Will the approval of a new French horserace betting levy pave the way for long-awaited change in the UK?

United Kingdom

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

We have reported many times over recent years on the reluctance of the UK Government to make any substantive changes to the Horserace Betting Levy, primarily to make it applicable to offshore bookmakers, on grounds that such changes could fall foul of European state aid rules (see, for example, here and here). Indeed, as recently as January 2013, the Sport Minister Hugh Robertson stated during the parliamentary debate of the Offshore Gambling Bill that legal advice received on the matter "says that although a levy is permitted in its current form, since it originates from before 1972 and therefore pre-dates state aid rules, the European Commission is likely to consider that the collection of contributions from overseas operators would substantially alter the levy, such that it was no longer compliant with state aid".

However, it seems that the Government Law Officers who provided this advice may have been mistaken, given that similar proposals for a French levy scheme have now been approved by the European Commission as being compliant with state aid law. (See the European Commission press release here.)

The changes in France have been necessary since the opening of online horserace betting to competition in June 2010. Prior to this, PMU, an economic interest grouping formed by two horse-racing parent companies and 49 regional racing companies, controlled horse-race betting in France and financed 80% of the French horse sector (including breeding, training centres and equestrian centres). With competition being introduced into the sector, a levy was proposed in order to continue to finance the horse-racing sector and to ensure fair competition between all betting operators.

The European Commission opened a detailed investigation into the proposals which led to certain changes being made to the original scheme proposed by the French Government. The approved scheme comprises assistance to the horse-race sector, based on the common interest that PMU and competing online horserace betting operators attach to the organisation of horse races on which bets are taken. Only the costs directly associated with the organisation of these races enter into the calculation of the level of the levy. The European Commission takes the view that the scheme is compatible with the state aid rules due to an exception which authorises aid to facilitate the development of certain economic activities, subject to certain conditions.

While the French proposal may not be the perfect template for changes to the UK's Horserace Betting Levy, it is now very clear that initiating substantive change to the Levy is an option open to the Government after all.