This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
In recent weeks the Commission has launched a new round of proceedings against EU Member States which continue to restrict online gambling operators from competing with state monopolies. The Commission's actions again indicate that it will not tolerate national rules which are incompatible with EU law.
German laws restricting the supply of gambling services under scrutiny
On 1 January 2008, the German states ratified controversial new laws which have the effect of protecting the national lottery and betting monopolies and at the same time prohibit online sports betting operators from providing all forms of online gambling services within Germany, except for those in relation to horserace betting. Following complaints from a number of service providers, the European Commission announced at the end of January that it had sent Germany an official request for information on this national legislation. The request is the first stage in the Commission's infringement procedure and Germany was given two months to respond.
The Commission's request focuses on certain aspects of the new laws, in particular: the total prohibition of games of chance on the Internet (notably sports betting); advertising restrictions on TV, on the Internet or on sports jerseys or billboards; and the prohibition on financial institutions processing and executing payments relating to unauthorised games of chance. Further questions have been raised regarding the authorisation regime to be granted to intermediaries as well as sanctions and fines in cases of organisation, and advertising of and participation in on-line games of chance.
Meanwhile Bet and Win International (BWin) suffered a legal defeat in March when it failed to have Germany's Federal Court of Justice overturn a ruling barring it from offering sports betting and casino games in Germany. This follows a long line of court cases in which BWin has had mixed success in seeking to establish that online sports betting operators should not be prohibited from offering services to German customers. As reported previously an Administrative Court of Appeal in Hessen found that a ban on internet gambling would be impossible to enforce and as such ought to be considered "null and void" in December last year.
VfB Stuttgart, the German football club, (supported by the German football league) has also begun its own legal challenge against the state gambling monopoly. As anticipated, VfB Stuttgart has been forced to end its sponsorship contract with BWin, since the Administrative Court of Baden-Württemberg in Mannheim outlawed the club from advertising the BWin logo in any way.
Last warning for Greece and Netherlands
On 28 February the European Commission issued a final request to Greece and the Netherlands to remove legal restrictions in their gaming markets. The Commission has issued this formal request following receipt of the countries' responses to its requests for information sent last year. The Commission considers that both countries have laws which restrict the free movement of gambling services (contrary to the EU Treaty) and cannot be justified as being necessary, proportionate and non-discriminatory. The countries must respond to the Commission's request by the end of April, after which the Commission may refer the matter to the European Court of Justice.
In Greece the Commission's key concern is that operators lawfully licensed in other EU Member States are prohibited from providing sports betting services and games of chance in Greece. In addition, there are restrictions on the promotion and advertising of such services and rules which seek to prevent Greek nationals' participation. In the Netherlands the Commission's investigation relates only to the provision and promotion of sports betting services.
The Commission stated that its reasons for issuing the final request in both countries were because: "the recent introduction of new addictive games, intensive and increasing advertising, and the absence of concrete measures against gambling addiction together constitute clear evidence of the absence of a consistent and systematic policy aimed at genuinely reducing gambling opportunities."
Meanwhile the Dutch courts have again shown support for the state lottery company (De Lotto) to the commercial detriment of licensed bookmakers based outside of the Netherlands. In an appeal against a judgment made in October last year, the District Court of Utrecht ruled against Unibet and again ordered it to stop providing gaming and betting services to Dutch citizens. The court ruled that Unibet must block Dutch citizens from using its services, and ruled that a fine of €100,000 per day (if Unibet continued to offer services) was enforceable.
The court was also asked whether the Dutch gaming rules are contrary to European law. The judge noted that there was no inconsistency between Dutch betting and gaming legislation and European law. Whether the European Commission, and potentially the European Court of Justice, agrees with this interpretation remains to be seen.
Time running out for French
We reported in December's gambling update that France had been given until March this year to find a solution to keeping its national betting laws in line with EU rules. Since then, the French government has insisted that there will be a controlled opening of the French sports betting services market which is currently dominated by two state-owned monopolies, Français des Jeux (FDJ) and Pari-Mutuel Urbain (PMU). The extent that this happens and when remain to be seen, but in the meantime a recent court case provides further weight to the Commission's arguments that the French legislation must be amended.
In January the Court of Appeal of Versailles ruled that France's gambling legislation may not be compatible with the EU rules on freedom to provide services and placed the burden of proof on the authorities to justify their regulation as being necessary, proportionate and non-discriminatory. The Court of Appeal relied on the European Court of Justice's Placanica ruling of March last year and France's Supreme Court in the Zeturf case of July last year. This ruling was made in relation to a request by the former CEO of Mr Bookmaker (an operator licensed in Malta) to rescind criminal proceedings brought against him last year for allegedly organising an "illicit lottery" and "clandestine betting on horse races".
European Commission continues to investigate Sweden's national legislation
At the end of January, the European Commission sent an official request for information to Sweden on national legislation restricting the supply and promotion of certain gambling services to Swedish citizens, in particular online poker games and tournaments. This follows previous similar requests for information from the Commission concerning sports betting sent to Sweden in April 2006. If the Commission finds that Sweden has not responded adequately within two months, the Commission may refer the matter to the European Court of Justice.
The Commission's latest inquiry into Swedish gambling restrictions seeks to verify whether all national measures relating to poker games and tournaments are consistently applied and compatible with Article 49 of the EC Treaty, which guarantees the free movement of services.
Poker games and tournaments are currently offered in Swedish international casinos and, since 2006, the state-owned company Svenska Spel has offered such services online. However, the national legislation effectively prevents operators licensed and regulated in other Member States from doing the same.
Italy notifies Commission of draft law to allow remote operators to offer online gambling services
As reported in our last update there are signs that the Italian betting and gaming market is finally going to be the subject of liberalisation. The notified Decree represents a first step towards the principle of mutual recognition concerning the provision of remote gambling services in Italy.
At the end of last year, the Italian government notified the Commission of a draft decree which sets compulsory criteria (in relation to the operation and collection of revenue from gambling services) that operators must meet in order to offer online gambling services in Italy. The Italian government notified its proposals to the Commission pursuant to EC Directives 98/34/EC and 98/48/EC, which impose an obligation upon each Member State to notify to the European Commission (and to each other) all draft technical regulations concerning products and "information society services" before they are adopted at a national level.
The aim of this draft decree is to regulate the provision of remote gambling activities by one or more licensed entities and to transpose the EC Treaty principles of freedom of establishment and freedom to provide services into national law. It will allow gambling operators with registered offices in an EU Member State to apply for licences on condition that they have sufficient turnover (at least EUR1.5 million in the previous two years) and comply with certain administrative measures. Once licensed, operators will need to promote responsible gambling behaviour and players must be assured of the safety, transparency and honesty of the games.
Israel to prohibit online gambling
In the first week of March, a proposed "child protection" bill which would have the effect of blocking access to online gambling sites (together with websites containing pornographic and violent content) in Israel passed its first reading in the Knesset. The controversial bill will require two more readings before Israel's Parliament before being enacted.
Adult Israelis would still be able to request access to sites on the Israeli government's yet-to-be compiled blacklist of websites. To date ISPs and civil rights groups have protested against the proposals. Israelis are currently prohibited from placing bets with foreign based gambling websites. In February last year an Israeli court ruled that Victor Chandler (based in Gibraltar) had broken Israeli laws by accepting bets from Israel-based customers. Victor Chandler lost on appeal and is now pursuing the matter in Israel's Supreme Court.