Commission's resolve and act as a catalyst for more determined action.
In the Placanica judgment, the ECJ expressly stated that restrictions on gambling operators by member states are capable of being justified. In particular, a restriction on the freedom to provide services is justifiable to prevent the exploitation of gambling for criminal or fraudulent purposes. Such justifications have always been subject to the principles of proportionality and non-discrimination between member states. The 2003 Gambelli judgment made this clear, but left detailed consideration of these issues to the Italian courts.
However, Placanica does provide further guidance, particularly on the issue of proportionality. It is now (if it was not before) abundantly clear that a licensing system is perfectly acceptable, but only to the extent that it genuinely contributes to the objective and does not go further than is necessary. However, a blanket exclusion, said the ECJ, does go beyond what is necessary, and lesser measures such as gathering information on an operator's representatives or main shareholders would be sufficient. Further, a restriction on the total number of licensees is only justifiable to the extent that it reflects a concern to bring about a genuine diminution in gambling opportunities. In addition, the ECJ found that a member state cannot apply a criminal penalty for failure to obtain a licence if, in breach of EU law, it refuses or does not allow the grant of licences.
In practical terms, we can conclude as follows:
- licence conditions in EU member states must not discriminate against commercial operators or operators based in other member states;
- a limit on the number of licences available is not acceptable unless a member state is actively working to bring about a genuine diminution in gambling opportunities; and
- if a member state prevents an operator from obtaining a licence in breach of the laws above, it cannot bring criminal sanctions against such an operator for failure to obtain such a licence.
None of the principles above breaks new ground, but they have now been clarified and re-emphasised. Quite clearly, this further questions the legitimacy of all EU state gambling monopolies, and comes at a crucial moment.
As previously reported, the European Commission is currently pursuing infringement cases against several states which ban commercial online gambling but license state monopolies to undertake similar activities. Whilst these cases are still some way from reaching the ECJ, and experience suggests that the industry should not expect swift and decisive intervention from the Commission, the Commission can only have been emboldened by Placanica.
Although some states, including Italy, Spain and (potentially) Poland, have already begun opening up their markets to commercial operators, we can be sure that the most determined protectionists will not give up their lucrative monopolies without a fight.